PM Daily Market Commentary - 8/14/2017

davefairtex
By davefairtex on Tue, Aug 15, 2017 - 12:20am

Gold fell -7.20 [-0.56%] to 1287.80 on moderately heavy volume, while silver dropped -0.04 [-0.20%] to 17.07 on moderate volume. A dollar rally [+0.37%] (and a falling Euro) seemed to pull gold lower, while silver held up substantially better. Is gold topping out? It certainly could be.

Gold's drop today started in Asia and continued through the London session, after which gold chopped sideways into the close in the US. Candle print was a bearish engulfing, which the code rates as a 48% chance of marking a top. I've seen much worse-looking engulfing patterns than this. The gold forecaster plunged a big -0.50 points, but is still bullish with a +0.53 rating. Gold remains above its 9 EMA. It appears as though gold is preparing to change trend, but has not done so just yet.

COMEX GC open interest rose +529 contracts.

Rate rise chances (Dec 2017) rose to 47%. That's a 10% increase from where we were last Friday.

Silver did substantially better than gold, mostly chopping sideways vs gold's moderate drop. Silver's candle print was a spinning top, which the code sees as neutral. Forecaster disagrees, dropping -0.40 to read a still-bullish +0.47. Silver continues to have trouble with the 200 MA, being unable to close above it 3 days in a row.

Open interest in COMEX SI contracts fell -241 contracts.

The gold/silver ratio fell -0.27 to 75.44. That's bullish.

Miners fell today, with GDX off -1.38% on moderate volume while GDXJ dropped -1.72% on moderately light volume. GDX printed a two-candle swing high, which the code felt was a 50% chance of marking the top. Forecaster dropped a huge -0.55 to read +0.32; still bullish, at least for now. GDX does remain above its 9 EMA, at least for now. GDXJ printed just a long black candle, which was neutral, and its forecaster fell by -0.25 to read +0.36 – GDXJ is still bullish also. No trend change yet for the miners, but things are definitely looking more iffy after today.

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

Platinum was hit hard, dropping -1.55%, printing a two-candle swing high which has a 53% chance of marking a top. Platinum's forecaster dropped -0.62 and is now showing -0.07, which is slightly bearish. This may mark the end of the platinum rally. Palladium rose +0.31%, but its forecaster dropped too, and now reads -0.01. Palladium is teetering on the edge. Copper fell -0.41%, and ended the day right at its 9 EMA. Copper's forecaster fell also, and now reads -0.25, which is a modest downtrend. It looks like the “other metals” are reversing.

The buck rose today, climbing +0.34 to 93.19. Forecaster jumped +0.36, but remains slightly bearish at -0.15. The opening white marubozu was not given a rating by the code. While the buck is trying to rally, its not clear yet if it will manage to pull it off.

Crude was hit hard today, dropping -1.25 to 47.59. Crude's print was a closing black marubozu, which the code feels is a continuation. Forecaster agrees, dropping a massive -0.63 to read -0.62, which is quite bearish. After chopping sideways for a few weeks, crude has finally picked a direction: down. There's no news that I saw driving prices lower. API report comes out after market close tomorrow.

SPX rebounded sharply from last week's selloff, rising +24.52 to 2465.84. Today's rally erases last Thursday's big drop; SPX is now back above its 50 MA. Tech led (XLK:+1.59%) followed by financials (XLF:+1.37%), with energy doing worst (XLE:-0.30%). Energy stocks continue to grind slowly lower; right now XLE is back down to levels last seen in April 2016.

VIX fell -3.18 to 12.33. 2/3 of last week's VIX rally is now gone.

TLT fell -0.51%, printing a bearish harami which the code assigned just a 37% chance of marking a top. TLT remains above all 3 moving averages, and is still in an uptrend; the TLT forecaster fell -0.21 but still retains a bullish reading of +0.48.

JNK rallied +0.44%, erasing last Thursday's losses but managing to print a shooting star candle; candle code said it wasn't bearish, however, and rates it as a likely continuation. JNK is now back above its 200 MA. We'll call this a mostly-risk-on day.

CRB fell -1.17%, making a new low. All 5 groups fell, led by energy which dropped -2.08%. Ouch. CRB's new short-term downtrend continues.

My concerns about the staying power of last week's “flight to safety” rally were borne out today, to some degree. The buck rallied, equities rallied, JNK rallied, and gold and TLT fell. While actual trend changes in gold and silver have not yet occurred, the overall orchestra appears to be tuning up to play downtrend music.

Equity market rallies are not gold-positive events. If this one continues, and the buck starts to rally in earnest, today's bearish engulfing for gold may just be the start. COT report shows that managed money shorts have been rinsed out almost entirely, while gold commercial shorts have risen enough perhaps to mark a top.

Last point: after today's close, early in tomorrow's Asia session, both gold and silver were hit by spike assaults: gold was hit for $6 on 5200 contracts, and silver for $0.22 on 1748 contracts. Both assaults took the metals through some minor support levels. It appears as though someone is trying to kick off a trend change here. We'll have to see how the buyers respond – this will give us a sense as to where we go next. If buyers don't show up, most likely the assaults will continue and the metals will move into a downtrend.

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11 Comments

Cold Rain's picture
Cold Rain
Status: Gold Member (Offline)
Joined: Jul 26 2016
Posts: 380
Game Over

Game over for this rally.  Maybe in 3 or 4 months we can do it all over again.  Triple top held in gold.  200 dma held in silver.  And back into the abyss we go.

KugsCheese's picture
KugsCheese
Status: Diamond Member (Offline)
Joined: Jan 2 2010
Posts: 1469
Re: Game Over

The hit was at 8:00, 8:30, 8:40 yet gold is trending up.

Cold Rain's picture
Cold Rain
Status: Gold Member (Offline)
Joined: Jul 26 2016
Posts: 380
Still Down Though
KugsCheese wrote:

The hit was at 8:00, 8:30, 8:40 yet gold is trending up.

 

It's still down a good $12, and silver is still in the basement.  It'll be interesting to see if they hit it again tonight/tomorrow.

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5683
Retail Sales

A big hit for gold came at 830 am, probably triggered by a strong retail sales report: 0.6% m/m, which is 7.2% annualized.  This can be a market-moving report - and it was today.

Gold did manage to recover all of its retail sales losses, but silver - not so much.  Silver looks pretty unhappy right now (down -0.46), but as always we should wait for the close to see for sure.

Miners seem to be doing ok given how badly silver is off.

KugsCheese's picture
KugsCheese
Status: Diamond Member (Offline)
Joined: Jan 2 2010
Posts: 1469
Re: Retail Sales

This report looks suspect.   Car sales tanked in July.

MJB's picture
MJB
Status: Silver Member (Offline)
Joined: Jan 5 2016
Posts: 117
Old discussion - Dave

Looking for an old discussion we had about Bitcoin. One fear you had about long term value/viability  was that the internet may be cut off. The blockchain just went into outer space via Blockstream Satellite.

Thoughts? 

https://blockstream.com/2017/08/15/announcing-blockstream-satellite.html

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5683
banking connection

MJB-

So satellites aren't permanent, invulnerable fixtures in the sky.  They're pretty easy to take out.

But my focus these days isn't on the internet partition issue - its on the banking connection to the exchanges.  Sever the banking connection (and that actually happened to bitfinix) and then nobody can turn bitcoin into cash any longer.  One day you have $100,000 worth of bitcoin.  Next day: how much is it worth if you can't get it out?

If you have a bank deposit of $100,000 in a bank that doesn't allow you to make withdrawals...is it really a bank deposit?

CHS says that they won't pull the plug this way - and he could well be right.  I certainly didn't let it stop me from buying my ETH.  Then again, I have a lot more money in bank deposits than I do in ETH.

MJB's picture
MJB
Status: Silver Member (Offline)
Joined: Jan 5 2016
Posts: 117
The day will come when you no

The day will come when you no longer will need to turn your BTC or crypto into fiat.. crypto is a bank killer. You and I are fairy young, we will see this before we pass away.

TenX is a crypto debit card, upload and spend. It works well from what I hear and the TenX (PAY) Token is shooting off like a rocket.

Just so we are clear you think internet cut off AND satellites shot down or scrambled? How far down this rabbit hole are you going to go?!

ETH is good. LTC is the current call. 

LTC = .15 ETH 8/16/17

LTC  > .5 ETH 10/31/17

I like time stamps with concrete calls. We will see in two and a half months.

Cheers.

 

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5683
rabbit holes

MJB-

I've gone over the limited war scenario a number of times.  I guess one more time won't hurt.  A limited war between major powers could easily result in a partition of the Internet.  It is also quite possible it would result in a large amount of space debris that would take down most if not all satellites in low earth orbit, depending on how enthusiastic the other side was in taking down the US space advantage.

https://worldview.stratfor.com/article/real-danger-space-weapons

You call it a rabbit hole (which, I interpret, means "this could never happen so its stupid to even consider") while I think it has a real chance of occurring.  Being a student of history, I look back at the pre-WW1 period, where the consensus was that war could never happen.  Presumably to them, war was a "rabbit hole" which was foolish to go down - especially a four year war that for all practical purposes ended the British Empire.

The limited war scenario doesn't stop me from trading bitcoin, but I'm keenly aware of what trades I'm going to make if I start to assess that such a war is starting to become more likely.

[Total war is a scenario too, but since it is largely not survivable, it is not one I spend any time on]

MJB's picture
MJB
Status: Silver Member (Offline)
Joined: Jan 5 2016
Posts: 117
Rabbit hole meaning one of

Rabbit hole meaning one of your premises for not investing/buying/liking Bitcoin was internet outage. I present to you the next wave of technology, taking the blockchain into outer space via satellites and then you say those satellites will be disrupted.. 

When the next tech comes out allowing for blockchain transactions I will let you know. I'm sure you will say it can be stopped as well.. problem is it hasn't.

I only bring this up because we are on two different sides. I think BTC flourishes, definitely should be a part of any prudent persons portfolio, you don't, giving several reasons why. One of which, at least to me now seems to be debunked. 

 

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5683
bitcoin isn't anything special

MJB

There are lots of asset classes out there.  They all have problems depending on the various scenarios that could occur.  BItcoin is one such asset class.

The government could confiscate gold.

They could also shut down bitcoin by severing the banking connection.

They could also make cash effectively illegal.  (Cash is for criminals + civil asset forfeiture on steroids + getting rid of $100s & $50s + banks just don't have cash anymore)

They could seize our 401k accounts in a debt crisis.

They could bail-in our savings accounts after a banking crisis.

They could impose capital controls restricting our ability to send money overseas in a debt/currency crisis.

They could impose negative interest rates on all our digital money (see "making cash illegal") in the next recession.

So I have an IRA, a savings account, I have cash, I have gold, and - I also have ETH.  The difference (I think) between you and I is that I like to remain conscious of what the downside looks like for each of the asset classes I have, and I keep my ear to the ground to see whether I need to act prior to that asset class starting to have problems.

You appear to believe that bitcoin & ETH are simply immune to government action and/or have no downside scenarios.  I think you're wrong.  I still own my ETH, but (as I like to think of it) I don't have my head in the sand as to what the bad things are that might happen.

I feel the same way about gold.  And cash.  And IRAs.  And savings accounts.  Etc.

Last point.  Did you notice in this post, and in my last post, that I told you "I own ETH"?  If you noticed this, and you still maintain that I am "against crypto", I have to wonder about your reading comprehension skills.  How could I possibly be "against crypto" and be long?

Try applying nuance.  Its more fun than simple black & white.

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