PM Daily Market Commentary - 1/26/2017

By davefairtex on Fri, Jan 27, 2017 - 2:04am

Gold fell -12.20 to 1190.80 on moderately heavy volume, and silver dropped -0.22 to 16.79 on moderately light volume. Gold continued selling off after yesterday's swing high; while the dollar did rally too, the dollar rise was only about a third of gold's drop.  That means gold's move was largely not a currency effect.

After a brief rally at the open, gold sold off for the rest of the day, making a low to 1183.90 about an hour after the US market opened. The subsequent rebound was relatively minor. Gold printed an “opening black marubozu”, which does not mark a low. Gold is now clearly through the 9 EMA, and appears headed for the 50. Given that gold fell by -1.01% and the buck rose +0.36%, and that's why I say that gold's move today was largely not a currency effect.

Open interest at COMEX for GC fell by -12,385 contracts.

Rate rise chances (May 2017) was unchanged at 36%.

Silver was hit again with a spike lower at 8:08-8:09, which drove silver to its new low of 16.68 - more or less the 50 MA.  Silver tried to rally off the spike down, but eventually failed.  The new low invalidates the relatively bullish hammer candle printed yesterday. Candle print today was just a “long black” candle, which was somewhat bullish: a 28% chance of a low. Silver underperformed gold somewhat, causing the gold/silver ratio to rise +0.20 to 70.92. Silver is now starting to look more bearish.  It appears that the commercials are attempting to move price lower; while they were unsuccessful yesterday, today's spike down looks to have been more effective.

Mining shares fell again today, with GDX off -2.56% on moderate volume, while GDXJ dropped -2.90% on moderately heavy volume. Candle print was a “spinning top” (and also NR7) candle, which looked neither bullish nor bearish - that defaults to the trend in place, which is bearish.  A positive sign was that almost all of the losses today came as a gap down at the open, which says traders were showing up to buy the dip. A negative sign was clear on the daily chart - GDX is now through its 9 EMA, which is a clear warning that the trend is now down.  Likewise, the MACD is quite close to a bearish crossover, which is another bearish sign.

Platinum fell -0.25%, palladium continued lower after yesterday's near-collapse, down -1.05%, while copper dropped -1.92%. It was a bad day for the metals. Copper printed a swing high, which yielded a 58% chance of a top.

USD rebounded, rallying +0.36 to 100.33. Candle print was a bullish engulfing, which the candle code rates as very weak; only an 18% chance of a low here.  Normally the bullish engulfing is fairly strong reversal pattern.  USD remains below its 9 EMA.  A close above the 9 would signal a likely reversal for the buck; until that happens, the buck remains in a downtrend.


Crude rallied strongly today, up +0.77 to 53.71, running into resistance at round number 54. Candle print was just a “long white” candle, which is neither bullish nor bearish. You can see on the chart that the sellers have appeared every time crude tried to move through 54; perhaps it is shale drillers engaging in hedging, or maybe its commercials betting on an OPEC failure or an increase in production by US shale drillers.  If crude can close convincingly above 54, it could lead to a more substantial break-out higher.   Energy equities do not seem to be big believers in the oil rally; the XLE:$WTIC ratio has done nothing but drop for the past two months.

SPX dropped slightly, off -1.69 to 2296.68. Candle print was a “short black”/NR7 candle, which seemed more bullish than bearish. Trading range was very narrow – SPX mostly just moved sideways in a range today. Materials did best (XLB:+0.26%) while sickcare fell (XLV:-0.77%). VIX fell -0.18 to 10.63. I'm not sure when I've seen VIX under 11 – VIX is very low right now, but I'd wait until I saw the market confirm some sort of reversal bar before jumping in.  Puts are extremely cheap.

TLT rose +0.36%, printing a “bullish harami” candle pattern that is actually quite positive: an 84% chance of printing a low. If this really is a low for bonds, that might suggest something positive might be in the offing for gold too, and maybe even the start of a correction in SPX.  We'll just have to see.

JNK moved up +0.05%, making another new high. JNK continues to signal risk on, and remains in a strong uptrend.

CRB rose +0.14; energy was the only group to rally today, but I guess that was enough. CRB remains in an uptrend, slowly working its way higher after putting in a major low in early 2016.

Today, gold and silver looked weak, and all items have dropped below their respective 9 EMA lines. The dollar has yet to put in an actual reversal; the weak bullish engulfing today does not qualify, nor has the buck crossed its own 9 EMA just yet. If the buck does manage to put in a swing low and cross its 9 EMA, the selling in PM could pick up substantially. Right now things seem fairly orderly, but a real reversal in the buck could cause a lot of trouble.

So – for now, no low for gold, silver, or the miners. More likely than not, lower prices are still ahead for PM. To my mind, the only thing that will put in a low for gold would be is if the buck reversed and closed below 100, SPX would have to print a significant swing high, and bonds would need to take off higher from here. That could all happen, but until it does, its probably best to watch and wait.  Gold and silver often drop more dramatically than you first expect, and dip-buying prior to actually seeing a real reversal on the charts can lead to a whole lot of red.

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