PM Daily Market Commentary - 2/20/2018

davefairtex
By davefairtex on Wed, Feb 21, 2018 - 5:43am

Today, gold plunged -18.10 [-1.34%] to 1331.30 on heavy volume, while silver dropped -0.21 [-1.23%] to 16.40 on extremely heavy volume. A strong dollar rally [+0.69%] definitely contributed to the plunge in the metals, but much of the loss was just due to selling pressure, especially in gold.

Note that while Monday was a US holiday, the futures markets were open for much of the day. Still, my data service merges both Monday and Tuesday into one candle. So when you see the charts, the most recent candle is both Monday and Tuesday combined.

Gold just chopped sideways on Monday, with all of the losses happening Tuesday; prices fell for most of the day, with the big drop starting after the US market opened at 9:30 am. Candle print was a swing high (54% bearish reversal), and the gold forecaster plunged -0.62 to -0.58, which resulted in a sell signal for gold. Ouch. Perhaps that big forecaster move was due to the swing low in the buck. There weren't any reports that I saw that triggered the plunge.  Gold ended the day below its 9 MA, which is bearish.  Gold appears to be in the process of forming a double top pattern - if true, that's bearish also.

COMEX GC open interest fell by -5,502 contracts today. It doesn't look like the commercials helped the move lower today.

Rate rise chances (March 2018) rose to 83%.

Silver was under pressure for much of the day also, but it staged a strong rally at 9:15 am which seemed to mitigate some of the damage. The closing black marubozu was a bearish continuation, and the forecaster dropped -0.20 to -0.49. One curious thing: the volume for silver today was extremely heavy, and yet the price drop wasn't really all that bad. Silver outperformed gold, on heavy volume. I take that as a cautiously positive sign – probably the only (marginally) positive sign in the metals today.  Next up: previous low at 16.13.

COMEX SI open interest rose 4,092 contracts today. Judging from the results of the recent COT reports, this is managed money jumping in short.

The gold/silver ratio fell -0.09 to 81.18 That's slightly bullish.

Miners gapped down at the open, and sold off all day long. This was one of those “run, don't walk” days for the mining shares – there was just nothing good to say. GDX plunged -2.84% on heavy volume, while GDXJ dropped -2.80% on very heavy volume. XAU forecaster dropped -0.57 to -0.26, which is a sell signal for XAU. My conclusion: miners really don't like the idea that the buck might be reversing.

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

Platinum fell -0.60%, palladium dropped -0.86%, while copper plunged -1.64%. It appears that the other metals didn't much like the dollar rally either. Copper: sell signal, platinum: sell signal, palladium remains in an uptrend, but it is looking as though it is about to reverse.

The dollar didn't do much on Monday, but rallied strongly on Tuesday, closing up +0.61 [+0.69] to 89.40. This was a 3-candle swing low for the buck. Forecaster jumped +0.28 to -0.20. That's still not a reversal, but the DX forecaster is slow to change direction. Probably it will reverse tomorrow, if we see another day like today. The big loser was JPY, which plunged -1.00%, with most of the losses coming on Tuesday. The Euro contributed, dropping -0.54%.  On the chart we see a potential double bottom forming; the buck needs a close above 90.25 to confirm the double bottom.  If it does this, that will be bearish for the metals.  The buck is now back above its 9 MA.

Crude rallied on Monday, and then sold off Tuesday, ending up +0.04 [+0.07%] to 61.57. Candle print was a doji, which was a bullish continuation. Forecaster didn't agree, plunging -0.44 to +0.11; crude remains in an uptrend, but may be about to reverse. If crude does print a lower high here, it may lead to an equity market sell-off; I suspect energy equities will not be happy if crude drops further.

SPX fell -15.96 [-0.58%] to 2716.26. There was a great deal of volatility overnight in the futures markets, which ended up with a gap-down open, an attempted rally which failed, and some strong selling into the close. Candle print was a swing high/confirmed NR7, which had a 63% chance of being a bearish reversal. Forecaster dipped -0.10 to +0.49. This might be a lower high. Sector map shows staples (XLP:-2.27%) and utilities (XLU:-1.30%) leading the market lower. Tech did best (XLK:+0.09%). Part of the problem today was bad earnings from Wal-Mart; the stock cratered, dropping -10% - most of that on a gap-down, with more selling during the day, closing at the lows. The issue: online sales didn't rise enough to make the analysts happy.

VIX rose +1.14 to 20.60.

TLT fell -0.44%; although it did rally off its lows as SPX dropped, the buying wasn't strong enough to pull TLT back into the green. TY dropped -0.09%; it too rallied off the lows, and its high wave candle print had a 45% chance of being a bullish reversal. TY forecaster moved up +0.15 to -0.21. Looks like some cautious optimism in bonds.

JNK fell -0.36%; most of last Friday's rally was erased. JNK forecaster dipped just -0.06 to +0.70, so it sees nothing to be too worried about from todays' move.

CRB rose +0.05% - essentially unchanged. 3 of 5 sectors fell, led by PM (-1.83%). I don't think CRB will be able to hold it together if the buck continues to move higher.

It was a bad day for the metals, no question about it. The miners looked especially weak, selling off all day long.  But it wasn't just the mining shares - gold did quite poorly today also.  What's more, the drop in the other metals backs up the generally negative tone.  This wasn't just about manipulation by the commercials.  Gold - and a bunch of other things - are sold when the dollar rallies.

If the buck double-bottoms, we could see a lot of selling in the commodity space.

Note: If you're reading this and are not yet a member of Peak Prosperity's Gold & Silver Group, please consider joining it now. It's where our active community of precious metals enthusiasts have focused discussions on the developments most likely to impact gold & silver. Simply go here and click the "Join Today" button.

7 Comments

Cold Rain's picture
Cold Rain
Status: Gold Member (Offline)
Joined: Jul 26 2016
Posts: 359
Interesting Day

Lots of reversals.  Metals are lower, of course, stocks had a big reversal and the TY got up to 2.95+.  Hawkish Fed minutes did not help equities.  It was funny to see the snap higher, only to roll back over.  If we finish solidly in the red today, I would guess we will see a pretty sharp downward move very soon.

Cold Rain's picture
Cold Rain
Status: Gold Member (Offline)
Joined: Jul 26 2016
Posts: 359
-168 on the Dow

Qualifies as solidly in the red.

lambertad's picture
lambertad
Status: Silver Member (Offline)
Joined: Aug 31 2013
Posts: 178
Talk = cheap

I'm just waiting to see Dave's weekly PM report over the next few weeks/months. That approx. 2000 point dive in the DOW followed by a 5.6B increase in the Feds BS seemed interesting. Gonna be awfully hard to shrink the BS if everytime they do equities bite it. Now is the time Chris, CHS, and others have been talking about with the fact that QE can never really end. The simple logic for me is:

The FED printed money to drive asset prices higher as their stated goal to create the wealth effect, yet, they seem to believe that withdrawing that same money that pumped assets in the printing phase be done without dropping asset values in the QT phase. Only a PhD could believe such a thing, and as we are seeing with QT, it may not work out all that well.  

On another note, I know this isn't a trading forum, but short TSLA anyone? 

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5368
WALCL

Here's WALCL run through an 8-point moving average.  It doesn't look quite as suspicious.

What happens if the Fed doesn't mind a correction?  Think about this: who will buy all those bonds, if not all that money fleeing equities?

lambertad's picture
lambertad
Status: Silver Member (Offline)
Joined: Aug 31 2013
Posts: 178
Good point

Dave, 

Excellent point. The drop in equities will chase people into bonds right at the same time that the FED is trying to off load them, is that your point? This should keep rates down and bond prices up at the expense of stocks. 

That should actually work out well in their plan if they are trying to keep people on the fringe borrowing and spending. I believe it's something like only 4/10 Americans actually own stocks. The "man in the street" doesn't get hurt when equities drop, but he does if rates go up and it costs him more to borrow on his CC/Auto Loan/whatever else. 

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5368
who will buy?

Yes that's what I'm saying.  I'm not positive, but I do think if equities start to have serious problems, money will flow back into bonds - and we sure do have a lot of them to sell right now.

Everyone imagines the Fed will start printing money when the equity market drops.  What if they don't?

 

cmartenson's picture
cmartenson
Status: Diamond Member (Offline)
Joined: Jun 7 2007
Posts: 5722
Should be erased...
Cold Rain wrote:

Qualifies as solidly in the red.

.Should be erased...by the cash open.  that's what the futures markets and central bankers/proxies are for!

Don't forget, more than 100% of all gains since the 1990's in the stock ""market"" happened in the overnight ""markets.""  Less than 0% happened in the cash market.

I see no reason today should be any different.

 

 

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Login or Register to post comments