PM Daily Market Commentary - 10/13/2015

davefairtex
By davefairtex on Wed, Oct 14, 2015 - 12:10am

Gold rose +5.00 to 1168.50 on moderate volume, and silver climbed +0.09 to 15.90 on moderate volume also.  Gold started the day being hammered in Asia, hit for a $10 loss, but by the time the US market opened, gold had recovered and it continued to climb right into the close.  Silver followed a roughly similar pattern.

Gold looked strong today, in spite of the takedown in Asia - or rather, because of the takedown in Asia.  When the shorts attack, its a test of market strength.  The shorts were able to push price down to the 9 EMA, but then buyers showed up to bid gold back up into the green and then some.  The shorts lost that particular struggle, which is the kind of thing that happens routinely in an uptrend.

As I write this, gold has broken through 1170 during trading in Asia; its not a surprising outcome given the strength gold showed during the US session.  A close above 1170 would be very good news, a sort of cup & handle breakout that in the optimistic case could see gold well above the 200 MA relatively quickly.  COT report shows there are still plenty of shorts to provide fuel for short covering breakouts.

Silver was hit in Asia and London too, testing support at its 9 EMA today just like gold, and it too found buyers at the 9 who eventually pushed prices back up to just below the 200 MA.  The support at the rising 9 EMA gives me more confidence in silver's ability to eventually move through that 200 MA.  My feeling is, the longer silver stays here, the more likely we are to see a breakout.  Most of the shorts will have entered by now, and if the longs continue buying the dips, eventually we break higher.  That's the essence of an ascending triangle pattern, which we see forming now in silver.  Today's candle was a positive development.

Miners continued looking weak today, with GDX rallying +0.57% on moderately light volume, and GDXJ fell -0.83% on light volume.  Miners tried rallying today but mostly failed.  Senior miners looked anemic; even though gold rallied into the close, miners had trouble finding buyers.  Hopefully miners can find buyers if gold can manage to close above the 1170 resistance level today.  If not, if miners don't follow gold higher, it is a sign of weakness overall for PM.

Platinum dropped -7.10 [-0.71%], palladium fell -11.25 [-1.62%], and copper was down -1.33%.  While gold and silver did relatively well today, the other metals are starting to fade.  Palladium specifically has crossed its 9 EMA to the downside for the first time in six weeks, which is always a shot across the bows of the bulls, and it looks like it may be about to suffer an MACD crossover in the near future.

The USD was mostly flat today, moving up +0.03 to 94.79.  CAD and AUD both sold off hard, due partially to the oil correction as well as bad news out of China, while Euro and Yen both rallied.  All news these days from China seems to be bad.

SPX fell today, dropping -13.77 to 2003.69.  In the morning SPX attempted to rally past the old high at 2020, succeeded briefly, and then spent the rest of the day drifting lower into the close.  Momentum from the 140 point move is definitely starting to fade.  My computer model wasn't happy with this performance; it is now short SPX.  VIX rose +1.50 to 17.67.

JNK continued falling today, dropping -0.19%, a mild enough move that hints at risk-off but isn't really saying more than that.

Bond ETF TLT rose +0.17%, rising to just under its 200 MA.  Another risk off hint, but not a very strong one.

The CRB fell -0.13%; commodities tried to rally today but failed.  Lots of things I follow were down.

WTIC continued moving downhill, falling -0.87 [-1.83%] to 46.57.  Oil tried to rally today also, but failed.  Oil is now back in its old trading range; whatever bullish sentiment propelled it up to challenge the 50 level seems to have evaporated.  Contrary to what the news says, oil's rally had nothing to do with the House passing a repeal of the 40-year old oil export ban.  Brent crude shows the exact same pattern as WTIC - a brief, strong rally, followed by a sell-off.   Brent oil, produced by the UK in the North Sea, would be unaffected by the state of the US export ban.  Computer model continues to be short oil.

HAA has 100 oz gold bars right now in NYC at 1197.39/oz [+2.18% over spot], and 1000 oz silver bars in NYC at 16.57/oz [+3.61% over spot].  Eagles in NYC are quoted at 20.26 [+26.70% over spot].  Premiums on the big bars fell somewhat, while premiums on Silver Eagles are down substantially.  Remember when they were at 40% two weeks back?  In another few weeks, if the trend holds, we'll see premiums on Eagles back below 20%.  I hate to say I told you so but...oh who am I kidding.  I love saying that!

While miners continue looking weak, silver has strengthened, and gold continues to move steadily higher in spite of dropping commodities.  We have new reports coming up soon: Retail Sales appears tomorrow.  Will bad news continue to be good news?

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8 Comments

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5683
gold blew through 1170; +20 and climbing

Looks like the shorts are running for cover.  The breakout from 1170 resistance was just as much fun as I'd hoped.  Notice how gold is outperforming silver; I suspect that's because there are more shorts left in gold for the longs to torture, and a breakout above an important previous high usually ends up causing lots of mayhem. 

The tanking dollar is helping too, I think.  Buck is off almost -0.60 today.

Perfect storm for gold.

The rally started this AM at 0830 after the release of both the Retail Sales and the PPI.  The buck didn't like the two reports, but gold and silver sure did.

Gold even managed to wake up the miners!

Mark Cochrane's picture
Mark Cochrane
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Joined: May 24 2011
Posts: 1227
Nail in search of a hammer?

So gold has blown right through resistance at 1170 and further on up above its 200 day average as well. Good right? Or is this just crying out for another one of those middle of the night smack downs? Maybe this time is different.... When do you call this a bona fide trend?

cmartenson's picture
cmartenson
Status: Diamond Member (Offline)
Joined: Jun 7 2007
Posts: 5969
The repairmen are going to be busy tonight...

I see someone nibbling away selling gold in the thinnest of market hours as I type this, and I see Netflix only down a single percent after a horrendously disappointing earnings announcement after being down as much as -12%  right after the announcement.

I think the repairmen have their hands full tonight.

Try to act surprised if we wake up in the morning and find all of this "fixed" via the miracle of futures levitation, or delevitation, as necessary.

Of course, maybe all of this can be explained by this being OpEx week, that magic time when all the highly leveraged positions and big layers assure that the 'right price' is the one that causes the most options holders to lose the most money.

But that's about as generous as I can be these days....

Arthur Robey's picture
Arthur Robey
Status: Diamond Member (Offline)
Joined: Feb 4 2010
Posts: 3936
Testing our luck.

Ah ha! A prediction. Nothing tests out a model like a prediction. 

I'm wondering how one goes about "shorting the market" like Nassim Talieb did. If I plan to lose $100 per month, every month until the fat tail event happens.

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5683
gold - a tad overbought

Mark-

Yes, the 1170 crossing and the 200 MA close are great.  The daily chart is looking really nice at this point.

At some point, we'll run out of shorts to hose, and then we'll see if people are really interested in buying at COMEX at these prices, or if price has to drop to find them.  Probably, we'll probably get a correction.  Since we've broken out so nicely, odds are decent that the correction will be mild rather than a drop through the 1075 low.  At least, that's what I'm hoping for.

If we can string together a few of these bullish-looking cycles, where we crest higher and higher each time, why, that's an longer uptrend.

The shorts have tried several times to push prices lower, but so far it hasn't worked.  Current uptrend is too strong right now.  Eventually, we'll run out of buyers, and they'll be successful.  That's a normal process.

Today the weak dollar (and the bad economic reports) rescued gold from a likely move lower.  We have Industrial Production on Friday.  Maybe it will be awful too, and it will send the dollar even lower...pushing gold even higher...

But I'm prepared to hedge at the next swing high.  Gold is a bit overbought right now, its starting to go vertical, and that usually ends with a spike up that then sells off.  Then we get to see how far it has to drop to find buyers again.

 

KugsCheese's picture
KugsCheese
Status: Diamond Member (Offline)
Joined: Jan 2 2010
Posts: 1469
Knocked Silly

Many metrics are at 2008/2009 lows (see mining companies).   There is only so much a company can cut and stay alive.  What happens on the next leg down?  And will QE4 be here sooner than thought?  I gotta place a bet and that is gold.

cmartenson's picture
cmartenson
Status: Diamond Member (Offline)
Joined: Jun 7 2007
Posts: 5969
Fixed!
Arthur Robey wrote:

Ah ha! A prediction. Nothing tests out a model like a prediction. 

I'm wondering how one goes about "shorting the market" like Nassim Talieb did. If I plan to lose $100 per month, every month until the fat tail event happens.

Maybe I just got lucky on this one?

 

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5683
models

Chris-

Amusingly enough, 8 hours after market close, my SPX model flipped from short to long based on yesterday's SPX action.  It is trained on data dating back to 1950.  Sadly the delay in updating meant I was unable to participate, but...perhaps someone else with a fair amount of money and a model of their own that produced similar output (but 8 hours more rapidly) decided to believe what their model said, in real time.

Just a thought.

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