PM Daily Market Commentary - 2/27/2018

By davefairtex on Wed, Feb 28, 2018 - 3:53am

Today, gold plunged -15.70 [-1.18%] on heavy volume, while silver dropped -0.18 [-1.11%] to 16.43 on very heavy volume. The buck rallied +0.54%; this caused a whole bunch of trouble for the metals.

There were a number of drivers for currency today; one was the testimony of Jerome Powell before Congress, which was released at 8:30 am. The Econoday summary went like this:

The new Fed chair said policy makers need to lift inflation but at the same time avoid overheating of the economy. He noted that wages should begin to increase at a faster pace and cited what he sees as a strong outlook for the economy including foreign demand for U.S. exports which he said is firming...

“On the one hand, we want inflation. On the other hand, we don't want too much inflation.” What does that mean? Who knows.

There was also a disappointing Durable Goods orders report at 8:30 am, which fell -3.7% m/m. This lined up with the recent, and relatively weak Industrial Production report, which also fell m/m.

Gold chopped sideways until 8 am, at which point it started selling off, more or less tracking the Euro which did essentially the same thing. The plunge in the Euro was fairly dramatic, losing almost a full point in about two hours, and that took gold down about $20. Gold forecaster plunged -0.46 to -0.47. You can see the distribution pattern in the chart - down day volume is higher than up day volume.  A break below the previous low of 1309 would be bad news. If the buck double-bottoms, that could easily happen.

COMEX GC open interest rose 2,536 contracts today.  This doesn't seem like commercials are ringing the cash register here.  That's odd.

Rate rise chances (March 2018) remained at 87%.

Silver mostly tracked gold, starting its plunge at 8 am and plunging alongside the Euro. Silver printed a bearish engulfing, and the forecaster plunged -0.48 to -0.18, which is a sell signal for silver. However, silver's chart hasn't broken down quite to the extent that gold's chart has.

COMEX SI open interest rose 1,376 contracts today.

The gold/silver ratio fell -0.05 to 80.29 That's neutral.

Miners were hammered, with GDX down -3.11% on very heavy volume, while GDXJ fell -2.93% on extremely heavy volume. The XAU forecaster plunged -0.42 to -0.41. Yesterday's lame XAU buy signal was just a headfake.  The miners have been weak since late January, and it feels as though the selling pressure is getting stronger.  A break below the Dec low could lead to a lot of selling; that's likely to happen if the buck confirms that double bottom pattern.

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

Platinum fell -1.69%, palladium plunged -2.25%, and copper dropped -1.30%.  That resulted in sell signals for both copper and platinum, with palladium hanging onto its uptrend - for now anyway.  The other metals were not happy with the dollar rally.

The buck rallied strongly today, up ,+0.48 [+0.54%] to 89.99, mostly because of the drop in the Euro [-0.67%]. DX forecaster moved up +0.25 to +0.12, which is a buy signal for the buck. This signal looks a little more compelling than the one we saw a few days back. The buck is not very far from breaking above that “double bottom confirmation” line at 90.29; if it does so, that's a technical signal that the longer-term trend in the buck has reversed, and is now up. The weekly DX forecaster is quite close to issuing a buy signal also.

Crude sold off today too, dropping -1.16 [-1.81%] to 62.84. Crude printed a swing high/bearish engulfing, and crude forecaster fell a big -0.54 to -0.15, which is a sell signal for crude. The API report after market close was no help [crude +933k, gasoline +1.9m, distillates -1.4m], which was good for a 20 cent move down. As has been the case for the last few months, falling crude prices have been bad for equities...

SPX plunged -35.32 [-1.27%] to 2744.28.  SPX rallied early, topped out at around 10:20 am, and then sold off through end of day.  SPX appeared to be following energy prices, at last to some degree anyway.  Candle print was a bearish engulfing, and SPX forecaster actually rose +0.06 to +0.37.  Cyclicals led lower (XLY:-2.12% along with utilities (XLU:-1.59%) while financials (XLF:-0.95%) did best.

VIX shot up +2.79 to 18.59.

TLT sold off fairly hard to start the day, but rallied back as equities sold off, ending the day down just -0.14%. TY didn't look nearly as good, dropping -0.28% and falling back below its 9 MA. TY forecaster remains in a mild uptrend, falling -0.05 to +0.09. The 10-year yield rose +4 bp to 2.90.

JNK fell -0.28%, printing a swing high/bearish engulfing pattern. Forecaster dipped just -0.04 to +0.31, so JNK remains in an uptrend, for now.

CRB fell -0.69%, with 3 of 5 sectors falling, led lower by energy (-1.15%). CRB printed a swing high candle pattern today.

The strong morning rally in the buck caused commodities to sell off; with gold in Euros more or less chopping sideways, currency moves drive everything.

If the dollar breaks through 90.29, and there isn't a safe-haven mood that accompanies the move, the selling in PM could get a lot worse.  That hasn't happened yet, but it looks as though traders (especially in the mining shares) are getting nervous ahead of time.

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1 Comment

Cold Rain's picture
Cold Rain
Status: Gold Member (Offline)
Joined: Jul 26 2016
Posts: 334

I hope gold can find some support in the mid $1200s.  It pretty much heads straight down every morning now.  Miners are horrible.

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