PM Daily Market Commentary - 9/13/2017

davefairtex
By davefairtex on Thu, Sep 14, 2017 - 2:27am

Gold fell -8.90 [-0.67%] to 1327.10 on moderately heavy volume, while silver dropped -0.14 [-0.78%] to 17.83 on moderately heavy volume also. Today's move in PM was entirely about currencies: the buck blasted through 92 resistance, climbing +0.64 [+0.70%] to 92.28. Gold's move was entirely a currency effect.

Gold was actually positive right up until the buck started its rally, which happened roughly around 8:30 am Eastern.  At that point the buck shot higher, the Euro plunged, with gold dropping right along with it.  Gold closed relatively near to the lows for the day.  Today's candle print for gold was just a long black candle, which the code felt was a (bearish) continuation. Forecaster agreed, dropping -0.16 to read -0.47. Gold has dropped below its 9 EMA, and it is now more clearly in a downtrend. I have to say - yesterday I thought things looked all right, my code seemed to see this coming.

COMEX GC open interest rose 139 contracts.

Rate rise chances (Dec 2017) rose to 46%.

Silver dropped along with gold starting at around 8:30 eastern, although it didn't drop quite as much, and it managed a modest rally at end of day.  Silver printed a spinning top candle, which the code felt was a bearish continuation. Forecaster also fell, losing -0.24 to read -0.34. That is a shallower downtrend than we see in gold, but it is still a downtrend. Silver ended the day right at its 9 EMA.

Open interest in COMEX SI contracts rose by +1,013 contracts.

The gold/silver ratio rose +0.08 to 74.43. That's slightly bearish.

The mining shares sold off slowly all day long - GDX dropped -1.82% on moderate volume, and GDXJ fell -2.20% on moderately heavy volume. Both ETFs printed opening black marubozu candles, which the code thought were bearish continuations. Forecasters also fell: (GDX: -0.41 to -0.83, GDXJ: -0.22 to -0.66). Downtrend is increasing.  Miners are the most bearish-looking component of the PM space right now.

Today, the GDXJ:GDX ratio fell, and so did the GDX:$GOLD ratio. That's bearish.

Platinum fell -0.94%, palladium dropped -1.67%, and copper plunged -1.84%. Copper and platinum have dropped into steep downtrends (forecasters for HG:-0.74, PL:-0.83) while palladium is chopping sideways back and forth across its 9 EMA. Reminder: copper's COT report shows that managed money is historically long, and this suggests that a copper downtrend could be quite severe if managed money starts liquidating en masse.

USD blew through 92 resistance today, up +0.64 to 92.28, up +0.70%. The closing white marubozu candle was a bullish continuation. USD forecaster shot up +0.61 to +0.56, putting the dollar into a clear uptrend. What's going on? Yesterday I said that it felt as though Trump might have turned the corner with his bipartisan debt limit ceiling rise – to the horror of the Republican leadership. Today we have a story where we see that Trump had lunch with the House & Senate leadership on DACA:

https://www.bloomberg.com/news/articles/2017-09-13/trump-wants-congress-vote-on-dreamer-migrants-democrat-says

Congressional Democratic leaders say they’ve reached a tentative agreement with President Donald Trump to “quickly” advance legislation to protect from deportation of about 800,000 undocumented immigrants brought to the U.S. as children.

It looks like the White House has a new strategy” to be bipartisan, Cuellar said.

If this bears out in the coming weeks and months, I believe this outcome to be wildly dollar positive. A bipartisan Trump will not be impeached, and he might get a fair amount of his legislation passed. Trump after all is not a very good Republican – he just wants to “win”. If that means working with the Democrats, it seems as though he's fine with that.

From the standpoint of PM, however, it is probably negative.

Crude shot up +0.93 to 49.59, rallying strongly for a number of reasons. Candle print was a closing white marubozu, which the code felt was a bullish continuation. Forecaster jumped +0.52 to read +0.33 – moving into a modest uptrend. Today's rally stopped right at the 200 MA. Crude is now looking right at round number 50, which it has had trouble with for the past 5 months.

So why the big move in crude? Today's EIA report (“petroleum status report”) was relatively bullish (crude build: +5.9m barrels, gasoline draw: -8.4m barrels), and the monthly IEA report showed that global oil production fell -720k bpd in August, due to unrest in Libya, Hurricane Harvey, and a decline in US production independently from Harvey. Demand also increased, up to 1.6 mbpd from the previous projection of 1.5 mbpd. http://oilprice.com/Energy/Oil-Prices/The-Most-Bullish-Oil-Report-This-Year.html

SPX inched up +1.89 to 2498.37, another new all time closing high. Candle print: short white/closing marubozu, which tells us that the trading range was narrow, and the market closed at its high. Today was about sector rotation: energy led (XLE:+1.25%) along with cyclicals (XLY:+0.72%), while utilities (XLU:-0.49%) and sickcare (XLV:-0.37%) declined. The “Medicare for all” bill was introduced by Bernie Sanders which, surprisingly, has garnered some Democrat support. The donors will not be pleased. Might a newly-bipartisan Trump looking for a win sign such a bill in exchange for his wall? The mind boggles.

There were also some amusing comments (via The Intercept) by Allergan CEO at a healthcare conference regarding the American people having “lost trust in drug companies.”  No, really?  We're only at 18.5% of GDP.  Surely the American people can just dig a little deeper.

https://theintercept.com/2017/09/13/pharma-ceo-worries-americans-will-say-enough-is-enough-and-embrace-bernie-sanders-single-payer-plan/

VIX fell -0.08 to 10.50.

TLT was hit once more, dropping -0.39%. The black marubozu candle was a bearish continuation. Flight to safety trade unwinds for the 4th straight day. Forecaster dropped -0.19 to a very bearish -0.80.

JNK fell -0.05%, dipping below its 50 MA. JNK is chopping sideways. I'm surprised it isn't doing better given the rally in crude today.

CRB rose +0.81%; 3 of 5 groups rose, led by energy (+1.66%). Looks like gasoline is returning slowly to a rough balance.

  • Oct: $1.65 [-0.01]

  • Nov: $1.60 [unch]

  • Dec: $1.57 [+0.01]

I believe the market is telling us right now that political uncertainty is declining in the US. Today's big dollar rally is accompanied by headlines on Trump's “new strategy” which has “Democrats cautious but encouraged.” Gold didn't drop too hard (it was flat, measured in Euros), but bonds are selling off.

North Korea is threatening to launch a nuke at Japan. To “sink” it. Markets don't seem to care, at least not much.

Headlines also suggest that NK likes bitcoin. To me, this doesn't bode well for bitcoin. First China outlaws ICOs, then head bankster Jamie Dimon links bitcoin to murderers and drug dealers, and now headlines say that NK loves bitcoin too...what's next? Its a bad news cycle for bitcoin. Deep state may have them in the crosshairs. Trend right now is down. You may believe bitcoin is “the revolution”, but things go in cycles.

The oil market appears to be rebalancing. Maybe. At long last. Energy (XLE) bottomed out four weeks ago, and is up almost 7%. Oil services (OIH) are up around 10%.

Gold has pretty clearly entered a downtrend. If the dollar rally continues, gold will almost certainly continue to drop. I think it all – or at least mostly – will depend on Washington politics. Can Trump reach a compromise on DACA? If so, he will have played it brilliantly, and the markets will probably use the DACA template to reassess his chances on tax reform.  "Only Trump could legalize DACA."

Of course, dollar positive means gold negative. Until the “More Europe” love-fest runs aground in Italy. Or the declining global credit impulse starts making an impact. Or if North Korea goes kinetic in some way.

But for now, we should probably take our cues from the bond market.  While PM prices are not collapsing (at least not in Euros anyway), in PM it is probably time to be a bit careful out there.

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7 Comments

cmartenson's picture
cmartenson
Status: Diamond Member (Offline)
Joined: Jun 7 2007
Posts: 5441
Ethereum crashing on volume

Best to just stand aside here, and wait and watch.

Dave, where's the next stopping point?

kaimu's picture
kaimu
Status: Silver Member (Offline)
Joined: Sep 20 2013
Posts: 158
JAMIE DIMON SAYS BITCOIN IS A FRAUD

Aloha! Jamie Dimon, CEO of JP Morgan uses the word FRAUD!

https://www.cnbc.com/2017/09/12/jpmorgan-ceo-jamie-dimon-raises-flag-on-trading-revenue-sees-20-percent-fall-for-the-third-quarter.html

Who better to know what fraud is?

Or is this a contrarian setup?

 

Adam Taggart's picture
Adam Taggart
Status: Peak Prosperity Co-founder (Offline)
Joined: May 26 2009
Posts: 2799
$160?

Seems like next major support level is all the way down at $160?

nickbert's picture
nickbert
Status: Diamond Member (Offline)
Joined: Jan 14 2009
Posts: 1206
$195 support for ETH?

Dave posted a chart in the comments of the Sept 12th PM Daily Commentary, which showed the next support being around $195 for ETH.  Pretty wild ride... makes swings in PM's look positively boring by comparison. cheeky

davefairtex's picture
davefairtex
Status: Diamond Member (Online)
Joined: Sep 3 2008
Posts: 4772
ETH stopping point

Yeah the stopping point I saw was 195-ish, on the daily chart.  Adam is right too - major support (weekly chart) is around 160sh.  But those price levels are more for entertainment value than anything else.

Relevant news item:

https://www.bloomberg.com/news/articles/2017-09-14/bitcoin-tumbles-as-chinese-exchange-says-it-will-halt-trading

There are three ways to approach this.

1) try to catch the low by rolling the dice at a support point.  I.e. put a buy order in at 195 and hope you have a lot of company.  It might be "the low", it might bounce for a few days only to continue dropping, or it might just keep dropping.  You just never know because you are *guessing* that you *might* have company.

2) wait for a daily candle that looks fairly strong.  If its at a support level, that increases the odds.  My candle code helps me to identify these points.  That's still a dice-roll, because some news could appear that will push prices down further, but its higher odds because other people have demonstrated their interest by dropping in cold, hard cash.  That's better than simply hoping that the buyers will show up.

3) Lastly, wait for my forecaster to turn positive before jumping in.  You will be late (the forecaster never gets the low - really never) but by the time the forecaster flips to uptrend, there is a certain amount of momentum built in that increases the likelihood of a decent trade.  It takes a lot of money to flip the trend.  You trade off more certainty for less profit, and sometimes the trend change doesn't pan out.  Still, last forecaster trade was a 50% move.  Of course, YMMV.

I sold the day after the top, at ETH 360 (ish) when my forecaster turned bearish.  I was actually a day late, which was to my benefit since there was a slight rally that I was able to sell.  Personally, I'm not going to jump in until that forecaster turns up once more.  Preferably after a nice bullish candle pattern.

All this technical babble is here to keep the emotion out of it all.  You don't want to be excited about crypto, you don't want to be terrified either.   An old tennis coach of mine used to say: "you don't ever want your pulse to go above resting."  Well that's the theory anyway.  Forecaster isn't bullish?  I'm watching.  (And even then - forecaster isn't useful when the market chops sideways, it only works in a strongly trending market)

In other news - gold actually looks decent today, so does TLT.  Just saying.  :)

cmartenson's picture
cmartenson
Status: Diamond Member (Offline)
Joined: Jun 7 2007
Posts: 5441
Your ""markets""

No comment:

davefairtex's picture
davefairtex
Status: Diamond Member (Online)
Joined: Sep 3 2008
Posts: 4772
round numbers

One thing I've noticed about bitcoin - it seems to like round numbers a fair bit.

Bitcoin topped out at $5000.  Once it broke $4000, the selling became very intense.  It struggled with 3000 for a while before it finally broke out.

My guess is, bitcoin might have some support at 3000.  "I swore to buy bitcoin if it ever got back down to 3000..."

Not sure how long that support will last, its just something I saw.  I'm guessing its an artifact of having a lot more non-traders involved.  Human psychology plays a bigger part, I'm guessing.

Sheesh.  Looking at the chart - we might get there today.

 

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