PM Daily Market Commentary - 5/11/2017

davefairtex
By davefairtex on Fri, May 12, 2017 - 3:55am

Gold rose +5.20 to 1225.00 on heavy volume, while silver climbed +0.13 to 16.32 on moderate volume. Look at that – a more than one-penny rise in silver. Party starts now.

Gold started moving higher in Asia, and climbed steadily right into the close in New York. There was a solid bid underneath gold all day long – this is a good sign and I haven't seen this for weeks. Candle print was a long white candle, which the code found to be bullish. No swing low for gold yet; that requires a close above 1228.70. Gold's RSI7 has jumped to 27.61, which suggests that gold may be forming a low here.

Open interest at COMEX for GC rose by +13,289 contracts.

Rate rise chances (June 2017) fell to 83%.

Silver had another strong move higher at around 7am Eastern, fell back, and then rallied into the close in New York. I wonder what those 7am rallies (that subsequently fail) are all about. Silver was more volatile than gold, but it too had a bid underneath it that hasn't been there for quite a while. Silver did manage to print a swing low today, by a penny. That's bullish. Candle print was just a long white candle, which the code found to be neutral. Hmm. Silver's RSI7 rose to 22, which is also bullish. MACD has stopped dropping, which is an early positive sign.

Open interest at COMEX for SI rose +8,892 contracts.

The gold/silver ratio fell -0.26 to 75.04. That's another positive sign. RSI7 of the gold/silver ratio has fallen to 71, which is another early indication of a low for PM.

Miners rallied sharply at the open, and then moved steadily higher for the remainder of the day. GDX climbed +2.01% on moderately heavy volume, while GDXJ shot up +3.72% on moderate volume. Candle print for GDX was a confirmed bull NR7, which the code found to be very bullish. GDXJ printed a white marubozu, which the code found to be bullish. Volume on both ETFs have steadily climbed over the last few days, which is a bullish sign. GDXJ closed above its 9 EMA today too, which is bullish. GDX:GLD ratio climbed: bullish. GDXJ:GDX ratio climbed also: bullish. The SIL:SLV ratio is actually starting to become overbought, it has done so well recently. Since miners usually lead, this rash of bullish behavior is a good sign for PM.

Platinum rallied +0.71%, palladium was up +0.63%, while copper moved up +0.42%. Platinum's confirmed bull NR7 was bullish, while copper's shooting star was quite bearish. Hmm. Copper could be a problem; it is below both the 9 and 50 MA, and remains in a downtrend. Platinum is trying to crawl back off its lows (still below all 3 averages), while palladium is within a few percent of its highs and remains in its uptrend. In spite of the rallies in all 3 metals, copper remains a concern.

The buck fell -0.06 to 99.40, staging a rally a few hours before the US market opened that subsequently failed. Candle print was a high wave, which the code felt was mildly bearish. The Yen did well; up +0.42% today. Was that the reason for the nice move in the miners and the rally in silver? Some days the linkage seems to work, while other days it does not.

Crude followed through after yesterday's strong rally, climbing +0.50 to 47.98. Oil seemed to run into selling at the 48 resistance level, but it did manage to move more conclusively above its 9 EMA, which is a bullish sign. Candle print was an opening white marubozu/NR7, which tells us that today's trading range was relatively narrow. Code felt the print was mildly bearish; a 20% chance of marking a top. Positive COT report remains in place; I think oil will probably continue to move higher. We get the COT update tomorrow.

SPX sold off sharply in the morning, but buyers appeared after the first hour of trading, pulling SPX back up; it closed down -5.19 to 2394.44. Candle print: a dragonfly doji/southern doji, which the code found to be bullish (53% chance of marking a low). The sell-off appeared to coincide with the testimony of Acting FBI Director McCabe, who variously said “internally, Comey had support” as well as “Russia investigation proceeding without interference.” Dems want a special prosecutor: Reps say no. Financials led the market lower (XLF:-0.63%) while consumer staples did best (XLP:+0.15%). Even after the rally took off most of the move down, today's sector map is showing risk off.

VIX rose +0.39 to 10.60. Puts are still quite cheap...although they are back in the double digits.

TLT was flat, coming back from a gap-down open to close even for the day. TLT is supporting the risk-off mood; it did not seem to agree with the rally in SPX today.

JNK sold off early, but bounced back alongside SPX, printing a doji and closing flat on the day. Candle code thinks the doji is quite bullish.

CRB rallied +0.52%, moving more convincingly above its 9 EMA. 3 of 5 sectors rallied, led by energy.

So how do things stand after today?

Swing low in GDX (and GDX:GLD ratio) last Friday. GDX crossed 9 EMA, and swing low in GDXJ yesterday. GDXJ crossed its 9 EMA, and swing low in silver (and GDXJ:GDX ratio) today. You can see that the miners are leading metal, and silver is leading gold. That's how we like things to be.

We also have a swing low for CRB. And TLT and SPX are both starting to hint at risk off.

I could wish that GDXJ was doing a bit better, but it is having some internal trouble (https://www.bloomberg.com/news/articles/2017-04-13/vaneck-s-junior-gold-miner-etf-seen-rebalancing-as-assets-soar) and may not be the fantastic indicator it used to be. We've all heard how small the PM space is; the junior miners are the smallest part, and the GDXJ ETF has attracted “too much money” for its own good.  Apparently, if one entity owns more than 20% of a company in Canada, its a regulatory nightmare, and GDXJ was apparently at these levels.  So, the GDXJ restructuring (which will cause a fair amount of selling of the junior miners) will occur mid-June, and no doubt traders are front-running that event.

But I digress.

We are all by now convinced that our friendly central bankers will keep SPX aloft. Maybe that's true. I prefer to follow the technicals; right now SPX still looks ok, but I'm not going to assume anything. XLF still looks ill, and the financials tend to lead.  And given the current correlations, if SPX sells off, gold should rally.

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2 Comments

jussaumm's picture
jussaumm
Status: Member (Offline)
Joined: Feb 16 2016
Posts: 11
China/US

Any thoughts on how the China/US trade deal makes an impact?

http://www.bbc.com/news/business-39894119

Does this just make the international markets more connected and exposed?

Thank you

davefairtex's picture
davefairtex
Status: Diamond Member (Online)
Joined: Sep 3 2008
Posts: 4263
china deal

It doesn't sound like anything too impactful - just an incremental improvement for specific industries.

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