PM Daily Market Commentary - 7/20/2017

By davefairtex on Fri, Jul 21, 2017 - 3:51am

Gold rose +9.60 to 1250.50 on very heavy volume, while silver moved up +0.05 to 16.40 on moderate volume. Although the move in gold looked strong, the majority of today's move ($6.60) was due to a contract roll and the associated contango. A very strong rally in the Euro (and the consequent drop in the buck) was entirely responsible for the remainder of the move higher in gold and silver.

Gold moved steadily lower in Asia and London, taking off along with the Euro at about 7:30 Eastern. Unfortunately, gold's rally did not keep up with the moves in currency, meaning that gold in Euros actually fell on the day. Candle print was a long white candle, which the code felt was bearish; a 52% chance of marking a high. Gold forecaster jumped +0.26 to a very bullish +0.81.

Open interest at COMEX for GC rose +1,854 contracts.

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

Silver mostly followed gold's track, selling off in Asia but then rallying back to make a new high during the London session to a new high at 16.39, but then faded into the close. The spinning top candle print was seen as somewhat bearish, with a 37% chance of marking the top here. Forecaster dipped -0.09 to +0.35. When viewed in Euros, silver actually printed a swing high today.

Open interest at COMEX for SI rose +750 contracts.

The gold/silver ratio rose +0.35 to 76.69. Mostly that's because of the contract roll in gold.

Miners moved higher today, rallying along with gold following the jump higher in the Euro. GDX moved up +0.63% on light volume, while GDXJ climbed +0.39% on very light volume. Candle was a spinning top, which the code felt was a continuation. Forecaster didn't move, remaining at a somewhat bullish +0.29. It was nice to see the miners actually rally for a change, even if the move higher was fairly tepid.

The GDXJ:GDX ratio fell, while the GDX:$GOLD ratio rose – mostly because of the contract roll. I'll call it slightly bearish.

Platinum rose +0.74%, palladium fell -1.52%, and copper moved up +0.35%. Palladium actually printed a swing high today which looked just somewhat bearish (a 31% chance of marking a high). Copper's short white candle was a continuation (of its new downtrend), while platinum more or less got back what it lost yesterday. Palladium's forecaster plunged into bearish territory, down -0.33 to -0.30.

The buck plunged today, dropping -0.47 to 94.06. The move started at about 08:35 Eastern, and was attributed to special counsel Muller expanding his investigation into Trump's business dealings with Russia. The buck's new low invalidated yesterday's bullish harami, and resulted in a long black candle, which the code felt was actually bullish: a 67% chance of marking the low. It is another chance for a low in the buck. The buck has fallen quite a distance, and is oversold in both daily and weekly timeframes (RSI-7 < 20).   The dollar's forecaster fell -0.16 to read -0.73, which is quite bearish. The Euro made a new high to 116.32.

Crude tried rallying today but the rally failed, with crude topping out right after the US market opened. about the same time that the Euro jumped higher. Candle print was a spinning top, which the candle code felt was a continuation – not bearish. Forecaster fell -0.11 to a still-positive +0.36. Crude remains above its 50 MA.

SPX inched down -0.38 to 2473.45. Candle print was a spinning top, which the code felt had a 34% chance of marking the top. Utilities did best (XLU:+0.72%) while materials performed worst (XLB:-0.74%). The sector map looked a bit like a Trump rally unwind – at least a mild version of one anyway.

VIX fell -0.21 to 9.58. Puts continue to get cheaper.

TLT moved up +0.29%; bonds are now moving steadily higher. Candle print is a long black candle, which the code found to be a continuation – not bearish. TLT forecaster moved sideways, unchanged at +0.51, which is relatively bullish. TLT looks to be in a steady uptrend now – surprising, especially since the dollar keeps dropping. Its probably not foreign money buying the treasury bonds right now.

JNK rose +0.11%, which is another new high. JNK has risen for 8 of the last 9 days, and continues to signal risk on.

CRB fell -0.14%, with 3 of 5 sectors dropping, led by livestock. CRB remains in a short term uptrend, trying to recover.

If you just look at PM performance measured in USD, the metals continue to move slowly higher, with gold looking better than silver. Gold's contract roll and the strong contango confused things somewhat too, making gold's performance look better than it would otherwise have been.

Miners continue to make slow progress, but they've stopped with the intraday selling pressure, so that's a positive sign too.

That said, I'd really like to be more positive overall on the metals right now, especially with the COT report structure being the way it is, but when viewed in Euros, the current rally looks like a dead cat bounce – especially if you eliminate the effects of today's contract roll. I have this sense that if the buck stops plunging, the metals could be in for a fair amount of difficulty.

Accordingly I think risks are skewed towards the downside right now.  It feel safer to just watch from the sidelines.

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