PM Daily Market Commentary - 8/28/2017

davefairtex
By davefairtex on Tue, Aug 29, 2017 - 3:08am

Gold shot up +19.00 to 1315.50 on exceptionally heavy volume, while silver rose +0.38 to 17.44 also on exceptionally heavy volume. Both metals started their rallies in Asia, but the big breakout started at 10:57 in the US, when traders suddenly started buying the metals, causing them to rise relatively quickly – it wasn't a spike per se since the breakout took several minutes, but the volume was extremely heavy, which most likely means that a fairly large number of short-side stops were hit. The buck helped by plunging -0.55 on the day.

What was the rally about? Perhaps it was about Hurricane Harvey. Or maybe it was North Korean missile launches. Its hard to say – there was no proximate cause that I could see, certainly no economic report. The launch time for both metals took minutes rather than milliseconds. This suggests to me as though there might have been some real change in fundamental buying interest rather than just an attempt to run the stops. I interpret this pattern as far more bullish than the usual manipulative spike.

Gold's move today totally invalidated any hint of last week's momentum pause. The breakout caused the forecaster to shoot up +0.42 to a very bullish rating of +0.72. Gold has spent the last 3 weeks unable to close above round number 1300; today's move almost certainly caused a large number of new shorts to cover – and maybe even some reversed direction.  It was a very bullish day.  Even gold in Euros did well, breaking out to a new high.

Comex GC open interest rose +37,107 contracts. That's a huge increase.

Rate rise chances (Dec 2017) fell to 32%. Perhaps that's another reason for the gold breakout. Gun to the head: is it more likely or less likely for the Fed to raise rates (and or start balance sheet normalization) following the Most Destructive Hurricane Ever? Answer: less likely, of course.

Silver jumped right alongside gold, conclusively closing above the 200 MA for the first time since April. Silver has also snapped its bearish-looking momentum slowdown, with last week's plunge on Friday now looking a whole lot like a head-fake. Silver's forecaster rose +0.37 to read +0.53; to my eye, silver's chart doesn't look quite as bullish as gold, and its nice to see that the forecaster isn't quite as bullish either.

Open interest in COMEX SI contracts rose 4,313 contracts.

The gold/silver ratio fell -0.57 to 75.43. That's bullish.

The mining shares took off like a rocket, with GDX up +3.63% on very heavy volume, while GDXJ climbed +3.83% on very heavy volume also. Both miner ETFs printed white marubozu candles, which tell us that the miners rallied all day long, and closed at the day high. That's bullish. Forecasters reflect this, with GDX's forecaster up +0.52 to +0.80, while GDXJ's forecaster was up +0.59 to read +0.74. Some of the miners I track were up more than 10% on the day.

The GDXJ:GDX ratio rose slightly, and the GDX:$GOLD ratio rose substantially. That's bullish.

Platinum climbed +1.55%, palladium rose +0.76%, and copper climbed +0.92%. Copper made a new multi-year high and continues its relentless uptrend: up +0.03 to 3.07. Palladium is bouncing around its highs, while platinum is struggling a bit more to break out higher.

USD plunged to new lows, dropping -0.55 to 91.98, which is a new multi-year low. Perhaps Hurricane Harvey's devastation isn't all that dollar-positive. Dollar forecaster plunged -0.40 to read a very bearish -0.86. The closing black marubozu candle is probably not a reversal. The dollar is not looking good at all. A convincing plunge below 92 could lead to a much stronger move lower, as well as capital flight from US risk assets such as equities.

Crude was hit relatively hard today, dropping -1.05 to 46.81. Crude's drop was blamed on the shutdown of 15% of US refinery capacity from that hurricane, which will lower demand for crude here in the US. Candle print was a long black candle, which the code believes might actually be a low: 53% chance. Forecaster thinks its bearish, dropping -0.69 to read a bearish -0.52. Crude did find some measure of support at its 50 MA, but the new low does look fairly bearish to me.

SPX rose +1.19 to 2444.24. 2438.97. The spinning top candle was neutral. Forecaster dipped -0.21 to read just +0.09. SPX remains below its 50 MA, and in a downtrend. Sector map shows that sickcare did best (XLV:+0.53%) while financials led to the downside (XLF:-0.64%). Perhaps that has to do with insurance companies having to pay out huge amounts of money in flood claims.  Otherwise, it was a relatively quiet day for equities.

VIX rose +0.04 to 11.32.

TLT fell -0.06%; it remains in a slow but steady uptrend.

JNK was unchanged, and remains in an uptrend. Today's doji candle was neutral.

CRB rose +0.10%; 3 of 5 groups rose, led by PM. Special mention to energy component gasoline, which was up +1.98% in some high volume trading.

Last Friday's spike down ended up with a breakout on Monday; the Friday spike down ended up being a headfake, with the real move (a trend continuation) coming Monday. Sometimes that happens.  I'm tempted to credit the hurricane for the gold rally. Certainly the continuing plunge in the buck helps a lot, as does the rally in the “other metals”.  Whatever the cause, buyers definitely appeared right at resistance and caused gold to break out.  Even the addition of 37k new GC contracts on Monday wasn't enough cap the rally.

That's about as bullish as you'd want to see.

The fairly substantial drop in the (December) rate rise projections is a valuable clue as to market sentiment right now: its bearish, at least on expectations for the Fed to tighten policy.

Lastly, September approaches. That's often a volatile month for equities.

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9 Comments

cmartenson's picture
cmartenson
Status: Diamond Member (Offline)
Joined: Jun 7 2007
Posts: 5570
PPT in da house

Problem:  futures down -15 points at the open for the S&P 500.

Solution:  Pump so much cash liquidity into the opening two minutes of S&P emini futures that you get two opening vertical green candles during the first two minutes.

Result:  A cash ""market"" that launches 88 degrees vertical with all bots now 'on point' having gotten the message about the correct direction.  ""market"" decline is now blunted for the day at worst, will end up violently green at best..  

cmartenson's picture
cmartenson
Status: Diamond Member (Offline)
Joined: Jun 7 2007
Posts: 5570
And here's how "they" do it

To manipulate prices properly, you need to use leverage in the most judicious manner.

Today that happens to be in the realm of volatility products.

So this tweet from Hunsader won't be much of a surprise:

 

cmartenson's picture
cmartenson
Status: Diamond Member (Offline)
Joined: Jun 7 2007
Posts: 5570
And now this...

No comment:

Cold Rain's picture
Cold Rain
Status: Gold Member (Offline)
Joined: Jul 26 2016
Posts: 327
Indefinite Buoyancy

I don't understand why this game can't be played indefinitely, or at least until the system collapses.  If the market action that we see on a daily basis is largely driven by computer, and you can so easily manipulate the computer, then how can you ever have a crash unless either:  A) the computer goes down or B) you decide to stop manipulating the computer?  And by computer, I mean algos.

cmartenson's picture
cmartenson
Status: Diamond Member (Offline)
Joined: Jun 7 2007
Posts: 5570
Nailed it! All indexes now green!

How did I know?

How could I tell in the first two minutes that major overnight weakness in the index futures would be completely reversed?

Easy.  I've been tracking the manipulation for years.

The worse the news, the more said news might disrupt the fragile perceptions of an easily scared and unaware populace, the more "they" feel they have to paint a green numbers all over the indexes.

Why anybody trades against these manipulators is a complete mystery to me.  So why not join them?  Why not grab free central bank money?

Well, for one thing this game is going to end violently someday. A ll at once.  

For another playing their game is a waste of life, a waste of time and only encouraging the more rapid destruction of the world.  Their assault on price discovery will have enormous consequences for everyone. So you might consider it your moral obligation to not encourage them. 

 

sand_puppy's picture
sand_puppy
Status: Diamond Member (Offline)
Joined: Apr 13 2011
Posts: 1758
Remember how recently this was "tinfoil hat"

Remember that it was just 8-10 years ago when anyone referring to the Plunge Protection Team was regarded as a nut?

Ideas shift.

Pretty soon it is "self-evident" and everyone knows that.

lambertad's picture
lambertad
Status: Silver Member (Online)
Joined: Aug 31 2013
Posts: 171
Marketwatch Headline

This is the headline article running over at Marketwatch.com. Below is the first couple of sentences of the article. It's been running all day and they haven't taken it down. I'm stupified, honestly. I thought for sure I would have captured the screen shot and it would have been taken down, but I went for a hike, came back, checked again, and it's still running.

Indefinite bouyancy? Great term, but I question if this can occur. People already know that the government stats are BS. They may not state it outright, but if the economy was doing so well, explain Trump. You can't. Like Chris and Jim Kunstler just discussed at length, the system is broken, people have a gut reaction that it is, but they just can't put their finger on it. When people can start putting their finger on it, watch out. I have a gut feeling this is closer to happening now than it has been at any time over the past 50 years. 

Likewise, Dave has pointed out that the drop in the dollar won't compensate for the rise in asset prices. If we expect the "free air"  technicals under 92 to hold, then international (i.e. sophisticated) investors who have money in the US market because it's the "cleanest dirty shirt" will start to exit. That exit will have to be backstopped by the FED or other CBs, as they have to make up for that cash leaving. Can they do it, probably. 

I suppose another way to levitate the market would be for Trump/congress to pass some legislation allowing Corps to bring home cash. Then they could binge on some more of their own stock buybacks, propping up the market or atleast their stocks. I'm sure this is being discussed somewhere. 

Anyway, it's all fun and games until someone loses an eye, as they say. Hope you're standing by a chair when the music stops....

cmartenson's picture
cmartenson
Status: Diamond Member (Offline)
Joined: Jun 7 2007
Posts: 5570
People starting to catch on..
lambertad wrote:

Like Chris and Jim Kunstler just discussed at length, the system is broken, people have a gut reaction that it is, but they just can't put their finger on it. When people can start putting their finger on it, watch out. I have a gut feeling this is closer to happening now than it has been at any time over the past 50 years. 

 

People are starting to catch on...I'm seeing more and more social media dot-connecting like this (found just a few minutes ago on Twitter):
 

These and a thousand other insults are scratching at the national psyche.  

Cold Rain's picture
Cold Rain
Status: Gold Member (Offline)
Joined: Jul 26 2016
Posts: 327
Dollar Up, PMs Down

Looks like they're going to save the dollar collapse for another day.  Steady buck buying all day long, coincident with with PMs headed into the red.  Hopefully, they can close the month above $1300/$17.50.  I have my doubts.

Anyway, good posts Chris and lambertad.

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