PM Daily Market Commentary - 7/12/2017

davefairtex
By davefairtex on Thu, Jul 13, 2017 - 5:27am

Gold rose +2.70 to 1219.70 on heavy volume, while silver rose +0.06 to 15.88 on moderately heavy volume.  Gold and silver shot higher after Yellen's testimony to Congress started at 830 am Eastern, but the gains from the rally didn't last through end of day.

So what did she say?  According to econoday.com, she believes that the Fed Funds rate doesn't have far to go to hit a neutral stance (1-2 more increases, perhaps?), and that the balance sheet unwind will begin relatively soon. There are a flock of Fed speakers this week – if they all start singing the same “relatively soon” tune, we could possibly end up with something interesting happening with the balance sheet at the meeting two weeks hence.

It appeared that gold initially liked the relatively dovish testimony from Yellen.  On the day, gold hit a new high of 1225.20, just 30 minutes after Yellen's testimony started, but gold could not make any more progress.  Candle print: spinning top, which the code felt was neutral. Forecaster jumped into positive territory, up +0.41 to +0.13. Gold has now moved into an uptrend – although it has yet to cross back over its 9 EMA.

Open interest at COMEX for GC rose a massive +17,063 contracts.  So let's see.  Gold rockets higher initially off the testimony, but ultimately it can't make much progress, and by end of day we see that 53 tons of new paper gold hit the market at some point during the day.  Volume is also fairly heavy.  Someone sure took this as an opportunity to go short

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

Silver looked a lot like gold, shooting higher off Yellen's testimony but failing to materially break higher.  Candle print for silver was also a spinning top, which the candle code felt was neutral. Forecaster jumped up +0.23 to a very slightly bearish -0.01. Silver also remains below its 9 EMA.

Open interest at COMEX for SI rose +2,414 contracts.  That's substantially less than gold.

The gold/silver ratio fell -0.14 to 76.78. That's slightly bullish.

Miners gapped up sharply at the open, and then spent the day slowly selling off; GDX rose +0.46% on moderately light volume, and GDXJ was up +0.37% on very light volume. Both ETFs printed black candles; both were rated neutral rather than bearish. In spite of the selling pressure, GDX still managed to rise above its 9 EMA. GDXJ's forecaster moved into bullish territory also. Miners still look bullish, just a bit less so today.

The GDXJ:GDX ratio fell slightly, while the GDX:$GOLD ratio rose. Neutral.

Platinum jumped +1.76% printing a whole variety of bullish reversal patterns adding up to a 63% chance of a low. Palladium rose +1.50%, and copper climbed +0.24%. All three of the 'other metals' looked good today. If the trend in the metals was determined by these three, we'd be all set. Platinum's move looks especially strong.  Maybe that's what occurs when someone doesn't drop 56 tons of paper on the market.

The buck rose +0.09 to 95.48, making a new low and then rebounding somewhat. It was relatively unaffected by Yellen's testimony. Although price did bounce around a fair bit for about 45 minutes, ultimately it didn't lead to any real movement.  Candle print was a spinning top, which the code found to be somewhat bullish. The dollar's forecaster remains bearish.  My sense is that the buck is bouncing around at the lows - it will probably move lower still, but it appears in no hurry to get there.

Crude did not like the EIA report, which showed “only” a -7.6 million barrel crude inventory draw.  In normal times this would be a very bullish reading, but apparently not today.  Traders took a bullish report and sold it relatively hard. It wasn't an utter disaster, but it certainly wasn't the big celebration I was expecting.  Crude ended the day off -0.29 to 45.55. Candle print was a bearish harami, which the candle code found to be fairly bearish – a 50% chance of a top. Crude forecaster moved up +0.08, bringing crude to a neutral reading. I go back to the basics; when the market sells off on what should be good news, that's really bearish. I'm guessing we go through another few days of selling now.

SPX rallied sharply, up +17.72 to 2443.25. SPX was another beneficiary of the Yellen testimony, with the rocketship launching right at 830 am and never really looking back.  I guess the equity market liked the thought that the rate rises were just about over.  In the sector map, tech did best (XLK:+1.30%) while energy brought up the rear (XLE:+0.28%).  Energy has been beaten like the proverbial rented mule for quite a while now - the master resource that nobody really cares about.  One million barrels too much, and its just worthless trash.  "Oh, but you'll miss me when I'm gone."

VIX fell -0.59 to 10.30.

TLT also rallied off Yellen's testimony, climbing +0.69% and closing above its 200 MA. The forecaster for TLT jumped +0.69 points and is now bullish. This was a very nice follow-through from yesterday's confirmed NR7.

JNK rose +0.57%, gapping up and rallying strongly on the day. JNK is now back above the 9 EMA. While JNK remains in its longer term downtrend pattern, it is now signaling risk on.

CRB fell -0.03%; while 4 of 5 groups rose, agriculture did quite poorly, losing -2.08% and dragging down the entire commodity complex down.

The technicals tell us that gold and silver are now at transition points.  I can't say for sure which way the metals will jump in the near term, but the bullish clues are:

  • platinum put in a very nice reversal off yesterday's low
  • the candle code is showing "neutral" (rather than "something bearish") for gold, silver, and the miners - we could call those a "continuation" candle print.  "That which doesn't kill the trend means it probably continues moving higher."
  • it took 56 tons of new paper gold to keep gold from exploding higher.
  • gold finally printed a swing low today in Europe.  It got a mid-range rating, which is a 44% chance of marking the low here
  • The buck does not look as though it will race higher anytime soon.
  • There are a lot of managed money shorts - especially in silver - just waiting to be run by the commercials.

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2 Comments

lambertad's picture
lambertad
Status: Silver Member (Offline)
Joined: Aug 31 2013
Posts: 123
Trolling the FED

Probably some summer interns, I bet they won't be invited back. Too bad, they already got their message across. I guess this just goes to show where the mentaility of that generation lies. Looks to be in their mid-twenties. I guess that's why this sign didn't say buy gold. I wonder if those 2 realize the Fed can have Bitcoin under their thumb in a matter of months, as they could with gold, except with gold they'd have to go door to door to get the stuff, bitcoin it's just a matter of shutting down the servers. Sure, sure it's decentralized, but as others have pointed out before, there is something fishy about the .Gov just letting this stuff fly. BTW, I think we're at peak stupidity in Cryptocurrencies - Check out Coinlaunch.co. You can launch your own Cryptocurrency there. Great idea, now everyone can have their own Cryptocurrency!

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 4448
trolling Yellen: facial expressions

So I liked the bitcoin thing for sure, just to stir the pot.

But do you notice the facial expressions of all the other people?  Uniformly, they are frowning.  Are they having fun?  They are not having fun.

The intern, on the other hand, IS having fun.

Which would you choose for your life?

 

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