PM Daily Market Commentary - 4/4/2017

By davefairtex on Wed, Apr 5, 2017 - 2:51am

Gold rallied +2.60 to 1258.00 on very light volume, while silver rose +0.04 to 18.32 on moderate volume.  Really, not much happened today in the PM or currency space.

Gold's candle print today was a spinning top with just an upper shadow, which looked a lot like a shooting star (failed rally) candle print. The code finds this spinning top somewhat bearish; a 30% chance of marking a top. On the chart we see gold attempting to rise above its 200 MA and failing. Volume remains low. A close above the 200 would probably see a substantial spike higher as the shorts run for cover. I'd say the odds favor a breakout right now.  From what I've seen, the commercials just don't like seeing a resistance line go unbroken for too long - the chance of running the stops (in both directions) seems just too enticing to pass up.

Open interest at COMEX for GC rose +8,469 contracts.

Rate rise chances (June 2017) remain at 62%.

Silver rallied higher breaking above its recent trading range, but it too failed to hold onto its gains, printing a doji/conf NR7 candle pattern. The doji is bearish, the confirmed NR7 is bullish – so we call it neutral. Another interpretation is, strong forces are pulling in both directions. Resistance remains at the previous highs around 18.50. I suspect the market will find a way to poke through 18.50.  Uptrend remains intact.

The gold/silver ratio fell -0.01 to 68.67.

Miners moved higher today, with GDX up +1.08% on light volume while GDXJ was up +1.09% on very light volume. The trading range today was fairly narrow, but the light buying pressure was enough to push prices just over the 50 MA by the close. The spinning top candle print was neutral, which suggests the current uptrend remains in place. Miners closed at the highs, which is also a good sign.  The declining volume is bearish, but until we get a reversal bar, momentum remains pointing higher.

Platinum rose +0.44%, palladium rallied +0.43%, and copper rallied too, up +0.48%. Copper managed to avoid sinking lower today, but today's print was probably not a low.

The buck tried rallying today but failed, printing a spinning top/NR7 which the code found neither bullish nor bearish. The buck is hovering just below its 50 MA, and it doesn't look to be in any hurry to break higher. I think it needs some bad news out of Europe, or some good news in the US.

Crude shot up +0.91 to 51.22, making a new high. There are hints from outside the US that the oil glut is starting to fall off; tanker traffic is down 16% this year. Is it possible that the oil builds in the US are a shale-driven phenomenon and do not represent the true state of world oil supplies? We need access to those satellite recon photos from Orbital Insight. Then we'd know more.

API report shows both an oil and a gasoline inventory draw. This didn't cause much of a reaction from price. EIA report tomorrow at 10:30. Candle code found today's “long white” candle to be relatively bullish. I suspect that there are a group of traders who actually know the state of world oil supplies - and that's why the bid remains underneath the oil market.

SPX inched higher, moving up +1.32 to 2360.16, selling off in the early morning but then rallying into the close. Candle print: closing white marubozu, which the code finds relatively bullish. SPX closed just above its 9 EMA. Sector map shows energy did best (XLE:+0.73%) while consumer cyclicals did worst (XLY:-0.16%). Without the energy rally, we probably fell today. Here's where you can see the sector map for yourself:

VIX fell -0.59 to 11.79.

TLT fell -0.54%, giving up more than half of yesterday's move higher. Print was a bearish harami/closing black marubozu. Code said the harami was mildly bearish, but the marubozu was actually quite bullish. Let's say we should probably buy this dip in TLT.

JNK moved sideways, closing up just +0.03%. Candle code felt the doji print today was bearish. JNK appears to be trying to decide which way it should go; continue lower after the swing high, or find support at the 9 EMA in preparation for a breakout.

CRB rose +0.58%, moving back above the 9 EMA and regaining more than half of yesterday's losses. 3 of 5 groups rallied, led by energy. CRB is still struggling. The livestock group has had a bad last 3 weeks and agriculture has been heading lower since mid-February.

In spite of the mildly bearish ratings from gold and silver, I suspect we'll see both metals poke their respective heads above resistance lines, even if just to make life difficult for the shorts. Uptrends remain in place. Even the miners are looking healthier now.

And this is before we get any exciting news from Europe, or some less-than-pleasant news out of Congress regarding Trump's attempts to Make America Great Again (with a pile of borrowed money).

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davefairtex's picture
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5683
FOMC minutes -> SPX reversal

SPX was up almost 20 points when the FOMC minutes were released at 2pm.  SPX immediately started selling off, and didn't stop until the market closed.  Something in those minutes made SPX very unhappy.

Gold on the other hand rallied back to even after being down perhaps $10.

I haven't seen a reaction like this in a while.  Here's what Econoday had to say - the part in bold is the area I believe that got SPX to sell off.

The first details of winding down the Fed's $4.5 trillion balance sheet are out with the minutes from the March 14 & 15 FOMC meeting. Most of the policy makers see a change in their reinvestment program sometime this year, one that will include the phasing out of both the Fed's holdings of Treasuries and mortgage-backed securities. Not surprisingly, they hope that shrinking the balance sheet will be gradual and predictable and several of the members wanted a quantitative trigger for ending reinvestment. 

The March meeting included the third rate hike of the expansion and nearly all of the 17 members were in support of the move. Nearly all agreed the economy is at or near full employment but nearly all also agreed that they have yet to hit their sustained 2 percent inflation target. With the PCE index at 2.1 percent and the core at 1.75 percent, several said their inflation target will likely be hit this year which could necessitate faster rate hikes.

The outlook for fiscal policy has not been emphasized in the FOMC statements but most say increased government spending could result in greater economic growth. About half the members factored in higher government spending in their economic targets. FOMC statements have been citing strength in consumer confidence which the minutes say could also improve growth provided, however, that it actually translates into higher spending.

Though the end of reinvestment is now in the cards, the minutes do mention that a number of members favor resuming asset purchases should the economy suffer a sharp, unexpected decline. And in a line that may be triggering some selling in the stock market, members noted that stock valuations are "quite high."

Luke Moffat's picture
Luke Moffat
Status: Gold Member (Offline)
Joined: Jan 25 2014
Posts: 384
Europe not liking it either

DAX broke it's recent 12200 support - let's see what happens tomorrow. I went short yesterday as it was overbought on both the weekly and daily charts. I wouldn't take this as advice though - if I was any good I wouldn't have to get up for work in the morning :)

Cold Rain's picture
Cold Rain
Status: Gold Member (Offline)
Joined: Jul 26 2016
Posts: 380

Along with the Fed minutes, it's going to be interesting to see if the market now starts paying attention to the elevated "military response" talk toward North Korea.  The level of rhetoric has really ratcheted up over the last couple of months, with no real "event" having taken place to support it.  We just all of a sudden realized that we need to do something about NK, it seems.  And today, there was some tough talk about Syria.  That, and the "Russian/Trump Collusion Scandal" create several points of instability.  We could see a correction come pretty quick if anything escalates.  Things feel a little more precarious than usual right now.  They'd better dust off the intervention machine, if they haven't done so already. :)

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