PM Daily Market Commentary - 4/11/2017

davefairtex
By davefairtex on Wed, Apr 12, 2017 - 3:32am

 

Gold rose +20.10 to 1276.50 on heavy volume, while silver shot up +0.39 to 18.34 on heavy volume also. Gold rose slowly higher in Asia and London, and then took off more seriously for reasons unknown a little bit after 8am in the US. Silver started its move about 15 minutes later, at about 8:20am. Both gold and silver continued moving higher right into the close. While the buck fell, it was not the proximate cause of gold's rally.

Yesterday gold printed a neutral doji candle; today's single candle was a closing white marubozu/strong line, which also confirmed yesterday's doji.  While dojis on their own are typically not so useful, doji candles that are followed by a strong rally ("confirmed" dojis) can be quite bullish - and this one certainly is. The move today took gold cleanly through the 200 MA and to a new multi-month high that dates back to levels last seen immediately after Trump's election back in November.

Open interest at COMEX for GC rose +26,742 contracts, or 83 tons of paper gold.

Rate rise chances (June 2017) fell 5% to 62%.

Silver moved more strongly than gold, but it also had more ground to make up after last Friday's smash. Candle print was a closing white marubozu/swing low/confirmed southern doji/strong line. It all adds up to a very bullish rating from the candle code. Silver is now back above all 3 moving averages. Unlike gold, it did not make new highs, but it did about as well as one might hope, especially given the bearish-looking COT report from last week.

The gold/silver ratio fell -0.41 to 69.62.

Miners gapped up at the open and rallied for most of the day; GDX was up +3.00% on heavy volume, while GDXJ rose +1.96% on moderate volume. GDX made a new high, and printed a long white candle, which was relatively bullish. GDXJ's smaller move appeared capped by the 50 MA, and its spinning top candle was seen as actually somewhat bearish by the candle code. While miners did ok, they didn't do all that well considering the strength of the rally in the metals today, and the GDXJ:GDX ratio continues to plummet as it has done for the past 5 weeks. The junior miners continue to wave the caution flag. I don't know why, but it has been a clear trend for a while now, and its a sign of risk off in PM.  Here's what that GDXJ chart looks like:

Platinum shot up +3.24%, palladium rose +2.11% and copper inched up just +0.10%. Platinum's huge move resulted in a swing low/strong line candle print (very bullish), and palladium's large move was a bullish engulfing which was also bullish, if slightly less so. Even copper's long-legged doji could be a reversal bar too, with a 46% chance of marking the low. Fun was had by all, it seems.

The buck fell -0.34 to 100.59, printing a swing high which has a 52% chance of marking a top. Today's drop in the buck was mostly about the Yen, which broke out quite strongly to new mult-month highs, rising +1.15%. The buck ended the day just below its 50 MA. While the timing of the moves in the buck did not align with the moves in gold and silver, certainly the falling dollar didn't hurt.

Crude rose +0.28 to 53.62, rising yet again to make a new high, driving ever-closer to the 54 resistance zone which held strong for 10 weeks at the start of this year. After the market close, API reported inventory draws across the board: oil -1.3 million barrels, gasoline -3.7 million barrels, and distillates -1.6 million barrels. Oil prices edged higher following the release. Oil is quite overbought, with RSI-7=85. Theoretically it should be difficult for crude to break through 54 after its two week and $6 run, but … if the EIA news turns out to be surprisingly good, it might just happen. Oil equities are definitely not keeping up: the XLE:$WTIC ratio has steadily fallen during the recent oil rally.

SPX gave hints of correcting today, and at one time was down about 15 points, but it (of course) bounced back closing down just -3.38 to 2353.78. Tech led the market lower (XLK:-0.38%) while industrials did best (XLI:+0.14%). Financials continue to look weak with XLF:-0.30%. Candle print was a doji, which the code felt was neutral. Downtrend remains in place, although this seems to be the slowest-motion downtrend ever.

VIX jumped higher for the second day in a row, up +1.02 to 15.07. Traders are increasingly worried about something – perhaps it was North Korea's threat to execute a nuclear strike if provoked was part of the concern. I'm not sure how buying puts on SPX would help protect one from a nuclear strike, but I guess you never know.

TLT shot higher, up +0.95%, breaking out of its recent trading range to a new multi-month high. The yield on the long bond has fallen 27 basis points (to 2.93%) from the highs set in mid-March. Bonds are back! At least for now anyway. I'm guessing they are also benefitting from the drop in rate-rise expectations, which are down substantially from last week's 71%. TLT says risk off.

JNK fell -0.19%, falling through the 50 MA and ending the day right at the 9. It looks mildly bearish, and hints of risk off.

CRB rose +0.20%, with 4 of 5 groups rising, led by the precious metals group. CRB is inching towards its 50 MA. CRB has so far managed to retrace about 40% of the losses it suffered in the recent commodity downturn.  Call it good, but not great.

So lets see.  Gold made new highs, silver jumped sharply too but is trailing gold, junior miners are trailing even more, and bonds are rallying.  VIX is spiking to new highs, and the buck is moving lower.  It looks like some kind of safe haven move, but perhaps the dropping rate-increase probability is encouraging the buck to retreat.  Normally in a safe haven situation I'd expect the buck to rally.

That VIX rally has my attention.  It started back in late March, and right now the VIX is starting to go vertical.

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6 Comments

Eannao's picture
Eannao
Status: Silver Member (Offline)
Joined: Feb 28 2015
Posts: 146
Great lines Dave!

"I'm not sure how buying puts on SPX would help protect one from a nuclear strike, but I guess you never know."

and

"Bonds are back! At least for now anyway."

Cold Rain's picture
Cold Rain
Status: Gold Member (Offline)
Joined: Jul 26 2016
Posts: 364
What Just Happened

What happened that drove the action in gold, silver, and the dollar just a few minutes ago?  G/S popped, while the USD fell off a cliff.  The stock market has been relatively stable today.

sand_puppy's picture
sand_puppy
Status: Diamond Member (Offline)
Joined: Apr 13 2011
Posts: 1889
What did the insiders know?

I agree.  What just happened?  And when will WE know about it?

Jim H's picture
Jim H
Status: Diamond Member (Offline)
Joined: Jun 8 2009
Posts: 2385
yeah.. that was some pop... metals getting interesting.

And my AAU went up 20.4%.. in one day.  I think that's a record one day increase for any stock I have ever owned.  

Cold Rain's picture
Cold Rain
Status: Gold Member (Offline)
Joined: Jul 26 2016
Posts: 364
It was Trump

Looks like he was the culprit.  He said the dollar was too strong.  That appears to be the reason for the moves in PMs and the dollar.

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5416
bonds are back

E-

Bonds are indeed back.  Not a rip-van-winkle trade, but while I'm waiting for the SPX correction/Trump trade unwind, I'm earning a big $27/month for each 100 shares of TLT I own.  Woohoo!  Beats the VIX which just decays over time.

CR-

Thanks for the tip about Trump being responsible.  It was right on.

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