PM Daily Market Commentary - 7/6/2017

davefairtex
By davefairtex on Fri, Jul 7, 2017 - 4:05am

 

Gold fell -1.80 to 1224.70 on moderate volume, while silver dropped -0.06 to 16.02 on moderate volume also. A fairly strong move down in the buck didn't provide much help at all to PM, which was under selling pressure again in Europe, where both metals made new lows. Buyers only appeared later in the day during the US trading session. Capital flight from US markets – both bond and equity – continued.

Gold more or less chopped sideways within a fairly narrow range today; the dollar plunge suggests gold remains in a downtrend over in Europe.  Gold's candle print was a spinning top, which the code felt was neutral.  Gold's forecaster dropped a big -0.59 points, pulling the forecaster into bearish territory.  Note that the forecaster works poorly as a trading advisor when the instrument moves largely sideways.  As with moving averages, the forecaster needs a solid 10+ day trend to do well.

The dollar fell and/or the Euro rallied fairly strongly, but it didn't help gold in dollars much at all. From this we know that gold in Euros fell once more – about 0.67% on the day, making a new low.

Open interest at COMEX for GC rose +11,366 contracts. That's another big increase – OI is up +21k over the past 4 trading days. Someone is increasing their short positions; 35 tons of paper gold just today (mine production: about 6 tons per day).

Rate rise chances (Dec 2017) fell to 50%.

Silver slowly sold off through Asia and Europe, finding a few buyers once the US market opened. The candle print was a spinning top, but since silver didn't make a new low, the candle code had no opinion on the direction. Forecaster ticked lower, dropping -0.06 to a bearish-looking -0.92.  Given the brisk plunge in the buck, that tells me silver isn't doing so well.

Open interest at COMEX for SI rose +5,767 contracts. It still doesn't seem like the commercials are closing out their shorts.

The gold/silver ratio rose +0.10 to 76.47. That's slightly bearish.

Miners sold off at the open, and mostly chopped sideways through end of day. GDX fell -1.27% on moderate volume, while GDXJ dropped -1.63% on moderately light volume. Candle print for GDX was a bullish harami, but the code saw it as more neutral, while GDXJ's print was just a short black candle, which the code found to be mildly bullish. Forecaster didn't particularly like the drop, falling -0.07 to a relatively bearish -0.55. GDXJ made a new low. The promise of yesterday's GDX bullish engulfing candle print seem mostly gone.

The GDXJ:GDX ratio fell slightly, as did the GDX:$GOLD ratio. That's bearish.

Platinum rose +0.03%, palladium fell -0.69%, while copper was unchanged. Platinum and palladium both remain in bearish territory, and copper is now bearish also.

The buck fell relatively hard, dropping -0.49 to 95.55. Candle print today was a two candle swing high, but the candle code called this one neutral rather than bearish. Forecaster moved lower but remains (barely) in bullish territory. Reading the tea leaves, it looks as though the buck may chop around at or near the lows for a while. The Euro bounced higher, up +0.63% - the primary reason for the dollar drop.

Crude tried to rally off a very bullish EIA report, but ended up falling, losing -0.27 to 45.38. Since crude didn't make a new low, the candle code didn't say anything about the failed rally. Forecaster thought it was quite bearish, and according to it, crude is now just barely in bearish territory. When the market sells off after good news - that's bearish. EIA report showed a -6.3 million barrel crude draw, and a -3.7 million barrel gasoline draw. I guess Russia & OPEC beats the EIA inventory.

SPX fell fairly hard, down -22.79 to 2409.75. Every sector fell, with the market led lower by sickcare (XLV:-1.29%) and energy (XLE:-1.11%). Utilities did best (XLU:-0.04%). It is a fairly bearish sector map picture today. SPX closed at or near its day lows; the opening black marubozu candle wasn't bullish. SPX closed below its 50 MA for the first time in about six weeks – that's a bearish sign. We may be entering an actual correction.

VIX rose +1.47 to 12.54.

TLT continued plunging today, down -0.83%. It is now below all 3 moving averages, and the RSI-7=21 says that TLT is starting to become oversold. TLT forecaster remains bearish at -0.70, ticking slightly lower today. Candle print was a high wave, which the candle code felt was bullish: a 50% chance of marking the low here. Is this the end of the selling from Europe? Hmm. I'm not so sure.

JNK sold off too, dropping -0.24% and making a new low. This marks the third lower-low set by JNK. Its in a clear downtrend now. Coal mine canary is saying “risk off.”

CRB rose +0.42%; 4 of 5 sectors rose today, led by energy. Both natgas and gasoline did fairly well, even though crude dropped. CRB remains in a downtrend, but has recovered off its lows.

Yesterday's potential low in PM didn't happen. I think the rising open interest was the tell. Europe still seems to be a seller – of dollars, SPX, treasury bonds, as well as gold.

A while back I thought traders would rotate into gold if SPX started to weaken. That does look to be happening – possibly – during US trading hours. Its hard to know for sure though. Certainly we also see domestic treasury-buying alongside gold once Europe closes.

Today, about an hour after market close (at 7:05pm Eastern), “someone” smashed silver for a massive loss, dropping it down to 14.34 and causing a burst of 8429 contracts to change hands over a 5 minute period. Price quickly rebounded, but took a while to stabilize, and since then it has traded mostly sideways around 15.80-85. What does this mean? Well, one easy answer is any long stops are now just gone, and the commercials have probably pocketed a reasonably large amount of money. If silver can keep from selling off further, this could actually be a bullish event. We will have to see what it looks like by end of day, and if the commercials added to their short positions or they closed them out. “Too soon to tell.”

Overall, we just have to wait for the selling to stop. That's a familiar theme in PM, and we find ourselves here once more.

Today's drop in SPX should not be ignored. Together with the bearish outlook provided by JNK, we're clearly moving into a risk off phase. That doesn't mean we immediately crash, just that traders will (probably) be selling rallies a little more enthusiastically.

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1 Comment

Cold Rain's picture
Cold Rain
Status: Gold Member (Offline)
Joined: Jul 26 2016
Posts: 287
Bloodbath

Looks like another bloodbath on tap for PMs today.  Non-farms will be the excuse, but it's really meaningless.  Sure, it was better than the consensus (222 vs. 179 exp) and wages were in line, but it's pretty immaterial to Gold and Silver, IMO, unless it was an unmitigated disaster, which nobody expected.  The Fed is pretty much already set their course for the year.

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