PM Daily Market Commentary - 10/17/2017

By davefairtex on Wed, Oct 18, 2017 - 3:46am


Gold fell -10.20 [-0.79%] to 1287.00 on heavy volume, and silver fell -0.21 [-1.22%] to 17.05 on moderately heavy volume. A falling Euro seemed to drag PM lower right along with it.

Gold followed through off yesterday's potential reversal bar, printing a swing high (reversal 44%), and dropping the forecaster -0.50 to read -0.35, which is a clear downtrend. Gold is now below its 9 MA. So – swing high + forecaster downtrend = trend change.

COMEX GC open interest fell -3,916. This suggests the decline wasn't the act of the commercials; they are now ringing the cash register on the way down.

Rate rise chances (Dec 2017) jumped to 92%.

Silver looks pretty much the same as gold; candle print was also a swing high (reversal 46%), and the silver forecaster fell -0.49 to read -0.48, which is a strong downtrend. Silver is now below all 3 moving averages. We silver on the cusp of a downtrend yesterday, and it is now here full force today.

Open interest in COMEX SI contracts rose by +73.

The gold/silver ratio rose +0.33 to 75.51. That's bearish.

Miners opened lower, but rallied back; traders seemed to be willing to buy the dip in the mining shares.  GDX fell just -0.17% on moderate volume, while GDXJ dropped -0.21% on very light volume. Candle prints for both ETFs were bearish continuations. Forecaster moves: GDX -0.05 to -0.41, GDXJ -0.02 to -0.46. I read this as saying traders were buying the dip, but that most likely won't continue if gold and silver keep selling off.

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

Platinum rose +0.30%, palladium climbed +0.78%, while copper dropped -1.26%. Does the platinum rally tell us anything about where PM prices are going next? I don't think so – it looks more like commercials ringing the cash register (OI dropped by -903, about a 1.2% change) than anything else.

USD rose +0.19 [+0.20%] to 93.28, following through off yesterday's swing low. The buck actually rallied more substantially (hitting a high of 93.52) but was unable to keep those gains into the close. Candle print was a spinning top, which was a bullish continuation. Forecaster dropped -0.02 to +0.23. Buck remains in a slow uptrend.

Crude was unchanged today at 52.13. That always means a doji candle print; today's doji star was a bullish continuation. Forecaster didn't like it, dropping -0.22 to +0.32; that's still an uptrend, but it appears that resistance at 52 is quite strong.  API report after market close showed a surprising (and bullsh) 7.1m barrel crude draw, which didn't seem to affect prices in the slightest.

SPX rose +1.72 to 2559.36. That's another new all time high.  Sector map shows that sickcare did best (XLV:+1.34%) while financials fell most (XLF:-0.49%), pretty much the reverse of yesterday.   "The failing" NYT reports that two senators reached a "bipartisan deal" to keep Obamacare alive by voting to fund insurance premium subsidies.  This is likely why the sickcare group rallied.  The equity market sector map is often a good measure of assessing winners and losers in situations like these.  It would be interesting to see if the senators in question receive substantial contributions from the insurance industry.  NYT didn't mention anything about contributions, but I think "cui bono" should be front and center for each article written.

VIX rose +0.40 to 10.31.

TLT rose +0.13%; it opened down, but rallied for most of the day. Bonds continue to look strong. Forecaster for TLT rose +0.06 to +0.34; TLT remains in an uptrend.

JNK rose +0.16%, which is a fairly strong rally for JNK these days. This puts JNK into a short-term uptrend; longer term, JNK is just moving sideways, and has been doing this for months.

CRB fell -0.21% today; 4 of 5 sectors fell, led lower by PM (-1.36%). 

PM clearly dropped into a downtrend after today's price moves. They say that price is an escalator on the way up, but an elevator on the way down. (Sometimes its more like falling down the elevator shaft on the way down). Why is it seemingly always faster to fall than to rise? Its one of those market mysteries, probably having to do with human psychology. We remember bad experiences 5 times more intensely than we remember good experiences. That was probably a pro-survival trait back in the day. Maybe it still is. But in the market, that trait probably manifests as a slow climb higher, and a steep drop lower.

Its time to watch from the sidelines until conditions improve.

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1 Comment

Cold Rain's picture
Cold Rain
Status: Gold Member (Offline)
Joined: Jul 26 2016
Posts: 382
Run, Don't Walk

Dave, I'm looking forward to reading that phrase in one of your upcoming commentaries.  It's getting about time. :)

Futures are up bigly this morning as gold and silver are plummeting.  Melt-up in progress, I guess.  It's funny that all these correlations exist, depending on who you read or listen to:  rising dollar/rising gold, falling dollar/falling gold, rising bond prices/rising gold, falling bond prices/rising gold, rising silver/rising gold, falling silver/rising gold (which is ok because gold is a hedge), rising inflation/rising gold, deflation/rising gold, fed hiking/rising gold, fed holding/rising gold...and on and on and on.

It's funny that the dollar can fall 5.60 and you get a $50 rise in gold, but it can fall 0.19, and you get a $10.20 plunge in gold.  At this rate, if you get the dollar back up to around 95, you might be able to buy gold for $600.  Of course, I'm being facetious, but it's not far off.

Anyway, let's go 24,000!

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