PM Daily Market Commentary - 11/2/2017

davefairtex
By davefairtex on Fri, Nov 3, 2017 - 1:00am

Gold rose +1.30 [+0.10%] to 1276.80 on very heavy volume, while silver edged down -0.02 [-0.12%] to 17.12 on very heavy volume also. The buck moved lower also, losing -0.13%.  There was a lot of back and forth today, but for the most part, most everything closed right around where it opened.

The big news of the day was the release of the Republican tax reform bill – 429 pages long; even the summary is 89 pages. Lots of new winners and losers; the initial reaction from SPX was to drop 13 points; the buck tanked, the Euro rallied, gold and silver spiked higher – but all of it was unwound fairly soon afterwards. We can say that it was largely market neutral.  https://www.politico.com/story/2017/11/02/tax-reform-house-gop-plan-244453

Gold spent most of the day chopping sideways. Gold did spike higher at 10am after the tax reform details were released, but the rally soon failed. Volume on the spike was extremely heavy – there were 45k contracts traded in about 15 minutes. Gold's move came alongside a sharp spike higher in the Euro – which, like gold, also failed. Candle print for gold was a shooting star, but the code felt it was neutral rather than bearish. Forecaster dropped -0.06 to -0.09. Gold ended the day just above its 9 MA.

COMEX GC open interest rose by 2,368 contracts.

Rate rise chances (Dec 2017) remains at 98%.

Silver rallied alongside gold at 10am, but the move wasn't as emphatic and silver's rally failed also. Silver printed a high wave candle, which the code felt had a 33% chance of being a reversal. Forecaster climbed +0.20 to +0.34. Sometimes after a big rally the sellers appear, but apparently not today.  Silver remains above the 9 MA, but just below the 50 and 200 MA lines.

COMEX SI open interest rose by 2,124 contracts.

The gold/silver ratio rose +0.16 to 74.58. That's slightly bearish.

Miners moved higher, with GDX up +0.44% on moderate volume, and GDXJ up +0.93% on moderate volume also. Both miners jumped on the PM rally at 10am, but then fell back as the rally failed. GDX printed a high wave, and GDXJ printed a spinning top – both neutral. Forecasters: GDX +0.39 to +0.08 (buy), GDXJ +0.41 to +0.17 (buy). GDXJ ended the day above the 9 MA. Is this an everyone-into-the-water buy signal? Its hard to say.  While the forecasters are signaling buy, on the charts the miners still appear to be chopping sideways.

Today, the GDXJ:GDX ratio rose, as did the GDX:$GOLD ratio. That's bullish. Maybe things are looking up for the miners.

Platinum fell -0.84%, palladium dropped -0.60%, and copper moved down -0.02%. In spite of the down day, all 3 other metals remain in uptrends, and there were no reversal candle patterns spotted today.

The buck fell -0.12 [-0.13%] to 94.46. Buck printed a bearish harami, which the candle code found to be inoffensive (i.e. not a reversal) but the forecaster was quite upset, falling -0.40 to -0.04, which is a sell signal for the buck. (I updated the DX forecaster to be a bit less jumpy – its now a 3-day forecaster so it waits longer before issuing buy and sell signals. Theoretically anyway.)

Crude rallied +0.48 [+0.88%] to 54.76, erasing yesterday's loss and making a new closing high. Crude seems stable above 54. It is mildly overbought, with RSI7 at 75. Interestingly, we have not seen any sort of breakout spike, the way we sometimes see in other commodities, as oil has made new highs. That suggests there is still a fair amount of selling pressure at these price levels – possibly from drilling companies looking to hedge. We get rig counts tomorrow at 1pm.  I have to say that I still think crude looks good here.

SPX rose +0.49 to 2579.85. SPX was hit twice, once in Asia, and another time after the 10am tax reform release, dropping 13 points in about 10 minutes.  The market soon reversed however, right along with the Euro, and gold. The day's doji candle print was seen as neutral. The SPX forecaster was not as sanguine, dropping -0.37 to +0.08. SPX is now just above stall speed, from the forecaster's point of view. Sector map shows that financials led (XLF:+0.94%) while cyclicals trailed (XLY:-0.75%).  Maybe that's a sense of who might be the winners and the losers.

VIX fell -0.27 to 9.93.

TLT rose +0.44%, making a new high, and printing a long white candle which was a bullish continuation. Forecaster moved up +0.16 to read +0.42. Bonds are continuing to recover.

JNK fell -0.05, dipping down briefly around the time of the tax reform release, but then rallying back, printing a highly-rated hammer candle on the day which may be a reversal (56%). Forecaster remains in a downtrend with a rating of -0.90.

CRB rose +0.10%, making another new high. 3 of 5 sectors rose, led by agriculture (+0.71%). Livestock printed a swing high and dropped -1.58%.

The equity market initially didn't like tax reform all that much; it did recover, but the "reform" clearly wasn't everything the equity market was hoping it would be.  Trump also selected his new Fed Chair - Powell.  Bloomberg provides the bio: https://www.bloomberg.com/news/articles/2017-11-01/powell-to-be-trump-s-nominee-for-fed-chair-replacing-yellen-wsj.  Powell appears to be a relatively controversy-free change.

Nonfarm payrolls is tomorrow at 8:30 am.

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6 Comments

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5408
btc update 2017-11-02

Bitcoin has been in an uptrend since the breakout 5 trading days ago.  Today is the first hint that the current move might be getting a little bit tired.  Today's spinning top candle (with a relatively large upper shadow) has a 55% chance of being a reversal.  Forecaster still shows a very strong uptrend, however, so I'd treat this just as a bit of a warning sign rather than any sort of sell signal.

BItcoin seems to like round numbers quite a bit.  The close happened roughly at 7000.

ETH appears to have run out of momentum.  The ETH forecaster is on the cusp of issuing a sell signal.  Contrast that with bitcoin's forecaster, which is about as high as it can get.  ETH appears to be the crypto poor stepchild. 

The key chart is the ETH-BTC chart, which shows almost a 75% drop for the ratio since it peaked out in June.  There is a flood of money pouring into crypto, but little if any of it is going into ETH.

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5408
payrolls +261,000

Nonfarm Payrolls report came in a bit lower than the consensus expectation of 325,000.  There was no movement on the average hourly earnings - which suggests that wage inflation isn't happening.  The participation rate fell -0.4%, which is why the unemployment rate dropped to 4.1% - people are dropping out of the workforce.

Immediately after the release, the Euro spiked higher, as did gold and silver, but the moves were not dramatic; I suspect today's number will not end up making any permanent change in the trend.

 

 

Cold Rain's picture
Cold Rain
Status: Gold Member (Offline)
Joined: Jul 26 2016
Posts: 363
4 Candle Swing Lows Are Worthless

You get a rally for a whole day.  Gold and silver and miners plummeting again.  Bet any BTC weakness will be immediately bought though.

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5408
weak euro

At least part of it was because the Euro - its down 0.6 today, which is a fairly large move.

But I really do think they pounced on silver though.  It just fell off a cliff.

 

 

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

At least part of it was because the Euro - its down 0.6 today, which is a fairly large move.

But I really do think they pounced on silver though.  It just fell off a cliff.

 

 

Yeah, it was a big spike down in the metals on no news, as far as I could tell.  The Euro, gold, and silver went down, and the dollar surged, all at the same time.  I knew trouble was brewing when the metals spiked after the jobs report.

Anyway, silver was up about .50 yesterday and is off about half of that today.  So, I guess it could be worse.

PeakGold's picture
PeakGold
Status: Bronze Member (Offline)
Joined: Jun 3 2017
Posts: 78
Silver

I'm still waiting for silver to hit $16.00 again. I think a lot of people are too.

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