PM Daily Market Commentary - 6/28/2017

davefairtex
By davefairtex on Thu, Jun 29, 2017 - 7:48am

 

Gold rose +1.90 to 1249.40 on moderately heavy volume, while silver rose +0.15 to 16.83 on very heavy volume. Silver definitely outperformed gold, but at least half of the move was an artifact of contango from a contract-roll, which happened today. Since the buck actually fell on the day, golds very modest move higher was entirely a currency effect. And then some.

So the ECB tried to walk back Draghi's “I'm going to taper” speech: "just kidding, we didn't mean it – and by the way you markets are really stupid for misunderstanding what the Great Man had to say. The very idea." That walk-back attempt caused the Euro to spike down hard at around 08:15 eastern, but it soon bounced right back ending up on the day +0.38%. Did I mention that Draghi hates it when the Euro rallies? Its hard to be a central planner, especially when the market doesn't follow your orders.

In spite of the supportive Euro rally, gold didn't have a great day; gold in Euros made a new low (dropping -0.30%) and gold in USD showed a failed rally – although the shooting star candle print was only seen as neutral by the candle code. Gold remains below its 9 EMA and 50 MA lines when viewed in USD, and from the Euro perspective it just continues to drop. That doesn't bode well for where we go next. The gold forecaster ticked up a few points, and is now just about even; really neither bullish nor bearish. When an instrument chops sideways, the forecaster will oscillate between bullish & bearish modes, but these signals should not be traded on, since you will end up getting whipsawed back and forth. Forecaster only works well when the trend is well-defined. My sense is, now is the time to be watching, rather than buying (or selling) gold.

Open interest at COMEX for GC rose +1,288 contracts.

Rate rise chances (Dec 2017) moved up to 48%.

Silver did better than gold; although half of the gain had to do with a contract roll & contango, silver still did all right. On the day, silver managed to score a new high, and is now comfortably above its 9 EMA. It also managed to finish recouping all of the losses from the big smash on Monday. The silver forecaster improved, ticking up +0.06 to a bullish 0.36 rating. That suggests the slope of the rally isn't all that steep, but it is definitely bullish. Still, how much of silver's rally is about currency? Well, all of it. Silver isn't actually rallying from an “international demand” perspective.  When viewed in Euros, silver has just been chopping sideways.

Open interest at COMEX for SI fell -831 contracts.

The gold/silver ratio fell -0.55 to 74.24. That's bullish.

Miners gapped up at the open, sold off, and then rallied back to close up. GDX rose +0.76% on light volume, while GDXJ moved up +1.55% on very light volume. GDX printed a bullish harami/takuri line candle, which the code felt was bullish, with a 61% chance of marking a low. The GDX forecaster fell -0.09 to register exactly 0.0 – neither bullish nor bearish. The GDXJ forecaster fell too, but remains somewhat bullish. All in all, the miners did ok today; buyers appeared to buy the dip, in spite of a lackluster performance by gold itself, and the junior miners continue to outperform.

The GDXJ:GDX ratio rose, and so did the GDX:$GOLD ratio. That's bullish.

Platinum rose +0.15%, palladium dropped -0.08%, and copper rose +0.72%. Both palladium and platinum are edging into downtrends while copper continues to look bullish.

The buck took another leg down today, dropping -0.35 to 95.74. The forecaster continued to fall, now a quite-bearish -0.76 signaling we probably have lower to go. The candle print was just a long black candle, which probably doesn't mark a low. Many other currencies did quite well; GBP rose a big +0.91%, probably as a result of PM May managing to cobble together a majority in parliament. CAD and AUD both did well – copper and oil both had good days.

Crude staged a reasonably strong rally today, up +1.16 to 44.88, with much of the move coming after the EIA report showed a mixed situation: +0.1M barrel crude build, and a -0.9M barrel gasoline draw. These are numbers that would have sent the market screaming lower last week, but this week we got a rally. This suggests that traders who wanted to sell are already gone. When market changes its behavior like this, that's a bullish sign. Forecaster jumped along with price, up a big +0.42 to 0.68. COT report tells us that there are a lot of new managed money shorts to squeeze in crude, and I suspect that's what the next few days will probably bring. I can't say for sure that this marks "the low”, however. The longer term bearish pattern of lower highs and lower lows remains in place, and so this may well just be a rally within the context of the existing crude downtrend. Certainly oil equities aren't rallying with any real conviction right now, and that would tend to support this "lower prices ahead - eventually" thesis.

SPX staged a sharp rally, up +21.31 to 2440.69, wiping out all of yesterday's losses in one go. Financials rallied most strongly (XLF:+1.57%) along with tech (XLK:+1.25%), while utilities (XLU:-0.96%) were the sole sector in the red. Financials did well because of high expectations from the Fed's annual bank stress test, the results of which were due out after market close. Passing grade = banks can use their extra cash to pay dividends and buy back stock instead of keeping them as insurance against a downturn. Most of them got the go-ahead to do just that. Doesn't that just have to mark the top?

VIX plunged -1.03 to 10.03. I guess all we get are one-day corrections these days.

TLT continued falling, down -0.33% printing a hammer candle which the code felt was neutral rather than bullish. Forecaster fell a bit further, now -0.44 which is solid bearish territory. TLT is now more convincingly below its 9 EMA. TLT is saying risk on.

JNK rose +0.35%, wiping out yesterday's losses and managing to close above its 50 MA. JNK now appears to be back in reasonably bullish territory. JNK: risk on.

CRB rose again, up +0.57%. All 5 groups rallied today, with the best gains in energy. This is the 4th-straight rally day for commodities, although they have a long way to move back into an uptrend.

Where does that leave us? Gold looks neutral, silver looks more positive, miners are somewhat positive with juniors looking best, while the other metals are split. The falling dollar should be helping gold a lot more than it has been doing.

My sense is that without a clear trend, or even just a soft uptrend, the safest course is to watch from the sidelines. And certainly when viewed in Euros, the trend for gold right now is down, and silver is flat. Juniors might be the only thing worth looking at, although the trend there is a choppy, shallow uptrend at best.

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4 Comments

cmartenson's picture
cmartenson
Status: Diamond Member (Offline)
Joined: Jun 7 2007
Posts: 5569
Selling PM's into first notice

...whocouldanode?

:)

Bullion banks doing what they do....

Cold Rain's picture
Cold Rain
Status: Gold Member (Offline)
Joined: Jul 26 2016
Posts: 324
Something's Different?

Feels like there's a glitch in the matrix.  Jawboning worked for one day and we're back to selling again.  Very unusual feel in the equity markets right now.  PM markets feel about the same, though.  Shares getting pounded, of course.  Wonder if we'll ever see $20 silver, $1500 gold, and a rising PM share market in our lifetimes again?  Maybe when the Dow is at 100,000 and all of the mines shut down.

Saw this...pretty good read:

https://www.tfmetalsreport.com/blog/8418/posx-continues-stink

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5064
unusual

I agree about the unusual equity market feeling.  Market seems nervous.  Big selling one day, rally next, selling next.

"Cat is always on the wrong side of the door."

I dunno.  Maybe its just time.  We've had low volatility for quite a while now.

These guys think they can control everything, but there are patterns within the global market machine that defy intervention - and straightforward analysis.

I just don't think its the time for gold right now.  Traders seem focused on the Euro, and equities, and gold is a bit of an afterthought.  Makes it easier for the big guys to play with it.  Reduced liquidity = sell equities = sell treasury bonds.

 

 

Cold Rain's picture
Cold Rain
Status: Gold Member (Offline)
Joined: Jul 26 2016
Posts: 324
Re: Unusual
davefairtex wrote:

I agree about the unusual equity market feeling.  Market seems nervous.  Big selling one day, rally next, selling next.

"Cat is always on the wrong side of the door."

I dunno.  Maybe its just time.  We've had low volatility for quite a while now.

These guys think they can control everything, but there are patterns within the global market machine that defy intervention - and straightforward analysis.

I just don't think its the time for gold right now.  Traders seem focused on the Euro, and equities, and gold is a bit of an afterthought.  Makes it easier for the big guys to play with it.  Reduced liquidity = sell equities = sell treasury bonds.

 

 

Or maybe not, lol!  Here comes our V-shape hammer reversal into the close.

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