PM Daily Market Commentary - 7/11/2017

davefairtex
By davefairtex on Wed, Jul 12, 2017 - 6:14am

Gold rose +3.30 to 1217.00 on moderately heavy volume, while silver rose +0.19 to 15.82 on moderately heavy volume also. Once again, the metals sold off in Asia, but this time they did not make new lows. Gold and silver behaved differently; because of the strong Euro (XEU:+0.57%) gold's move was entirely currency-driven, while silver seemed to benefit from some more concerted attention from the buyers.

Gold's low today came at 10:25 at 1207.40; 30 minutes later, buyers took gold up $8 in about 15 minutes on some high volume moves that seemed to run the stops of the shorts, at least intraday anyways. Gold closed at the highs for the day. Gold ended up printing a swing low, which the code assigned a 57% chance of marking a low. Gold's forecaster jumped +0.33, but still has a bearish reading of -0.23. Candle code is usually faster to react than the forecaster. Still, if I look at gold in Euros, I see that gold did not print a swing low; GC.EUR forecaster is still bearish at -0.46. So gold in USD looks good, while gold in Euros remains weak.

Open interest at COMEX for GC fell -2,310 contracts. Finally we're seeing some shorts being closed out.

Rate rise chances (Dec 2017) fell to 47%.

Silver sold off in Asia, but hit bottom just after Tokyo closed; silver started taking off right alongside the Euro rally that started around 8am, spiking higher and breaking out repeatedly until about mid-day. Silver eventually closed at the highs. Whenever I see this behavior, I get the sense that the shorts are being squeezed. Candle print was a spinning top; with the massive hammer from two days ago dominating the picture, the candle code won't have much to say in a bullish direction for quite a while. Forecaster jumped +0.50 to read -0.24; one more day like today and we'll be back in bullish territory. Silver remains below all 3 moving averages, but it is looking a lot better than it did two days ago.

Open interest at COMEX for SI rose +1,404 contracts.

The gold/silver ratio fell -0.72 to 76.93. That's bullish.

Miners sold off initially, but then recovered and by closing GDX was up +0.60% on moderately light volume, while GDXJ climbed +0.37% on very light volume. Forecaster was impressed by the GDX move, moving up +0.35 into bullish territory to +0.17. GDX is now in an uptrend once again. GDXJ is lagging behind somewhat, still slightly bearish at -0.04. Miners appear to be leading the group higher – although the light volume today wasn't particularly inspirational.

The GDXJ:GDX ratio fell, while the GDX:$GOLD ratio rose. Call it a draw.

Platinum rose +0.10%, palladium climbed +1.16%, and copper moved up +0.89%. Palladium continued moving higher after yesterday's swing low, while copper printed a swing low of its own today. Platinum had a low-rated takuri line candle print – platinum made a new low today. It continues to struggle.

The buck fell -0.36 to 95.39, moving closer to its recent low at 95.22. The closing black marubozu looked unpleasant; the candle code did not think it marked any sort of a low. The forecaster moved deeper into bearish territory, down -0.20 to a bearish rating of -0.30. Might we see new lows in the buck? We just might. That should help PM, and possibly crude also.

Crude sold off in Asia along with the metals, making its low prior to the US market open, after which it rallied strongly through end of day – seemingly assisted by the falling buck. The API report at 430 pm was a blockbuster surprise – an 8.1 million barrel crude draw, which caused an immediate pop in the price by 50 cents. Crude closed at its highs for the day, up +1.19 to 45.84 and printed a swing low – which the candle code did not find all that compelling, rating the pattern as neutral. Forecaster jumped +0.45 points to read a gently-bearish -0.08. Crude is now back above its 9 EMA. All will depend on the EIA report tomorrow. Crude was well bid prior to the API report, up about 50 cents on the day.

SPX fell -1.90 to 2425.53. SPX suffered a big burst of selling just after 11am Eastern, dropping 15 points in about 20 minutes, but the dip was bought, and price recovered almost back to even by end of day. Energy did best (XLE:+0.54%) while financials fell most (XLF:-0.88%). The rally in financial stocks may have run its course.

VIX fell -0.22 to 10.89.

TLT climbed +0.17%, printing a confirmed bullish NR7 – candle code rated it a 74% chance of marking a low. TLT's forecaster rose +0.13 to -0.38. We may have a low for bonds.

JNK fell -0.05%; no follow through after yesterday's swing low for JNK. My sense is that traders are selling the rallies in JNK right now. That's risk off.

CRB rose +0.68%; 4 of 5 groups rose, led by energy. Commodities remain in a downtrend; recovery has been slow.

Reading the tea leaves, it looks like a low for PM, but not everyone is on board just yet. Silver is the best performer. As long as it continues to move higher – as long as the commercials seem ready to hose managed money's large short collection, the metals should continue moving higher.  The only chart that gives me pause is the GC/EUR chart.  The new low today in Euros (and the -0.26% drop) suggests that gold's reversal remains a bit precarious - from an international perspective.  Until gold reverses in all currencies, we won't have everyone on board and any move higher will depend entirely on currency.

Note: If you're reading this and are not yet a member of Peak Prosperity's Gold & Silver Group, please consider joining it now. It's where our active community of precious metals enthusiasts have focused discussions on the developments most likely to impact gold & silver. Simply go here and click the "Join Today" button.

11 Comments

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

Nice reversals in gold and silver this morning.  Yellen must have said something.

Edit: Just saw she was pretty dovish, not expecting additional rate hikes to occur rapidly and saying she sees equal chances of overperformance or underperformance of the economy.  Seems bullish for stocks, bonds, and PMs at the moment.

PeakGold's picture
PeakGold
Status: Bronze Member (Offline)
Joined: Jun 3 2017
Posts: 70
Could just be consolidation.

Could just be consolidation. I bought in at $15.61 yesterday, and just exited. We are at a critical resistance area here at $16.00 based on the trending channels, and I'm not sure of the direction. My gut is telling me that we get another leg down from here, but we'll see...

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 4772
lower channel

Peak, if you draw that lower channel about 50 cents lower, then it appears as though silver bounced off lower trendline support.  So rather than running into resistance right now, its bouncing off support!

Half full, or half empty?  While the grid stuff looks interesting, it seems as though it can be subject to human emotion.  'I think silver won't make it' - and so unconsciously you draw the grids accordingly.  I think the COT report is bullish, so i draw them in different places.  I think mine looks just as reasonable!

PeakGold's picture
PeakGold
Status: Bronze Member (Offline)
Joined: Jun 3 2017
Posts: 70
That's a great point Dave! I

That's a great point Dave! I appreciate the criticism! It could go either way as you say...

I think so far, it's my favorite charting style because it has allowed me to get really close to buying and selling at resistance areas. More so than other styles I have tried. I'm also a fan of the RSI in combination with the grid. 

It's all a work in progress!

 

 

PeakGold's picture
PeakGold
Status: Bronze Member (Offline)
Joined: Jun 3 2017
Posts: 70
Also, hopefully

Also, hopefully subconsciously! Not unconsciously! I hope to be fully awake when I make my life decisions!

I think you are right that I probably sold too early, If bearish, $16.40/$16.50 is probably the logical top to this reversal. I'll probably wait on the sidelines to see what happens around that level. 

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 4772
automation

I'm always looking to automate things.  I do this because if the computer says so, it does so without either hope or fear.  The computer doesn't care if its right or wrong, so it won't be tipping the scales in either direction.

I never was able to come up with satisfactory rules for drawing trendlines that I could automate, but for sure markets do tend to trend, and the lines help us to see the pressure points (and/or the decision points) more effectively.  If I could automate it, then I could feed the results to my ML algorithm, and it could assess the likelihood of support or resistance holding at each junction.  Wouldn't that be fun?

My ML code has RSI already built-in.  And moving averages.  And a bunch of other things.

Part of the process would involve drawing the lines as a timeseries played forward, and seeing how effectively the lines proved as forecasters of where prices tended to peak or trough.

 

PeakGold's picture
PeakGold
Status: Bronze Member (Offline)
Joined: Jun 3 2017
Posts: 70
See, my trend line worked! I

See, my trend line worked! I was excited to wake up to broken support in the hourly this morning. We'll see if we get some momentum on the downside through tomorrow, then I may decide to capitalize on the opportunity for the Monday morning price drop! I expect we'll get a leg down to somewhere near where the flash crash brought us.

Regarding your probability model. I agree that computers can be far more predictive than humans when all of the input variables are known and defined. There are apparently missing predictors in your model though. What are they? Can they be easily defined or identified? What's cool about the human mind is that it can gather data and input extremely random variables (subconsciously or unconsciously wink)  that a computer will never be able to model. Some times human intuition can be just as valuable as a machine learning algorithm. 

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 4772
lots of moving parts

Peak-

So a lot of things are happening here.  I just drew a line on a page that looked good to me.  That's thing #1.  I think my line looked great - and it seemed to follow your rules for drawing lines.  My line could still be right too.  We haven't closed below it yet.

Thing #2 is, market hasn't closed yet.  Perhaps wait until tomorrow to take the victory lap.  Today - anything could still happen.  We have 3 hours yet.  Buyers could show up and we could get a nice hammer candle.  You just never know.

Thing #3 - my candle code spits out probability, not certainty.  It saw continuations.  That's not a guarantee; it just didn't see a top based on yesterday's price action.  Yellen's speech before the Senate seemed to cause trouble for PM today.

Ultimately, I think you have missed my point, which is, if you don't have a system for constructing your grid lines, all they really are is a projection of your own hopes & fears (and/or your own personal powers of divination) and you are just using your chart as a communication vehicle.

You might as well just say, "I feel that silver is going down when it hits 15.90" and skip the chart entirely.  Your feelings may in fact be 100% accurate - but the little lines on the chart provide me no help at all in replicating your results, since they're totally internal to you.

Lastly...I'm still putting my money on the commercials.  They don't usually lose these battles.  Managed money is way overloaded short.  As in, they've never had more shorts in play in history.  Of course I could be wrong, but I'm going with the odds.

PeakGold's picture
PeakGold
Status: Bronze Member (Offline)
Joined: Jun 3 2017
Posts: 70
hope this helps

My post was meant to be light-hearted and playful. Based on my method, you followed everything correctly and somehow my last post seemed to have hit a nerve. I never said that what you did was wrong. I'm sorry to have caused any frustration.

Here was my method yesterday...

I bought USLV around 15.61 on the 11th and sold at $15.96 based on the price action yesterday, the 12th. Silver refused to trade beyond the center of the channel and kept rebounding off lower support (chart below). For me, it screamed that support was going to break. When I woke up this morning and saw the support line was broken, I was not surprised because I expected the event when I sold at  $15.96

The line that you drew in the weekly (above) corresponds with the likely price point of the next support area in the hourly... mid $15.50s

If that 15.50ish area holds, then I will likely go long again, otherwise I will continue my bearish opinion

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 4772
that helps

Ok thanks for the more complete explanation.   Apologies for being testy.

Part of my problem is, I'm convinced the computer both can and will do better than humans for the bulk of the normal trading tasks.  It certainly does better than me anyway.

So my frustration is, I can't get you to tell me what it is you do.  I don't see a consistent system.  Sometimes you draw the lines at the closing prices, other times you use the shadows.  I can't write code to (seemingly) change its mind randomly.  It has to have a system!

So if you don't tell me, then I can't try to teach my computer to do it - the theory being, computer will do it a lot better than I ever could.

Your trade yesterday looked great.  If you don't mind to keep posting them, and maybe I'll be able to figure out by enough observations what it is you are doing.

 

PeakGold's picture
PeakGold
Status: Bronze Member (Offline)
Joined: Jun 3 2017
Posts: 70
lines

Basically opens and closes are equally important... shadows are less so. The down trending lines connect the lowest two opens or closes, and the up trending lines connects the highest two. Usually using a well established trend line as a reference for a less establish line is helpful and sometimes necessary.

Sometimes there are reaching candle sticks where the wick is largely extended, those sometimes are reaching just to touch/confirm a line. Those are helpful

Ultimately, it's really about the open and closing prices as indicators.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Login or Register to post comments