PM Daily Market Commentary - 9/7/2017

davefairtex
By davefairtex on Fri, Sep 8, 2017 - 12:09am

Gold rose +15.00 [+1.12%] to 1354.00 on very heavy volume, while silver climbed +0.25 [+1.36%] to 18.20 on moderately heavy volume. Currencies played a fairly significant part in the move higher in the metals; mostly it was about the Euro, driven higher by the ECB meeting and press conference that occurred prior to the US market open.

Intraday, the Euro rallied going into the ECB meeting, was fairly volatile during the press conference, but ended up strongly higher on the day, up +1.04 [+0.88%] to 120.24. While the Euro didn't quite make a new high, it did make a new multi-year closing high.

Gold rallied steadily all day long, starting in Asia and ending the day near the highs in New York, making a multi-month new high that dates back to September 2016. The Euro's rally definitely appeared to help, but gold did seem to be rising independently of the Euro as well. Candle print: a long white candle, which the code felt was a bullish continuation. Forecaster rose +0.20 to 1.06, which signals a strong uptrend. The climb in gold once again requires us to use the weekly chart for perspective. The previous high at 1377 (from July 2016) is the next hurdle for gold to climb. Gold's RSI7 is back to 82, which is overbought.

COMEX GC open interest rose +14,986 contracts. That's a lot of new shorts: 46 tons of new paper gold.

Rate rise chances (Dec 2017) plunged to 31%.

Silver chopped sideways in Asia, lagging behind gold initially, but then took off during the ECB press conference and ended the day near the highs. The long white candle was seen as a bullish continuation. Silver's forecaster moved up +0.05 to 0.79, which is a strong uptrend. Silver also needs a weekly chart to provide perspective; the previous high for silver to watch is 18.65, which dates back to mid-April. You can see by comparing the "previous high" in silver to that of gold, that silver is lagging gold fairly significantly.  Silver's RSI7 is now at 85, which is overbought.

Open interest in COMEX SI contracts rose by +3,336 contracts.

The gold/silver ratio fell -0.18 to 74.42. That's slightly bullish.

The mining shares rallied too, with GDX up +2.29% on heavy volume, while GDXJ climbed +2.34% on heavy volume too. Both miners made new highs, which erases any bearish leftovers from yesterday's drop. Candles for both ETFs were long white candles, but the code felt as though they might be tops; about a 40% chance. Forecaster disagreed, rising +0.28 to 0.81 for GDX, and +0.12 to 0.91 for GDXJ. Those are both strong uptrends. The miners continue to lag behind gold; GDX is just now approaching its February high at 25.71.  Miners do appear to be leading silver.  This all suggests the current rally is probably more about a flight to safety rather than a new PM uptrend.

Today, the GDXJ:GDX ratio was mostly flat, while the GDX:$GOLD ratio climbed. That's bullish.

Platinum climbed +1.29%, palladium rose +1.62%, while copper dropped -0.27%. Palladium appears to be trying to avoid a breakdown, platinum made a new high and remains in a strong uptrend, while copper's uptrend also remains in place.

USD was hammered today, dropping -0.61 [-0.66%] to 91.44, closing below 92 for the first time since late 2014. The story was entirely about the ECB. Did Draghi say or do anything new in his press conference? Well there was the usual line about interest rates remaining really low for a long time. (Does "forever" work for you?)  However, the press tortured him with tapering questions until he finally admitted that “October” would be the meeting where tapering would be announced. “Assuming nothing else bad happens between now and then.” (I'm paraphrasing). The market seemed primed to expect this news, rallying prior to the meeting, volatile during, but then rallying afterwards. Draghi clearly did not want the Euro to rise – he called the recent rally in the Euro “tightening”, which is not an effect he's looking for - but there was really nothing he could do. Sucks to be him.

And of course, the buck moves inversely to the Euro. The breakdown of the buck below 92 gave off an important technical signal: a sell signal.  The forecaster is telling us that the buck's downtrend is accelerating.

Crude moved mostly sideways today, closing down -0.02 to 49.26. The bearish doji star candle pattern was seen by the code as a bullish continuation. Forecaster dropped -0.15 to 0.72, which is still a strong uptrend. Today's EIA report showed a crude build (+4.6m barrels) and a gasoline draw (-3.2m barrels), which ended up being a non-event for the market. Looking at the chart, oil seems to have run into resistance at its 200 MA/round number 50.  Arguably crude "should have" done better given the drop in the buck today.

SPX fell -0.44 to 2465.10. Candle print was a spinning top, which provided no information. Forecaster fell -0.10 to -0.08, moving SPX down into a gentle downtrend. Financials led the market lower (XLF:-1.73, a big drop), while sickcare did best (XLV:+1.11%). Market seems to be bifurcating; financials look downright ill right now, having peaked in early August and then printed a series of lower highs and lower lows. XLF is now below its 200 MA. Since financials tend to lead, that's bearish.

VIX fell -0.08 to 11.55.

TLT shot up +1.02%, making a new high that dates back to November 2016. The opening white marubozu might be a top (43% chance) but the forecaster is back to an uptrend, rising +0.57 to 0.68. Bonds have been very volatile over the past several trading days, but the uptrend has remained in place. Risk off.

JNK rose +0.03%, which is basically no change. JNK is going sideways.

CRB fell -0.07%, moving slightly lower. Only 1 of 5 groups fell: agriculture, which dropped -1.13%. Unleaded gasoline front month fell slightly, but the back end contract rose.

  • Oct: $1.66 [-0.01]

  • Nov: $1.59 [unch]

  • Dec: $1.55 [+0.01]

The ECB meeting ended up smashing the buck below round number 92, and the Euro ended up closing above 120. A rate increase in December is looking steadily less likely. Hurricanes appear to be lined up to strike the US one after another: anyone hear about Hurricane Jose?  https://www.wunderground.com/cat6/triple-trouble-cat-5-irma-cat-3-jose-cat-1-katia  Ok, Jose isn't on track to hit the US.  Well not yet anyway.  Bonds continue moving higher. All of this is gold-positive. Gold looks to be set to challenge its post-BRExit high of 1377 in the not so distant future. If the buck remains in its downtrend, I believe we will see this sooner rather than later.

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5 Comments

SingleSpeak's picture
SingleSpeak
Status: Gold Member (Offline)
Joined: Nov 30 2008
Posts: 495
Bummer

"This all suggests the current rally is probably more about a flight to safety rather than a new PM uptrend."

crying

Penny551's picture
Penny551
Status: Silver Member (Offline)
Joined: Nov 8 2012
Posts: 149
Candle Code

Dave-

I trade using a trend analysis tool similar to your forecaster and look at condlestick patterns to help spot reversals early...which is on e reason I like your commentary so much!

Quick question...Can you birefly expand on how you wrote your candle code?  ie) I assume you referenced some of Steve Nison's work and tweaked it a bit?  

Just curious!

Thx again for writing these every day.  It's a huge perk for the PP community!

~SP

Cold Rain's picture
Cold Rain
Status: Gold Member (Offline)
Joined: Jul 26 2016
Posts: 287
Fridays are good for selling PMs

A weekly close over $1350 for gold and $18 for silver would be good, but it looks like it's a selling day.  Also, the buck is probably going to try to not put in a weekly close below $92.  We'll see...

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 4774
candle code

SP-

Quick question...Can you birefly expand on how you wrote your candle code?  ie) I assume you referenced some of Steve Nison's work and tweaked it a bit?

This was one of my earlier machine learning projects.  I collect a bunch of example candle patterns from equity market historical data, and let the neural net figure out which ones ended up doing well and which ones would did poorly.  I used Thomas Bulkowski's candle definitions, among others, to write code to identify the candle patterns.  There are no good online candle libraries, so I had to write my own.  There are a bunch of rare patterns, but I ignore them.

I'm working on a new version - for weekly and monthly data - which is more generic.  It doesn't use the specific japanese candle pattern names, it just uses bits and pieces of what defines the patterns in addition to context.  Still a work in progress I'm afraid.  RED = sell, BLUE = buy.  You can see it has maybe a 50-60% hit rate.

Penny551's picture
Penny551
Status: Silver Member (Offline)
Joined: Nov 8 2012
Posts: 149
Re: Candle Code

Great stuff.  Thx for sharing!  

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