PM Daily Market Commentary - 3/22/2017

davefairtex
By davefairtex on Thu, Mar 23, 2017 - 5:23am

 

Gold rose +7.20 to 1251.80 on moderately heavy volume, while silver was unchanged at 17.55 on light volume.  After the big plunge in bank stocks yesterday, today was fairly uneventful.
 

Gold rose in fits and starts today starting in Asia, topping out in the afternoon in the US at 1251.50.  Gold then sold off a bit into the close.  Candle print was a short “opening white marubozu”, which the candle code thinks is quite bullish. This marks 6 straight up days for gold following the FOMC announcement last Wednesday. At this rate, gold is about two days away from a test of the 200 MA and/or the previous high at 1262.   Its all good news right now for gold.

Open interest at COMEX for GC rose +7,601 contracts.

Rate rise chances (June 2017) remains at 54%.

Silver mostly just traded sideways within a range today, ending the day exactly where it started.  On the chart, silver printed a doji candle, which the candle code actually thinks is bullish. Silver is holding just above its 50 MA.

The gold/silver ratio rose +0.41 to 71.33. The gold/silver ratio has been steadily rising since the FOMC meeting announcement. This is less of a PM rally, and more of a gold rally.  Even so, silver isn't showing any signs of bearishness.

Miners rallied strongly at the open, but that lasted for about 45 minutes, after which the miners moved sideways-to-lower for the remainder of the day. By the end of the day, GDX was back to almost flat, down -0.04% on moderate volume, while GDXJ dropped -1.07% on light volume. Candle print for GDX was a short black candle which the code felt was mildly bearish. Print for GDXJ was a swing high, which the code felt was quite bearish. The junior miners are starting to look ill. Last time this happened, it predicted a more general sell-off in the PM space; I'm going to be watching these juniors very closely.

Platinum fell -0.39%, palladium climbed +0.43%, and copper rallied +1.17%. The candle code felt copper's “closing white marubozu” was bullish; 56% chance of a bounce here. That would be helpful. Copper downtrends make it hard for silver to move higher.

The buck moved steadily lower today, dropping -0.15 to 99.47. The candle print ended up being one of those "useless doji" candles which is neither bullish nor bearish.  Bottom line: no low for the buck yet.

Crude rose +0.01 to 48.16, but behind that penny move was a big sell-off making a new low to 47.01 following a bearish EIA report which showed a large 5.4 million barrel crude inventory build. Oil wasn't happy going into the report, and the bearish news caused it to spike down to its day low. However, it only spent a few moments at that price point because the buyers showed up and pushed prices steadily back to break-even. Dip-buying is alive and well in crude oil. The doji candle print was neutral; we need a bullish close tomorrow to mark a low.  (I'm surprised at the candle code's conclusion; to me, today was a high volume doji deep in oversold territory; theoretically that should be a reversal bar.  But what do I know?)

After yesterday's brisk move lower, SPX bounced back slightly, rising +4.43 to 2348.45.  Candle print was a spinning top, which the code found mildly bullish; 30% chance of a low here.  Print for XLF was a spinning top, which the code found more bullish: 47% chance of a low.  Tech led (XLK:+0.63%) while financials trailed (XLF:-0.21%).

Here's my current thought: market loves money flows in, and a tax cut and an infrastructure spending plan is all about pouring (borrowed) money into the economy.  Currently, all this stimulus is blocked behind the rearrange-the-deckchairs-on-the-sickcare-titanic bill that the Republicans are trying to move through Congress. If sickcare-titanic ends up taking a long time to founder (or, reach port), that means we're less likely to get that gush of (borrowed) money that the market is hoping to see.  And maybe it will never see it.  If that happens, it is probably good for a 15% drop in SPX right off the bat.  And maybe more.

VIX rose +0.34 to 12.81.

TLT rose another +0.40% today, having risen 5 of the last 6 days. Its “high wave” candle looks somewhat bearish. TLT is fairly well correlated with gold right now, and has been for the last month or so.  Today's move puts TLT more convincingly above its 50 MA, but since TLT remains mired in a pattern of lower highs and lower lows, it remains in a downtrend.

JNK rose +0.36%, printing a bullish-looking “closing white marubozu” which the code tells us is very bullish. After panicking out yesterday, traders rushed to buy the dip today. JNK seems to have found support at its 200 MA. Cautious risk on.

CRB fell -0.24%; commodities are doing better than oil, but not all that much better.

Things are still in a news-driven mode, I think.  Trump has been President now for a couple of months, the tweets have significantly trailed off, but nothing much has been done.

Bonds have managed to lift off their lows along with gold; silver is lagging behind, and now the junior miners are starting to look a bit ill.  That's not a lot of conviction for a PM rally; I like it when everything lines up and points in one direction or another.  And I do not think we've made a low in SPX just yet.  If we bounce here, I'm guessing that's the bounce you should short once it fades away.

Gold has been in a steady uptrend in Euros since the reversal on March 12th; perhaps that's the tell here.  As long as it keeps plugging higher, hopefully those miners will get the message and move higher too.

Hopefully.

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7 Comments

Cold Rain's picture
Cold Rain
Status: Gold Member (Offline)
Joined: Jul 26 2016
Posts: 327
About Time For DUST or JDST?

Just getting that feeling that it's about time to short PMs and miners again.  Your points above, Dave, are good, and we keep seeing miners not moving higher on these gold rallies.  That has been leading to a selloff in PMs and miners.  If the pattern holds, it's getting close to time to back up the truck on short positions.

dryam2000's picture
dryam2000
Status: Gold Member (Offline)
Joined: Sep 6 2009
Posts: 279
Miners

The PM's (physical) and the PM mining shares (the paper derivative associated with companies, many of which require financing to operate, have extensive counterparty risks, etc.) are very different animals.  Sure, there are short term correlations, but there are more differences than similarities over the long run.  

Gold has outperformed the Barrons gold mining index by 400% since 1971.

Gold/silver have inherent value without counterparty risks.  In the simplest terms, a mining company is someone standing on top of a hole in the ground with future promises to reward investors.  Most of us at this site are keenly aware how future promises of wealth seem to be turning out these days.

Just my $0.02

 

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5072
miner clues

CR-

Looking at the daily chart, GDX sure does look unhappy, and GDXJ looks even worse.  Of course it all depends on how we close.  That 50 MA sure is tough resistance.

GDX:GLD ratio dropped below its 9 EMA today.  Last time that happened, we still had another week or so of gold upside move left.  And if the rally in SPX today turns out to be a headfake, gold should do fairly well.

At this point I'm still positive on gold, but a lot less positive on the miners.  I just don't like how they are behaving.

 

Cold Rain's picture
Cold Rain
Status: Gold Member (Offline)
Joined: Jul 26 2016
Posts: 327
davefairtex
davefairtex wrote:

CR-

Looking at the daily chart, GDX sure does look unhappy, and GDXJ looks even worse.  Of course it all depends on how we close.  That 50 MA sure is tough resistance.

GDX:GLD ratio dropped below its 9 EMA today.  Last time that happened, we still had another week or so of gold upside move left.  And if the rally in SPX today turns out to be a headfake, gold should do fairly well.

At this point I'm still positive on gold, but a lot less positive on the miners.  I just don't like how they are behaving.

 

Dave, yeah I agree with you.  It speaks to there being interest in metals as a safe haven right now as opposed to overall bullishness in the sector, like there was in early 2016.  You've pointed that out before, and it seems to be where we are currently.  Maybe that'll change at some point.

dryam2000's picture
dryam2000
Status: Gold Member (Offline)
Joined: Sep 6 2009
Posts: 279
Deflation

Deflationary pressures are building.  The miners reflect this.  It's not any more complicated than this.

Jim H's picture
Jim H
Status: Diamond Member (Offline)
Joined: Jun 8 2009
Posts: 2379
SA...

My Seabridge stock (SA) ain't doing so bad today.....   Gold in the ground.. cheap.   

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5072
deflationary pressures

dryam

Deflationary pressures are building.  The miners reflect this.  It's not any more complicated than this.

Well I like uncomplicated things for sure, but I'm confused by this one.

If you produce a product whose price is rising (gold), and you experience deflation (you're a miner, in a "deflationary pressures are building" environment), that's a good thing, right?  Your income is increasing, and pretty much everything else on your P&L is a cost, so for you, deflation is great.

Or do you mean something else when you say "deflationary pressure?"

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