PM Daily Market Commentary - 9/11/2017

By davefairtex on Tue, Sep 12, 2017 - 12:42am

Gold fell -19.30 to 1331.70 on moderately heavy volume, while silver fell -0.18 to 17.86 on moderate volume. Both metals gapped down at the open in Asia; gold continued moving lower, while silver mostly chopped sideways. A strong rebound in the buck [+0.55%] put pressure on the metals.

My sense is that Hurricane Irma's impact ended up being a small fraction of what it could have been; the relief from this ended causing a rebound in the buck, and the unwinding of the flight-to-safety trade that had been building for several weeks.

Gold's gap down was about $10 at the open, and the selling pressure just kept pushing price lower as the day wore on. The rising dollar didn't help. Candle print was a two-candle swing high, which had a 66% chance of marking a top. Gold is now below its 9 EMA. Forecaster plunged -0.59 to 0.11 – that is still a slight uptrend, but it is definitely in jeopardy.

COMEX GC open interest fell -309 contracts.

Rate rise chances (Dec 2017) bounced back to 41%.  More evidence of the easing of the safe haven move.

Silver did a little better; it gapped down at the open, but didn't fall all that much during the trading day. Candle print was a short black/spinning top candle – also a swing high - but the code felt it was not a reversal. It had just a 13% chance of a top. “Lowest rated swing high ever.” Forecaster dropped -0.29 to read +0.11. Silver is still in an uptrend, like gold, but fading rapidly. Silver did seem to find support at its 9 EMA.

Open interest in COMEX SI contracts fell by -928 contracts.

The gold/silver ratio fell -0.35 to 74.58. That's bullish.

The mining shares had a bad day, with GDX down -2.69% on heavy volume, while GDXJ fell -2.79% on heavy volume also. Both miner ETFs are now below their 9 EMA lines; candle prints today are both spinning tops – which appear to be a bearish continuation pattern. Forecasters agree: (GDX:-0.33 to -0.11, GDXJ: -0.44 to -0.33). The miners are now in a downtrend. Looks as though that bearish divergence last Friday was the tell.

Today, the GDXJ:GDX ratio fell slightly, and the GDX:$GOLD ratio dropped more substantially. That's bearish.

Platinum fell-1.73%, palladium rose +0.05%, and copper rose +1.04%. All three of the other metals are in modest downtrends according to their forecasters.

USD staged a strong rally today, moving up +0.50 [+0.55%] to 91.63. Candle print was a swing low, which had a 78% chance of marking the low. That's a very strong reversal pattern. Forecaster agreed, jumping +0.43 to read -0.40; still a downtrend, but a lot less of one than it was on Friday. Buck remains below its 9 EMA, so it has yet to materially change trend, but the reversal does suggest a recovery in the buck could well be in our future. If so, this will cause problems for gold.  We will have to see if the buck can make it through resistance at 92.  That's the next critical level for USD.

Crude rallied +0.64 to 48.40, printing a bullish harami pattern which the code felt was actually a bearish continuation. Forecaster agreed, dropping -0.28 to read -0.10, which is a gentle downtrend. Crude appears to be in no mans land, looking for direction. API report comes out tomorrow after market close.

SPX shot higher, up +26.68 to 2488.11, which is a new closing high for SPX. SPX gapped up at the open in Asia, and then rallied strongly during the US session. Forecaster jumped +0.56 to read +0.45, which is an uptrend. The excitement today was led by financials (XLF:+1.74%) which appear to be relieved by the much more modest-than-expected impact of Hurricane Irma. Cyclicals trailed (XLY:+0.53%). The sector map suggests a bull market move.

VIX fell -1.39 to 10.73.

TLT plunged -1.19%, dropping well below its 9 EMA and printing a 3-candle swing high. Forecaster dropped -0.64 to read -0.12; TLT has probably entered a downtrend. That's risk on.

JNK rose +0.32%, which recovered all of Friday's drop. The spinning top candle wasn't particularly bullish, however. JNK continues to look a bit feeble.

CRB rose +0.27%; 3 of 5 groups rose, led by industrial metals (+1.04%). Unleaded gasoline front month fell slightly.

  • Oct: $1.63 [-0.01]

  • Nov: $1.58 [unch]

  • Dec: $1.54 [unch]

I'd summarize today's activity as a “Hurricane Irma Wasn't That Bad” relief rally. Trump got a debt ceiling limit raise out of the Democrats courtesy of Hurricane Harvey, putting off the fiscal emergency for now too. “Never let a crisis go to waste.” It also raises a credible threat of Trump crossing the aisle for more bipartisan action.

My focus is on the dollar.  Can it move up past 92 resistance?  If so, then I believe gold could see a more substantial correction.  We just have to see how things go.

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