PM Daily Market Commentary - 2/9/2017

davefairtex
By davefairtex on Fri, Feb 10, 2017 - 4:05am

 

Gold fell -13.70 to 1229.40 on moderate volume, and silver dropped -0.14 to 17.64 on moderately heavy volume. A big currency move, triggered by a Trump comment about a tax plan to be released within the next few weeks, caused the buck to spike and gold and silver to sell off.

The move in the buck started at 09:55, and that triggered a move lower in gold that started at that same time. To me it appeared that the commercials decided to jump in short (and/or the longs decided to bail out), but the comment by Trump was pretty clearly not anticipated by the market, as gold's drop was not a sharp spike down, but instead a steady series of smaller moves. The only large spike of the day happened after market close, at 16:54, where 2k contracts traded hands and gold dropped from 1232 to 1226 in one minute, marking the low for the day.

The candle print for today was a two-candle swing high, which the code rates a 76% of marking a top. That's a pretty high rating for a swing high. Gold remains above its 9 EMA, which stands at 1225.  A close below the 9 EMA is the next step in the process towards a PM trend change, but until it happens, gold remains in an uptrend.

Open interest at COMEX for GC fell by -3,156 contracts.

Rate rise chances (May 2017) were unchanged at 25%.

Silver dropped along with gold, but the fall wasn't quite as strong for silver as it was for gold. Silver did not print a swing high, but only a “closing black marubozu/NR7”, which the candle code finds to be bearish, with a 44% chance of marking a top. The NR7 tells us the trading range was smaller than normal, and this particular candle print may indicate a large move is in the offing. Silver remains above its 9 EMA. The gold/silver ratio fell by -0.22 to 69.69, which is slightly bullish.

Miners fell too, with GDX down -2.58% on moderately heavy volume, and GDXJ was down -3.10% on heavy volume. Candle print was a two-candle swing high, which it turns out, is only somewhat bearish: a 30% chance of a top. The swing high for GDXJ was more bearish – a 64% chance of a top. Although GDX is now back below its 200 MA, it remains above the 9 EMA. Miners do not look as bearish as I would have expected, at least according to the code anyway. To me the candle looks unpleasant, but until we see that drop below the 9, miners remain in an uptrend.

Platinum fell -0.28%, palladium moved down -0.21%, and copper dropped -0.28%. Platinum printed a shooting star (33% chance of a high), while palladium printed a spinning top/NR7 (39% chance of a top).

USD rallied strongly today, up +0.37 to 100.59, as a result of an off-hand comment by Trump about a soon-to-be-released tax plan that presumably will fix everything - “it will be phenomenal – in terms of tax.” Yen was the primary loser, dropping -1.16%, while the Euro fell -0.34%, and the Pound was off -0.31%. This comment spiked the buck up about 0.30 at the time it was made, and from what I could see, it more or less renewed the “Trump trade” of items that were perceived to be the winners from the projected Trump Tax changes. It helped that this occurred in the direction of the new dollar trend, which is up. Buck is above its 9 EMA. Candle code found the “closing white marubozu” to be bullish.

Crude rallied today, rising +0.74 to 53.31, following on from yesterday's surprise rally. Candle print was a two-candle swing low, which the candle code gave a 63% chance of marking a low. Crude is now back above its 9 EMA. Traders certainly showed up to buy the dip yesterday; whether that translates into the ability to push prices above 54 resistance is yet to be seen.

SPX rallied strongly today, up +13.20 to 2307.87, making a new all time high and closing above round number 2300. Candle code sees the breakout as bullish, as do I; from a technical standpoint, a new all time high means there is no overhead resistance – no trapped longs wanting to sell to get out even. Financials were the big winners (XLF:+1.37%), while utilities fell (XLU:-0.85%). Energy, industrials, and cyclicals also did well. This sure looks like the Trump trade that appeared to be in the process of unwinding over the prior few days. VIX fell -0.57 to 10.88.

TLT was hit hard, dropping -1.15%, losing most of yesterday's gains; it appears that bonds were another casualty of Trump's “phenomenal” tax plan comment. TLT remains above its 9 EMA, at least for now.

JNK rose +0.22%, popping back above the 9 EMA. Candle code saw the move as bullish. It also suggests a return to risk on.

CRB rose +0.26%, moving back above its 9 and 50 MA lines. Only 2 of 5 groups rose, but one of those was energy, which did quite well today.

Gold has printed a swing high. Those don't always lead to disaster (one that happened back in January ended up being just a 3-day downturn) but we are all on notice; with the dollar rising, the commercials have a much easier time pushing prices around, because the traders who are looking to buy-the-dip pull their bids. That's when, historically, we see a whole lot more downside spikes. Do the spikes cause the trend, or are the spikes just more profitable once the trend turns down? Since none of us sit on trading desks at the big banks, we can't possibly know for sure.

So, buck is in an uptrend, gold and GDX have printed swing highs, silver still looks ok, while both platinum and palladium have printed (bearish) shooting star candles. I believe risk is substantially higher in the PM space than it was yesterday – at least in the near term anyway. And since this is a daily commentary, most of what I talk about is focused near-term.  Long term, we'll see derivatives explode, a deflationary crash, defaults, bank holidays, a COMEX default, and maybe even hyperinflation.  Probably not next week, however.

A close below the 9 EMA would cement the trend change for me. If the buck continues higher, that's probably how things will play out.  The 9 is not that far away.

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2 Comments

Eannao's picture
Eannao
Status: Silver Member (Offline)
Joined: Feb 28 2015
Posts: 135
Great one-line synopsis!

DaveFairTex Wrote:

"Long term, we'll see derivatives explode, a deflationary crash, defaults, bank holidays, a COMEX default, and maybe even hyperinflation."

robie robinson's picture
robie robinson
Status: Diamond Member (Offline)
Joined: Aug 25 2009
Posts: 1148
We may even see another 19th

but not another Pink Floyd!

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