PM Daily Market Commentary - 2/8/2018

By davefairtex on Fri, Feb 9, 2018 - 2:35am

Gold rose +0.20 [+0.02%] to 1320.80 on moderately heavy volume, while silver rose +0.05 [+0.31%] to 16.37 on very heavy volume. While almost everything else fell today, PM managed to remain mostly even. Should gold have done better on a day when SPX dropped 100 points? Probably.

Gold sold off slowly for the first part of the day, making a new low to 1309 at around 7:30 am, and then rallying slowly into the close. Candle print was a doji, which had a 45% chance of marking a low. Forecaster liked the price action, rising +0.23 to -0.05. It looks like gold is on the cusp of making a low here.

COMEX GC open interest fell by -5,845 contracts today. It appears that short covering continues; gold is probably not being leaned by the commercials.

Rate rise chances (March 2018) fell to 66%.  Will the Fed raise rates after all the selling in equities?  Next Fed meeting is 40 days from now - almost an eternity.

Silver made its new low (16.19) earlier than gold – in Asia at around 11:15 pm – and then bounced higher starting at around 7:30 am, after which it chopped sideways into the close. Candle print was a bullish harami, which had a 43% chance of marking the low. Forecaster wasn't as happy, dropping -0.12 to -0.57; forecaster is telling us that silver has more downside left. Looking at the chart, silver has exhibited a recent pattern of dropping hard, then resting for a day or two, and then dropping hard once more. Maybe we have another hard drop left?  Silver's RSI-7 is at 30, which is only slightly oversold.

COMEX SI open interest fell -9,299 contracts today. Wow, that 1,446 tons of paper silver gone. That's 4.5% of the total open interest closed out.  And I notice that copper had the same thing happen - a huge drop in open interest.  Looking back at 2008, I see that OI dropped during most of that time, only starting to rise 2 weeks after the lows for silver in November 2008.

The gold/silver ratio fell -0.23 to 80.68. That's somewhat bullish.

Miners were mixed, with GDXJ down -0.55% on very heavy volume while GDXJ rose +0.26% on very heavy volume also. While GDX printed a spinning top (a bearish continuation), GDXJ printed a doji, which had a 43% chance of being a bullish reversal. XAU dropped -0.84%, making a new low. XAU forecaster fell -0.16 to -0.28; that's not suggesting a low for the miners is upon us – probably more downside ahead.

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

Platinum fell -0.83%, palladium plunged -2.63%, and copped dropped -0.73%. The other metals all look fairly bearish, with palladium looking especially unhappy. Palladium has plunged almost 20% from its highs set back in mid-January. All the other metals are in downtrends – they are all doing much worse than gold.  Here's palladium - 3 months of uptrend, erased by 3 weeks down.

The dollar traded in a range today but was unable to move higher, closing unchanged at 89.95. Unchanged always means a doji candle print, which in this case has a 49% chance of marking the high for the buck. DX forecaster doesn't agree, moving up +0.08 to +0.43, which is a strong uptrend.

Crude fell again today, dropping -1.30 [-2.11%] to 60.34. Crude chopped sideways until the US open, at which point the selling started, and it didn't really let up until market close at 4pm. That's a new low for crude. The long black candle was a bearish continuation, and the forecaster dropped a further -0.08 to -0.73, which continues to be a strong downtrend for crude. Ouch. Crude has blown through several minor support levels in the past week; perhaps it will find buyers around the 57.50 level.  That said - I'm not sure we see buying in crude until the equity market stops falling.

SPX plunged -100.66 [-3.75%], making a new low. This confirms yesterday's shooting star, which is bearish. SPX forecaster moved sideways, unchanged at -0.84. That's a strong downtrend. SPX closed at the dead lows of the day. That's bearish too. Sector map looked very bearish: financials did worst (XLF:-4.40%) with tech close behind (XLK:-4.14%). Utilities did “best” (XLU:-1.12%). When tech and financials lead lower, that's as bearish as you can get. Today there was no place to hide in equities.

VIX rallied +5.73 to 33.46.

Here's what the US looked like vs the rest of the world: dead last.  Tomorrow, Asia probably has a bad day as a result.

Name Chart Chg (D) 52w ch MA9 MA50 MA200 50/200 Last Crossing last
Europe IEV -2.50% 15.62% falling falling rising falling ma200 on 2018-02-08 2018-02-08
Eurozone EZU -2.82% 21.64% falling falling rising falling ma50 on 2018-02-07 2018-02-08
Developed Asia VPL -2.84% 13.78% falling falling rising falling ma50 on 2018-02-05 2018-02-08
Emerging Asia GMF -2.96% 25.97% falling falling rising falling ma50 on 2018-02-07 2018-02-08
Latin America ILF -3.09% 16.47% falling rising rising rising ema9 on 2018-02-02 2018-02-08
United States VTI -3.60% 11.97% falling falling rising falling ma50 on 2018-02-05 2018-02-08

TLT fell -0.11% - it actually gapped down at the open and rallied as SPX fell. Still, if this is the best TLT can do on a day with SPX down 100 points, it tells you that traders just don't want to buy bonds. TY did slightly better, up +0.02%. TY forecaster rose +0.19 to +0.08, which is a buy signal for TY.  I'm not buying; it was a weak performance given the plunge in equities.

JNK cratered, down -0.72%, making a new low. JNK forecaster dropped -0.19 to -0.93. Even though the 10-year isn't doing all that well, JNK is being sold hard.  The JNK:IEF ratio is signaling risk off – just in case you weren't watching equities.

CRB fell -0.29%; 3 of 5 sectors fell, led by energy (-0.89%). My sense is, it could have been worse.

So what to read from today's price action?  While traders are fleeing risk, they are not rushing into the usual safe havens of bonds and gold.  Armstrong's market commentator had this to say, which lined up pretty well with the price moves I saw:

We are still not seeing the safe-haven bid move towards precious metals because quite honestly the fear does not appear to be in the market. Many tell us “the decline just feels orderly”!

That's where we are today anyway.  Technicals are not showing any sign of a low in anything just yet.  A new low on Friday will not bode well for where things head next.  DJI is in a downtrend in all timeframes.

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Wantingtoretire's picture
Status: Member (Offline)
Joined: Oct 14 2011
Posts: 8
Safe Haven Bid

I follow Martin Armstrong. I am expecting a downside overshoot of the DOW up-channel. Even getting to minus 20%. Then, we should see things change.

davefairtex's picture
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5058
key: crude oil

Key to what happens to day (at least from what I see) is crude.  Once crude stopped plunging, that's when we reversed.  And then once crude stopped rising, that's when SPX stopped too.

Of course, we have no idea if it will hold through the close, but - just saying.  It's all connected.

I agree though - no safe haven bid from gold.  The best it could do was stay even.

Uncletommy's picture
Status: Gold Member (Offline)
Joined: May 3 2014
Posts: 472
Show me the money - Cash flow rules

The oil industry is reaching its ability to borrow and is just running as fast as it can to keep expensive equipment working. Depreciation can only take you so far before the wheels come off. The promise of future returns - how fast do you have to move to stay ahead of the PP inevitabilities?

davefairtex's picture
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5058
GDX: strong close

GDX went from -3% down to almost flat in about 15 minutes right at the end of the day.

My guess is this is massive short covering by commercials who are ringing the cash register prior to the weekend.  My guess: the pressure might just be off the mining shares next week.

Just a guess though.

Certainly its not bearish.

Mk 1 eyeball shows a doji/hammer candle which should be a very strong reversal bar.

JJP's picture
Status: Member (Offline)
Joined: Dec 28 2012
Posts: 2
Release of Rigged PM's

Still waiting for a PM move that encourages HODL decision. 

Appreciate your input Dave F.


davefairtex's picture
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5058
PM set free

Yeah, I can't predict when that will happen, but - like the Supreme Court justice said about obscenity, "I'll know it when I see it" - when the price action changes.

PM will rally when the faith in government starts to recede.  That has to happen at some point, but until it does, the cycle of suppression (and the lack of interest) can keep gold from moving too strongly higher.  Until then, just watch and wait.

FWIW I think the Chinese are playing along with the game, acquiring gold now for relatively cheaper prices while they can.  Wouldn't you?  There has been a bid underneath gold since the 1050 lows.  I'm guessing that's physical buying, but who can say for sure?

If it is one of my grey swans that causes the confidence break, we'll have time to react, but if it is something we don't see coming, then it might not be possible to pick up physical gold at or near today's prices - kind of like a supply of water after an earthquake.

It might be worth getting HODL gold in advance.  Dollar cost averaging, so you don't need to feel like you have to pick the low - which nobody can really do anyway.  Just a thought anyway.

I think that's more emphatically true now for silver.  Given the COT report, and the gold/silver ratio at 81, its probably worth buying some right now.  Roughly speaking, the odds are in your favor.

Petey1's picture
Status: Bronze Member (Offline)
Joined: Sep 13 2012
Posts: 58
Just wait a few days

I stopped trying to time the exact lows on Silver and Gold awhile back.  Too much worry and stress.  Just buy when I have extra cash and the price is reasonable.

It always goes lower a few days to a week after I buy so just wait, I am going Monday.  No fancy charts needed lol.  It stopped being about every last dollar and more about piece of mind for when something goes wrong.  Plus I can see it, hold it in my hands and it can be used to make things!  Stored offsite of course.

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