PM Daily Market Commentary - 7/16/2018

By davefairtex on Tue, Jul 17, 2018 - 7:18am

Gold fell -0.80 [-0.06%] to 1241.00 on moderately light volume, while silver dropped -0.03 [-0.16%] to 15.81 on light volume. The buck also fell, losing -0.25%, which said that the metals overall had a fairly unpleasant day; the metals group fell overall, so did crude.

Gold took a first leg down in Asia, dropping along with copper; it fell a second time during the US session as the USD shot higher, closing at or near the lows of the day.

Gold more or less traded sideways today, trading in a narrow range.  That means the candle print was a doji – bearish continuation. It was a quiet day.  Forecaster ticked up +0.09 to -0.34. Gold remains in a downtrend in all timeframes. No reversal yet for gold. The best we can say is, at least gold didn't make a new low.

COMEX GC open interest rose 8,641 contracts. Shorts are continuing to build.

Rate rise chances (September 2018) rose to 87%.

Silver pretty much tracked gold - it was a quiet day for silver also.  Silver's candle print was also a doji – and also a bearish continuation. Silver forecaster fell -0.08 to -0.25, which is a mild downtrend. Silver remains below all 3 MA lines, and remains in a downtrend in all 3 timeframes.

COMEX SI open interest rose by 741 contracts today. No short-covering yet.

The gold/silver ratio rose +0.07 to 78.49, which is slightly bearish.

Miners tried to rally but failed, moving lower on the day, with GDX off -0.41% on moderately light volume, and GDXJ fell -0.77% on moderate volume. XAU's spinning top candle was a bearish continuation, and XAU forecaster inched up +0.02 to -0.42. That's still a brisk downtrend, but it seems as though the pace is starting to ebb a bit. XAU made a new low. XAU is in a daily/weekly downtrend, and is in a monthly uptrend – although the monthly uptrend is fading, and will flip to a sell signal if the decline continues.

The GDXJ:GDX ratio fell, while the GDX:$GOLD ratio moved higher. That's neutral.

Platinum fell -0.66%, palladium plunged -2.03%, and copper moved down -0.34%. Interestingly, copper forecaster actually issued a buy signal today, while palladium made a new low and issued a sell signal, with platinum making a new low. Boy, palladium sure looks unhappy. It is hard to know where things go next. Copper's reversal may be significant, although we'll have to see.

Looking at the COT report for copper, I see that managed money is now heavily short, and commercials are heavily long – which is a good setup for a reversal. News flow will beat the COT report: if the Chinese respond with a $200 billion counter-tariff operation, the copper plunge will continue.  Otherwise, copper is a very extended rubber band, and it would not take much for it to snap back in a flurry of short-covering. Such an event would probably drag the rest of the metals along with it, along with selected sections of the equity market.  Here's what the COT managed money short position looks like: we should be at or near a bottom right now for copper.

The buck fell -0.24 [-0.25%] to 94.18. The fall in the buck didn't seem to help PM at all, which tells us that gold in Euros fell a bit more briskly; in fact, gold in Euros made a new low. DX printed a swing high (44% bearish reversal), and DX forecaster plunged -0.47 to -0.09, which is a sell signal for the buck. DX is now below its 9 MA. Weekly and monthly remain in an uptrend, but momentum is continuing to slow.

Crude plunged -2.61 [-3.73%] to 67.28. What caused the big plunge? Depends on who you read; some say it was the State Department suggesting the US wouldn't be quite so strict on the Iran sanctions regime, others say it was Saudi Arabia offering new cargoes of oil at a larger discount, along with OPEC saying they weren't going to report individual country production, but instead just report overall group production, allowing Saudi Arabia to produce more to make up for drops in production from Venezuela and possibly Iran. (Iran didn't like this very much).  The drop took oil cleanly through its 50 MA. Crude is in a downtrend in both daily and weekly timeframes, while remaining in an uptrend in the monthly.

SPX fell -2.88 [-0.10%] to 2798.43. Trading range was quite narrow, the short black spinning top was neutral. Forecaster plunged -0.23 to +0.12, which is still an uptrend, but not by very much. The SPX rally may be running out of steam.  Really, not much happened today. Sector map shows energy led lower (XLE-1.15%) while financials did best (XLF:+1.78%). Most sectors fell.

VIX rose +0.65 to 12.83.

TLT fell -0.42%, printing a strong swing high (58% bearish reversal). TY printed a neutral-looking bearish engulfing, and the forecaster edged down -0.10 to +0.11 which is still an uptrend, at least for now.

JNK dropped -0.08%, also printing a swing high (46% bearish reversal), although forecaster remains in an uptrend. If this is a high, it would be a distinctly lower one; to my eye, JNK continues to signal risk off, at least in the medium timeframe.

CRB plunged -1.32%, with 4 of 5 groups falling, led by energy (-4.02%). Today's plunge was all about oil.

Reading the tea leaves, I feel like a three-handed economist.

On the one hand, copper may be putting in a low. The COT report suggests we are there, and even if we just start to discuss talks with China on trade, I see a sharp rally higher in the industrial metals. That's what the commercials are betting on.

On the other hand, there's oil – Trump has figured out he can't impose a 2 mbpd sanctions regime on Iran and still have reasonably low oil prices, not even if he sells oil from the SPR. I'm guessing low oil prices “trump” his geo-political objectives in Iran. Saudi Arabia is really ramping up production, and Libya appears to be back online, at least for now, and so it seems that we will have an oil price correction for a time.  Lower oil prices may be good for the economy, but they are generally bad news for commodities overall.

Lastly, there is gold, silver, and the miners. All my information is telling me they are weak. We must honor the downtrend, as it is firmly in control right now.  There isn't even a hint of a low for gold, silver, or the miners right now, and a break for silver below 15.67 could lead to a whole lot more selling.  The silver miners I track are seeing a lot of selling pressure right now.

That's pretty much it.

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Cold Rain's picture
Cold Rain
Status: Gold Member (Offline)
Joined: Jul 26 2016
Posts: 392

Pretty soon, I’m going to downgrade my target for gold from $1200 to $1100.  Nothing to stop it and no reason to buy it in the west yet.

davefairtex's picture
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5860

I thought copper might have a chance at a low today, but it didn't happen.  Until the tariff impact stops happening, we won't see a bottom for the metals - gold, silver, any of them.

GDX did pretty well, all things considered.  Not sure how long that lasts.

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