PM Daily Market Commentary - 3/2/2017

davefairtex
By davefairtex on Fri, Mar 3, 2017 - 3:37am

Gold plunged -15.60 to 1234.40 on moderately heavy volume, while silver was crushed, dropping -0.67 to 17.79 on heavy volume. Both gold and silver fell steadily after the opening in Asia, gold dropping more than silver, pressured by another strong dollar rally. Then at 11:30, silver was absolutely smashed – probably by the commercials – dropping perhaps 50 cents in 40 minutes time.

I say this because there were no other items that dropped on or about that same time, no external influences that would explain why a large number of silver traders would all decide to bail out. It all looked fairly arbitrary, as if some big player decided, right at that moment, it was time for the 10-week silver rally to come to an end.

This is my “Chart of the Day” - 10-minute intraday silver chart as seen from my trading app.

 

Gold was under pressure right from the open in Asia, dropping steadily for most of the day. When the silver smash occurred at 11:30 in New York, that dragged gold down another $10 to its low of 1231.10. Gold did bounce back, but not very far. Candle print was an “opening black marubozu” which is bearish. The move today took gold well below its 9 EMA.

Open interest at COMEX for GC rose 6,110 contracts.

Rate rise chances (May 2017) jumped to 80%, with the prospects of a March 2017 rate increase rising to 78%. Was this a contributing factor to gold's decline? Its hard to say.

In spite of the mild decline, silver was holding up fairly well until the selling smash at 11:30. One minute trading was normal, and the next I saw pressure rapidly build up, driving silver through several support levels, triggering a large number of long-side stop-losses. Me calling silver's move higher “unstoppable” in yesterday's commentary might have contributed too – hubris is never a good thing in trading.  When a crank like me gets all enthusiastic, its probably a good time to eye the exits.

Candle print was a “strong line”, which of course is bearish. Silver is now below its 9 EMA, and 200 MA. It also printed a swing high today too.   The gold/silver ratio jumped by +1.67 to 69.39.  That's all bearish.

How long will it take the buyers to return? We will just have to wait and see. The COT report shows a heavy concentration of managed money longs – an easy target for the commercials seeking to run the stops. We will only know next week how many longs fled as a result of today's silver smash. File this under the heading: “things that should be illegal, but aren't.”

Miners had a bad day, with GDX dropping -4.57% on moderately heavy volume, while GDXJ plunged -8.24% on extremely heavy volume. Both miner ETFs printed “long black” candles, which do not mark a low. Both miners are through their 50 MA lines, moving deeper into bearish territory. Award for “biggest move of the day” goes to Endeavour Silver, which fell an astounding -24.83%. It was a bad day to be releasing a somewhat negative earnings report. Miners were actually doing all right until about 15 minutes prior to the silver smash; its as though the miners could see it coming. They started to sell off, and then 15 minutes later, down went silver.

Platinum fell -2.92%, palladium dropped -1.23%, and copper lost -1.56%. It was a bad day all around for the metals.

The buck had another strong move today, breaking out to new highs, rising +0.42 to 102.11. The bulk of the gains in the dollar came before the US market opened, and it seemed to have a stronger impact on gold than it did yesterday. Was it rate rise prospects? Trump looking presidential? Its hard to say, because they both happened at the same time. And maybe its something else. The buck is starting to become overbought, but today's "long white/NR7" candle is bullish, not bearish.

Crude was hit today too, dropping -1.09 to 52.58, following through from yesterday's bad reaction to the EIA report. Today's plunge took crude below its 50 MA. The “closing black marubozu” is bearish, with crude closing almost at the lows of the day. There are an immense number of managed money longs; will they continue to buy the dip in crude, as they have done for the past 11 weeks? If not, crude could fall a very long way in a hurry, if and when they decide to bail out.

SPX fell, dropping -14.04 to 2381.92, printing a bearish harami candle that has a 27% chance of marking the top. Financials led the market down (XLF:-1.55%) while utilities did best (XLU:+0.72%). Basically all the sectors that rose yesterday, dropped today, and vice versa. VIX fell -0.72 to 11.81.

TLT fell -0.36%, continuing its fall even in the face of a retreat in equities – probably because of the increasing odds of a rate increase. Bonds don't like higher rates much at all.

JNK fell -0.24%, printing a swing high. JNK probably didn't like the drop in crude prices.

CRB plunged -1.28%, making a new low, invalidating yesterday's swing low. Every commodity group fell, with the worst losses happening in energy.

While the silver smash was almost certainly because of the commercials running stops, the miner downtrend is its own thing.  Bad earnings, worries-in-advance about a rate raise, its hard to know, but the miner chart continues to look quite bearish.  Miners are definitely oversold, but they have not quite reached the capitulation stage just yet.

A conspiritorial-minded person might imagine that the commercials are trying to do one last flush prior to chaos enveloping Europe.  I really do think "this time the jig is up" over there.  From the comments coming out of the EU leadership, they seem to believe it too; its all sounding more and more desperate.  And if Trump manages to avoid daily tweet-fests about both stupid and/or critical things, the buck will remain a safe haven.  Confidence is a fragile thing.

I keep saying we're in a news-driven market.  The recent rally in gold had nothing to do with COMEX buying, and everything to do with Europe and Asia.  Sometimes I think silver is hammered in order to move the gold price lower.  Its a much smaller market, but the correlations between the two are quite strong.  If silver drops sharply, gold will drop in sympathy - and so it is probably cheaper to smash silver to get a lower price for gold than to smash gold directly.  Its a theory anyway.

After today's silver smash, we now need to wait to see when the buyers return, and if the bid remains under gold.  Based on my macro view it should - now lets see if it actually does.

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7 Comments

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5465
miner table for the day

Here's the miner table for today's moves.

Name Chart Chg (D) 52w ch EMA9 MA50 MA200 50/200 Last Crossing last
Newmont Mining NEM -2.38% 28.05% falling rising falling rising ma50 on 2017-02-27 2017-03-02
Silver Wheaton SLW -2.68% 24.08% falling rising falling rising ma50 on 2017-02-27 2017-03-02
Randgold GOLD -2.96% 0.89% falling rising falling rising ema9 on 2017-02-27 2017-03-02
Royal Gold RGLD -3.45% 37.79% falling rising rising rising ma50 on 2017-02-27 2017-03-02
New Gold NGD -3.47% -16.27% falling falling falling falling ema9 on 2017-02-22 2017-03-02
Gold Fields GFI -3.79% -24.69% falling rising falling rising ma50 on 2017-02-24 2017-03-02
Agnico Eagle AEM -3.82% 19.77% falling rising falling rising ma50 on 2017-02-27 2017-03-02
Goldcorp GG -3.84% 4.52% falling rising falling rising ma50 on 2017-03-02 2017-03-02
Kinross Gold KGC -4.58% 14.83% falling rising falling rising ma50 on 2017-02-28 2017-03-02
Barrick Gold ABX -4.60% 32.84% falling rising falling rising ma200 on 2017-03-02 2017-03-02
Anglogold Ashanti AU -4.60% -17.16% falling rising falling rising ma50 on 2017-02-24 2017-03-02
Franco-Nevada FNV -6.04% 6.01% falling rising falling rising ma50 on 2017-03-02 2017-03-02
Eldorado Gold EGO -6.17% -2.03% falling rising falling rising ma50 on 2017-02-24 2017-03-02
Yamana Gold AUY -6.18% -8.19% falling falling falling rising ema9 on 2017-02-17 2017-03-02
Coeur Mining CDE -6.43% 100.25% falling falling falling falling ema9 on 2017-02-09 2017-03-02
Iamgold IAG -6.68% 55.13% falling rising falling rising ma50 on 2017-02-27 2017-03-02
Pan American PAAS -7.62% 72.23% falling rising rising rising ma50 on 2017-03-02 2017-03-02
Hecla Mining HL -7.86% 100.00% falling falling rising falling ma200 on 2017-02-27 2017-03-02
Pretium Gold PVG -8.03% 102.99% falling rising rising rising ma50 on 2017-03-02 2017-03-02
McEwen Mining MUX -8.60% 74.32% falling rising rising rising ma50 on 2017-02-27 2017-03-02
Silver Standard SSRI -8.90% 69.65% falling rising rising rising ema9 on 2017-03-02 2017-03-02
First Majestic AG -9.45% 85.17% falling rising falling rising ma50 on 2017-03-02 2017-03-02
Fortuna Silver FSM -10.75% 48.84% falling falling falling rising ema9 on 2017-02-24 2017-03-02
Endeavour Silver EXK -24.83% 91.86% falling falling falling rising ma50 on 2017-03-02 2017-03-02

 

MJB's picture
MJB
Status: Silver Member (Offline)
Joined: Jan 5 2016
Posts: 117
A lot of red..

Man that's a lot of red.

Dave do you see a floor in the silver price? How low can we go in your opinion? 

I am tempted to get in soon via long futures (July or Sep) or call options (same months). Thoughts on price points?

Cold Rain's picture
Cold Rain
Status: Gold Member (Offline)
Joined: Jul 26 2016
Posts: 372
Support

So much for all that support at $1230.

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5465
silver floors

MJB-

Well one level could be 16.25 and/or the 50 MA.  But it could stop short of that.  It just depends on when those dip-buyers appear.

Today doesn't look too bad for the metals, but we'll just have to see.  I think the miners need to cooperate too.  Let's see how we close.

Rate rise changes are now at 86% after a speech by Yellen.  Looks like a done deal.  Gold is rallying, buck selling off.  Not sure what that's about, but I like it.

I guess I'm not seeing some massive $150 drop in the cards for gold, and probably not a huge drop for silver - although that's still up in the air.  If commodity prices keep dropping, that will be hard on silver.

@CR:

Look at that.  Gold back above 1230.

MJB's picture
MJB
Status: Silver Member (Offline)
Joined: Jan 5 2016
Posts: 117
Sounds like a HOLD opinion

David Morgan also advocating for a wait and see position.

Rate rise changes are now at 86% after a speech by Yellen.  Looks like a done deal.  Gold is rallying, buck selling off.  Not sure what that's about, but I like it.

Jim Rickards has been saying interest rate rise will be good for gold. I will try and find the article again and post. I can't help but think something is going to break. How can Europe and Japan still be negative and we are increasing? Maybe FED throws a curve and increases by more than a quarter point. That would get interesting.

Cold Rain's picture
Cold Rain
Status: Gold Member (Offline)
Joined: Jul 26 2016
Posts: 372
davefairtex wrote: MJB- Well
davefairtex wrote:

MJB-

Well one level could be 16.25 and/or the 50 MA.  But it could stop short of that.  It just depends on when those dip-buyers appear.

Today doesn't look too bad for the metals, but we'll just have to see.  I think the miners need to cooperate too.  Let's see how we close.

Rate rise changes are now at 86% after a speech by Yellen.  Looks like a done deal.  Gold is rallying, buck selling off.  Not sure what that's about, but I like it.

I guess I'm not seeing some massive $150 drop in the cards for gold, and probably not a huge drop for silver - although that's still up in the air.  If commodity prices keep dropping, that will be hard on silver.

@CR:

Look at that.  Gold back above 1230.

Yep, definitely a good sign to bounce above that level.  Hopefully, we close above.  Your point about the miners is key.  No reason miners shouldn't be a buy if metals prices are projected to rise.  It will be key to see some stability and upward movement there, which as you have pointed out, has been missing lately.

MJB's picture
MJB
Status: Silver Member (Offline)
Joined: Jan 5 2016
Posts: 117
LBMA -Thompson Reuters

https://www.google.com/amp/www.nasdaq.com/article/cme-thomson-reuters-st...

The good stuff always comes out on Friday after the close.. I need a little help understanding the effect this will have and don't anticipate much from the MSM. Think it's safe to assume the auctioneers seat at the LBMA is very hot right now, hence TR's decision. Also worth remembering the recent slam came from Europe. I wonder if regulators are finally paying attention?

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