PM Daily Market Commentary - 8/24/2017

davefairtex
By davefairtex on Fri, Aug 25, 2017 - 3:07am

Gold fell -4.80 to 1291.50 on moderately heavy volume, while silver dropped -0.12 to 16.96 on very heavy volume. While gold moved lower, silver was smashed at 8:30 am in London, hit for 16 cents over 15 minutes of trading. Volume on silver was the heaviest volume in weeks.

Gold chopped steadily lower over the day, closing relatively near to its day lows, however the trading range was fairly narrow. Candle print was a spinning top; no help as to direction. The forecaster was not happy, however, dropping -0.43 to read a newly-bearish -0.20. While gold remains above its 9 EMA, the MACD indicator appears ready to execute a bearish crossover, and the RSI is showing strong signs of a bearish divergence. All this TA tea-leaf reading (some of which has been slowly building up for a while now) suggests an increasing likelihood for a near-term correction in gold.

Comex GC open interest rose +4,735 contracts. More shorting.

Rate rise chances (Dec 2017) fell to 38%.

Silver started dropping late in the Asia trading session, and then it was smashed more dramatically early in London, dropping to a new low of 16.81 before bouncing back somewhat. Candle print was a spinning top, which the code felt was neutral. Silver closed right at its 9 EMA. Silver's MACD is also quite close to a bearish crossover, and silver's forecaster dropped -0.19 to a slightly bearish -0.06. Like gold, silver appears to be on the edge of starting a correction.

Open interest in COMEX SI contracts fell -3,213 contracts.

The gold/silver ratio rose +0.28 to 76.15. That's bearish.

In spite of the decline in the metals, the mining shares moved higher, with GDX up +0.39% on moderate volume while GDXJ inched up +0.06% on very light volume. Both ETFs rallied into the afternoon, but faded into the close. Candle print for GDX was just a long white candle, which the code felt was a continuation. GDXJ printed a spinning top, which had a 34% chance of marking the high. Forecaster reinforces this; GDX's forecaster rose +0.13 to read +0.30, while GDXJ's forecaster dropped -0.14 to read +0.09. The GDX uptrend is a lot stronger-looking than GDXJ's uptrend.

The GDXJ:GDX ratio fell, but GDX:$GOLD ratio rose. That's a wash.

Platinum rose +0.09%, palladium climbed +0.03%, while copper shot up +1.73%, making a new multi-year high to 3.04. Palladium and platinum both printed boring doji candles, while copper's new high was seen as a continuation. No recession in sight with copper at new highs – and in that same vein, GDP Now projects Q3 GDP at 3.8%.

USD rose +0.13 to 93.06, trying to rally but only partially succeeding. Print for today was a short white/NR7 candle – no help as to direction. Forecaster rose slightly, up +0.05 to -0.17. Buck remains below its 9 EMA, and seems to be slowly moving lower, in spite of today's rally.

Crude fell today, dropping -0.75 to 47.62. Crude topped out at 9am Eastern, and fell hard until noon, making a new low to 47.06. It bounced back somewhat, with the final candle print being an opening black marubozu which the code felt was a bearish continuation. Forecaster agreed, plunging a big -0.54 to a newly bearish -0.20. Crude is now back below its 9 EMA, and is probably back in a downtrend.

SPX fell -5.07 to 2438.97. A rally in the futures overnight was sold fairly hard at the open, and SPX never really recovered. SPX remains below its 9 EMA and 50 MA. In spite of today's drop, SPX forecaster jumped up +0.26 to read a semi-bullish +0.29. I have no idea what that's about. Perhaps something in a strongly correlated market rallied – maybe it was copper. Sickcare did best (XLV:+0.29%), while consumer staples fell most (XLP:-1.38%), by far the worst performer of the day. What's up with the big hit to the normally-boring consumer staples?

Its about grocery stores (a component of XLP) and “The Amazon Effect.” Amazon provided more detail on its plans for the Whole Foods acquisition today, and all the grocery store stocks sold off hard.

https://www.eater.com/2017/8/24/16194226/whole-foods-lower-prices-amazon-deal

“This deal gives Amazon a physical home branch in the U.S. right away,” says Brian Frank, an investor and adviser for food and tech companies. “Now Amazon has a footprint with which to use Whole Foods as distribution centers for a broader blanketing of America with food on demand and delivery.”

In other words, when shoppers step into a Whole Foods, they’re not only walking into a grocery store but also entering an Amazon warehouse — one that’s now stocked with a much better grocery selection. Disregard the inventory, and Amazon has made a straightforward investment in physical real estate. According to several reports, the strip malls that feature Whole Foods Markets have shot up in value since the deal was first announced.

Or put another way, baby kale, delivered by drones.

VIX fell -0.02 to 12.23.

TLT fell -0.37%; it remains above the 9 EMA, but today's move dropped the forecaster -0.25 to +0.04. Uptrend for TLT remains in place, but is weakening.

JNK rose +0.14%, which is a new closing high – at least for the past two weeks anyway. JNK is trying to recover, but remains in a six-week downtrend.

CRB rose +0.12%; 3 of 5 groups rose, led by industrial metals. Copper was the big star today.

Was the assault on silver in London the opening salvo in a new PM downtrend? I suspect that might have been the goal. Buyers did appear and pulled prices back up, but not far enough for my comfort level – and not far enough for my code either. There have been a steady build-up of shorts this past two weeks; the 200 MA has proven to be a mostly-brick wall for silver, as has 1300 for gold. Miners are a curious exception: GDX continues to chug higher.

That said, if the SPX downtrend continues, I suspect gold won't sell off too hard and/or there will be plenty of buyers that will appear and buy any drops. The correlation with TLT should see to that. Theoretically anyway.

Based on the current setup, I see two outcomes:

1) a PM sell-off that turns into a new downtrend, accompanied (driven by) by a rally in the buck, SPX, and JNK.

2) a PM headfake lower that sharply reverses once the buck, SPX, and JNK all decide to sell off.  At that point we probably see a strong move through 1300 (as well as silver's 200 MA).

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12 Comments

davefairtex's picture
davefairtex
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bitcoin update

Bitcoin forecaster flipped to uptrend yesterday - on the swing low.  That hammer candle a few days back was the reversal.

Cold Rain's picture
Cold Rain
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Posts: 364
PMs

Given the technical setup Dave described, I'm going to predict a sharp selloff after the Jackson Hole comments.  Some trader placed a bet that hawkish comments are going to emerge.  Inside info?  Anyway, the table is set for a nice decline.  Hopefully, it will just be a temporary headfake.

jtietz79's picture
jtietz79
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Spike

What's with the spike to $1301?

Cold Rain's picture
Cold Rain
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Posts: 364
Durable Goods?
jtietz79 wrote:

What's with the spike to $1301?

DG plunged 6.8%, giving back the Boeing bump from last month. Maybe that was it?

Cold Rain's picture
Cold Rain
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Posts: 364
Or maybe this...

http://www.zerohedge.com/news/2017-08-25/gold-spikes-after-feds-kaplan-s...

"Gold is spiking, USDJPY dropping, and stocks leaking lower after Dallas Fed's Kaplan dropped some serious tapebombs ahead of Yellen's speech...

Speakingon Bloomberg TV, Kaplan headlines wwre as follows...

  • FED'S KAPLAN: WE CLEARLY ARE ACCOMMODATIVE RIGHT NOW
  • KAPLAN: INVESTORS USED TO IDEA RATES WILL BE LOWER FOR LONGER
  • FED'S KAPLAN: MARKET OR REAL-ESTATE CORRECTION COULD BE HEALTHY
  • KAPLAN SAYS MARKET CORRECTION WOULDN'T NECESSARILY HURT THE ECONOMY, AND MAY HELP IT
  • KAPLAN: WE SHOULD BE MOVING ON B/SHEET AS SOON AS POSSIBLE
  • KAPLAN: FED CAN SHRINK B/SHEET WITH MINIMAL IMPACT ON MARKETS"
Cold Rain's picture
Cold Rain
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Spike?

I made another post that said "your post has been queued for moderator review" or something like that.  I have no idea why, but the last time it happened, the post never showed up.  Anyway, perhaps the spike was due to Dallas Fed's Kaplan made some comments.  It's an article posted on Zerohedge, which I linked to in the previous post that has been hidden.

cmartenson's picture
cmartenson
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Sorry about that - posted
Cold Rain wrote:

I made another post that said "your post has been queued for moderator review" or something like that.  I have no idea why, but the last time it happened, the post never showed up.  Anyway, perhaps the spike was due to Dallas Fed's Kaplan made some comments.  It's an article posted on Zerohedge, which I linked to in the previous post that has been hidden.

Cold Rain - your posts 'disappearance' was caused by our automated spam filter flagging it...when posting a direct link the spam filter will sometimes, if not usually, put that into the approval queue.

Nothing intended by the admins towards your post personally!

:)

I've taken it out of the queue and made it live.

cmartenson's picture
cmartenson
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Kaplan left out some very important things...
Cold Rain wrote:
  • KAPLAN: FED CAN SHRINK B/SHEET WITH MINIMAL IMPACT ON MARKETS"

That's just a dumb statement which needs two qualifiers.

1) Sure, technically correct, as long as the Fed does this over a 100 year time frame.

2)  Also, this will be true if and only if the other central banks of the world pick up the slack by expanding their balance sheets.

But I would bet you a bajillion dollars that if the Fed attempted to shrink at the same pace it expanded it would tank the living hell out of the m""markets""

Cold Rain's picture
Cold Rain
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Posts: 364
Yellen

So, her comments were largely non-eventful, which, I suppose is not immediately materially impactful for PMs.

Chris,

Thanks for unhiding the other post.  I didn't take anything personal by it at all.  The other time it happened, I made a long post from my phone (which, the graphics don't display correctly and I have to scroll up and down a lot in order to review/edit).  Anyway, I saved my edits, found more issues, fixed and saved again, and after about the 3rd time, the post disappeared.  It was totally my fault, as I think the filter thought I was spamming.  Anyway, thanks for the explanation.  I'll keep that in mind next time I post attached/embedded content.

Also, your comments around Kaplan's statement were spot on.  The Fed can't unwind or tighten too much further without precipitating a market selloff, at the very least, and at worst, a full-blown financial crisis.  It's just more jawboning.  I think they would love to see a little altitude reduction from the markets "voluntarily", but I'm not sure they will get a lot of it.  Either way, they will jawbone as much as they can.  But we know that their words don't really mean very much anymore.

davefairtex's picture
davefairtex
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Posts: 5417
wide swings this morning for gold

Upspike for gold at 9:17 (8.9k contracts), a bigger downspike at 9:41 (21k contracts), and then another up-spike at 10:00-10:01 (4.4k+8.9k contracts), the time of Yellen's speech.

Looks like both the shorts and the longs were stopped out today - but probably more longs than shorts, given that 21k-contract spike down there in the middle.

The 10am move was due to a big spike higher in the Euro - almost 50 cents at that time...now up +0.77.  Euro is threatening to break out to new highs, to 118.77.  Buck is threatening to make new lows: -0.49 to 92.71.

Lots of excitement today, but gold not doing all that well given the weakness in the buck.

HoldGold's picture
HoldGold
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Gold priced in currencies other than the US Dollar

Gold doesn't look as strong today when priced in currencies other than the US Dollar. (I can only use one image per comment, and chose to illustrate my point with the Euro Currency.) If the US Dollar should catch a bid next week, the action in gold could get ugly. 

.

 

phusg's picture
phusg
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Joined: Jul 16 2014
Posts: 33
GDX <-> Brazil announcement?

> Miners are a curious exception: GDX continues to chug higher.

It's been chugging for a while now, but any relation to the announcement 2 days ago that Brazil is scrapping a huge nature reserve thought to be rich in gold?

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