PM Daily Market Commentary - 3/27/2017

davefairtex
By davefairtex on Tue, Mar 28, 2017 - 4:09am

Gold rose +10.90 to 1257.30 on moderate volume, while silver shot up +0.35 to 18.12 on moderate volume also. Silver was the star today, breaking out to new highs and rallying strongly into the close. A falling dollar helped the PM rally effort, although a USD rally around mid-day in the US put a cap on the move higher.

Intraday, gold gapped up at the open in Asia and continued to move higher right up to the US open. It appeared as though gold was preparing to break through the 200 MA just at the open (hitting a new high of 1261), but minutes later, gold was hit by a wall of selling which drove price down about $10 over the next few hours. The assaults seemed to weaken gold's enthusiasm for the remainder of the day . Gold never did regain its highs, but ultimately the selling did not result in a bearish candle print. Candle print was an “opening white marubozu” and also a minor swing low, which the candle code thinks is bullish. On the chart we can see that gold rallied right up to the 200 MA, but was unable to rise above it. A close above that 200 MA would be a very bullish sign. Gold is moving into overbought territory, with RSI-7=79.

Open interest at COMEX for GC rose +11,909 contracts. That's another high volume day for open interest.

Rate rise chances (June 2017) fell to 50%.

Silver rallied alongside gold, but suffered less than gold did from the wall of selling just before mid-day, and recovered nicely back to close near the highs. Candle print: long white candle, which the code found slightly bullish. I expect the code is a bit concerned about the overbought situation; silver's RSI-7=78, similar to gold. However when silver rallies hard, it can move much further into overbought territory before it finally runs out of steam. On the chart we see silver managed to close just above its 200 MA, which is bullish, as is the accelerating pace of the rally. Volume is just a little light.  Perhaps the buying pressure isn't coming from COMEX. Next resistance level is at 18.50.

The gold/silver ratio fell -0.75 to 69.37; it has been falling now for 3 days straight. That's bullish.

Miners gapped up strongly at the open, but sold off hard in the first 30 minutes as gold was smashed. Miners did recover, but never quite regained the highs of the day. GDX was up +2.23% on moderate volume, while GDXJ climbed +2.04% on moderate volume too. Candle print for GDX was a confirmed bullish NR7, which the code finds to be bullish. GDXJ was not so fortunate; it printed a spinning top/NR7, which the code thinks is mildly bearish. GDXJ continues to underperform GDX, which is a sign of risk off in the miners. GDX really needs a close above the 50 to get back in sync with the metals.

Platinum rose +0.45%, palladium plunged -1.71%, and copper was mostly unchanged, down -0.08%. There were some pretty wild moves today; platinum printed a high volume (bearish) large gravestone doji, while copper showed an equally large (bullish) dragonfly doji. Copper's dragonfly has a 66% chance of forming a low (very high for a single-candle pattern), while platinum's bearish candle look more like just a 25% chance of marking the stop. Palladium's bearish engulfing has a 39% chance of printing a top. Copper's move looks to be the most significant. Something got copper traders all excited at about 11:30, and boy did it take off.


The buck fell -0.47 to 98.97, breaking below the H&S neckline for the first time. It did manage to bounce back somewhat, but the candle print was still bearish: an opening black marubozu, which suggests the buck will continue moving lower. The Euro broke out to new highs as a result (108.65), as did the pound. The pound has been rallying into PM May's announced schedule for triggering Article 50; make what you will of that.  BRExit will happen, it won't be the end of the world, and once Italy has their election, May will look like a genius for her fantastic timing.

Crude fell -0.29 to 47.85; it was pounded down hard in Asia and London, but buyers appeared at around 47 which dragged crude back up by end of day. Candle print was a hammer, which was (perhaps) a 37% chance of marking the low. We really need a confirmation tomorrow for oil to look more than mildly bullish. Crude seems to have decent support around the 47-48 level. API report is due out tomorrow after market close. There is a fair amount of chatter about Permian basin wells having a cost of $20/bbl. That region is where all the growth in rig counts has happened, so there may be some truth to the story. The oil majors (Exxon, and Chevron) have been big buyers of drilling rights recently.  While shale was a "land ponzi scam" a few years back, I suspect the majors are well aware of current shale economics at this point.

http://www.cnbc.com/2017/01/17/exxon-mobil-doubles-oil-and-gas-holdings-in-permian-for-56-billion.html

SPX fell -2.39 to 2341.59; e-mini futures fell hard in Asia, but the buying started right at the open in NY, and it didn't stop until late in the afternoon. Energy did worst (XLE:-0.47%) while sickcare was best (XLV:+0.27%). The “long white” candle was neutral - neither bullish nor bearish. This is not a reversal bar for equities.

VIX fell -0.46 to 12.50 – after first reaching 15 at the open and then selling off all day.

TLT rose +0.45% making a new high and moving to the top of its recent trading range. TLT appears to be enjoying the bearish sentiment in equities. Trend is still up. Risk off.

JNK fell -0.19%, not doing much of anything today. JNK remains in a downtrend. Risk off.

CRB fell -0.20% but printed a dragonfly doji, which looks like it might be a reversal bar. 4 of 5 sectors dropped, the sole winner being PM. CRB remains in a downtrend.

My read is that the market is now is a “show-me” mood regarding Trump and his tax plan. “Make America Great/Hitler” has now morphed into “Can't Get Anything Done/Bumbler.”  That's dollar-negative.  Note: it turns out, Hitler was good for stock prices.  Well, right up until Stalingrad anyway.  Food for thought.

http://www.investmentoffice.com/io/Investment_Thoughts/Markets_in_History/Germany_CDAX_Index_1930_1950.php

Money still appears to be steadily leaving the US for other places. The dollar's break below 99 is an ominous sign – well, its not ominous for gold, but it is for the price of US assets.

If you're worried about where gold goes next, watch silver. Today for instance when gold was assaulted, silver dropped modestly, and then bounced right back up again. I've never yet seen a case where, if silver rallies, gold drops hard. Right now silver is on a roll, and these silver moves can go for longer than you might expect.

I also get the sense that the buying pressure in silver isn't coming from the COMEX.

Miners still look weak. When the juniors under-perform the seniors, that's never a great sign. That's the one fly in the ointment in the current gold rally.  That's not to say I think the miners will crater while gold continues moving higher.  Its just that if we have a correction in PM, miners will probably drop really hard.  Gold and silver seem like safer bets to me right now, just based on how things are trading.

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11 Comments

vadim_75's picture
vadim_75
Status: Bronze Member (Offline)
Joined: Oct 18 2015
Posts: 48
Miners

It's just getting weirder... as to silver miners it's insane. On the other hand algorithms may not know that silver miners' business has something to do with silver...

Strange times. 

Cold Rain's picture
Cold Rain
Status: Gold Member (Offline)
Joined: Jul 26 2016
Posts: 364
Strange....or Not?
vadim_75 wrote:

It's just getting weirder... as to silver miners it's insane. On the other hand algorithms may not know that silver miners' business has something to do with silver...

Strange times. 

Either the miners have no relation to the price of PMs, such that as the price of the metal moves higher, the miners, whose profitability has no correlation to the higher metal price, drift sideways or decline (Strange), or

The smart money knows that the PM price is about to be smashed and is, of course, not buying shares, thus keeping the lid on any momentum surge in the sector (Not Strange...actually very much the normal MO of the day).

Regarding the equity markets, it is entertaining to watch the narrative shift from Friday to Tuesday:

Friday:  Market declines on uncertainty around the repeal and replace of Obamacare.

Tuesday:  Market surges now that it appears likely that the government will no longer be bogged down with healthcare and can focus on more important things like Tax Reform.

How about this:  You never have to ever worry about the market ever going down ever again for any reason ever.  In fact, you never ever ever have to ever even ever worry about a 5% correction ever.  In fact, every stock will always go up forever except the miners, who will never ever go up ever ever.

Cold Rain's picture
Cold Rain
Status: Gold Member (Offline)
Joined: Jul 26 2016
Posts: 364
Day Early

Dave, I was a day early.  Here we go!

vadim_75's picture
vadim_75
Status: Bronze Member (Offline)
Joined: Oct 18 2015
Posts: 48
RE: how about this...Bravo!

CR, Ok i admit it's rigged much more than i thought. Today is a very important day. Whoever's been selling miners recently and especially today knew for sure (not guessing, 100% sure)  that usd/jpy wouldn't break 110, and direction for gold is only down. I can't find any other explanation.

 

 

 

 

Cold Rain's picture
Cold Rain
Status: Gold Member (Offline)
Joined: Jul 26 2016
Posts: 364
Lower Bob
vadim_75 wrote:

CR, Ok i admit it's rigged much more than i thought. Today is a very important day. Whoever's been selling miners recently and especially today knew for sure (not guessing, 100% sure)  that usd/jpy wouldn't break 110, and direction for gold is only down. I can't find any other explanation.

 

 

 

 

How low do you think miners will eventually go before they turn around for a real bull run?  You think they make it all the way back down to their 2015 lows?

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5418
agree

Vad-

I agree.  I can't explain it, all I can do is change my strategy accordingly.  If money is flowing out of the miners, I'd prefer to just watch from the sidelines.

Silver today is once again hanging tough.  That tells me: keep the silver!

 

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5418
how far down

CR-

I've kind of concluded its a bit of a fool's game to try to predict "how long things will drop".  I've never seen anyone do a very good job with that.  I look at support and stuff, but I don't treat it like any sort of gospel truth.

Now I just try to watch how the market is reacting to whatever is going on.

For instance, lately the miners look ill.  So I sold.  When they stop looking ill, I'll buy them back again.

I try not to have expectations.  It doesn't always work.  Expectations tend to creep back in.

Right now, oil seems to be hanging tough at 47.  I'm not sure it bounces here, but it probably doesn't go much lower.  I'm guessing this from the number of times it has bounced.around these levels. 

And just one more observation.  Its ok for Chris to get really upset that the market hasn't crashed yet.  He has his reasons.  But if you try to trade with that mindset, that's extremely dangerous - for you.  Its a fantastic way to lose money.

My old tennis coach used to try and get us all to relax.  He would say, "your pulse should never go above resting."  I think about that with the market.  If I can watch what happens, and my pulse never goes above resting, I tend to do a lot better.

Today XLF printed a strong-looking swing low.  If you are short, you should have bailed out.  No gnashing of teeth - just bail out.  Odds are against you now, for whatever reason.

SPX looks strong too.  TLT printed a swing high.  All the signals say, "no crash today."

Luke Moffat's picture
Luke Moffat
Status: Gold Member (Offline)
Joined: Jan 25 2014
Posts: 377
Indifference
davefairtex wrote:

Today XLF printed a strong-looking swing low.  If you are short, you should have bailed out.  No gnashing of teeth - just bail out.  Odds are against you now, for whatever reason.

SPX looks strong too.  TLT printed a swing high.  All the signals say, "no crash today."

I kind of come to the table with the attitude that my opinion doesn't matter and learning that's the best approach. By ditching my arrogance I've also ditched my anger - when stuff goes against me I don't fight it. I'm starting to view the "market" as a series of waves. There's nothing fundamental about it other than a string of digital tokens jumping between the various trading products. It's also really boring.

Note: still keeping an eye on DAX and FTSE despite today's jump. Relative Strength Indicators are my emotional whack-a-mole :)

Cold Rain's picture
Cold Rain
Status: Gold Member (Offline)
Joined: Jul 26 2016
Posts: 364
Spot On

Dave,

Your rationale is spot on.  Leave emotion at the door and trade on what is.  Price is what matters in the end.  The thing I don't really get regarding the equity markets is why you used to get corrections along the way up, but you don't anymore.  The common thinking is that the farther you stretch the band up, the harder it snaps back down.  But does that rule even apply anymore?  It's hard to see how it doesn't, but again, what is, is.

And it doesn't matter what the news is.  Trumpcare moving forward.  Market up.  Trumpcare obliterated.  Market up.  Richmond Fed sharply higher.  Market up.  Richmond Fed sharply lower.  Market up.  Consumer sentiment sharply higher.  Market up.  Consumer sentiment sharply lower.  Market up.  Trump going to lose the election.  Market up.  Trump wins the election.  Market up.  The Fed stands pat.  Market up.  The Fed hikes 10 times in a row.  Market up.  Deflation increasing.  Market up.  Stagflation setting in.  Market up.  Inflation coming.  Market up.  A moose farts.  Market up.

Is the only pillar supporting the entire system the value of equities?  It would seem like it, based on the behavior of the stock market.

Anyway, I hope we find out the truth about this one day.

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5418
my own emotions

CR-

Using my own emotions as a guide, I really thought this time might be "it" since I saw the short unfolding but I didn't feel like taking it.  I have been thoroughly convinced against going short.  That's usually about the time when a short is the right thing to do.  :)

All the behavior you describe is an uptrend.  Money is flowing into the market from somewhere.  When it stops flowing in, that's when we'll get a correction.

I expect people in 1999-2000 felt similarly frustrated.

Its really important not to get emotionally exhausted by things going against you.  Easy to say, difficult to do.

This is why I work on my analysis software.  I need something else sitting beside me to help prevent me from freaking out.  "Oh, my code told me this.  Stupid code, how can you have been so wrong?"

Its an AI scapegoat.  Everyone needs a scapegoat!

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5418
indifference

Luke-

Yeah, none of our opinions matter unless we have billions of dollars to move around the market.  Then, they do matter.  :)  Until then, we are best served by observation and neutrality (as best we can do).

I agree too about ditching arrogance & anger.  (Cue Yoda: "Fear leads to anger.  Anger leads to hate.  Hate leads to suffering.")  Boy does it ever.

I have inflicted too much suffering on myself in the past to believe that's the right path to take.

My AI scapegoat helps too.  :)

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