PM Daily Market Commentary - 3/8/2017

davefairtex
By davefairtex on Thu, Mar 9, 2017 - 2:17am

 

Gold plunged -7.80 to 1208.10 on moderate volume, while silver fell -0.27 to 17.25 on moderately light volume. As with yesterday, it was a bearish day for the metals; in addition to gold and silver, platinum, palladium, and copper all fell, with platinum dropping most.  The rising dollar didn't help, but also was not the cause of the trouble.  Overall, it appears as though commodities are headed lower.

Gold rallied slightly in Asia, sold off during London trading, and then moved sideways during the US session.  Candle print was a long black candle, which the code thinks is bearish. The volume remains relatively light, which continues to suggest that the selling wasn't all that intense. Today's drop stopped more or less at the 50 MA. There is no material change from yesterday; I think the problem for gold right now is there just aren't any buyers. Gold is oversold (RSI-7=21) and has now fallen 4 days out of the last 5.

Open interest at COMEX for GC fell -3,512 contracts.

Rate rise chances (March 2017) rose to 89%.

Silver's decline is much steeper than gold; silver is now through its 50 MA. Candle print today was a “closing black marubozu” which the code says is bearish. When something closes at the lows for the day, that's almost always a bearish sign.  Silver too has fallen for 4 of the past 5 days.  As with gold, the volume over the last few days is relatively light.  This suggests that the drop is mostly about a lack of buyers rather than a massive long liquidation.   Contrast that with what you will see later in platinum and crude, where the volume is very large.  The gold/silver ratio rose +0.61 to 70.03.

Miners opened lower, tried to rally, and mostly failed; GDX fell -0.74% on light volume, while GDXJ dropped -1.16% on very light volume. Judging by the declining volume and the look of the chart, the selling pressure in the miners is growing weaker; I suspect if gold were to stop dropping, the buyers would come out in force. Miners are oversold, with RSI-7=17.  The candle print was a “spinning top”, which the code found to be bullish; a 47% chance of marking the low. That's very bullish for a spinning top.

Platinum fell -1.54%, palladium dropped -0.39%, and copper lost -0.86%. It was yet another bad day for the metals. The selling in platinum is very heavy; volume continues to be quite large, and the decline very steep.  Here's what that looks like:

The buck rose +0.26 to 101.95; the rising dollar puts some pressure on the metals, but the rising currency accounts for less than half of gold's decline today. The recent commodity downtrend has sent both CAD and AUD into tailspins.  The Euro is moving lower, but not very rapidly.

Crude absolutely cratered today, down -2.55 [-4.82%] to 50.39. Crude drifted lower into the EIA report release, jumped higher immediately after the report was released, and then spent the rest of the day selling off relentlessly. EIA reported an inventory build of +8.2 million barrels; it was a bearish report, but less bearish than yesterday's API report.  For some reason, the report finally mattered.  Whomever was stepping up to “buy the dips” over the past 12 weeks showed up only briefly, and then vanished, leaving the sellers firmly in control. Candle print was a “black marubozu/strong line” which is quite bearish. You can see crude has now broken convincingly below the (rough) 51-55 trading range that has held for the past 3 months.  This all looks pretty horrid.  The large number of managed money longs that are at risk for liquidation means the price could drop a very long way before the selling pressure abates.  We'll just have to see how things go.  I'm guessing the shale drillers have hedged a large amount of their future production at around 54.

SPX fell -5.41 to 2362.98. Many sectors actually rose today, with cyclicals leading (XLY:+0.42%); it was a huge drop in energy equities that dragged the market down (XLE:-2.60%) with utilities not far behind (XLU:-1.60%). VIX rose +0.41 to 11.86.

TLT fell -0.54%, making another new low. TLT is just above the lows set back in December 2016. A breakdown here could lead to a fair amount of selling in TLT.

The decline in JNK is accelerating, off a big -0.74% today. JNK is heading full speed towards its 200 MA, and it is strongly signaling “risk off.” JNK is quite oversold, but historically JNK can fall a long way before the dip-buyers start to appear. Today's “closing black marubozu” is very bearish according to the candle code, and is not signaling any sort of low for JNK.

CRB fell a massive -1.58%, pulling the commodity index well below its 200 MA. Commodities are now clearly in a downtrend. 4 of 5 groups fell today, with the biggest loss coming from energy.

It was another day where everything except the dollar fell.  Equities are holding up best; I'd guess because of capital flows from other places.  For sure the GDP Now estimate of 1.3% for Q1 2017 isn't the reason for the relative ongoing strength in equities.

It appears as though traders have run out of patience for the oil recovery - there is no telling how much selling we will see before oil reverses.  It all depends on how many of those managed money longs decide to bail out.

PM appears to be caught in a commodity downdraft.  Other things are being hit far worse than gold.  The relatively lower trading volumes seen in gold, silver, and the miners are faintly bullish clues that at least for now, there is no massive liquidation in the space.  If and when the commodity pressure abates, we should see some decent buying - probably starting first with the mining shares.

But so far, that hasn't happened.  Market always moves in cycles, we're in a down cycle right now, and if you are looking to go long, now its time to just wait for the other buyers to show up.

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4 Comments

Cold Rain's picture
Cold Rain
Status: Gold Member (Offline)
Joined: Jul 26 2016
Posts: 321
Dive Dive Dive

$16 handle on silver and about to be an $1100 handle on gold.  Everything getting sold.  Dollar down. PMs down.  Crude down.  Stocks down.  Bonds down.  Yikes.

cmartenson's picture
cmartenson
Status: Diamond Member (Offline)
Joined: Jun 7 2007
Posts: 5568
No, not really.
Cold Rain wrote:

$16 handle on silver and about to be an $1100 handle on gold.  Everything getting sold.  Dollar down. PMs down.  Crude down.  Stocks down.  Bonds down.  Yikes.

True, except that for stocks the ""market"" suddenly, and without warning, once again decided "enough is enough!" and u-turned on all indexes like a flock of birds heading for the sky.  Nothing but green ever since.

10 green five minute candles in a row.

Nobody will every convince me that this is anything but a completely manipulated ""market"".  

The 'who' and the 'why' are up for debate, but not the fact of.

 

Cold Rain's picture
Cold Rain
Status: Gold Member (Offline)
Joined: Jul 26 2016
Posts: 321
It was me
cmartenson wrote:
Cold Rain wrote:

$16 handle on silver and about to be an $1100 handle on gold.  Everything getting sold.  Dollar down. PMs down.  Crude down.  Stocks down.  Bonds down.  Yikes.

True, except that for stocks the ""market"" suddenly, and without warning, once again decided "enough is enough!" and u-turned on all indexes like a flock of birds heading for the sky.  Nothing but green ever since.

10 green five minute candles in a row.

Nobody will every convince me that this is anything but a completely manipulated ""market"".  

The 'who' and the 'why' are up for debate, but not the fact of.

 

I knew as soon as I typed that, it would turn around.  But seriously, I agree with you 100%.  The "why" is the real conundrum.  It's like the fear of even a moderate correction at this point is just overwhelming they can't let it slip...not even a little.

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5059
late-day oil bounce

Oil equities have been beaten with the ugly stick now for weeks.  They may have put in a low today; most likely, that oil equity rally helped SPX to bounce.  At least, that's the thing I noticed recovering.

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