PM Daily Market Commentary - 10/15/2015

davefairtex
By davefairtex on Fri, Oct 16, 2015 - 8:10am

Gold fell -0.90 to 1183.00 on heavy volume; silver was unchanged at 16.12 on moderately heavy volume.  Gold saw a significant amount of selling at the time of the slew of reports that came out at 08:30 Eastern, maybe 35,000 contracts in a 20 minute period.  Gold eventually recovered, but tailed off into the close.  Silver followed a similar pattern.

I bring up the volume issue because I'm looking for it; the commercials tend to sell short near the highs - some people imagine that the commercials actually set the high because of all the selling they do.  This was a large number of contracts exchanged.  It didn't look like anyone was trying to move the market - the selling was spread out over a 20 minute period rather than one massive spike lower at the moment of the report release, and that's why I suspect the commercials are trying to add to their positions right now.

Today looks like a top may be forming.  Gold printed a doji, on high volume, with a new high that is only slightly higher than yesterday.  Part of the problem with gold was a strong dollar rally.  If the buck puts in a low here, gold will likely correct.

Silver was unable to break out again today.  It looks like the sellers have capped the gains in silver for now.  Most of the shorts have already covered, so there isn't so much fuel for a breakout.  Silver's RSI is showing a bearish divergence, which indicates that upside momentum has started to wane.  All that said, silver still remains above its 9 MA which is a bullish configuration so until something bad happens, the bull case remains alive and well.

Miners went nowhere today, with GDX closing almost flat (-0.06%) on light volume, while GDXJ rose +0.525 on light volume too.  No movement on light volume is nothing to worry about; it appears that the miners are taking a rest after the big move yesterday.  Still, miners seem to follow the dollar; if it rises, miners will have problems.

The USD took off higher today following the flurry of US economic reports released at 08:30 Eastern; they included the CPI which showed inflationary pressures in housing, a weak Manufacturing Survey, and an average Jobless Claims report.  As always its not the news, but the market's reaction that matters.  That may sound odd, but experienced traders know this to be true - markets have a current aggregate set of expectations that get realigned when news comes out, and its impossible to tell ahead of time what "the aggregate market" is expecting the news to be.  The USD market definitely liked something about these reports; perhaps the dollar is nearing a low.  That would be generally negative for PM.

SPX put in a big gain today, rising +29.62 to 2023.86 and setting a new cycle high.  The last two days of selling were wiped out in one go.  VIX fell -1.98 to 16.05.  While my model expected this, I certainly didn't.

JNK moved sideways again, up just +0.06%.  Its not telling us anything.

Bond ETF TLT dropped -0.49%, showing that money probably flowed from bonds to equities on the day.

The CRB dropped -0.42%, dropping below its 9 EMA; losses were heavier earlier in the day, but CRB managed to rally back.  It was probably helped in this by oil.

WTIC made a new low today, hitting 45.23 before bouncing back strongly along with US equities; both oil and equities rallied together starting at around mid-day.  WTIC closed up +0.57 [+1.23%] to 46.86, and it printed a bullish-looking hammer candle, which appears as though it might mark a low.  Computer model was not impressed - it is still short oil.

HAA has 100 oz gold bars right now in NYC at 1205.55/oz [+2.12% over spot], and 1000 oz silver bars in NYC at 16.59/oz [+3.60% over spot].  Eagles in NYC are quoted at 19.97 [+24.73% over spot].  Premiums on the big bars were mixed, while premiums on Silver Eagles continue dropping.

Industrial Production report is out tomorrow at 9:15 Eastern.  It will likely be bad, but - as always - market's reaction is what counts.

I suspect if the buck finds a low, PM will mark a high.  Its not a guarantee, but both are extended and a bit due for a reversal.  Be careful out there.

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