PM Daily Market Commentary - 7/19/2017

davefairtex
By davefairtex on Thu, Jul 20, 2017 - 4:03am

Gold fell -1.00 to 1240.90 on heavy volume, while silver dropped -0.01 to 16.25 on moderate volume. Since the buck actually rallied +0.18, it was a mildly positive day for PM.

Gold sold off a bit in Asia, making a low to 1235.10, but then it rebounded, resulting in a spinning top candle. Since there was no new high or low, the candle code has no opinion on direction, but to me the rapid recovery from the minor sell-off looked relatively positive. Forecaster did not agree, dropping -0.21 to read a still-bullish +0.55. Gold remains above its 200 MA, but below the 50. Gold in Euros actually made a new high today.

Open interest at COMEX for GC fell -1,788 contracts.

Rate rise chances (Dec 2017) remains at 43%.

Silver looked a bit stronger than gold today, selling off in Asia but then rallying back to make a new high during the London session to 16.34. It could not keep its gains through the close, however, printing a northern doji candle that the code felt was a continuation – i.e. uptrend remains intact. The silver forecaster wasn't as happy, dropping -0.09 to read +0.44; its still bullish, but a bit less so after today.

Open interest at COMEX for SI rose +2,639 contracts. Someone continues to pile on short in silver.

The gold/silver ratio fell -0.04 to 76.34. That's slightly bullish.

Miners traded in a range today, with GDX ending up +0.18% on light volume, while GDXJ fell -0.39% on very light volume. GDX printed a high wave candle, which the code felt was probably a continuation. Forecaster ticked up +0.03 to read +0.29, which is somewhat bullish. This was the first white candle body in 6 days for the miners.

The GDXJ:GDX ratio fell, while the GDX:$GOLD ratio rose. It looks slightly bearish.

Platinum fell -0.75%, palladium fell -0.64%, and copper moved down -0.73%. Both copper and palladium may have put in highs today; while they weren't swing highs, both metals printed confirmed bearish NR7 patterns which had a 50+% of marking a top. Forecasters for all 3 metals plunged; all three remain bullish (although in palladium, just barely so), but much less so after today's price action.

The buck bounced back after yesterday's strong sell-off, rebounding +0.19 to 94.53. Candle print was a bullish harami, which the code assigned a 42% chance of marking the low here. That's a bit more bullish than yesterday's print. USD forecaster bounced back +0.28, but still reads a bearish -0.57. The buck is struggling to put in a low here; it still looks like less than a 50% chance that it will succeed.

Crude staged a strong rally today, up +0.84 to 47.25, making a new closing high for this cycle. Crude moved steadily higher in Asia and Europe, but the bulk of the rally came after the EIA report revealed a bullish -4.7 million barrel crude inventory draw, as well as a -4.4 million barrel gasoline inventory draw. The long white candle was seen as a continuation. Crude forecaster moved up +0.12 to read a fairly bullish +0.46. Crude is now cleanly through its 50 MA, which is an important bullish waypoint.

SPX rose +13.22 to 2473.83, which is another new all time closing high. Energy led (XLE:+1.46%) while financials trailed (XLF:+0.04%) - that says all sectors were in the green today. Energy was able to close (just barely) above its 50 MA for the first time since January 2017. This could be an important trend change for energy equities.

VIX fell -0.10 to 9.79. Puts remain cheap.

TLT inched higher, up +0.05%; the northern doji candle was seen as a continuation. TLT forecaster rose +0.14 to read a relatively bullish +0.51. TLT continues to move higher in the face of an SPX rally and a dropping dollar; that's a positive sign for bonds.

JNK rose +0.16%, making a new high. It has resumed its uptrend, and is signaling risk on. The oil rally probably helps.

CRB climbed +1.01%, making a new high for this cycle. 4 of 5 groups rallied, led by energy. CRB appears as though it is really starting to recover now.

The pressure on the mining shares appeared to drop today, at least from the standpoint of the senior miners anyway. While gold and silver fell, both metals rallied in Euro terms, which is good news. At the same time, the moves remain modest, and it appears that managed money is continuing to short silver heavily, based on the large increases in open interest.

If the buck recovers, I suspect the metals will tip over and sink. I'm not sure what the chances of that happening are. The technicals remain reasonably strong, but that rally in Euros remains anemic, which continues to suggest this bounce may be just a counter-trend rally with a short lifespan.

How does this align with the COT report, which looks bullish? Well, the COT report can always get more bullish. At some point we should see a substantial rally in the metals to clear out all those new managed money shorts, but so far, the "real" rally (where silver moves up sharply in all currencies) just hasn't happened yet.

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7 Comments

PeakGold's picture
PeakGold
Status: Bronze Member (Offline)
Joined: Jun 3 2017
Posts: 78
Support tested... a day later

So there was the test of support I thought was going to happen yesterday, and about 10 cents higher. I think we will see another retest, but from there I'm not confident. You make a strong case for a bullish scenerio, but my gut is telling me this is the top for now. 

I still think $14.00 silver is going to happen, but if we get into the high, $16s, then I think I might change my mind

http://i.imgur.com/Vqo6mSI.png

 

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5062
strong case

Heh I dunno about a strong case.  I'm quite concerned by the relative lack of buying interest in Europe, and by the relatively poor performance of the miners.  The COT report is very bullish, but if gold & silver (in Euros) continues to languish the way it is doing today, I don't see a happy ending to the PM story near term.  If all we get off a 1% move in the EUR/USD is $3 in gold and $0.05 in silver, its not a good sign.

Based on what I see today, I think your "gut" could be entirely correct, near term.  I think the COT will eventually prevail, but ... it may have to wait for Draghi to actually start his tapering first.

I'm lightening up.

PeakGold's picture
PeakGold
Status: Bronze Member (Offline)
Joined: Jun 3 2017
Posts: 78
I think we will know by

I think we will know by Monday, and I'll be looking to take a short position then. I'm looking at $15.40, $15.00, and $14.00 as possible bottoms for this dip (should it take place). 

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5062
bitcoin rally

Looks as though a technical solution for bitcoin was (largely) approved by the mining community to mitigate transaction processing volume issues for bitcoin - at least for the near term anyway.

http://www.bbc.com/news/technology-40654194

Today's massive rally in bitcoin snapped the downtrend line and - most likely - invalidates the "waiting for Aug 1" scenario I talked about before.  No need to wait for Aug 1 if the solution is here today and approved by enough of the miners.

This is just a guess as to the driver, though, since I don't track the community all that closely.  But price & volume don't lie - money is pouring into bitcoin right now: maybe $500 in just one day.  That's some big money.

Google trends for "segwit2x" has almost gone vertical in the last 4 days.  That's some supporting evidence that this story is likely true too.

And one more trend indicator I've learned to trust: mrees has once again emerged from hiding.  :)  Now that's a surefire sign of a renewed uptrend!

Not trading advice!

mrees999's picture
mrees999
Status: Gold Member (Offline)
Joined: Aug 16 2013
Posts: 372
Haha - very funny.

A new motorcycle and the summer of great weather in a great country has beckoned me.  My prediction of a 70% correction was pretty close and follows the pattern for several years in crypto. I predicted $120 and we dropped to 130 – who knows if the bear has left its seasonal return, but it probably has - as the great bitcoin pumpkin has returned a month earlier than I suspected.

I, however, have many more open roads to discover on my trusty Indian motorcycle. I’ve named her from wince she came.

Eth.

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5062
nailing the top

All I know is that if you disappear again on a "motorcycle trip", I'm selling.  Same goes for any more skeleton posts.  You nailed the very day of the top with that one.

The rally started today at 4 AM (Pacific).  The volume pattern says huge amounts of money started pouring in at that time.  Something changed at that moment.  I have no idea what that was, but its impossible to miss when you look at the price/volume charts.

I think we could go through 3000 today.

PeakGold's picture
PeakGold
Status: Bronze Member (Offline)
Joined: Jun 3 2017
Posts: 78
So silver closed about 6 or 7

So silver closed about 6 or 7 cents higher than I was expecting, so I believe silver will go a little higher. All day silver was bouncing off and held support, so I'm wondering if that continues into Sunday and Monday and we see $16.75?

Here on the weekly...

On the daily...

Still expecting to jump into a short position on Monday because we are due for a correction of some size. Should be an interesting week ahead...

Have a good weekend!

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