PM Daily Market Commentary - 5/17/2017

By davefairtex on Thu, May 18, 2017 - 1:10am


Gold screamed higher, charging up +24.40 [+1.97%] to 1261.20 on exceptionally heavy volume, while silver rose just +0.05 to 16.89 on very heavy volume. The move today was all about the big move lower in US equities as well as a fall in the buck, driven by chatter of impeachment from the Democrats, and frustration from the Republicans on the current set of issues surrounding the Trump presidency.

Gold went from laggard to leader in just one day. Gold started its move early in Asia trading, and then moved higher in fits and starts throughout the rest of the trading day, closing right at its high. This always means a white marubozu candle print and today, a bullish strong line too. Candle code felt this was a bullish outcome; white marubozu candles very seldom mark tops. It was a clear safe haven move for gold today.

Open interest at COMEX for GC jumped by +15,632 contracts.

Rate rise chances (June 2017) fell -4 to 65%.

Silver rallied at first right alongside gold, making a new high to 17.03, but silver was hit in the afternoon with a pair of strong selling attacks, one of which involved huge volume and a big 15 cent spike down.  Silver did manage to recover, but it ended the day only gaining a nickel [+0.27%], a far cry from gold's big move. Candle print for silver was a high wave, which the code felt was bullish.

Open interest at COMEX for SI fell -774 contracts.

The gold/silver ratio jumped higher, up +1.25 to 74.67. This is generally bearish for PM, and it reinforces the sense of a safe haven move today.

Miners gapped at the open, tried to rally, sold off briskly in the afternoon, and then recovered by the close. After all the back and forth, GDX closed up +1.79% on moderately heavy volume, while GDXJ rose +2.46% on moderate volume. Candle print for GDX was a spinning top which the code felt was mildly bearish, while the GDXJ print was a long-legged doji which the code felt was bearish. GDX:$GOLD ratio fell slightly, while the GDXJ:GDX ratio rose, as did the SIL:$SILVER ratio. Ratios say the uptrend remains in place, while the candle prints are hinting at potential reversals.  The afternoon selling in the miners in the face of gold's massive rally was a bit disconcerting; the candle code doesn't know about gold/silver ratios, or gdx:gold ratios.  If it did, it might have been a bit more bearish.

Platinum rose +0.50%, palladium fell -1.44%, and copper edged down -0.16%. Copper didn't do much, platinum continued moving higher, while palladium is really starting to look weak. Palladium is now below the 50 MA and looking ready for a plunge.

The buck plunged again today, dropping -0.53 to 97.35. The buck is now below where it was when Trump was elected; the Trump USD rally has been completely unwound. Candle print for the buck today was an opening black marubozu, which the code felt was just slightly bullish, believe it or not. For its part, the Euro jumped +0.70% to 111.61, while the Yen screamed up +2.11%. That's more fodder for the yen = gold theory. The buck is now oversold, with RSI7=21.

On the chart, we see 5 days straight down for the buck; it appears that Friday's swing high was the tell.  The firing of FBI Director Comey got the attention of the currency market, and it has sold off ever since.  Likewise, the bond market also figured out there was trouble at roughly the same time.  Equities were a lot slower to notice.  Something to remember.

Crude staged a nice rally today, closing up +0.74 [+1.53%] to 49.20. The rally started in Asia, spiked briefly higher after a bullish-looking EIA report showed inventory draws across the board, but then faded into the close. Candle print was just a long white candle, which essentially just retraced yesterday's losses. Crude remains above its 9 EMA, but just below the 200. I suspect if it weren't for the plunging equity market, crude might have done better today; crude tends to be a risk-on (beneficiary of reflation) asset, most of which were sold hard today.

SPX gapped down overnight, and sold off relentlessly all day long, dropping -43.64 [-1.82%] to 2357.03. The sharp move took SPX cleanly through its 9 EMA and 50 MA in one stroke, broke support at 2380, and printed a very bearish-looking swing high which the code gave a 92% chance of marking the top. Financials led the plunge (XLF:-3.15%) along with tech (XLK:-2.73%), while utilities actually made a gain (XLU:+0.25). This is the Trump Reflation in reverse – total risk off.

VIX screamed higher, up +4.94 to 15.59. Looks like puts at VIX=10 were a pretty good deal after all.

TLT screamed higher too, gapping up overnight and then rallying further to close up +1.47%. While bonds didn't make any new highs today, they were very strong. Long bonds is pretty much the same as short equities, at least right now anyway. That's a strong risk off signal from bonds.

JNK fell hard, dropping -0.48%, printing a swing high, and ending the day below its 9 EMA. The swing high was seen as bearish, with a 78% chance of marking the top. JNK is also signaling risk off.

CRB rose +0.61%, with all 5 sectors showing gains. Best performance was in the PM group. The PM move doesn't surprise me, but the other sectors rallying does, a bit.

If Trump is impeached, the reflation rally is over, but even if he isn't impeached, the struggles over the whole mess will completely derail his agenda for months. That means, no tax reform, no infrastructure, no focus on trade deals, no wall, no nothing.

And that leaves the market, which has rallied to new highs on the optimism of making America great again, precariously perched at all time highs. We could call this a Wile E. Coyote moment for the equity market. And I think he just looked down today.  Will it continue dropping?  That depends entirely on politics right now.

Watch TLT, and gold, and the buck.  That should tell you where things are headed.

One amusing observation: the Democratic leadership has backed rapidly away from the "impeachment" talk.  Perhaps the day's losses in their portfolios got their attention.  Maybe they need to run off and sell a bunch of things before engaging in more loose talk.

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Cold Rain's picture
Cold Rain
Status: Gold Member (Offline)
Joined: Jul 26 2016
Posts: 385

BTFDers are back in control, it seems.  VIX, PMs, Miners smashed.  Back in the old days, you'd get a multi-day sell-off.  You really don't see that much anymore.  Philly Fed smashes expectations.  What a shock!

davefairtex's picture
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5738

TLT is still green.  And the minis are up all of 3 points.  I'm not seeing this as some massive recovery just yet.  Shorts have to be nervous, collecting on their 1.8% move, because they haven't seen any moves like this for quite a while.  Its a process.

Surely you didn't expect a straight-line trip to 1100 SPX?  :)

Market acts to hose the largest number of participants.  Just keep repeating that to yourself, knowing that you are one of the ones it is trying to hose.  In fact, the market told me just this morning that it has singled you out for special attention!

I'm seeing a lot of pounding happening to silver, yesterday and today.  Looks like they're trying to rinse some people out, not sure what that's about, but that's what is happening.  Sometimes I think they try to control gold by messing with silver.  Gold seems to be holding up relatively well.  And the miners have had a decent move, so they're vulnerable to some selling right now.

This Trump investigation isn't going away.

Watch TLT.  They can't play with it quite as effectively since its a much larger market.


Cold Rain's picture
Cold Rain
Status: Gold Member (Offline)
Joined: Jul 26 2016
Posts: 385

This morning had that all-too-familiar down-draft-is-over/problems-are-solved solved kind of feel to it.  Equities have come back some.  It'll be interesting to see when the FANG stocks break, if they do.  That may be a good tell.  And yeah, I can attest to the fact that the market always tries to screw me over! :)

Will be interesting to see if Trump Happy Hour strikes again today.  Seems like sometime between 4-6pm ET lately, there's some breaking news on the political front.  "Weird" how it always seems to happen at that time and not during market hours.  Also "weird" how NK always tests missiles on the weekends.  It's like they don't have time during the hustle and bustle of their 40hr/week M-F day jobs.  So on the weekends, when they're sitting around with nothing to do, they play around with missiles.

Anyway, almost nothing ever seems to happen during market hours.

Cold Rain's picture
Cold Rain
Status: Gold Member (Offline)
Joined: Jul 26 2016
Posts: 385

Yup, here we go now, Dave.  Dollar and stocks surging.

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