PM Daily Market Commentary - 9/25/2017

davefairtex
By davefairtex on Tue, Sep 26, 2017 - 5:13am

Gold rose +13.60 [+1.05%] to 1314.10 on heavy volume, and sliver climbed +0.18 to 17.22 [+1.09%] on moderately heavy volume. The buck also jumped +0.52% today, and the 20 year also moved up +0.63%; it was a safe haven rally day.  Prices jumped after North Korea said that the US has “declared war” and said that it had the right to countermeasures, including shooting down US bombers “even when they are not inside the airspace border of our country.”

http://www.reuters.com/article/us-northkorea-missiles/north-korea-bolsters-defenses-after-flight-by-u-s-bombers-rhetoric-escalates-idUSKCN1C026A

A curious part of the article reads:

The unverified Yonhap report said the United States appeared to have disclosed the flight route of the bombers intentionally because North Korea seemed to be unaware. South Korea’s National Intelligence Service was unable to confirm the report immediately.

Gold prices moved sideways until about 10:50 am Eastern; at that point, gold started taking off and really never looked back. Candle print was a long white candle, which appeared bullish. Gold printed a 3-candle swing low today, which is bullish. Forecaster jumped up +0.58 to +0.30, signaling a change back to an uptrend. The rally today stopped right at the 9 MA.

COMEX GC open interest rose +7,246 contracts. I'm guessing the commercials are going short.

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

Silver followed gold, taking off at 10:50, and eventually closing the day at the highs. Candle print was a closing white marubozu/confirmed bullish NR7, which had a 75% chance of marking a low. That's a high rating. Silver's forecaster jumped +0.51 to +0.08, moving silver just barely into an uptrend. Silver remains a fair amount below its 9 EMA; it is lagging gold somewhat. That's to be expected in a safe haven move.

Open interest in COMEX SI contracts fell by -494 contracts.

The gold/silver ratio fell -0.03 to 76.31. That's neutral.

Miners moved higher, with GDX up +1.53% on heavy volume, while GDXJ moved up +1.92% on heavy volume also. Both candle prints were long white candles, which the code felt was relatively bullish. Forecasters: GDX +0.41 to +0.09, GDXJ +0.21 to +0.08. Both miner ETFs are now above their 9 MA lines, and have tentatively entered an uptrend. Junior miners printed a swing low last Friday.

Today, the GDXJ:GDX ratio rose, as did the GDX:$GOLD ratio. That's bullish.

Platinum rose +0.84%, palladium fell -0.86%, and copper dropped -0.58%. This was platinum's first good day in 11 sessions; huge volume, and a large spinning top that has a 53% chance of marking a low. Forecaster jumped almost back to even. Palladium and copper both remain in downtrends, below 9 MA, with forecasters somewhat negative.

USD rose +0.47 [+0.52%] to 92.44, moving back above round number 92. The dollar move was not about North Korea – the dollar rally started much earlier in the day, and my guess is that its related to the German elections, where Merkel's party (the CDU) and their coalition partner (the SPD) lost a significant amount of support vs where they were in 2013: CDU down -8.5%, SPD down -5.2%. SPD decided to abandon the coalition with Merkel, and so she will have to form a government either as a minority, or cobble one together with a bunch of smaller parties. AfD, labeled a “far right” party by the media, got 13%, up 8% from 2013. They are anti-Euro and anti-immigration; AfD party leader (who just resigned - the drama) has a same-sex partner though, so its not your typical American “far right” (i.e. a bunch of Nazis) group.

Chart from the FT shows you better than I can:

https://www.ft.com/content/e7c7d918-a17e-11e7-b797-b61809486fe2

The parliamentary math says that Merkel will have an even harder time doing anything to help Greece, or to support Macron's calls for More Europe. Greek stock market plunged -6.32% on Monday. They know what's coming next.

We also have an developing situation in Spain, complete with a ticking clock: the Catalan government announced (previously) that it would have a vote on an independence referendum on October 1, 2017. Spanish PM Rajoy has ordered the police to arrest members of the Catalan government who support the referendum (and apparently plans to charge them with sedition – complete with 10 year prison sentences), sent in Federal police and the military to seize ballots, and took over control of the finances of the province to make sure (provincial government) money isn't being spent to fund the referendum. In response, the local (Catalan) police have refused to cooperate with the central government, and dock workers in Barcelona have refused to service ships associated with the Federal police. Could this lead to a civil war? It sure could. By next week, even.  If someone starts shooting, it could really get out of control.

Crude shot up +1.47 [+2.90%] to 52.13, breaking above its recent resistance zone. I'm not sure what the news driver was. Candle print was a bullish NR7/strong line, which is a bullish continuation. Crude forecaster shot up +0.37 to +0.46, jumping back into a strong uptrend. If this continues, we may get through overhead resistance at 54. That would be a huge deal.  Huuuuge deal.

Below is a weekly chart - I've been working to construct forecasters for longer term charts, and I have completed one for crude that seems to work well enough.  You can see the oil breakout above 51, as well as the key 54 resistance level just ahead.

SPX fell -5.56 to 2496.66. This was a 4-candle swing high – by a penny. SPX closed below its 9 EMA. It looked like a safe haven move: energy exploded higher (XLE:+1.44%) along with utilities (XLU:+0.92%) and staples (XLP:+0.72%) while tech plunged (XLK:-1.18%).

VIX jumped +0.62 to 10.21. Puts are still cheap.

TLT jumped +0.63%; half of the gains came after the open, and the other half came when gold jumped higher at 10:50 am. Candle print was a long white candle, which was a bullish continuation. Forecaster screamed higher, up +0.74 to +0.50, which is a strong uptrend.

JNK moved up +0.08%, edging slowly higher. JNK remains in an uptrend

CRB rose +0.57%. 3 of 5 sectors rose, led by energy which was up a big +2.76%.

Two major impacts occurred in the market today; first, the possible top in the Euro coming from the poor showing by Merkel's party in the German elections and the expected impacts of that on EU policy and stability going forward. Second, the threat by North Korea to shoot down US bombers in international airspace.

This resulted in a rising dollar, and a rising gold price. This unusual outcome reflects a large move higher in gold-in-Euros, which shot up +1.9%.

The jump in the metals caused trend changes across the board. How long will PM remain in an uptrend? Safe haven moves are never that reliable. What happens if peace breaks out? I suppose there is little chance of that in the Korean situation, but you never know. The Chinese might decide to step in, peace could break out, and then where would you be?

And that falling Euro is something to watch too.  That's generally speaking not great for gold.  But if the Europeans start buying gold, then its probably a wash.

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6 Comments

Cold Rain's picture
Cold Rain
Status: Gold Member (Offline)
Joined: Jul 26 2016
Posts: 363
PMs

"How long will PM remain in an uptrend? Safe haven moves are never that reliable."

Apparently not long.  Straight down from the open today.  Can PMs not move up two days in a row, even with all the swing lows, bullish white candles, and jump in forecaster numbers?  The interesting thing about NK, is that nothing magically changed from the course of the day yesterday to the overnight hours to this morning.  So, why the continued rise throughout the day and the plunge this morning, if it were all NK related?

cmartenson's picture
cmartenson
Status: Diamond Member (Offline)
Joined: Jun 7 2007
Posts: 5727
The answer, of course
Cold Rain wrote:

"How long will PM remain in an uptrend? Safe haven moves are never that reliable."

Apparently not long.  Straight down from the open today.  Can PMs not move up two days in a row, even with all the swing lows, bullish white candles, and jump in forecaster numbers?  The interesting thing about NK, is that nothing magically changed from the course of the day yesterday to the overnight hours to this morning.  So, why the continued rise throughout the day and the plunge this morning, if it were all NK related?

...is that these ""markets"" are in total lockdown.  Equities cannot seem to lose for more than two days, and PM's cannot gain for more than two days.

It's just how it is at present.

Of course, this all ends very, very badly because central planning never works.  It's linear thinking in a complex (non-linear) world.  It works until it doesn't int he same way that a bridge holds under increasing weight until it doesn't.

It's truly astonishing that we are where we are...where nothing matters.  Sorry people of Houston still struggling, the nation has forgotten you and moved on.  NFL knee-taking and all all that.

Sorry people in the Florida Keys.  Good luck with whatever you are up to, you are entirely out of our national news cycle.

And Puerto Rico?  Eh...the MSM is about done with you too.  Cannot hold a frame of view more than 4 days and you are pushing it at 6 here.

Meanwhile, has everyone seen the shiny new equity prices?  Razzle Dazzle!!

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5410
German election

Buck rallying for a second day now.  I think the German election effect may have some legs.  Gold does seem to have a fairly strong bid at 1300-1305, but I'm not sure it holds if the buck keeps moving higher.

A dollar rally is always my top concern.

Cold Rain's picture
Cold Rain
Status: Gold Member (Offline)
Joined: Jul 26 2016
Posts: 363
Sad
cmartenson wrote:

...is that these ""markets"" are in total lockdown.  Equities cannot seem to lose for more than two days, and PM's cannot gain for more than two days.

It's just how it is at present.

Of course, this all ends very, very badly because central planning never works.  It's linear thinking in a complex (non-linear) world.  It works until it doesn't int he same way that a bridge holds under increasing weight until it doesn't.

It's truly astonishing that we are where we are...where nothing matters.  Sorry people of Houston still struggling, the nation has forgotten you and moved on.  NFL knee-taking and all all that.

Sorry people in the Florida Keys.  Good luck with whatever you are up to, you are entirely out of our national news cycle.

And Puerto Rico?  Eh...the MSM is about done with you too.  Cannot hold a frame of view more than 4 days and you are pushing it at 6 here.

Meanwhile, has everyone seen the shiny new equity prices?  Razzle Dazzle!!

It's very sad that this is indeed where we are.  It's completely dystopian.  I just saw a headline on ZH that said the S&P has closed at record highs 37 times -- the most in 20 years.  Pretty amazing given meager growth, mounting debt, heightening geopolitical risk, and being so long in this expansion cycle.  New housing sales disappointed again today.  And consumer confidence drops.  But let's get that S&P back over 2500 so we can get on our way to 2600.

Gold has found near term support at $1300, but I don't expect that will hold today.  Silver has had nearly a .40 swing already on the day.  Just straight down.

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5410
what does this chart tell you?

Here's a pop-quiz.  What is this (weekly) chart telling you - coming immediately after the German election?

Cold Rain's picture
Cold Rain
Status: Gold Member (Offline)
Joined: Jul 26 2016
Posts: 363
^^ Chart

Gold going to drop to at least $1250, probably lower. :)

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