PM Daily Market Commentary - 5/1/2017

davefairtex
By davefairtex on Tue, May 2, 2017 - 4:59am

 

Gold fell -12.10 [-0.95%] to 1257.40 on moderately heavy volume, while silver plunged -0.35 [-2.03%] to 16.87 on moderately heavy volume also. While PM was hit for a small loss in the Asia session, most of the damage came after the US market opened.  Gold popped briefly after a weak construction spending report at 10am, but then was promptly pounded lower, driven through 1260 support.  Silver fell in a similar pattern, and only managed to stop dropping at the previous low of 16.81.

Gold made a new low today to 1254.90, breaking below the 1260 support level. Breakdowns are generally bearish. The intraday bounce off the new low was pretty feeble, resulting in a long black candle that ended up confirming last Friday's NR7 – the way the NR7 trade works is, you go trade in the direction of the confirmation, which is in this case down. The whole picture signals lower prices ahead.

Open interest at COMEX for GC fell -914 contracts.

Rate rise chances (June 2017) remain at 71%.

Silver did much what gold did only more so, falling all the way down to the previous low at 16.81. There it found buyers, but not very many, as the bounce off support was pretty feeble. Candle print was just a long black candle, which the code felt was bearish. Even though silver is heavily oversold (it has an RSI-7=10), the candle code isn't seeing a low just yet. This is the 11th straight day down for silver. A break below support @ 16.81 (technically) signals the end of silver's multi-month uptrend.

Open interest at COMEX for SI rose +2,318. This is more than a little surprising: I would have expected the commercials to ring the cash register again today. One explanation might be that the commercials feel some strong need to keep pushing silver's price lower, and so instead of covering their shorts, they are adding more as price drops.

The gold/silver ratio rose +0.81 to 74.53. The ratio is starting to go vertical – which is generally the last stage before it tops out and reverses. So that's good news of a sort. We should be nearing capitulation in silver.  Theoretically anyway.

The miners fell today also, following the drop in gold and silver. GDX closed down -2.43% on moderate volume, while GDXJ fell -2.79% on moderately heavy volume. Both ETFs made new lows, which is bearish. Candle for GDX was a long black candle, which the code felt was bearish. Candle print for GDXJ was a long black candle too – but also a “confirmed bear spinning top” which was substantially more bearish. (That last print: basically a bearish confirmation of Friday's failed rally). No signs of a low for the miners today.

Platinum fell -1.57%, palladium dropped -1.30%, and copper rose +1.82%. Copper's strong rally took it cleanly back above the 50 MA; while copper remains in a longer term downtrend, it is only about 5 cents away from reversing back into an uptrend. Platinum's strong bearish engulfing candle ended up smashing through support, making a new low, and looking very bearish. Platinum's rating was the most bearish rating in the PM complex today.

The buck went nowhere again today, rising +0.02 to 98.86, printing a doji/NR7 candle which the code felt was mildly bullish. Buck remains below its 200 MA and in a downtrend; it has been chopping sideways just below the 200 now for the past 5 trading sessions.

Crude fell through support today, dropping -0.45 to 48.74, ending the day below the 200 MA for the first time in 6 weeks. Even though crude broke support, the trading range was narrow, resulting in a short black/NR7 candle print, which the code felt was neutral. We have the API report out tomorrow after market close, which should help the market pick a direction. The crude oil COT report shows that the previously high concentration of managed money longs have mostly been rinsed out of their positions over the last two months. Now would be a good time for oil to rally – but we might get one more drop before the reversal happens, just to get the last of the managed money longs out before prices rebound.

SPX traded in a narrow range today, up +4.13 to 2388.33. Candle print was a doji candle, which the code felt was neutral. Tech led (XLK:+0.75%) with financials close behind (XLF:+0.64%), while utilities did worst (XLU:-0.60%). SPX has been chopping sideways now for the past 4 trading sessions.

VIX plunged -0.71 to 10.11, briefly moving into single digits (9.9!) which is the lowest I've seen it in years. There is no fear out there right now.

TLT fell -1.04%, making a new low right alongside gold. TLT did find support at its 50 MA, but is definitely signaling risk on.

JNK fell -0.48% today, printing a two candle swing high and running entirely counter to the day's risk on feel. What's the story with JNK's plunge? I don't know.  JNK gapped down in the morning and traded sideways all day long. Candle code says the swing high is bearish. When JNK starts to sell off, its a bad sign for risk assets - JNK is a good coal mine canary.

CRB fell -0.07%, mostly unchanged. 3 of 5 groups fell, including energy and PM, but agriculture rallied strongly, which resulted in the CRB going nowhere.

No reversal yet for PM. However, the FOMC meeting starts tomorrow. I have often seen PM decline sharply prior to the FOMC meeting, make a low the day before, and then rally following the meeting announcement. I don't have stats on how often this happens, but I've seen it often enough that I know it's a thing.

The drop in JNK is something to watch; if it continues, then it will probably drag SPX down with it at some point.

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1 Comment

vadim_75's picture
vadim_75
Status: Bronze Member (Offline)
Joined: Oct 18 2015
Posts: 48
is russell a leading indicator?

Again Russell seems to be telling us a little bit different story, then SPX and Nasdaq. Would be interesting to see if it works as well as it did last time.

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