PM Daily Market Commentary - 10/9/2017

davefairtex
By davefairtex on Tue, Oct 10, 2017 - 3:00am

Gold rose +7.50 [+0.59%] to 1286.40 on moderate volume, while silver rose +0.14 [+0.83%] to 16.99 on moderate volume also. Gold and silver followed through off the bullish-looking reversal bars printed last Friday. While the buck did retreat somewhat, it was a very mild move, losing just -0.15%.  That means that gold and silver rallied in the other currencies too, which is positive for PM overall.

Gold popped higher early in Asia, and then moved largely sideways for the remainder of the day, managing to close near the highs. Candle print was a 2-candle swing low, which had a 52% chance of being a reversal. Gold is now through its 9 MA. Forecaster jumped +0.51 to read +0.51 – that's a big move.  Forecaster is pretty sure that gold has reversed.

COMEX GC open interest rose +158 contracts.

Rate rise chances (Dec 2017) remains at 87%.

Silver also spiked higher in Asia, and like gold traded sideways for the rest of the day. Silver also printed a 2-candle swing low, which the code felt was quite strong, a 69% chance of a reversal. Silver's forecaster jumped +0.21 to read +0.49. Silver moved through its 9 MA on Friday – silver's chart looks a bit better than gold at this point. While this isn't a Euro story per se, I think it really helps that the buck is gently falling at this point.

Open interest in COMEX SI contracts rose by +1,749.

The gold/silver ratio fell -0.18 to 75.72. That's bullish.

Miners moved up too, with GDX up +0.64% on moderately light volume, and GDXJ climbed +1.10% on very light volume. There did not appear to be a massive flood of money into the mining shares – the big move happened on Friday, although GDXJ did have a steady move higher all day long. Candle prints: GDX short white, GDXJ long white - both bullish continuations.  GDX forecaster: +0.08 to +0.39, GDXJ: +0.15 to +0.29. Miners remain in an uptrend.

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

Platinum rose +0.17%, palladium rose +0.92%, and copper moved up +0.10%. It was a relatively quiet day. Platinum remains poised for reversal but has not materially rallied off its lows, and palladium is bouncing along just above its 50 MA trying to decide if it will correct.

USD fell gently today, dropping -0.14 [-0.15%] to 93.47. That was enough to print a swing high (50% reversal chance) because of the shooting star printed last Friday. Forecaster fell -0.15 to +0.06. USD remains above its 9 MA, but the uptrend appears to be slowing substantially. A break below the 9 MA would be bearish. If that happens, that would probably be quite supportive of the fledgling PM uptrend.

Crude rose +0.36 [+0.73%] to 49.71. It was a relatively modest rally, and the candle print was a bullish harami, which had only a 38% chance of a reversal. Crude did manage to close back above its 200 MA. Forecaster moved up +0.11 to -0.09. API report comes out tomorrow after market close.

Oilprice had an article entitled “Is the Bakken profitable at $50 oil?”  (spoiler alert: answer is no). That's at $50 WTI, which is about where we are now. At $70 WTI, the answer is yes. Total losses if oil stays at $50 WTI are at least $20 billion. The article was a bottom-up calculation – it looks to have been a relatively large amount of work by the author – worth reading if you are an energy market wonk.

http://oilprice.com/Energy/Crude-Oil/Is-The-Bakken-Profitable-At-50-Oil.html

SPX fell -4.60 [-0.18%] to 2544.73. Sector maps shows that sickcare led lower (XLV:-0.63%) along with financials (XLF:-0.38%), while tech did best (XLK:+0.25%). Forecaster fell -0.16 to read +0.23. Might we see a modest correction? We might. RSI7 is 75 and dropping, coming down off some really overbought levels.

VIX jumped +0.68 to 10.33.

TLT rose +0.32%. It was not quite a swing low, but TLT is hinting at risk off, just a bit. I'd think about jumping in, except I'm reluctant to buy bonds while the Fed is normalizing its balance sheet.  Still, if the equity market corrects we'll probably see a strong move higher in TLT.

JNK rose +0.08%. Not much change. It continues to move sideways.

CRB was unchanged. It looks ready to break down, however.

Today we saw swing lows in gold and silver. The miners have been saying this for a week now, and today silver and gold finally caught up. Note that this happened at the same time as the (mild) swing high in the buck. Currency moves represent either a headwind or a tailwind to gold. Over the past month, the buck has risen about 2.5%; during that time, gold has fallen about 5%.

Viewing PM prices through the lens of the COT report (and assuming COMEX remains a significant driver of PM prices in the near term), the COT report shows us that there are no managed money shorts to squeeze for gold. There are a few silver managed money shorts, but not very many. Any extended rally will have to come from managed money piling in long.

We'll have to see how things go, but for now we appear to have a change in trend.

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4 Comments

Cold Rain's picture
Cold Rain
Status: Gold Member (Offline)
Joined: Jul 26 2016
Posts: 271
PM Action

It's looking good the last couple of days.  May get that golden cross in silver in the next few sessions, unless it sells off hard again.  Wonder what is driving the move?

Cold Rain's picture
Cold Rain
Status: Gold Member (Offline)
Joined: Jul 26 2016
Posts: 271
Never Mind

Looks like we've peaked out and are moving lower the for the rest of the day.  Probably finish nearly flat on the day for another reversal.

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 4683
miners sold hard

The miners started dropping in the morning, and have fallen all day long.   Bearish engulfings everywhere.  I have no idea why.  Some of the miners are down 5% - on a day when gold is still up 0.5%.

Its not a great sign.

Prints for the metals should be ok.  At least, not horrible anyway.

With the buck off -0.50, I expected a bit more though.

Cold Rain's picture
Cold Rain
Status: Gold Member (Offline)
Joined: Jul 26 2016
Posts: 271
davefairtex wrote: The
davefairtex wrote:

The miners started dropping in the morning, and have fallen all day long.   Bearish engulfings everywhere.  I have no idea why.  Some of the miners are down 5% - on a day when gold is still up 0.5%.

Its not a great sign.

Prints for the metals should be ok.  At least, not horrible anyway.

With the buck off -0.50, I expected a bit more though.

It all balances out.  Yesterday, metals outpaced the currency move to the upside. :)

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