PM Daily Market Commentary - 9/22/2017

By davefairtex on Fri, Sep 22, 2017 - 5:54am

Gold fell -10.20 [-0.78%] to 1294.30 on very heavy volume, and silver dropped -0.21 [-1.25%] to 17.00 on moderate volume. A steady move higher in the Euro/steady fall in the buck did not support PM at all; gold and silver both made new lows.

The selling in gold happened well before the US market opened; gold made a new low of 1291.20 at about 8:45 am Eastern. Candle print for gold was an opening black marubozu, which has a 34% chance of being a reversal. Forecaster wasn't pleased, dropping -0.14 to -0.52. Volume was even heavier than yesterday, which is a bit remarkable given the volatility following the FOMC announcement. Buyers did show up at the 50 MA, but technically, things don't look great; the pace of the downtrend is increasing.

COMEX GC open interest fell -11,201 contracts.  The drop in OI suggests that the commercials are ringing the cash register.

Rate rise chances (Dec 2017) remains at 71%.

Silver fell harder, but found more buyers on the dip. Candle print was an opening white marubozu, which had a 50% chance of being a reversal. Candle code liked what happened in silver a lot more than gold. Forecaster didn't, dropping -0.21 to -0.59. Silver ended the day right at round number 17 – more or less at the 50 MA also.  Forecaster sees the pace of the downtrend increasing, while the candle code (probably) liked the bounce.

Open interest in COMEX SI contracts fell by -2,137 contracts.

The gold/silver ratio rose +0.36 to 76.14. That's bearish.

Miners gapped down at the open, rallied, but then the rally failed. GDX fell -1.23% on moderate volume, while GDXJ dropped -1.06% on light volume. GDX printed a spinning top, which the code felt was a 47% chance of a reversal. Both candles would have been shooting star candles under different circumstances. RSI7 for GDX is now 30, which is just starting to become oversold. Forecasters didn't move much: GDX: -0.01 to -0.46, GDXJ: -0.07 to -0.45.  Traders seem to want to buy the miners - if gold would just stop falling, they would probably buy quite a number of them.

Today, the GDXJ:GDX ratio rose, but the GDX:$GOLD ratio fell. That's neutral.

Platinum fell -0.65%, palladium fell -0.24%, and copper dropped -0.73%. Copper and platinum both made new lows. Platinum has dropped 9 of the last 10 days. If you think gold has done poorly, take a look at platinum.

USD fell -0.25 [-0.27%] to 92.05. The buck did not follow through from yesterday's post FOMC announcement rally. Forecaster moved up +0.05 to +0.36. Tea leaves say that the buck remains in a modest uptrend, but so far I'm not seeing any great enthusiasm to move prices higher.

Crude was almost unchanged, up +0.01 to 50.74. Crude actually fell substantially intraday, but buyers appeared and bought the dip. Candle print was a doji, which was seen as a bullish continuation. Forecaster edged down -0.01 to +0.33. Can crude break through 54? Right now it looks like a tough slog. Rig counts come out tomorrow, which provides some insight into the near term changes in shale driller capex spending. Crude's RSI7 is 74, which is slightly overbought.

SPX fell -7.64 to 2500.60. Today's drop was not any sort of candle pattern my code recognizes – it was a closing black marubozu, but it didn't form a new low. Consumer staples led the market lower (XLP:-0.95%) along with tech (XLK:-0.54%), while industrials rallied (XLI:+0.30%). Forecaster plunged -0.43 to -0.13, hinting at a trend change in the offing. SPX is resting right at the 9 MA. A break below the 9 would be bearish.

Note: I've updated most of my forecasters to be 2-day rather than 3-day; these will generate more rapid changes in trend, but will also tend to generate a lot more trades. For instance, the 2-day SPX forecaster generates about twice as many trades as the 4-day forecaster. Example ratings: 2-day: -0.13 3-day: +0.20, 4-day: +0.44.

Another data point: while I have had some reasonably good success recently in training up prediction models for gold, silver, and other items, I have been unable to come up with one for SPX.  Models that worked great for most of the history of SPX just don't work right now.  Its a curious thing.

VIX fell -0.11 to 9.67. Puts are cheap again.

TLT fell -0.06%; bonds tried to rally but the rally failed. Candle print was a spinning top, which the code found to be neutral. Forecaster moved up +0.11 to -0.46. Jury is still out as to whether or not the Fed meeting will mark a near-term low for bonds.

JNK dropped -0.16%, printing a bearish engulfing candle pattern – probably not a reversal though. JNK remains above all 3 moving averages.

CRB fell -0.67%, wiping out yesterday's gain. 4 of 5 sectors fell, led by the drop in PM (-1.66%).

It looks as though traders are bailing out of PM following the FOMC meeting independently of the relative lack of enthusiasm for buying the dollar. There was also a slight hint of bearishness in equities; a brisk bit of selling hit the market right at the open. Bonds remain weak.

The downtrend remains in place for PM.  While the candle code likes to hint at possible reversals, we haven't seen anything decisive.  Traders do appear to be somewhat willing to buy both silver and the miners, but the overall downtrend in the metals is dominating right now.  Most everything is being sold.  Stand aside until that changes.

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btc update 2017-09-22

Today's print for bitcoin was a long legged doji, which the candle code felt was a bearish continuation.  My new version went short a few days back, but today's $10 drop actually looked bullish to the forecaster.  Bitcoin really "likes" the 9 MA, meaning any crossing back above the 9 will probably result in another buy signal.  That said, my Mk 1 eyeball sees the downtrend line marked in red, which seems to be dominating the directionality of bitcoin right now.  I found it instructive that bitcoin's recent rally failed right at that downtrend line.  That's bearish.

ETH looks a bit different.  It fell harder, my new code kicked off an earlier buy signal (which I wish I'd caught), rallied back above its downtrend line, but has now once more resumed falling after it was unable to rally through 300 resistance.  It is now back below the 9 MA.

Do you see the downtrend pattern in June/July in the chart below?  I think we're (roughly) repeating that pattern again.


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btc 2017-09-23

Looks like we have another MA9 crossing today.  That's a buy signal.  Forecaster agrees, jumping just over the 0-line by 0.02 points.  When something is trying to figure out direction, there is often a lot of back and forth like this.  Once the trend changes for real, the forecaster will stay long until something important happens to break it - like when the Chinese decided to outlaw bitcoin exchanges.

ETH has not yet changed trend - although it is very close - so I'm not going to include the chart.  It has executed a crossover of the 9 MA, which is a "low tech" buy signal.  Intraday, it looks quite strong.  My guess is, the forecaster will emit a buy signal if it holds today above 280...also, the 9 MA is now starting to turn up, which is also bullish.  BItcoin is giving us the hint that ETH will probably break out too, although ETH is looking a bit weaker right now.

So - that's two buy signals.  The up-turning MA for ETH and BTC suggests that the wave of selling might be at an end. 

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