PM Daily Market Commentary - 4/24/2017

davefairtex
By davefairtex on Tue, Apr 25, 2017 - 9:01am

 

Gold fell -8.00 to 1277.90 on very heavy volume, while silver was flat at 17.98 on extremely heavy volume. Gold gapped down hard at the open, and sold off even harder, making a new low to 1266.00 before bouncing back. Silver did not have a gap down open, and thus silver ended up flat on the day. Volume was extreme in both metals.

All the fuss was caused by the unwind of the “Le Pen Safe Haven Trade”, which happened because the election results were relatively close to what the polls had indicated, suggesting that the US Trump Surprise was most likely not going to translate into France during round 2. The election was by no means a victory for the status quo; the winner, Macron, has no political party behind him, has never campaigned for office before, and is 39 years old. Most likely he won because he wasn't a mainstream politician, although his policies certainly seem entrenched in the status quo.

http://www.vox.com/world/2017/4/19/15197620/macron-french-elections-far-right-banker-france

Gold opened down about $6 and then promptly dropped another $10, making a new low to 1266.00. Buyers showed up and prices bounced back higher, but never quite far enough to regain the losses from the gap down open. Candle print on the day was a takuri line, but also a confirmed bearish spinning top; the takuri line was bullish, but the confirmed spinning top reversal was quite bearish, so I don't really know where we stand. More bearish than bullish, I think. Gold is now below the 9 EMA, and that's bearish.

Open interest at COMEX for GC rose +3,496 contracts.

Rate rise chances (June 2017) rose to 67%. We're almost back to “done deal” land for the June rate increase prospect.

Unlike gold, silver didn't suffer a gap down at the open. It did spike lower, making a new low to17.62, but the buyers lost no time in buying the dip, and by end of day, price was back to where it started. Candle print was a takuri line/high wave, which the candle code felt was quite bullish. Silver remains above its 50 MA. The unwind of the safe haven trade has left silver looking substantially stronger than gold. Silver is now at the outskirts of oversold territory.

The gold/silver ratio fell -0.43 to 71.07.

Miners gapped down hard at the open, rallied nicely but that rally failed, with the miners dropping back down at the close. GDX was down -1.74% on moderately heavy volume, while GDXJ dropped -2.43% on moderately light volume. The candle print for GDX was a confirmed bearish NR7, which the code felt was bearish. Same thing for GDXJ, except there was also a gap down doji candle which the code felt was bullish – so GDX bearish, and maybe GDXJ neutral. Sometimes I get 3 different candle prints from the code, and they don't all agree, so I have to read the tea leaves as best I can. GDX ended the day below its 50 MA, which is bearish.

The GDX:$GOLD ratio continued to fall, as did the GDXJ:GDX ratio. Those are both bearish signs.

Platinum fell -1.16%, palladium rose +0.08%, and copper moved up +0.27%. Not too much happened in the other metals – just platinum had a bit of a bad day.

The buck plunged -0.91 to 98.92 because the Euro screamed higher right at market open; Euro rose +1.33%, a huge move for a large currency. Clearly the currency market was relieved that no Trump Effect was seen in the French first round elections. The huge rally in the Euro meant that gold's plunge in Euros was far worse than the drop in dollars; here is what that chart looks like: a -2.20% catastrophe. Are the worries over in Europe now? The Euro is only trading at 108.67, right at its 200 MA. The Euro needs to return to 116 before anyone really needs to worry about a bullish reversal in the Euro.

Crude continued falling, down -0.42 to 49.21. The spinning top candle was slightly more bearish than bullish – descent probably continues. Crude made a new low to 49.03. There appears to be some support at 49/the 200 MA, but I'm not sure it will hold. With RSI-7=24, crude is in oversold territory. Given the big drop in the buck, crude's continue move lower is not a great sign.

SPX gapped up overnight because of the safe haven unwind, and more or less chopped sideways for most of the day. SPX closed up +25.46 to 2374 – it was a narrow trading range even though it was a large rally, which means the candle print was an NR7, which the code found to be neutral. Financials led by a longshot (XLF:+2.25%), while the utilities trailed (XLU:+0.52%). The individual sector candle prints were a lot more bullish than the overall market, at least in some areas.

The VIX cratered, dropping -3.79 to 10.84. Wow.

TLT fell -0.49%, gapping down at the open and then rallying back for much of the day. Candle print was a two-candle swing high which the code found somewhat bearish. TLT remains above its 9 EMA, although down a few percentage points from its high. Bonds did not collapse in the same way the VIX did, but the signal from TLT is still risk on.

JNK jumped higher, moving up +0.46% and breaking out of its recent trading range to a new high. JNK is no longer in a downtrend, having broken the cycle of lower lows and lower highs. That said, the candle code felt the print was bearish – a 41% chance of marking a top. That's unusual. Let's see how that plays out.

CRB continued dropping again, down -0.52%, making a new low. Commodities are in full retreat right now, led by energy. 4 of 5 groups dropped today; industrial metals were the only group that rose.

Plunging commodity prices doesn't bode well for the whole “inflation” thing (anyone remember that?) but we are getting more than hints of risk on from our various indicators: JNK, equities, TLT. The Euro has snapped sharply to the top of its trading range. A breakout here should theoretically help gold, except that gold in Euros is not looking great. Who needs gold when you no longer need to worry about Le Pen?

That rate-rise increase isn't helping gold either. Hmm. If gold can't rally alongside the Euro, we might be in a bit of trouble here.  If TLT loses its 9 EMA, that's also a bad sign.

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6 Comments

Cold Rain's picture
Cold Rain
Status: Gold Member (Offline)
Joined: Jul 26 2016
Posts: 363
Miners

Are getting obliterated today.  Bloodbath.  I keep wondering if they will give up all the gains they made in 2016 and get back to their 2015 lows.  They certainly can't sustain any move higher at present.  Definitely speaks to risk off in the space.

vadim_75's picture
vadim_75
Status: Bronze Member (Offline)
Joined: Oct 18 2015
Posts: 48
worth reading, i think.

https://www.tfmetalsreport.com/blog/8292/junior-mining-sector-about-implode

Considering how many gold bulls see it as a buying opportunity, i'm a seller now. 

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

Yes I agree, the miners look really unhappy.  The new low in GDXJ looks bad for sure.

Fairly oversold; RSI-7=14.    But we could see GDXJ test its Dec lows.  This cycle should stop short of that, theoretically, but I don't see a lot of support right now.

I think the problem is gold-in-euros.  Its just cratering.  My current thought: support for the gold rally might have been Euro-centric.  That doesn't bode so well, since I don't see a euro-gold catalyst appearing for a while.

 

Cold Rain's picture
Cold Rain
Status: Gold Member (Offline)
Joined: Jul 26 2016
Posts: 363
vadim_75
vadim_75 wrote:

https://www.tfmetalsreport.com/blog/8292/junior-mining-sector-about-implode

Considering how many gold bulls see it as a buying opportunity, i'm a seller now. 

The thing of it is, the gold bull universe is relatively small.  And they are always calling for higher metals prices and mining share prices.  You hardly EVER hear the goldbug crowd say sell.  I haven't seen much change in their thinking for a good long while.  What I think makes sense to pay attention to is the mainstream.  When you start hearing about gold and miners in the mainstream, then I'd be more inclined to use something like sentiment as a barometer.  Right now, you hear nothing in the mainstream about anybody really being all that bullish on gold.

vadim_75's picture
vadim_75
Status: Bronze Member (Offline)
Joined: Oct 18 2015
Posts: 48
Anyway, without exposure on

Anyway, without exposure on gold, miners are useless. If the next upturn in gold wouldn't be followed by rising the miners with healthy beta, the perfect storm may happen.

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

Good discussion guys.

My coal mine canary is TLT.  After resisting downward pressure for a few days, it is off more than a full percent today.  Its time to run, not walk.  Safe haven bid is just gone.  Sometimes that's how it goes.

And this whole GDXJ thing - who knew?  I mean, it definitely showed up in the ratios, but us slobs at the sticky end are always the last to know.

Perhaps I should start using SGDJ instead of GDXJ.  What do you think?  Trading volume is crazy light.  That's my only concern.

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