PM Daily Market Commentary - 8/15/2017

davefairtex
By davefairtex on Wed, Aug 16, 2017 - 4:30am

Gold fell -10.80 [-0.84%] to 1277.00 on heavy volume, while silver plunged -0.45 [-2.61%] to 16.62 on heavy volume also. Another strong dollar rally [+0.48%] certainly didn't help. Looks like PM has transitioned into a downtrend.

Gold was hit early in Asia, dropping $5 in 1 minute at 21:09 Eastern. Gold bounced back somewhat, but then moved slowly lower until the Retail Sales report was released – unexpectedly strong - which drove gold to a new low of 1272.70. Candle print was an opening black marubozu, which the code felt was a continuation. The forecaster plunged -0.62 points, dropping into bearish territory at -0.09. Gold is now below the 9 EMA. Gold is now in a downtrend.

COMEX GC open interest fell -74 contracts.

Rate rise chances (Dec 2017) remain at 47%.

Silver fell alongside gold, dropping once at 9pm, and then another time at 830am after the Retail Sales report. The rebound was not impressive. Candle print was an opening black marubozu which the code felt was a continuation. The forecaster plunged -0.84 to a bearish -0.36. Silver is also through the 9 EMA. All of that is bearish.

Open interest in COMEX SI contracts fell -639 contracts.

The gold/silver ratio jumped up +1.37 to 76.81. That's very bearish.

Miners moved down today; GDX fell -1.18% on moderate volume, and GDXJ dropped -1.48% on moderately light volume. Both forecasters have plunged into negative territory. GDX has dropped below the 9, and GDXJ is below all 3 moving averages. Miners are now in a downtrend.

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

Platinum fell -0.74%, palladium dropped -0.95%, while copper fell -0.79%. All three metal forecasters are in a downtrend now.

The buck climbed again today, rising +0.45 to 93.64. Forecaster jumped +0.46, now reading +0.28. Buck has made a new closing high, although the long white candle looks a tad bearish, with the candle code assessing a 34% chance of this being a high. That's probably because of a reasonably large upper shadow. USD/JPY rose +0.94%, falling convincingly below the 9 EMA.

Crude actually managed to rally today, rising +0.20 to 47.79, first making a new low to 47.02 before rallying back into the green by end of day. The API report showed a massive, unexpected crude inventory draw of -9.2m barrels; this caused a brief pop higher which then faded. Still, the candle code felt the spinning top had a 56% chance of marking the low. The crude forecaster moved up +0.25 to read -0.40, which means that crude remains in a downtrend. If the EIA report confirms the draw, perhaps we will see a bounce.

SPX fell -1.23 to 2464.61, printing an opening black marubozu – a continuation candle. Forecaster moved up into bullish territory. Utilities led (XLU:+0.56%) while cyclicals did worst (XLY:-0.92%). The sector map isn't suggesting any sort of strong rally. September can be a month of unpleasant surprises; it is only two weeks away, and it is possible that Monday's bounce is petering out.

VIX fell -0.29 to 12.04.

TLT fell -0.42%, dropping below the 9 EMA. Bonds were hit by the strong Retail Sales report, which presumably has increased the chance of the Fed starting its campaign of unwinding its balance sheet during the September meeting. TLT is now below its 9 EMA, and the forecaster shows TLT is starting to turn down, falling -0.55 to a rating of -0.06.

JNK moved up +0.11%, inching higher but remaining below its 9 EMA. JNK appears to be having a bit of difficulty; is the bounce running out of steam? If so, that's risk off.

CRB fell -0.68%, making another new low. 3 of 5 groups fell, led by agriculture. CRB ended the day just above its 50 MA.

The buck moved higher, crossing its 9 EMA, and at the same time, and a whole bunch of things dropped: gold, silver, platinum, palladium, copper, TLT, and the mining shares. All of the those items are now back below their 9 EMA lines, which is a short term trend change indicator - they are all now in downtrends.

If the buck continues to rally, that will probably continue causing problems for PM.

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10 Comments

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5687
BTC top marker

I got this cute pic from my friend the bitcoin arb trader: it reminded me a whole lot of the skeleton I got from mrees that marked the top in ETH a few months back.  This is the same trader who, when I asked him how serious the Aug 1 transition would be, laughed and said "this is NOTHING!"

Humor aside, bitcoin forecaster has dropped, but still shows bitcoin in a strong uptrend.

Luke Moffat's picture
Luke Moffat
Status: Gold Member (Offline)
Joined: Jan 25 2014
Posts: 384
Overbought?

Also, the 10 month RSI is something ludicrous like 96. The last two times that happened Bitcoin started selling off. Just an observation mind you - no skin in this particular game.

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

Trumpster has bought line and sinker into the "stat" mills.   The economy is so rosy they can raise the debt ceiling!  Credit Card defaults have jumped so much the FED even remarked about it.   Sounds like a good economy.

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5687
silver rally

Silver rally today looks quite strong, and the buck hasn't gone anywhere.  Its a "bullish harami" (at least so far) and I'd guess this is a reasonably strong one.  All the metals components are back above their 9 EMA lines, which suggests the drop yesterday might just have been a headfake.

Wouldn't that be good news?

Cold Rain's picture
Cold Rain
Status: Gold Member (Offline)
Joined: Jul 26 2016
Posts: 380
Indeed
davefairtex wrote:

Silver rally today looks quite strong, and the buck hasn't gone anywhere.  Its a "bullish harami" (at least so far) and I'd guess this is a reasonably strong one.  All the metals components are back above their 9 EMA lines, which suggests the drop yesterday might just have been a headfake.

Wouldn't that be good news?

My thinking, after seeing the rally in silver today (so far), is that PMs would shoot lower after the release of the Fed minutes.  The COT info, on silver in particular, is decently bullish.  We'll see in a few, I guess.

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5687
PM rally off FOMC minutes

Initial reaction to the minutes was a pop higher in gold and silver, along with a rise in the Euro.

I'm not sure what elements in the minutes caused the rally - it sounds like the real debate as to when to start tapering the balance sheet happens in the meeting next month.

Perhaps it was concerns over low inflation - and the CPI numbers this month sure won't encourage the Fed to start tapering.

Miners actually look fairly happy for a change.  GDX +2.62%.

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

Yeah, Dave.  The pop, so far, has held.  But I'm not sure what's all that different from the last minutes release when gold and silver tanked on basically the same news.  If it was/is really all about the balance sheet (which is still widely expected to begin winding down next month, as far as I can tell), why would the reaction be different?  My guess is that the minutes are more of an excuse or cover for a move as opposed to a real fundamental driver.  Because nothing has really changed, other than the latest inflation reading.  And it's actually been trending lower for a while now.

It's going to be really interesting to see what happens if they punt next month on the wind-down.  Virtually nobody expects a rate hike, so you can probably rest assured that won't happen.  But if they delay the balance sheet wind-down, then we could, and likely will, see a big move in PMs.

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

FED said balance sheet shrinkage would begin soon.   Then disagreement on further rate hikes.  Of course, the major player leaving the T-Bill market will raise rates!

bronsuchecki's picture
bronsuchecki
Status: Bronze Member (Offline)
Joined: Apr 22 2012
Posts: 81
Chart error

Dave, you have doubled up on the GDX chart, the gold one is missing.

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5687
XIV, chart error

Kugs-

Second time you've mentioned XIV and the first time I've actually looked at it.  Really interesting.  I've thought about shorting VXX, but I keep expecting the SPX to tip over so that one is hard for me to do even though its a dreadfully big moneymaker over the past N years.

Bron-

Thanks!  Fixed.

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