PM Daily Market Commentary - 6/18/2015

davefairtex
By davefairtex on Fri, Jun 19, 2015 - 1:04am

Gold shot higher today, up +16.40 to 1201.00 on very heavy volume, while silver climbed +0.05 to 16.13 on very heavy volume as well.  PM started climbing in London and didn't really stop until noon in NY.  Was this a delayed reaction to the FOMC meeting, or something else?  Its hard to say.  While gold did well closing near its highs, silver printed a tall inverted hammer candle, indicating a failed rally on the day.

Gold has achieved its first bullish goal - closing above the 50, ending its recent short term downtrend.  Next goals: a close above the 200, and then a close above the previous high of 1232.

Silver initially looked good, but selling kicked in once silver had reached its 50 MA, and by end of day silver had lost most of its gains.  The inverted hammer candle print does not look good.  Selling pressure on silver is just too strong right now - as we know from last week's COT report it was Managed Money dumping all over silver.  Perhaps it is them once again causing trouble.

Mining shares rallied today, with GDX up +1.27% on moderate volume, while GDXJ climbed +1.57% on moderate volume too.  The senior miner rally was anemic; on a day with gold up +1.38% I would have expected the senior miners to have done at least double that if not better.  Based on today's performance, I'd say the senior miners are not confirming gold's rally.  Junior miners continue to outperform, which is bullish.

The dollar had a big, high volume spike lower at 08:30 EDT, but recovered almost instantly - the fun happened at the time of both the CPI release and the Jobless Claims report.  Apart from that brief moment of excitement, the buck more or less just drifted lower on the day, down -0.25 [-0.26%] to 94.24.

Greece doesn't look to be causing any major currency moves out of Europe; the Euro climbed +0.29% today, nearing a recent high of 114 set a few weeks back.  Either the market thinks that Europe won't be affected by a Greek default, or the Greek default will be avoided - its hard to say which.  I'm not saying the markets are right - I'm just telling you what I believe they are saying.  The Greek stock market had a failed rally today - spiking higher in the afternoon in NY only to sell off an hour later.

SPX (US equities) shot higher today, up +20.80, crossing above its 50 MA and looking reasonably strong.  Is it too having a delayed benefit from the relatively dovish FOMC announcement yesterday?  That's my guess.  VIX dropped -1.31 to 13.19.

Bond ETF TLT fell -0.49% on the day.  It doesn't seem to matter so much what is going on elsewhere, bonds remain weak.

The CRB (commodity index) rose +0.27% on the day, mirroring the drop in the buck.  More or less - no change.

WTIC (west texas crude) moved higher, climbing +0.74 [+1.24%] to 60.51.  Brent/WTIC spread continues to narrow, down to 3.71.  One of these days, WTIC will decide to either break out, or break down.  When it does, I suspect the move will be violent - generally speaking the longer the consolidation, the more violent the breakout.  I wish I knew which way it would go!

Gold's breakout today was nice to see; I'm a bit concerned that silver's rally failed, and that the mining shares treated the breakout as more of a ho-hum than a cause for excitement.  As a result I'm a bit cautious about today's price action.  Gold shouldn't be leading the charge, it should be silver and the miners, and they are the ones holding back right now.  If gold can close above that 200 MA for more than a day or two, it will be a positive sign.  Let's see what happens.

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5 Comments

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5058
Tsipras optimistic

Confounding the apparent facts on the ground, Tsipras is optimistic of a deal even at this late date:

http://www.ekathimerini.com/4dcgi/_w_articles_wsite2_1_19/06/2015_551240

"The leaders summit on Monday is a positive development on the road toward a deal," Tsipras's office said in a statement. "All those who are betting on crisis and terror scenarios will be proven wrong."

"There will be a solution based on respecting EU rules and democracy which would allow Greece to return to growth in the euro."

My money is on Tsipras.  I'm hearing hints (Armstrong) that suggest there are other avenues for Greece to get the can kicked apart from the usual suspects.  Tsipras is clearly sending the signal that he's willing to go to the mat to protect pensions, he has the backing of the Greek people - it may require some "white knight" to come in and rescue the situation in some "unexpected" way so the Eurogroup can save face.

Something to consider: the intel advantage the EU has over the Greeks is considerable.  Although the Five Eyes aren't directly involved here, I'd just bet they are leaking selected bits of information on Greece to their counterparts in Germany, just to show how useful they are to have around.  I'm dead certain that the intelligence agencies of all major EU countries are focused on the Greek negotiating team, and the Greeks completely lack any ability to gather similar intel on their counterparties.  I'd guess every single computer the Greek officials own has been compromised by either zero day bugs or evil maid attacks, and as a result the Greek proposals land on the desks of the EU bureaucracy long before they are even completed.  Phones have all been tapped, bugs have been planted, you name it, its been done.

If you were Tsipras and/or Varoufakis, how would you handle this vast great imbalance, where every single discussion you have with your team gets broadcast to the other side as it is happening?  Interesting problem, isn't it?

Jim H's picture
Jim H
Status: Diamond Member (Offline)
Joined: Jun 8 2009
Posts: 2379
Silver

Silver open interest on Comex is at a new high record.

Dave said,

Silver initially looked good, but selling kicked in once silver had reached its 50 MA, and by end of day silver had lost most of its gains.  The inverted hammer candle print does not look good.  Selling pressure on silver is just too strong right now - as we know from last week's COT report it was Managed Money dumping all over silver.  Perhaps it is them once again causing trouble.

Here is the link to OI;  http://www.cmegroup.com/trading/metals/precious/silver_quotes_volume_voi...

Why do you call the loss of Silver's gain, "selling pressure" rather than "new naked short contract creation pressure"?  I fail to understand the words you use sometimes given the data.  

 

 

thc0655's picture
thc0655
Status: Diamond Member (Offline)
Joined: Apr 27 2010
Posts: 1512
The Cone of Silence!

If that doesn't work, how about the Greeks threatening to destroy themselves?

Despite all the tough talk and superiority coming from the Troika, the apparent truth of the matter is they can't afford to give Greece more money and therefore skip on their debt payments and perpetual EU debt serfdom (what would Italy, Spain and Portugal do?), AND they can't afford to let Greece refuse to pay, collapse and leave the Euro.  Quite a predicament for them, in spite of their huge technological, financial, and espionage advantages.  So the situation has gotten so extreme that Greece's pitiful weakness has become it's ace in the hole.  Greece is so weak the Troika can't afford to let them fail!  And Tsipras is right in his basic message: You (the Troika) drove us to this very moment in this crisis and you are so powerful we are unable to get ourselves out of it. YOU have to take responsibility for what you have engineered.

I agree with you Dave: my money is on Tsipras (and gravity and math, for that matter) and a rescue by a third party would be the only way to kick the can a little further (though not actually solve any real structural problems) while saving face for everyone.  We should start a pool on who it will be...

OR maybe an inept 19 year old "revolutionary" will assassinate some European public figure and Greece will be "solved" by WWIII, which would of course begin out of "nowhere."

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5058
selling pressure

JimH-

Why do you call the loss of Silver's gain, "selling pressure" rather than "new naked short contract creation pressure"?  I fail to understand the words you use sometimes given the data.

Eh.  Perhaps because from where I sit, I generally can't tell the difference between longs taking profits and shorts initiating new positions.

Did you see a massive increase in open interest just yesterday?  That would be a clue that it was a bunch of new shorts.

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5058
cones of silence

Tom-

Ok, so - full disclosure here - I love Get Smart, and I'm a huge fan of the Cone O Silence.  "No Max, NOT the Cone of Silence!"

Quite a predicament for them, in spite of their huge technological, financial, and espionage advantages.  So the situation has gotten so extreme that Greece's pitiful weakness has become it's ace in the hole.  Greece is so weak the Troika can't afford to let them fail!

Fundamentally, if you own 320 billion euros to your banker, you have the whip hand, not your banker.

However, it is the way this particular hand is played that ends up being critical.  The key problem: Greek people desperately want to stay in the Eurozone, and they want austerity ended.  These apparently irreconcilable differences mean that the room for maneuver is strictly limited.  Tsipras can't just throw bombs and default.

So what's the play?

Well, the primary goal is for Tsipras to keep the Greek people on his side at every step along the way.  As long as they feel that he represents their authentic interest, his hand remains strong.

To that end, him remaining optimistic that if a deal can be made, he stands ready to make one, and that he at all times remains the authentic representative of the apparently multiple-personality will of the Greek people's desires - everything works.  At the "grand strategy" level, the intel weakness doesn't matter, because its the essential truth of his alignment with his people that provides him the support he needs.

However, it was the personal level that intrigued me.  Once you start to play this game, every action you take is under someone else's microscope.  They know everything, you know nothing, they hit you with a thousand different arrows from every direction, including the press, and subject you to immense pressure.  Everyone in every room you walk in is against you.  How much fun would this be?  Its not easy.  We are herd creatures, our tendency is to want to go along.

And you don't even have the always-malfunctioning Cone of Silence to make you feel like you can have a private conversation with your team!

Its just a tough environment.  I think he's doing a pretty good job, all things considered.

Just my two cents.

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