PM Daily Market Commentary - 5/22/2017

By davefairtex on Tue, May 23, 2017 - 5:54am

Gold climbed +4.80 [+0.38%] to 1260.50 on heavy volume, while silver shot up +0.32 [+1.87%] to 17.16 on moderately heavy volume. Silver clearly led the move higher, breaking out to new highs; whatever force that had decided to hammer silver last Thursday simply wasn't in evidence today.

Gold moved a bit lower in Asia, but then rallied steadily into the afternoon in the US, pulling back slightly into the close.  Today's candle print for gold was a spinning top, which the candle code thinks is somewhat bullish. Gold remains above all 3 moving averages, and is right on the edge of breaking out. A strong close above 1260 resistance would be a bullish sign.

Open interest at COMEX for GC rose +13,959 contracts.

Rate rise chances (June 2017) remain at 79%.

Silver spiked briefly higher in Asia, but then moved steadily higher alongside gold, retreating slightly into the close in the US.  While silver's rally took a similar path as gold, it was much stronger.  Silver's candle print was a long white candle, which the code thinks is slightly bullish. The breakout above round number 17 looks quite bullish, and the COT report (showing a large number of new managed money shorts) is supportive of that story as well. The factors that support a silver rally remain in place.

Open interest at COMEX for SI rose +189 contracts.

The gold/silver ratio plunged -1.09 to 73.48, and is bullish for PM.

Miners gapped up at the open, rallied into the afternoon, but then fell into the close erasing much of the day's gain. GDX was up +1.31% on moderately light volume, while GDXJ rose +1.59% on light volume. For all the fuss in silver, there was not all that much enthusiasm in the mining shares today. Candle print for GDX was a shooting star, which the code felt was mildly bearish, while the print for GDXJ was a swing low/closing white marubozu, which netted out to a mildly bearish rating; apparently the swing low wasn't all that impressive. The GDX:$GOLD ratio moved slightly higher, as did the GDXJ:GDX ratio, but that comes after two days of solid decline at the end of last week. All-in-all, miners looked generally unenthusiastic today.

Platinum rose +0.99%, palladium climbed +1.47%, and copper moved up +0.56%. Palladium printed a bullish-looking spinning top which might be a low (40%), platinum made a new high which looked bullish, while copper also made a new high closing just above its 50 MA. It was all good news for the other metals, which helps to support the moves in gold & silver.

The buck continued falling, dropping -0.16 to 96.75, making a new low and printing a spinning top which looked relatively neutral. This probably isn't the low for the dollar. The Euro surged to a new high (+0.29%) to 112.40. The Yen went nowhere (+0.01); can gold rise without the Yen?  Apparently it can.

Crude moved up +0.20 to 51.04, printing a spinning top candle which the code felt was somewhat bearish. This, ahead of the API report due out tomorrow after market close. OPEC members have telegraphed their agreement to keep the production limits in place for the next 9 months; they have a meeting coming up on May 25th, but they decided not to keep us in suspense. had an article where they laid out the 5 outcomes from the meeting. I list them below, along with my assessment of the likelihood:

  • No extension [very unlikely; also very bearish]

  • 6-month extension [unlikely; bearish]

  • 9-month extension [likely; neutral]

  • 9-month extension + new members joining in [possible; bullish]

  • 9-month extension + deeper cuts [unlikely; quite bullish]

SPX rallied for the third day in a row, up +12.29 to 2394.02. Trump Troubles don't seem to have impacted US equities at all. The opening white marubozu candle looked bullish.  Utilities led (XLU:+0.89%) while energy & materials trailed. I believe that a rally led by boring, high-yielding utilities doesn't count, but here we are, 10 points away from the all time high.  Energy equities continue to have real trouble. While oil has managed to crawl back above 50, it does not seem to be enough to attract buyers back into energy.

VIX plunged -1.11 to 10.93. Buying puts has been a sucker's bet for a long time now. At this rate, we should hit single digits again in the VIX in a day or two.

TLT fell -0.27% printing a doji/NR7 which the code felt was somewhat bearish. TLT remains near its highs; it has not plunged even in the face of rising equities, although it is starting to fade from its recent highs.

JNK rose +0.27%, scoring a new multi-month high. That's risk on.

CRB rose too, up +0.54%. Every sector rallied today, led by energy. That makes the poor performance in energy equities even more striking.

Whatever happened to silver last Thursday, it isn't happening anymore. The drop turned out to be just a head-fake. The COT report from Friday showed a massive increase in managed money shorts. They make for an inviting target for the commercials to run; its hard to see how silver drops in that situation, since this is just money lying there on the table for the commercials to pick up. The new high today most likely squeezed some of them out.

The Eurogroup met; did they give Greece the much-awaited debt relief? Sure they did, double-helpings of debt relief, along with an apparently-sincere apology for the 8 years of depression they deliberately inflicted on the country.

Just kidding!  Back in the real world, the answer was: sorry Greece, Germany refuses to even discuss it until 2018.  And if you've been paying attention, you know what Germany will say when that time rolls around.

The intransigence of the Eurogroup has to be read to be believed:

  • Greece made “huge progress” in implementing the new austerity demands of the Troika. They also have a massive primary surplus. But, regardless of that success:

  • No money for Greece now; Schauble won't talk about bailout money even in the near term until the IMF participates.

  • IMF (apparently) won't participate until there is debt relief – but in spite of that, the Eurogroup hopes they can be persuaded.

  • Schauble refuses to even discuss debt relief for Greece until 2018.

  • Eurogroup will talk about it yet again at their next meeting on June 15.

  • Greece of course has a payment to make to their lords and masters in July.

Looks like Macron's victory has the EU back into their old mode of dealing with peripheral Europe: “suck it up, buddy”. The EU has read the same Greek polls we all have: it still shows the Greek people aren't yet ready to leave, in spite of all economic beatings their country has received – mostly at the hands of the Germans, which of course is the country that has received the largest benefit from the Euro currency. At some point, the Greek monkey will get tired of receiving cucumbers while the German monkey gets grapes, but when will that happen? Maybe the same time the US voters throw out all the cartel employees they have currently elected to represent them in Congress.

Comey's testimony is scheduled "after the Memorial day weekend."  That should keep a bid under safe haven assets between now and then.

And who knows what else might occur.  Trump seems to attract Black Swans - and he even generates a few all on his own.

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Cold Rain's picture
Cold Rain
Status: Gold Member (Offline)
Joined: Jul 26 2016
Posts: 331
Golden Poo

I would create a post about how the equity markets will go higher and gold, silver, and miners will head lower.  But I'm not going to. :)

In all seriousness, it looks like the miners are now set on making lower highs and higher lows for the foreseeable future.

davefairtex's picture
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5153
miners unhappy

Miners looked weak yesterday, and downright unhappy today.  I'm not sure if its a bearish engulfing or what - but I'm guessing the code won't be so happy with GDX.

GDX:GLD is also looking a bit more bearish too.

Looks like the miners just aren't ready to rally yet.


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