PM Daily Market Commentary - 4/3/2017

davefairtex
By davefairtex on Tue, Apr 4, 2017 - 3:09am

 

Gold rallied +3.80 to 1255.40 on very light volume, while silver rose +0.01 to 18.28 on moderate volume.

Gold drifted lower in Asia and London, spiking higher just after 10 am in the US, and retaining most of the gains into the close. Candle print: spinning top/swing low, which the candle code finds very bullish. Coming on a day when the buck moved higher, its a pretty good performance. I'm not sure what caused the spike, but its a bullish outcome, especially since gold closed right at the highs for the day.  One odd thing: the volume in the past few days has been quite low, which is not what you want to see in a rally.

Open interest at COMEX for GC rose +5,311 contracts.

Rate rise chances (June 2017) moved up to 62%.

Silver sold off also, but found support at the 200 MA and bounced back by end of day to close virtually unchanged. It was a narrow trading range day, which resulted in a doji/high wave/NR7 candle print, which the candle code finds to be bullish. Silver is bouncing around near the top of its recent trading range. A break above 18.50 could lead to a nice spike higher as any remaining shorts bail out.

The gold/silver ratio rose +0.19 to 68.68.

Miners rallied fairly strongly today, with GDX up +1.71% on moderate volume while GDXJ was up +1.81% on moderately light volume. The closing white marubozu candle print for GDX is (surprisingly) slightly bearish, but its also a swing low, and GDX also managed to close back above the 9 EMA - I'm going to rate that as somewhat bullish. The good performance in the miners today has caused the GDX:$GOLD ratio to rally significantly for the first time in more than two weeks. That's a good sign. The miners really need a close above the 50 MA to move into a bullish mode, but today was a big improvement over what we've seen recently from the mining shares.

Platinum rose +0.71%, palladium rallied +0.59%, but copper dropped hard, losing -1.85%. Platinum printed a very bullish confirmation off Friday's takuri line candle – a 93% chance of marking the low. That's about as good as it gets. Copper is looking ugly; last week's rally was entirely wiped out and more by today's drop. A drop below the 2.57 previous low might be signaling bad news ahead for the global economy. Copper is in a downtrend, and that seems to be where we are headed.

The buck gapped up at the open and more or less chopped sideways for the day in a narrow range, printing a doji/NR7 candle which the code felt was more bullish than bearish. The buck is hovering just beneath its 50 MA; a close above it would be bullish. Buck remains in an uptrend.

Crude fell -0.54 to 50.31, printing a short black candle which the code finds only slightly bearish. Libya reported that its 220kbpd field is back online. Perhaps that was the problem. The API releases its inventory report after market close tomorrow. After the strong rally last week, oil appears to be taking a rest.

SPX fell today, dropping -3.88 to 2358.84. The plunge happened early, but then the dip-buyers appeared towards end of day and pushed prices back up. Candle print was a “high wave”, which the code felt was bullish. SPX remains in a downtrend (lower highs, lower lows) but today's reaction to the early sell-off was definitely bullish. The sector map looks bearish however; best performer was sickcare (XLV:+0.08%) while the worst was consumer cyclicals (XLY:-0.40%). XLY also printed a bearish-looking swing high today.

VIX rose +0.01 to 12.38.

TLT jumped higher, up +0.80%, printing a strong looking white marubozu that was also a very bullish swing low. The strength in bonds strongly suggests risk off, regardless of how SPX ended the day. Bonds look poised to break higher; a breakout above the downtrend line would be quite bullish - for bonds anyway.  Bearish for equities.  TLT is saying "risk off".

JNK gapped down hard at the open, and traded sideways for the day, printing a doji/swing high, which the code finds bearish. JNK is saying risk off right now.

CRB fell -0.73%, printing an ugly-looking bearish engulfing and a swing high which took CRB below its 9 EMA. 4 of 5 sectors fell, led by industrial metals which have fallen hard now two days in a row.

Today I'm looking at the long bond for my clues; it rallied quite strongly, while at the same time JNK dropped. This suggests that traders don't quite believe in the SPX rebound. Falling copper prices signal possible economic weakness ahead. Right now, gold and silver appear to be trading as monetary items; market seems to be treating them as cash. Why do I say that? Over the past month, the correlation between gold and TLT is very high.

Based on this, if SPX does correct, I'd expect a gold rally. And that's the hints we are getting – from TLT, JNK, and copper. And maybe the miners have worked through their period-o-weakness.

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3 Comments

jussaumm's picture
jussaumm
Status: Member (Offline)
Joined: Feb 16 2016
Posts: 20
Agree or not?

Hi Dave,

I was wondering if you agreed with Chris' assessment that there are powerful actors out there who will not let the major market indices drop 1% without acting? 

Thanks

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5408
money flows

After experiencing Trump now for months, I've realized that sometimes people say things for effect.  Or, they believe "directionally" what they are saying, but perhaps not numerically.  If we translate the statement and don't focus on the 1% so closely, we can come up with something like:

"there is a lot of money flow into the market right now, and in aggregate, that money appears eager to buy the dips."  It is difficult for a correction to occur in that situation.

I'd guess that a fair amount of that money is from all the QE that is still happening every month, in Japan and at the ECB.  If that ever stops, the "powerful actor" effect may stop at the same time.  Dip buyers could well be buying because they can see specifically who else happens to be buying, and they have figured out that as long as money printing/equity buying is happening, the wind is at their backs.

Somebody, somewhere, knows very specifically what the central banks are buying.  They can see the order flow - where the money is going.  And they use this information to inform their own trading.  That's my guess as to what's really happening.

Trump said, "Obama wiretapped me!"  In reality, the NSA/CIA collects literally everything, everywhere, and someone inside the administration fished out the Trump-related intercepts from among everything that was collected.  Trump may not have been accurate about the specifics (i.e. there were no Watergate Plumbers), but directionally, he was correct.

In spite of those money flows, I do think the Trump Rally could be unwound in a hurry if Trump's tax plan and/or his infrastructure spending plan runs into problems in Congress.

 

jussaumm's picture
jussaumm
Status: Member (Offline)
Joined: Feb 16 2016
Posts: 20
Many thanks

Appreciate the thoughtful response.

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