PM Daily Market Commentary - 1/4/2017

davefairtex
By davefairtex on Fri, Jan 5, 2018 - 5:42am

Gold rose +9.50 [+0.72%] to 1324.00 on very heavy volume, and silver climbed +0.10 [+0.58%] to 17.27 on heavy volume. The buck lost all of yesterday's gains, dropping -0.35%, which helped the metals make new highs.

Gold sold off early in Asia, but then rallied steadily for the remainder of the day, making a new high to 1327.30 in the afternoon in New York.  This resulted in a long white candle, which was a bullish continuation. Gold's forecaster fell -0.02 to +0.18 which remains an uptrend.

COMEX GC open interest rose by +32,919 contracts today. That's 102 tons of of new paper gold. It looks as though the commercials are jumping in heavily short – both yesterday and today.

Rate rise chances (March 2018) is at 73%, up 5% today.

Silver followed gold's track, dipping early in Asia, but then rallying for the remainder of the day, making a new high to 17.32.  Silver printed a spinning top candle again today, which had a 36% chance of marking the top. Forecaster plunged -0.12 to +0.03; silver forecaster is close to issuing a sell signal. Resistance for silver is just ahead: 17.35-17.45.

COMEX SI open interest rose +3,337 contracts today.

The gold/silver ratio fell -0.04 to 76.56. That's neutral.

The miners dipped a bit in the morning, then slowly rose for the remainder of the day.  GDX rose +0.64% on moderate volume, while GDXJ climbed +0.69% on moderately light volume. The move in the mining shares was relatively modest, compared with the strong rally in gold. XAU forecaster fell -0.29 to +0.07. GDX printed a bearish harami (57% reversal) as did GDXJ (32% reversal). After 3 weeks of moving higher, the miners are definitely seeing some selling pressure.

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

Platinum rallied +0.81%, palladium climbed +1.31%, and copper had a wide trading range but only ended up +0.05%. Platinum continued its rally; this is bullish for PM generally. Why did platinum do better than gold or silver? I suspect it is because platinum open interest climbed by just 21 contracts; the commercials aren't unloading short on platinum the way they are in gold and silver. Same was true yesterday; platinum open interest actually declined. Without the selling pressure from the commercials, I suspect gold and silver would have performed a bit better over the last few days.

As mentioned, the buck fell -0.33 [-0.35%] to 91.55. Print today was a long black candle, which was a bearish continuation. Dollar forecaster dropped -0.06 to -0.69 – the buck is in a strong downtrend. Yesterday's rally was almost entirely wiped out by today's plunge. The Euro climbed +0.43%, making a new high to 120.68, invalidating yesterday's swing high. Although the rate increase chances have markedly increased since the FOMC minutes were released, that hasn't helped the buck much at all.  That suggests a strong downward pull on the dollar, since the prospect of higher short term rates generally help a currency.

Crude fell -0.04 [-0.06] to 61.88. The EIA report looked bearish to me (crude -7.4m, gasoline +4.8m, distillates +8.9m) but the market didn't seem to mind very much. Volume was heavy, trading range was narrow. Crude printed a northern doji candle, which had a 46% chance of a bearish reversal. Crude forecaster dropped -0.16 to +0.42.

SPX rose 10.93 [+0.40%] to 2723.99, which is another all time high. It looked to be a bit of a failed rally, resulting in a spinning top candle which had a 46% chance of marking a top. Financials did best (XLF:+0.93%) while utilities were pounded once again (XLU:-0.83%). It was another bullish, broad-based rally day today. SPX forecaster rose +0.15 to +1.04.

VIX rose +0.07 to 9.22. The low 9s are generally a decent buy point for VIX.

TLT fell -0.02%, more or less chopping sideways.  TY fell -0.11%, making a new low but managing to bounce back.  Bonds remain in a downtrend.

JNK rose +0.14%, another good day for junk debt. JNK's move today cleared the previous high set back in November, which suggests that JNK may be moving back into a longer term uptrend. JNK continues to confirm risk on.

CRB rose +0.01%; 3 of 5 sectors rose, led by industrial metals. Momentum for commodities is starting to flag a bit.

While gold remains relatively strong, as does platinum, the uptrend for both silver and the miners is fading. It appears from the changes in open interest that the commercials are loading up heavily short at this point. It is fortunate that the buck continues to be weak, or else we might have corrected already.  I suspect we will need new highs from the miners in the next couple of days in order to avoid a sell signal.

For now, the uptrend remains in place. If the buck makes a new low, the metals will probably continue to rise in spite of the malign influence of the commercials.

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