PM Daily Market Commentary - 8/30/2017

By davefairtex on Thu, Aug 31, 2017 - 12:55am

Gold fell -0.80 to 1313.80 on heavy volume, while silver rose +0.12 to 17.50 on heavy volume also. The metals chopped sideways in a narrow range today, a strong performance given a significant [+0.70%] rally in the buck.

Not much happened today in the price for gold, even though trading volume was heavy.  Gold printed a spinning top candle which the code felt was neutral. Forecaster fell -0.17 to read +0.64. That's still a bullish reading, and my sense is that gold won't be entering a correction unless it ends up closing below the 9 EMA. Today was just a day of rest – a good achievement given the big dollar rally. As you might have guessed, gold in Euros moved higher today, up +0.57%.

Comex GC open interest fell -1,880 contracts.

Rate rise chances (Dec 2017) rose to 41%.

Intraday, silver looked a whole lot like gold, chopping sideways in a narrow range. Silver's “rally” actually came as a the side effect of a contract roll – 12 cents of backwardation applied today. SIU7 (September silver) -> SIZ7 (December silver).  In other words, It wasn't actually a rally. Candle print was a spinning top/NR7, which the code found to be neutral. Forecaster for silver rose +0.14 to read +0.59. Forecaster doesn't know about contract rolls though, so I'm not sure it means anything.

Open interest in COMEX SI contracts fell -3,996 contracts.

The gold/silver ratio fell -0.59 to 75.10. That's neutral – it was all about the contract roll today.

The mining shares fell, moving slowly lower all day long. GDX dropped -1.06% on moderate volume, while GDXJ fell -1.41% on moderately light volume. Miners are right on the cusp of printing in a swing high – GDX missed it by just three cents today. Given the lack of a swing high, both miner candle prints were neutral. The GDX forecaster fell -0.15 to 0.59, and the GDXJ forecaster dropped by -0.15 to 0.59 also. GDX executed a golden cross today: the 50 MA crossed over the 200, which is a long term bullish sign. The last time the miners did that was back in March 2016. The golden cross is a very bullish sign – long term.

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

Platinum fell -0.42%, palladium dropped -1.44%, and copper moved down -0.50%. Palladium printed a swing high (53% reversal), closed below its 9 EMA, and its forecaster dipped into bearish territory, while both copper and platinum continue to look relatively strong.

USD rallied sharply after yesterday's strong doji candle, rising +0.64 to 92.65, moving back out of the danger zone. Candle print today was a swing low, which the code assigns a 77% chance of a reversal. Forecaster jumped up +0.65 to read a slightly-bearish -0.14. That's a big improvement for the buck, which looked ready to start moving down into free-fall territory just yesterday. The buck closed right at its 9 EMA. The Euro also printed a swing high, as did the Yen. This confirms yesterday's doji candle.

Crude fell again today, dropping -0.35 to 45.97. Crude rallied briefly after a fairly bullish EIA report (crude inventory: -5.4m barrel draw, gas inventory: flat), bouncing back to 46.75 before falling for the remainder of the day. Crude forecaster dropped -0.07 to read -0.54, which is fairly bearish; oil remains in a downtrend. Volume today was very heavy. Econoday says that the drop in crude was due to Hurricane Harvey and the refinery shutdowns in Houston. tells us that the devastation from the flooding has complicated the energy market picture substantially: Houston itself is responsible for 750k bpd in oil demand, Houston refineries produce 3.9 mbpd of gasoline, oil producers are offline due to pipeline shutdowns – production, consumption, and inventory data will be very messy for (perhaps) months to come. This means a lot more guessing for oil traders as to whether or not the oil market is returning to any sort of balance.  Headline says that's a disaster for OPEC: maybe so, especially if they are trying to "paint the tape" and show large reductions in crude oil inventory.

SPX rose +11.29 to 1257.59. Today's rally resulted in a swing low candle print, which the code felt was just mildly bullish – a 37% chance of a reversal here. Still, SPX is now back above both the 9 and 50 MA lines, and the forecaster jumped +0.27 to read a bullish +0.42. Basic materials did best (XLB:+0.74%) while utilities did worst (XLU:-0.29%). Money appears to be heading back into equities – perhaps this is linked to today's strong dollar rally. If you buy dollars, then you have to decide where to park them.

VIX fell -0.48 to 11.22.

TLT fell -0.03%, chopping sideways in a narrow range today. TLT remains in an uptrend near the high set yesterday.

JNK rose +0.22%, climbing back over its 50 MA. It appears that JNK's downtrend is probably at an end. That's risk on.

CRB fell -0.35%; 4 of 5 groups fell, led by energy. CRB looks to be headed slowly lower. Gasoline rose once more, up +2.22%.

Yesterday's possible rebound in the buck turned into today's swing low. It appeared as though money returning to the US has ended up in the equity market. Why?

My opinion:  there's nothing like a good disaster to get politicians to act. Who wants to grandstand on a debt ceiling debate when millions are homeless in Houston? Its terrible optics. Even if you're an allegedly budget-conscious conservative, if you are seen withholding disaster relief, you could well lose your next election. After all, these are good oil-drilling Texans that need help, vs the partiers from New Orleans who were hit last time around.  Arms will be twisted until the right thing happens.

So my guess is, that means free money, and plenty of it. A stimulus package is probably on the horizon, and that may be bullish for equities at least in the short term.

Gold still has a bid, though, managing to remain flat even in the face of a strong dollar. I'd expect some retracement after this week's breakout, and so far, that's all it has been. Gold in Euros continues to rally.

Late-breaking news: a spike assault in the Asia session hit gold for $8 in 1 minute (8.8k contracts changed hands) - we'll have to see if buyers show up or not.  Gold is currently trading at 1308, down -5.80.

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