PM Daily Market Commentary - 8/18/2015

By davefairtex on Wed, Aug 19, 2015 - 2:55am

Gold rose by +0.10 to 1117.00 on moderately heavy volume, while silver was smashed, dropping -0.45 [-2.94%] to 14.84 on very heavy volume.  The metals were looking good, even rallying right before the NY open, only to encounter strong waves of short selling that pushed prices lower - dramatically lower for silver.  Gold recovered nicely; silver did not.

Gold's doji print on the day indicates there was strong buy-side support when prices were pushed down to the 9 EMA.  The shorts attacked, buyers showed up, and gold rallied right back up to its starting point.  That's a bullish sign in my book, and it keeps the bullish "cup & handle" pattern in play for gold.  For those goldbugs who get upset every time the shorts show up - remember today.  Look at the intraday chart, and see what I mean when I say "buyers showed up."  That's what happens in an uptrend.  Same assault, different outcome.

Silver was a different story.  Silver had some selling pressure earlier in the day during the Asia session likely in sympathy with copper, which was also beaten up at that time, so when the shorts attacked PM a few hours before market open in NY, silver just collapsed hitting its low of 14.68 shortly after 930 ET.  The difference in performance between silver and gold was really stark.  This suggests silver is much more closely aligned right now with base metals, while gold continues to diverge.

Since we've been talking about copper, here's what the copper chart looks like.  I warn you its ugly; don't view this before mealtime or with children present.  Ha ha.  Since China became a vast construction site about 10 years ago, copper = China, and as Chris said, its also a proxy for other base metals.  You don't need to read news about how China is doing, just watch copper.  Unfortunately, silver tends to be influenced by copper - and that's a bad influence these days.

GDX underwent some strong selling early in the morning because of the plunge in gold, but managed to find decent support on its 9 EMA.  By end of day, GDX managed to get back to where it opened, printing a doji.  GDX ended up dropping -1.80% on moderate volume, but that actually was a pretty good performance on a day when silver fell almost 3%.  GDX is looking more like gold than like silver, which is a good outcome if you bought the miners last week on that swing low.

Selling was a bit heavier in the junior miners, which fell -2.43% on moderately heavy volume.  Much like the seniors, GDXJ found support on the 9 EMA; buyers appeared to push prices back up to relatively close to where the market opened.  Again, not a bad day all things considered.

The USD rallied for the third day, up +0.25 to 97.07.  The fact that gold stayed even with a dollar rally is a good sign for gold.  Gold is moving steadily higher when viewed in Euros.

SPX sold off a bit, falling -5.52 to 2096.92.  It wasn't a very eventful day.  VIX rose +0.77 to 13.79.  The large move in the VIX in the face of a minor move lower in SPX suggests to me that traders are anticipating a move lower and loading up on puts.  My computer models don't know what to make of SPX right now.  DJIA, on the other hand, looks bearish, with a clear pattern of lower highs and lower lows.  It even had a death cross just last week.  Interestingly, DJIA has been underperforming SPX since about 2012.  Who knew?

Bond ETF TLT fell -0.79%, closing just barely below its 9 EMA.  Momentum indicators suggest the upward momentum for TLT is fading, and a correction may be near.

The CRB (commodity index) actually didn't fall today - it rose +0.12% - but it remains below its 9 EMA and it remains in a strong downtrend.

WTIC (oil) rallied, climbing +0.49 [+1.17%] to 42.37.  Oil is now tracking sideways in a range, with the low at 41.35 and the high at 42.96.  If WTIC can close above 43, that will mark a swing low for oil; while we had another one of those three weeks ago that led nowhere, if WTIC can close above that 9 EMA at the same time, things might be different this time around.  The further it falls, the larger the bounce should be.

And on that note - my computer suggests that if oil does decide to bounce, it could be a really significant move.  However, it is not showing a low yet, so its too soon to buy.  Same discipline we used for gold: wait for the swing low and the 9 EMA crossing.  Based on what my computer is telling me, oil at this point is probably a better bet from a trading perspective than gold is - there just seems to be more energy there for a rebound.  I'm refining my models, perhaps someday soon you'll see something more than just occasional hints on the daily update.

Gold remains well supported, with buyers showing up when there is a dip.  Miners appear to be behaving similarly.  Silver is weak, tracking copper, while oil has started moving sideways and is hinting at a possible rebound.

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davefairtex's picture
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5687
gold breakout!!

Don't look now, but we officially have a gold breakout above resistance - gold now at $1128!

Even silver is back from the grave - back above its 9 EMA even.

Now if we can only get oil to rally too, my beautiful picture will be complete.

There is a Petroleum Status Report today in about 45 minutes (10:30 ET).  Hopefully the market will use it as an excuse to rally.

cmartenson's picture
Status: Diamond Member (Offline)
Joined: Jun 7 2007
Posts: 5971
Oil not lows

The inventory report took a weak oil price and gave it a swift kick in the lower back...


davefairtex's picture
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5687
best laid plans

Yeah, that hope I had for a happy petroleum status report ran right into unpleasant news.  Well, that's what stops are for.  Small losses taken quickly are best when you are wrong.

Usually after a sell-off like we are seeing today, we will probably see another few more days of selling.  We'll probably get a new low for oil today - yep there it is - and maybe even see oil in the 30s by end of week.

FOMC has its minutes release today at 14:00 ET.  Perhaps they will say something interesting, although I don't know what it might say that would get oil off the ground.

Gold seems to be chugging along - it made a new high at 1129.30, and it is dragging the miners behind kicking and screaming.

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