PM Daily Market Commentary - 4/18/2017

davefairtex
By davefairtex on Wed, Apr 19, 2017 - 4:41am

 

Gold rose +5.20 to 1291.50 on heavy volume, while silver dropped -0.13 to 18.28 on very heavy volume. Both metals were hit by a strong sell-side assault at 09:47 during the US trading session; gold bounced back strongly following the spike even recording a gain on the day, while silver's rebound was markedly less robust. The buck was hit hard, falling almost a full point.

The big news of the day, apparently unrelated to the spike assault on gold and silver, was an announcement by UK PM May that she will seek early elections, scheduled for June 7th. This resulted in a massive rally in GBP, at one point up almost 3% on the day. Fun article from Bloomberg (Voice of the Bankers) which can be summarized as: “PM May opportunistically calls for new elections in order to utterly destroy what remains of the opposition – which hardly seems fair!”  I get the sense Bloomberg doesn't like May, or BRExit very much.

https://www.bloomberg.com/view/articles/2017-04-18/may-s-latest-brexit-gambit-is-clever-but-not-smart

Gold was trading more or less sideways until the assault at 09:47, which took gold down to a low of 1280.50 and was accompanied by the usual large spike in volume. The rebound took about 30 minutes, entirely wiping out the loss. It was probably helpful for gold that the buck was steadily dropping during this whole time. Gold spent the rest of the day moving higher, closing near its day high. Gold-in-euros actually fell, since the Euro was up +0.81% on the day. Candle print for gold was a spinning top, which was slightly bullish.  Uptrend remains in place.

Open interest at COMEX for GC rose +3,629 contracts.

Rate rise chances (June 2017) dropped to 45%. What seemed like a sure thing not long ago is rapidly evaporating.

Silver was hit far harder than gold by the spike assault, and silver's rebound was more feeble than gold's rebound, with silver not quite able to regain all the day's losses. Silver printed a two-candle swing high, which was somewhat bearish – but the candle code felt that today's spinning top was actually quite bullish. Net-net: the surprising answer is, more bullish than bearish. Silver is now below its 9 EMA, which is bearish. Volume was immense. It appears that a whole lot of stops were run today. It looks bearish to me, but what do I know?

The gold/silver ratio rose +0.78 to 70.65.

Miners fell also, with GDX dropping -0.82% on moderate volume, while GDXJ fell -0.75% on light volume. GDX printed a mildly bullish hammer candle, while GDXJ printed a high wave which the code felt was neutral. GDX made a new low on the day, which GDXJ managed to avoid. GDX also printed a three-candle swing high, which is bearish.  While the GDX:$GOLD ratio is falling, the GDXJ:GDX ratio may be putting in a low.  Is it safe yet to go back into the junior mining shares?  I think I'll wait another day to be sure.  The miners are a bit confused right now.

Platinum fell -1.02%, palladium fell -2.18%, while copper plunged a huge -2.61%. All three metals were seen as quite bearish by the candle code. Palladium smashed through its 50 MA, platinum printed a bearish engulfing, while copper made a new low and wiped out two days of gains. The charts of the “other metals” looked far worse today than either gold or silver.

The buck plunged -0.80 to 99.36, hit hard by rallies in the Euro (+0.81%) and the Pound (+2.18%). Candle print for the buck was a closing black marubozu, which means the buck closed at its lows of the day. Code thought it looked bearish, as is usual for the closing-at-the-lows days.

Crude fell -0.43 to 52.71, with most of its losses coming after market close. The API report released at 16:30 was surprisingly bearish, showing a crude oil draw of -0.840m barrels, but a gasoline build of +1.374m barrels. Oil market didn't like this, losing about 30 cents immediately after the release. Crude remains above its 9 EMA, and the candle code felt the long black candle today was just somewhat bearish. That said, crude did print a swing high, although since it took 4 days to do it, I have no assessment for just how bearish that is.  The EIA report out tomorrow at 10:30am will be key.

SPX fell -6.82 to 2342.19. SPX gapped down overnight, and more or less traded sideways, printing a long-legged doji candle on the day; the doji means the market closed about where it opened. Sickcare did worst (XLV:-1.09%) while consumer staples did best (XLP:+0.45%). Financials (XLF:-0.94%) and energy (XLE:-0.94%) both looked ill too. Both SPX and XLF remain below their 9 EMA, in a clear downtrend.

VIX fell again, dropping -0.24 to 14.42.

TLT screamed higher today, up +1.31% breaking out to new multi-month highs once again. Bonds are up about 6.5% since their lows in mid-March; a drop of about 40 basis points (2.97% to 2.56%) in yield. It looks like the bond shorts are being squeezed. How long have I talked about this bond rally? It sure seems easier to make money going long bonds than it does shorting equities.

JNK fell -0.03%, basically no change. JNK remains within a narrow trading range, and it looks neutral right now.

CRB fell -0.45%, dropping back below its 200 MA and the 9 EMA all in one go. While all sectors fell today, industrial metals were absolutely crushed, with the overall group dropping -3.20%.

From what I could see, there was no “normal” reason for the drop in PM today at 09:47; there was no linkage with other markets, no big currency move, no economic report, etc. Likewise, while the gold COT report does show an increase in commercial short positions, we aren't at a major top, so there is no stop-running motivation (at least for gold) for the commercials to drive price lower.

We're also in an uptrend, so there is no reason for the attackers to think that momentum is on their side. Its tough to drive prices lower in an uptrend because traders tend to buy the dip – as they did today in gold.

TLT rallied, a safe haven move.  Gold and TLT are (these days) fairly well correlated.  Hammering gold on a TLT-positive day seems problematic.

Lastly, the buck fell today – and it wasn't a small move lower. Generally speaking, its going against the flow to hammer gold and silver prices lower against a backdrop of a briskly dropping dollar. From a trading perspective, you are really going against the tide.

So, once you eliminate the normal trading strategies, what you're left with is manipulation. Someone pounded silver in order to affect gold. Silver is a smaller market and is more easily moved, while gold is the larger market which costs more to move around. Or to use my new favorite meme, they killed a silver chicken to scare the golden monkeys.

Why?  I wasn't invited to the meeting.  Perhaps it was driven by a level of concern about the geopolitical stress right now with North Korea, the upcoming first round election in France this weekend, PM May's announcement of new elections (I'm guessing by now that Brussels really hates all these annoying elections), and a slow unwind of the Trump rally.

Still even with the pounding, a bid remains under gold, a bit less so under silver, while the rest of the metals are starting to materially weaken. I'm watching TLT for my clues. TLT tells me there is a safe haven move happening now, but money is also fleeing the buck, which makes things a bit confusing.

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17 Comments

vadim_75's picture
vadim_75
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Posts: 48
yen

Dave, i'm sorry, i just don't understand why you're refusing to get usd/jpy as the reasons for many "sudden" moves in gold, it usually fits perfectly.

Mark Cochrane's picture
Mark Cochrane
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Was this USD/JPY - again today?

 

Gold Slammed For Second Day As 'Someone' Panic Dumps $3 Billion Notional Ahead Of London Fix

http://www.zerohedge.com/news/2017-04-19/gold-slammed-second-day-row-someone-panic-dumps-3-billion-notional-ahead-london-fix

cmartenson's picture
cmartenson
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Anatomy of the gold ""market""

The point of any market is something called price discovery.  

When that is operating, buyers and sellers are openly agreeing on mutually acceptable pricing for whatever is being bought or sold.

In a ""market"" there is no price discovery, only participants that manipulate the pricing structure.  This is why anti-monopoly laws exist.  It's what price gouging in advance of an approaching hurricane is forbidden.
Why this next crap is allowed to happen, repeatedly, is a mystery, but also an indication that the price discover mechanism for gold is broken.

Nearly 13,000 contracts in a single one-minute candle is a massive, price distorting dump.

Such a move is designed to blow out the bid structure, and communicate to any remaining longs that they are up against a beast that will crush them.

That's roughly $1.6 billion in gold trying to be bought/sold in a single one minute window.  Not even the most liquid of markets can handle that kind of volume.  Of course that blew out the pricing.

This is not a functioning market, but a ""market"" that looks like one but actually isn't.  It's the playground for some corrupt, deeply well-connected players who get a free pass from regulators on behavior that would land you or I in jail in a skinny minute.  Which is why it's extra aggravating.

See also: the Bradley Birkenfeld interview.

 

sand_puppy's picture
sand_puppy
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Posts: 1575
So who is doing this?

I don't know.  But I suspect that it is another example of a transparent cabal -- a group of people in plain view, but who have a hidden alliance and purpose that enables them to take these kinds of coordinated actions on ""markets.""

Minimum cast of players:

  1. Financial players who place the buy and sell orders
  2. Those who ""regulate"" the markets but don't notice
  3. Financial writers at "trusted news sources" who don't notice or report.
  4. a gullible public who somehow isn't able admit to consciousness any process denied by its "trusted news sources."
  5. the "nut jobs" who believe that they observe market manipulation (who should be shunned by all intelligent people).

 

Time2help's picture
Time2help
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Posts: 2656
Level of coordination

System is corrupt top-to-bottom. It's purposefully designed as a skimming operation at this point.

Question is how coordinated are the activities between different levels/layers/players. Probably pretty decent based on observations to date. Plus lots of bots/AI to corral the smaller fish.

On the reactive side it's obvious that human intervention kicks in. The temporary chaos surrounding flash crashes, the drop and subsequent 1,000 point overnight gain after the election results came in, etc. That's where I'd expect things to break (when they do, assuming this doesn't go on forever like some sad twilight zone episode).

But who knows. I'm just some fucking guy.

vadim_75's picture
vadim_75
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Look guys, with all that

Look guys, with all that dumps PM haven't really moved much, it's miners who're really moving.

With all that stuff around jnug and jgdx, it looks like these dupms are just the cover to sell miners... or buy. 

KugsCheese's picture
KugsCheese
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The gold slam didn't work

The gold slam didn't work very well.   Seems many are getting concerned about risks around the globe.

Cold Rain's picture
Cold Rain
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Posts: 247
Probably Miners

They're getting crushed, so Vadim is probably right.  Either that, or there's just so much of a bid under gold that they can't move the price appreciably lower.  So, a couple of thoughts:

1) I'll bet they will hit it again tomorrow, if the metal doesn't fall the rest of the day.

2) If it's just about driving the miners lower, then the only purpose for that I can think of is because they want to buy them at a lower price (because they know the metals are going higher).  If that's the case, then a 2-3 day sell-off in the space will precede a pretty substantial rise in shares, along with advancing metals prices.

3) They've hit gold for two days in a row, hard, and so far, all they've been able to do is halt the advance as opposed to precipitate a decline.

4) Equities in general are struggling.

5) The Russian collusion investigation, as well as potential military engagement with NK and Syria are simmering...not to mention tangential issues with Russia and China.  The French vote is Sunday.  NK has said they will continue to launch test missiles and has threatened to perform a nuke test on the 25th.

6) Oh, and the debt ceiling issue is still out there.

4-6 should place a solid bid under gold.  But if commercials keep loading up short, it's going to be hard to bet against them, until the thing breaks (and we have no idea when that will be).  Anyway, for whatever reason, they are intent on slamming PMs right now. 

davefairtex's picture
davefairtex
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alternative facts

Vadim-

Can you please show me a chart of how the Yen caused yesterday's spike down in gold?

Unless you show me a chart, it didn't happen.

I don't want to hear how I'm "usually" wrong.  I want to see a chart showing me that I'm wrong this time.

 

vadim_75's picture
vadim_75
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Dave, no offense i didn't say

Dave, no offense i didn't say that you're usually wrong. I can't find how to attach chart here, sorry for my silliness, maybe you help me out here!

Meanwhile, this chart is not mine, but it speaks for itself, hope the author wouldn't mind:

http://themacrotourist.com/images/2017/04/JPYApr1217.png  

Cold Rain's picture
Cold Rain
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Vadim...question:

What is the author's guess as to what's happening and why?  The chart makes the point that the correlation is tight since the beginning of 2016.  While it does appear to be tighter starting around that time, the general trends of the Yen and Gold appear to be pretty much in step since the inception of the chart.  I'm wondering what the author thinks is the cause of the tightening around the start of 2016 and why it is important.

vadim_75's picture
vadim_75
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CR, that's the very important

CR, that's the very important question, and i know nobody who has an answer, and i've asked many professionals.

The author has more to think about on the subject and i really like the topic)), but has no explanation either :

http://themacrotourist.com/macro/were-all-yen-traders-now

vadim_75's picture
vadim_75
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Posts: 48
and the last from there

Maybe that's the root of abnormality in the miners space which we're observing recently:

http://themacrotourist.com/macro/the-real-message-from-the-gdxj-mess

Sorry for giving so many links to the other site, but i've not seen anywhere else the exact list of the companies affected by the rebalancing. I'm sure it's useful.   

Cold Rain's picture
Cold Rain
Status: Silver Member (Offline)
Joined: Jul 26 2016
Posts: 247
Thanks!
vadim_75 wrote:

CR, that's the very important question, and i know nobody who has an answer, and i've asked many professionals.

The author has more to think about on the subject and i really like the topic)), but has no explanation either :

http://themacrotourist.com/macro/were-all-yen-traders-now

Thanks for getting back.  If you learn any good theories here, please pass them along.

On another note, this is now what, 4 days in a row of 100+ point moves on the Dow?  I guess you could say volatility has picked up!  The quick buy-the-dip mentality so prevalent in the equities markets seems to have cooled off a tad.

vadim_75's picture
vadim_75
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Posts: 48
CR, In dow three days of four

CR, In dow three days of four it's due to -5% BOA, GS and IBM i guess.

What really puzzles me it's Russell - today for example +0.4% Amazing. 

Cold Rain's picture
Cold Rain
Status: Silver Member (Offline)
Joined: Jul 26 2016
Posts: 247
No Answer
vadim_75 wrote:

CR, In dow three days of four it's due to -5% BOA, GS and IBM i guess.

What really puzzles me it's Russell - today for example +0.4% Amazing. 

I remember you mentioning the Russell before.  I don't know why it's doing better than the large caps.  You'd think higher beta would be favored less in an uncertain environment.  I dunno.

davefairtex's picture
davefairtex
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Posts: 4611
interesting day

Vadim, CR-

First - when I look for the reasons why price moved on a given day, I look at the intraday charts to see if movement in one item happened at roughly the same time as movement in another item.  Yesterday, gold and silver both tanked without any movement in anything I track.  And yes, that includes USD/JPY.  JPY didn't move at all, and gold spiked down.  Therefore, I concluded that JPY was not the proximate cause of gold's drop.

To add a chart, first download it to your computer, then hit the square box on the top of this dialog.  Then hit "browse server", then "Upload", then Browse, then select your file, then Upload, then insert.

That was some good info regarding the rebalancing of GDXJ.  It is possible that we've seen the end of the trouble - the last few days I notice that the GDXJ:GDX ratio may have bottomed out.  And there was some really strong buying pressure at end of day for some of the larger juniors I watch.

I agree with you guys that gold didn't move all that much even with these spikes down.  There's a bid underneath gold right now that the spikes isn't affecting very much at all.  Traders seem to be buying the dip.

Also, the timing of the spikes is suspicious as Mark pointed out; driving price lower just few minutes before the London Fix smacks of a "banker price adjustment" prior to the expiration of some contract or another with one of their customers.  Perhaps a gold miner had a big hedge that expired yesterday that used the "London Fix" price, and the banker wanted to "adjust" the fix so they didn't have to pay their customer quite so much money.  These bankers are real scumbags.  Its like your grocer putting his thumb on the scale to make your bag of carrots seem to weigh more at checkout.

Rules apply to us, but not to them.  If caught, the worst that happens is they pay a fine that's substantially less than the sum total of money they've made as a result of their manipulations.  And Martha Stewart gets four months in jail.

But I digress.

 

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