PM Daily Market Commentary - 2/23/2017

davefairtex
By davefairtex on Fri, Feb 24, 2017 - 5:01am

 

Gold rose +12.50 to 1250.70 on moderate volume, and silver climbed +0.16 to 18.23 on very heavy volume. The buck fell just -0.13; the good-sized move higher in PM was not a currency effect.

Gold broke out to new highs today, and managed to close the day near the top of its trading range.  Candle print was just a "long white" candle, which the code does not see as bearish.   Gold is moving into the 1250 resistance zone; its expected that a fair amount of selling will happen here, as some number of trapped longs from the 1250 lows (last October) sell now that they are finally back to even.  If gold can plow through this area, that's a very bullish sign.

Open interest at COMEX for GC rose by a massive +27,295 contracts.

Rate rise chances (May 2017) remains at 44%.

Silver broke out too, but with a bit less enthusiasm than gold. As with gold, the candle code does not see a top here in silver either. Trading volume was extremely heavy; that is probably commercials going short, simply because there are not too many managed money shorts left to cover. The gold/silver ratio rose +0.07 to 68.59. The under-performance by silver on a day when gold broke out provides us a clue as to what might be going on.

Miners were up on the day, with GDX rising +0.16% on moderate volume, and GDXJ climbed +0.47% on moderate volume also. But if you look at the chart, you see an unpleasant red candle which really doesn't look much like a rally.  What actually happened is that the miners gapped up at the open, and then spent the whole day selling off, complete with a 1% dip in the last 30 minutes of trading, closing at the dead lows of the day. Candle print was a “closing black marubozu” which the candle code rates as bearish. If we look at the GDX:$GOLD ratio, we can see that the ratio has been dropping for the past 10 days. Miners have been underperforming gold fairly dramatically.  That's another clue about what's going on too.

Platinum rose +0.58%, palladium climbed +0.48%, and copper plunged a massive -3.44%. The day's drop in copper has taken it below the 9 EMA. Might we have seen the peak in copper for a while? Its possible. That would make it harder for silver to move higher.

The buck tried once more to rally through the 50 MA and failed, dropping -0.13 to 101.01. Candle print was a confirmed shooting star/swing high, which the candle assigns a 54% chance of marking a top. While the buck remains above its 9 EMA, the failure to move above the 50 is a bad sign, as is the swing high.  My opinion is that if not for the near civil-war the US is having, the buck would be a whole lot stronger, but that's where things are. Unless chaos increases in Europe, the buck probably moves lower from here.

Crude climbed +0.49 to 54.36, slowly moving into the 54 resistance zone. Candle print was a spinning top, which the candle code says is mildly bearish – today's move higher had some elements of a failed rally to it. The selling pressure still appears to be immense whenever prices rise above 54. The petroleum status report showed a very modest (0.6 million barrel) inventory build, which is vastly better than last week's 13 million barrel build. The news caused crude to move down off the highs, which is why the day's price action looked a bit like a failed rally.

SPX rose +0.99 to 2363.81; SPX sold off hard in the first 90 minutes of trading, but managed to bounce back by end of day. Candle code calls this a spinning top, which it rates as more bullish than bearish. Utilities had another great day (XLU:+1.03%) while cyclicals brought up the rear (XLY:-0.68%). Industrials (XLI:-0.65%) printed a swing high today.  This swing high may lead to something; it has a 46% chance of marking a top for XLI.  VIX fell -0.03 to 11.71.

TLT climbed +0.30%, slowly creeping higher.  I think bonds are starting to make their comeback.  All we need now is a top in SPX.  Bonds are hinting at risk off.

JNK moved up +0.11%, making another new high, and confounding any prospects of a top in SPX.  Contrary to TLT, JNK continues to signal risk on.

CRB rose +0.21%; only 2 of 5 groups moved higher, but they included both energy and PM, and the rise in those two was enough to pull the entire complex higher.  Overall, CRB is in a slow move lower from the highs set in mid-January.  This suggests the "inflation story" may have a medium-term expiration date.

When gold is leading the PM space higher, its not a sign of an overall PM rally. To me, the evidence is starting to pile up that this current move is safe-haven based.  Certainly there are elements of an inflation trade that crop up from time to time, but when you see gold leading the miners, and especially when gold breaks out on a day when the miners are sold all day long – that is absolutely not “risk on” in the PM space.

Again, that's what the price evidence is suggesting to me: a safe haven move.  If you look at the gold-in-euros chart, the picture becomes even more clear.

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6 Comments

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5066
gold to 1258.20

Looks like a breakout in Asia, gold is well into its resistance area, which is a good sign.  I'd look for selling around the 1264 level, which is the 200 MA.  Right now - its all systems go for gold.

 

Cold Rain's picture
Cold Rain
Status: Gold Member (Offline)
Joined: Jul 26 2016
Posts: 326
$1250

Will be interesting to see if gold can close over $1250 today.  I am doubtful.

vadim_75's picture
vadim_75
Status: Bronze Member (Offline)
Joined: Oct 18 2015
Posts: 48
is it only me who thinks it's strange?

The same as yesterday - 

For example KGC:  3,84/3,85   88300/9270, ussually it's 1500/1000 something like that.

GDX 24,5/24,51  40k/30k, 1 sec later 70k/1k, 1 sec later 15k/60k.

if you add low volumes across the miners, considering big moves in gold, the picture looks strange, doesn't it? Anybody else see what i see, or there is nothing to pay attention to?

Cold Rain's picture
Cold Rain
Status: Gold Member (Offline)
Joined: Jul 26 2016
Posts: 326
vadim_75 wrote: The same as
vadim_75 wrote:

The same as yesterday - 

For example KGC:  3,84/3,85   88300/9270, ussually it's 1500/1000 something like that.

GDX 24,5/24,51  40k/30k, 1 sec later 70k/1k, 1 sec later 15k/60k.

if you add low volumes across the miners, considering big moves in gold, the picture looks strange, doesn't it? Anybody else see what i see, or there is nothing to pay attention to?

I don't know, but the miners are selling off all day, even as gold and silver are up pretty good.  Looks like my doubts about closing below $1250 may have been premature.  But for whatever reason, the miners are not liking this rally too much.  Makes me think this might be a false breakout.  Otherwise, why would they not go up as we see continued rising of the underlying metals?

vadim_75's picture
vadim_75
Status: Bronze Member (Offline)
Joined: Oct 18 2015
Posts: 48
if buyers do met selling

if buyers do met selling pressure it must have been on big volumes, but there is no volumes at all.

GLD - average 7.44mln, now 1hour before close 8+mln

GDX - average 71mln, now 24mln!!!

I just can't describe how striking it is. 

 

  

Cold Rain's picture
Cold Rain
Status: Gold Member (Offline)
Joined: Jul 26 2016
Posts: 326
vadim_75 wrote: if buyers do
vadim_75 wrote:

if buyers do met selling pressure it must have been on big volumes, but there is no volumes at all.

GLD - average 7.44mln, now 1hour before close 8+mln

GDX - average 71mln, now 24mln!!!

I just can't describe how striking it is. 

 

  

I guess miners being down on lower volume is not necessarily a bad thing.  I dunno.

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