PM Daily Market Commentary - 5/18/2017

By davefairtex on Fri, May 19, 2017 - 3:00am

Gold fell today, dropping -14.40 [-1.14%] to 1246.80 on exceptionally heavy volume, while silver was crushed, dropping -0.32 [-1.92%] to 16.57 on very heavy volume. Silver appeared to have been under heavy selling pressure today, repeatedly pounded through several support layers. Gold followed silver down - but not all that far.

Gold sold off in Asia, rallied to a new high of 1265 in London, and then was pounded lower for the remainder of the day. Today's candle print for gold was a closing black marubozu, which the candle code finds to be bearish: a 58% chance of marking the top. If it weren't for today's new high, gold would have printed an even more bearish swing high.  At the same time, today's massive volume speaks of a big struggle taking place between bears and bulls.  I'm not sure we should count gold out just yet.

Open interest at COMEX for GC rose +4,513 contracts.

Rate rise chances (June 2017) rose +14 to 79%. That was a big move - and I really don't know what caused it.

Silver was hit all day long, starting in Asia, then making its new low an hour after the US market opened in a classic spike attack, where 3268 contracts traded hands and price fell 17 cents – all in just one minute. It is pretty clear that someone wants silver prices lower, and that's the result they got. Silver's candle print was a swing high, which the code assigns a 70% chance of marking the top. Silver also blew through its 9 EMA also. A small end of day rally kept things from looking too grim, but silver did make a new low to 16.43.

Open interest at COMEX for SI fell -1,268 contracts.

The gold/silver ratio continued climbing, up +0.60 to 75.27. This is generally bearish for PM; I think its also a sign sometimes of “controlling gold by using silver as leverage.”

Miners had a really bad morning, plunging hard for the first 30 minutes of trading; they rallied off those lows, but then the rally ran out of steam around noon. GDX ended the day down -3.08% on moderately heavy volume, while GDXJ dropped -3.61% on moderate volume. Both miner ETFs printed swing highs; GDX's swing high had a 77% chance of marking a top, while that of GDXJ only registered as 32%. I'm not sure why the GDXJ swing high had such a low rating.

Platinum fell -1.42%, palladium plunged -2.73%, while copper dropped just -0.53%. Platinum printed a swing high (73%), palladium made new lows, while copper actually printed a bullish-looking takuri line candle, which the code assigns an 82% chance of marking a low. Copper sold off hard, but then rallied back almost as hard; candle code likes to see that sort of thing. At some news was good today in the metals.

The buck recovered today, rallying +0.30 to 97.65, making a new low and printing a long white candle, which the code felt had a 40% chance of marking the low. That's not bad. Perhaps we've seen the top for the Euro at 111.64. The Yen fell sharply, losing -0.69%. Is that the reason for gold's plunge? I don't think so. But maybe it made things easier.

Crude continued moving higher, up +0.38 to 49.58; it ran into a spot of trouble in the London session, dropping almost 70 cents in 20 minutes, but then the buyers showed up pushing prices well into the green by end of day. Candle print: a hanging man, which the code generally thinks is bullish. Crude has risen to just under the confluence of the 50 & 200 MA lines. Dips continue to be bought in crude; round number 50 is just ahead. I sometimes wonder if the Saudis are participating on the buy side in the futures markets to keep prices propped up. If so – they have to be spending bucketloads of money to do it.

SPX continued dropping in the futures markets overnight, but managed to rally at least somewhat once the US market opened. SPX closed up +8.69 to 2365.72. The rally would have been better, except there was a flurry of selling in the last 30 minutes which took the market down 10 points. Traders weren't looking to take SPX home overnight, which looks bearish to me. Candle code rates the “thrusting” candle pattern as neutral. Tech led the bounce (XLK:+0.59%) while energy trailed (XLE:-0.03%). Energy equities really are having problems; XLE:$WTIC is plunging once again.

VIX fell -0.93 to 14.66.

TLT rose +0.11%, making a new high, and continuing to signal risk off. When TLT rises, and gold gets smashed, it makes me suspicious. The bond market is not giving the all-clear, so the drop in gold is probably due to someone using their balance sheet to push prices lower.

JNK rose +0.13%, erasing some of yesterday's plunge. Junk, like equities, are recovering, but slowly.

CRB fell -0.40%, with 3 of 5 commodity sectors dropping, led by agriculture. CRB remains just below its 50 MA.

My sense today is that Wednesday's strong market response to the Trump impeachment threat sobered everyone up. Politicians have portfolios too. Silver was smashed in order to encourage gold to drop, so “things don't get out of control.” I guess the $24 move in gold got everyone's attention. Smashing silver worked, the dollar recovered some of its losses, while SPX looked sluggish, and TLT continued creep higher. TLT is my tell.  They can hammer silver fairly cheaply because its a relatively small market - total above ground silver might be about $50 billion. Total bond market, just in the US: 39 trillion. Moving bonds around is a whole lot harder.

Currently, TLT is acting as a safe haven. When it continues to rise, that tells me the market remains concerned.  By all rights gold should be rising too.

That's why I start talking about manipulation when TLT continues moving higher, while gold (and especially silver) get smashed. Those two things just don't make sense together.

So given we've got an official intervention, its tough to know exactly where price will end up. I suppose it all depends on how long they want to keep pounding on silver. In Asia, silver has recovered, at least to some degree. We'll have to see how it goes. The Trump impeachment story isn't going away. This should keep a bid underneath gold - whether that's enough to keep prices moving higher is the big unknown.

I don't think we'll be seeing any Trump reflation anytime soon.  I am sticking to my short equity/long bond trade, since I think that is how things will play out over the medium term.

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1 Comment

Cold Rain's picture
Cold Rain
Status: Gold Member (Offline)
Joined: Jul 26 2016
Posts: 380
Risk On

Risk on is back in style, even though PMs are hanging in.  TLT is down slightly and the VIX is hammered back down like a rented mule.  All the talk about a return to volatility may be a bit premature.

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