PM Daily Market Commentary - 12/6/2017

davefairtex
By davefairtex on Thu, Dec 7, 2017 - 5:37am

Gold fell -2.80 [-0.22%] to 1265.60 on moderate volume, while silver dropped -0.14 [-0.87%] on moderate volume. Today the buck rallied +0.23%, which about equals the drop in gold. Silver had no such excuse, and neither did the miners.

Gold moved mostly sideways, trailing off slightly as the dollar rallied. The narrow trading range resulted in a short black/spinning top candle, which was unrated since no new low was made. Gold's forecaster ticked up +0.04 to -0.38. Gold remains in a downtrend.

COMEX GC open interest fell by -7,002 contracts. That's probably short covering by the commercials, and may account for the narrow trading range today. Isn't it interesting that platinum cratered today while gold did not? Platinum's OI jumped by 3,143 contracts, almost a 4% change. Pound platinum so you can cover your gold shorts.

The gold short-covering operation – I believe – is a positive sign for gold longer term.

Rate rise chances (Dec 2017) remain at 90%.

Silver fell more heavily than gold, also moving lower as the buck moved higher, and it closed almost at its low. Silver's candle print was a long black/bearish continuation. Silver's forecaster rose +0.08 to -0.32. Its not clear if round number 16 is providing much support. No reversal today. Silver's RSI7 is 16, which is oversold.  Silver has daily-chart support down around 15.60.

COMEX SI open interest rose by 1,927 contracts.

The gold/silver ratio rose +0.51 to 79.25. That's bearish.

The miners fell once more, with GDX down -1.27% on heavy volume, and GDXJ off -1.39% on heavy volume also. GDX printed a spinning top, which had a 49% chance of being a reversal. GDX's long black candle was a bearish continuation. Forecasters dropped in both ETFs, with GDX -0.05 to -0.09, and GDXJ -0.13 to -0.28. These aren't steep downtrends. RSI7 for GDX: 19, GDXJ: 21. Miners are oversold. HUI broke below the previous low set back in July – that is not good news. We probably have more downside ahead. The HUI downtrend is starting to look a bit more alarming - it broke below the previous low set back in July.

Today, the GDXJ:GDX ratio fell, as did the GDX:$GOLD ratio. That's bearish.

Platinum plunged -1.65%, palladium rallied +0.98%, and copper rebounded +0.49% after its huge drop yesterday. The plunge in platinum was the worst in the metals group; platinum is right at round number 900, which is critical support. A drop below 900 means next support is at 832, which is a long way away. Plunging platinum will pull gold and silver prices lower, sure as the sun rises tomorrow.

The buck rose +0.23 [+0.25%] to 93.28. The dollar is moving steadly higher; the closing white marubozu is a bullish continuation. Forecaster edged up +0.02 to 0.24. I still don't think this is much juice given the tax reform success. As you know, a rising dollar will cause problems for PM.

Crude sold off hard, dropping -1.49 [-2.59%] to 56.00. The cause appeared to be a combination of yesterday's bearish API report, and today's EIA report which wasn't all that much better: crude -3.4m, gasoline +3.6m, distillates +2.7m.  Since oil closed near its day low, the resulting closing black marubozu print was a bearish continuation, and the crude forecaster plunged -0.49 to -0.63. That's a downtrend. There should be some support from 54-55, with the bulk of it down at 54, since that was prior resistance.  If oil plows through 54, it could go down quite a bit further.

SPX tried to rally again today – largely failed – dropping -0.30 [-0.01%] to 2629.27. The downside move in SPX seems to be petering out. The short white candle was a bearish continuation; forecaster rose +0.18 to +0.67; SPX remains in an uptrend. Sector map shows tech leading (XLK:+0.64%) while energy trailed (-1.30%) due to the drop in oil prices.

VIX fell -0.31 to 11.02.

TLT moved up +0.35%, making a new high, but it looked a bit like a failed rally. The spinning top candle print had a 45% chance of being a bearish reversal, and forecaster dropped -0.14 to +0.56. That's still an uptrend, but if the equity market stops dropping, TLT probably reverses here. TY moved up just +0.11%. It is lagging TLT substantially..

JNK fell -0.11%, slowing moving lower. JNK remains in a downtrend.

CRB fell -1.46%, with 4 of 5 sectors falling. Energy led lower (-2.56%). CRB is now below its 200 MA, and the commodity group correction is starting to pick up speed. Dropping commodity prices will tend to drag PM prices lower also.

PM remains in a downtrend, with platinum worst, and gold doing best. I assume that the dropping open interest in gold are the commercials ringing the cash register. I suspect that's partly why gold's decline has been relatively slow. It might also be physical buying, but since I don't have access to spot prices, I can't say for sure.

Just as a point of interest: the gold/platinum ratio is now at 1.40, which is (roughly) a 35 year low. Other than 2017, the last time the ratio was in the 1.40s was in 1982. If platinum falls through 900, the ratio could make some new all time highs in the near future.

Miners continue to make new lows, the buck is moving slowly higher, the equity market shows no inclination to sell off hard, short rates are rising steadily, and the overall commodity complex is moving lower. These factors don't help.

As usual in these sorts of downtrends, my admonition stands: watch from the sidelines until we see the big money buyers appear. As long as managed money continues to liquidate, price will continue falling. Once that process is over, then it will be time to jump in long.

Of course, you may not be able to resist silver at 16.  I mean, who could?  However if you are patient, you might get it substantially cheaper. I leave you with the somewhat scary-looking monthly chart...a massive, 2-year descending triangle, with silver in a downtrend. This is why I said that silver is nearing “critical support” around the 15.80 price level.  Any substantial move through 15.80 and...we might end up seeing silver in the 14s once again.

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6 Comments

pinecarr's picture
pinecarr
Status: Diamond Member (Offline)
Joined: Apr 13 2008
Posts: 2223
Silver at 16

Dave, thanks for your comments on silver:

"Of course, you may not be able to resist silver at 16.  I mean, who could?  However if you are patient, you might get it substantially cheaper. I leave you with the somewhat scary-looking monthly chart...a massive, 2-year descending triangle, with silver in a downtrend. This is why I said that silver is nearing “critical support” around the 15.80 price level.  Any substantial move through 15.80 and...we might end up seeing silver in the 14s once again."

I've been watching the silver price hover around 16 the last couple of days, trying to decide if this was the time to consider buying my 1st Monster Box...   But maybe I'll hold tight for a day or 2 and see what happens.

  Thanks for sharing your insights.

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 4851
btc update 2017-12-06

While price jumped a massive $2k today, the forecaster is suggesting we may be approaching a top in bitcoin.  Daily RSI=97, that's nosebleed-overbought territory.

I've updated the bitcoin model.  Forecaster now has access to some of the blockchain metadata.  It should be better at predicting prices.  Theoretically anyway.

And here's ETH.  Sell signal 4 days ago.

Cold Rain's picture
Cold Rain
Status: Gold Member (Offline)
Joined: Jul 26 2016
Posts: 291
PM Slaughter

Going to feel bad watching the price of gold get to $1000 and silver get down to $10, but it will feel good buying there.  Maybe we can load up with some mining shares too, when the sink to the early 2016 lows, assuming any of them are still in business!

Risks for war with NK are increasing, but I guess sentiment has become so bad in the PM space + the mania in the crypto space + all of the mainstream info about how the economy is getting better + breaking key support levels = PM pressure.

PdeB's picture
PdeB
Status: Bronze Member (Offline)
Joined: Dec 29 2009
Posts: 39
BTC and futures

Any thoughts on how futures trading will impact BTC? When will your model be able to incorporate that?

Thanks Dave!

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 4851
futures

I have no idea if my models will continue to work once futures start trading.  With the big boys with their big computers involved, they could well change the current rhythms of bitcoin and my stuff could simply stop working.

That's what happened long ago to SPX.  It had a certain rhythm back in the 60s and 70s, but once computers got involved, things changed, and it became harder to trade.  That's what my analysis of history says.

Who knows, though.

RSI-7 = 97 right now.  BTC hit $20,000 on GDAX just an hour ago - now back down to $17k.  .  That's a $3000 round trip in 2 hours.

 

PdeB's picture
PdeB
Status: Bronze Member (Offline)
Joined: Dec 29 2009
Posts: 39
BTC and futures

Thanks, Dave. We're in for a wild ride ahead of us!

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