PM Daily Market Commentary - 2/7/2017

davefairtex
By davefairtex on Wed, Feb 8, 2017 - 1:58am

 

Gold fell -1.80 to 1235.50 on moderate volume, and silver dropped -0.04 to 17.70 on moderate volume also. The buck rose by +0.39% on the day, which more than explains the very modest -0.15% drop in gold.

Gold was under pressure for much of the day, as the buck rallied as much as +0.90 before falling back towards the end of trading. In spite of the pressure, the trading range was fairly narrow; gold's candle print today was a “bearish harami/NR7”, with the NR7 indicating a smaller-than-usual trading range. Candle code says that today's print is neither bullish nor bearish. Ultimately, today was probably just a day of rest after 8 straight days up.  In fact, when measured in Euros, gold actually rallied +0.42%.

Open interest at COMEX for GC rose by +6,320 contracts.

Rate rise chances (May 2017) were unchanged at 26%.

Silver also was yanked around by the buck, and it too sold off into the close. Candle print for silver was a “spinning top”, which doesn't tell us anything about direction; its neither bullish nor bearish. Silver did make a new high to 17.79. The gold/silver ratio rose a bit, up +0.06 to 69.80.

Miners moved lower too, with GDX falling -0.43% on moderately light volume, and GDX dropping -0.90% on moderate volume. Both miner ETFs made new highs on the day, but were unable to hold onto the gains into the close. Candle print was a spinning top, which once again provides us no clue as to direction as it was neither bullish nor bearish.  Miners are overbought, with RSI7=78.

Platinum fell -0.95%, palladium was down -1.09%, and copper dropped -0.60%. Candle code felt that platinum's “opening black marubozu” was relatively bearish: 41% chance of a top here. Platinum is now back below its 200 MA.

USD tried staging a strong rally, rising as high as 100.65 before fading; ultimately the buck closed up +0.39 to 100.20. This caused the buck to close above its 9 EMA for the first time in 5 weeks. The Euro was the cause of most of the dollar strength, dropping -0.63% and closing below its 9 EMA. The Euro looks to be changing trend – the MACD for the Euro has executed a bearish crossover.  If the Euro continues to fall, and from a technical perspective it seems more likely than not to do so, that could cause gold to top out and start correcting.

Crude was hit hard, dropping -1.37 to 51.88, with much of the damage happening at the end of the day, when an extremely bearish API inventory report revealed that inventories rose by a gigantic 14.2 million barrels - the second-biggest build in history. When the news hit, it caused oil to plunge almost 50 cents. Crude is now through its 50 MA, and the chart is now looking quite bearish. Candle print was a “black marubozu” which said that crude prices fell all day long, and closed at the lows. Crude now needs a less-bearish petroleum status report to rescue it from a potentially large price decline.  If we don't get a rescue, will managed money "paper longs" bail out?  If they do – and they are historically long right now – the decline in crude prices could be quite dramatic.

SPX rose +0.52 to 2293.08. The trading range was relatively narrow; SPX made a new high, but was unable to hold its gains. Energy was the big loser (XLE:-1.42%), with consumer staples (XLP:+0.82%) doing best. The spinning top candle print was neither bullish nor bearish. VIX fell -0.08 to 11.29.

TLT rose +0.74% on the day, breaking out more convincingly above its 50 MA. The 10-year looks even better. Bonds may be moving into an uptrend; certainly TLT's MACD suggests a trend change is at hand.

JNK fell -0.05%, continuing a slow decline that just hints at risk off. JNK has fallen 7 days out of 8, but the declines each day have been minor. Still, MACD is now pointing down. That's risk off.

CRB fell -0.41%, dropping below its 50 MA. 3 of 5 groups actually rose, but oil's plunge was enough to pull the whole complex lower.

The Euro looks poised to start moving lower, and bonds may be ready to start rallying. How will gold react? Today the reaction in gold was quite muted, and in fact gold-in-euros jumped +0.42%.  Can that continue if the dollar starts rallying more decisively?  We'll just have to see.  Certainly the bid under gold seems stronger than it did just two weeks ago.   I'm less sanguine about what will happen to crude.  If those managed money longs start to bail out more seriously, we could see crude move back down into the mid-40s in a big hurry.

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2 Comments

Cold Rain's picture
Cold Rain
Status: Gold Member (Offline)
Joined: Jul 26 2016
Posts: 380
PMs

I expect to see gold, silver, and the miners finish down today.  There's been some volatility so far today, but I expect they will drop through the afternoon.  In fact, I would be pretty surprised if we didn't finish the week with gold closing below Armstrong's $1221 number.  You saw he posted on his website the other day that gold closed last week at $1220.80.  He went out of his way to make a post just to say that publicly...in between all of his other private posts on gold,

Cold Rain's picture
Cold Rain
Status: Gold Member (Offline)
Joined: Jul 26 2016
Posts: 380
Wrong

Welp, at least some of my predictions above were incorrect.  We'll see how the week turns out for the rest.

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