PM Daily Market Commentary - 5/2/2017

davefairtex
By davefairtex on Wed, May 3, 2017 - 5:10am

Gold rose +0.40 to 1257.80 on moderately heavy volume, while silver dropped -0.03 to 16.84 on moderate volume. Both gold and silver made new lows, but the trading ranges were relatively narrow. Not to spoil the surprise, but really not much happened today; most likely, traders were on hold waiting for the results from the FOMC announcement tomorrow at 2pm.

The focus will be on two things: first, the expected pace of rate increases for the remainder of the year, and second, any more details on the timing of the reduction in the Fed's balance sheet.

Gold made a new low today to 1252.60, dropping briefly below its 200 MA but managing to crawl back above it by end of day. Candle print was a doji, to which the code assigns a 28% chance of marking the low for gold. That's somewhat bullish, but for sure we need a confirmation tomorrow. If it comes, most likely it will happen after the FOMC announcement at 2pm.

Open interest at COMEX for GC rose +4,482 contracts.

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

Silver tried staging a rally, only to fail by end of day, dropping back close to the open price. The trading range was narrow, resulting in a spinning top/NR7 candle, which the code found to be neutral. Silver also made a new low to 16.80. This is the 12th straight day down for silver. RSI-7 for silver is now at 10, which is very oversold. It could rally at any moment.

Open interest at COMEX for SI fell -2,298 contracts.

The gold/silver ratio rose +0.13 to 74.67.

The miners tried rallying, but the rally largely failed – it was better than what happened to silver, but not much. GDX rose +0.23% on moderately light volume, while GDXJ dropped -0.51% on very light volume. Miners too appear to be on hold, waiting for the outcome of the FOMC meeting tomorrow. Candle print for GDX was a spinning top, which the code felt was slightly bearish. GDXJ printed a doji star, which the code also felt was neutral. Both ETFs avoided printing new lows, but they also managed to avoid printing reversal bars too.

Platinum fell -0.48%, palladium rose +0.23%, while copper fell -0.70%. Platinum followed through off yesterday's very bearish candle print, showing no signs of a low. Palladium remains near its highs, while copper is taking a rest after a slow but steady climb over the past 2 weeks.

The buck traded in a narrow range today, losing -0.10 to 98.76. Candle print was a spinning top/NR7, which the code felt was bearish. Buck is giving off bearish hints going into FOMC. If the Fed starts to lean more towards balance sheet reduction in their statement, I'd expect the buck to reverse course and head higher. If it happens, that's probably gold-negative.

Crude was hit hard, dropping -0.66 [-1.35%] to 48.08. The drop was substantially worse than that at one point, with crude hitting a new low of 47.35, but crude bounced back towards end of day, and after the close the API report came in with a bullish surprise: a crude inventory drop of -4.6 million barrels. That event was enough to pull price back above 48. The candle print was a spinning top; the long lower shadow provided substantial hints of bullishness, but today's drop also confirmed the NR7 from yesterday, resulting in a bearish call by the code. So that means, most likely, no reversal in crude today although if EIA confirms the API report, that might mark the low. Maybe. There is a lot of bearish news out there right now.

SPX traded in a narrow range again today, up +2.84 to 2388.33. Candle print was a doji/NR7, which the code felt was bullish. Industrials led (XLI:+0.48%) while consumer staples did worst (XLP:-0.67%). Candles from the individual sector map items supports the bullish assessment. SPX continue to chop sideways with a slight upward bias, but it remains just a dozen points shy of breaking to a new all time high.

VIX rose +0.48 to 10.59.

TLT rose +0.51%, erasing all of yesterday's drop and printing a bullish engulfing candle. Code wasn't so impressed, finding it just somewhat bullish. Still, its a positive sign for gold, since gold and bonds are fairly well correlated right now.

JNK rose +0.16%, moving just slightly higher. It was surprising to see JNK rally on a day when crude fell so strongly.

CRB plunged -0.69%; only 2 of 5 sectors fell, but energy is the big dog, and it had a bad day.

For most of the market, today was a relatively uneventful day; traders are probably just waiting to see what the Fed will decide to do. In the entire PM complex, only gold remains above its 200 MA and its 50 MA. The rest of the items (platinum, silver, and the miners) are in deep downtrends. Certainly when they reverse, the big gains will be in those items, but in the meantime it is fairly painful to be long any of them.

Given the assault on silver prior to the French election, this downtrend was in part a managed thing, but I suspect if Le Pen had won, no amount of pounding on silver would have restrained the buyers for PM.  There will come a time when BRExit-like news comes so hot and heavy, no intervention will be able to do more than slow the pace of the move - more or less what happened in 2011.

Meanwhile, we're back to watching the Fed, and keeping an eye out for any black swans.

Side note: stealth winner of the equities lottery: the Greek stock market, represented by ETF symbol GREK. It is going vertical, up 5% just this week alone, and is up more than 50% off the lows set in early 2016.

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7 Comments

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

Nice breakdown in gold and silver today.  Gold through the 200 day and silver below the $16.80ish mark.  Miners seem to be doing ok, though.  Will be interesting to see if this turns out to be a head fake or not.  We'll prolly know by 3:00 pm.

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5408
sell-off going into FOMC

I'm actually happy about this, because my gut says that silver - probably - won't go down for a 14th day in a row.  The setup feels like we'll see a rally.  Miners are suggesting it: GDX:GLD ratio looks to be putting in a low.

Silver's RSI-7 is at 7.5.  That's about as much capitulation as you generally see.

It's a dice roll, but I'm gambling we'll see a reversal off the announcement at 2pm.

Lots of miners are bouncing off their earnings reports.  KGC is up 14% just today.  Back from the dead!

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

What a dud.  Mostly hawkish comments from the Fed.  Of course, they see the Q1 weakness as transitory.  I wonder if they would ever state that the economy is actually looking weak.  Actually, I know they won't.  Odds see rate hikes as pretty much a lock in June.  Gold selling off now and of course the miners have turned down now as well.

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5408
well that went badly

Silver RSI7=7.42.  Closed right at the lows.  It was an ugly day, which followed another 13 ugly days.

At some point it will end.  I thought it would be today, but...

cmartenson's picture
cmartenson
Status: Diamond Member (Offline)
Joined: Jun 7 2007
Posts: 5727
If this were stawks...

If this were stawks it'd be an international emergency.

But since it's just the commercial silver shorts destroying the longs and the price discovery mechanism for a commodity that the plutocrats are perfectly happy to see in a perpetual state of weakness, this is 100% okay with the ""regulators.""

 

cmartenson's picture
cmartenson
Status: Diamond Member (Offline)
Joined: Jun 7 2007
Posts: 5727
Silver = Macron

My views on the PM ""market"" is the same as elections in supposedly "democratic" countries.

If you see them as essentially fair, good for you.

Me?

I see this as evidence of a rigged system:

Imagine that...a Rothschild pick/candidate getting nearly 100% of the free media coverage as compared to the non-banker pick.

Could be a coincidence..better luck next time, should run a  better campaign Le Pen, and maybe you shouldn't cry over a bad silver trade, and all that...but it all is just obviously rigged and corrupt to me.

...Occam's Razor.  I prefer simple explanations over complex ones like "every news magazine in France suddenly decided, on their own, that running flattering photos of Macron on their covers was something they all thought of on their own, at the same time."

 

 

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

So, do you see the markets as fair or unfair?  That's the kind of question that lawyers ask - it requires a person to take a changing, complex system and reduce it down to a binary state.

The markets are about money flows.  If some amount of money flow comes from official sources, and who at times want to move prices in a given direction for their own reasons, is that fair or unfair?

What if it only happens some of the time?  Is that fair or unfair?

What if the amount of money used varies?  Is that fair or unfair?

What if official flows become swamped by non-official money flows?  Is that fair or unfair?

During the run-up to the French first round election, it didn't seem to matter that "someone" was pounding silver daily.  Every dip was bought, in both gold and silver.  I got two things from that.

  • officials were scared
  • their interventions were just barely able to keep a lid on prices

I saw the same thing happen during BRExit - minus the lid.

My thesis, based on my observation, is that at some point non-official money flows will absolutely swamp any money coming from official sources when things turn bad.  What's more, I think its incredibly useful to spot this if and when it starts to happen, because it will help me to identify turning points in non-official sentiment.

If we are sailing against a variable-strength current, the knot-meter gives off signals that don't line up with our speed relative to the land.  That doesn't mean the knot-meter is useless, it just means we have to adjust our calculations and keep the variable current in mind.  And if it turns out that measuring the strength of the current is useful information too, then the knot-meter turns out to be essential.

My goal is to spot intervention when it happens, assess the level of effort employed, then assess the impact of non-official money flows, and from all of that determine where sentiment really lies and where the trend is likely to go.

And that means I have to move beyond the simple binary state of fair and unfair.

BTW: great picture of Macron on every single magazine.  Official intervention dialed up to maximum.

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