PM Daily Market Commentary - 10/19/2015

davefairtex
By davefairtex on Tue, Oct 20, 2015 - 12:51am

Gold fell -6.80 to 1170.60 on moderate volume; silver dropped -0.20 to 15.83 on moderate volume.  Both gold and silver sold off steadily starting in Asia and continuing through to the close.  The rising dollar probably had something to do with the drop in PM today, as did falling commodity prices.

During the weekly report I expressed concern over the buildup of commercial short positions, which often happens near short term tops.  It appears as though we are now entering a correction.  The rising dollar (it's been rising now for three days) is partly to blame, as is just the normal market cycle where things move from oversold to overbought, and back again.

Think of this as "cheaper gold in your future."  If you were feeling like you were missing out last week, here's your chance to get on the bus at a discount to what everyone else was paying just a few days ago.  Rather than buy today, we can let the RSI (a momentum indicator) help us see when a cycle low might happen.  RSI shows how the market moves from oversold (below 30) to overbought (above 70).  In a strong uptrend, the RSI might not get as low as 30, but its a rough clue how much decline we might expect before a cycle low might be found.

Silver dropped below its 200 MA, printed a swing high, and closed (just) below its 9 EMA today.  Silver appears to be rolling over into a correction.  How long will it sell off?  Where might it find support?  It depends probably on commodities, the dollar, and who knows what else, but one good place to watch is the rising 50 MA.  If the uptrend is strong enough, it might not even make it down that low.  Once again, the RSI can help.  Last low, it didn't even make it down to 30 before it bounced; if that happens again, silver will find support before it hits the 50.  No guarantees, of course; that's the optimistic scenario.

Miners sold off hard today, with GDX losing -4.21% on very heavy volume, and GDXJ dropping -4.66% on heavy volume as well.  GDX printed a swing high, dropped through its 9 EMA, and appears to be entering a correction.  Wait; I was wrong.  The swing high was Friday.  This is just the follow-through on the day after.  In any event, miners look ugly and my sense is we'll probably see at least another day or two of selling before the buyers start thinking about showing up.  I have noticed that mining shares do not like a strengthening dollar, and three days of a rising dollar has led directly to two days of miner selling.

The USD continued rallying for the third day today, up +0.37 [+0.39%] to 94.95.  The buck has now moved back above its 9 EMA, but is only just now starting to recover from the selling that followed the Nonfarm Payrolls report several weeks ago.  Is this just a brief relief rally to be followed by more selling?  I think that's more likely than not just based on the weak-looking dollar daily chart.  That would tie in with gold's uptrend.  If the dollar does start to rally for longer than just a week, then we'll have to revisit.

SPX had a relatively uneventful day, rising +0.55 to 2033.66.  It traded in a relatively narrow range today.  SPX is approaching another resistance point - a previous low that was set a few months before the 10% crash in August.  This would be another logical point for shorts to start entering the market, and/or for the longs to take profits and move to cash.  VIX fell -0.07 to 14.98.

JNK staged a nice rally, moving up +0.36% and popping above its 50 MA for the first time in many months.  This suggests a return to risk-on.  JNK appears to be threatening to break up.  I don't know why, but its not something we should ignore.

Bond ETF TLT fell -0.27%; bonds have been more or less trading sideways in recent weeks.  Given the strong equity market that's probably the best we can expect.  At least they are showing no signs of heavy selling by foreigners right now.

The CRB fell -1.36%, a big move that brings CRB back down to its 50 MA.  It is important for CRB to hold the 50 if the modest commodity uptrend is to remain in play, otherwise we could see a fair bit of selling in commodities.

WTIC fell -1.16 [-2.43%] today, dropping back below its 9 EMA and generally looking weak.  WTIC appears to be doing just a little bit better than Brent.  Brent is hovering just above its 50 MA; if Brent moves below the 50, then there is 47.5 support and then its just "air" down to 42.5.  All that means - Brent is at a decision point right now, and a break below these support levels will bring out a lot of selling which will push oil substantially lower.  A fall in Brent will cause a fall in WTIC too, which would drag oil down to test 44, and possibly even 38.

HAA has 100 oz gold bars right now in NYC at 1194.44/oz [+2.19% over spot], and 1000 oz silver bars in NYC at 16.37/oz [+3.69% over spot].  Eagles in NYC are quoted at 19.67 [+24.57% over spot].

Dollar is rallying, commodities are dropping.  Gold and silver were overbought, and this dollar rally/commodity drop is most likely encouraging PM to correct.  Miners are leading to the downside, as you might expect them to do.  If you are looking to buy gold - best wait.  There are probably better prices ahead.

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3 Comments

Michael_Rudmin's picture
Michael_Rudmin
Status: Platinum Member (Offline)
Joined: Jun 25 2014
Posts: 922
Maybe the source of these attacks...

...on PM is something completely different: maybe, it is the "creative emergency accounting" that the Treasury talks about that putatively holds the national deficit at zero.

Maybe it is primarily done not to attack PMs, but to raise operating expenses: the federal version of a benefit carwash, if you will.

Maybe they are using a combination of gambling and fleecing, but running closer and closer to the cliff.

Thus the recent statement "you don't want to see a liquidity crisis..."

That would be interesting, because if the Treasury is doing that, it practically would guarantee that we will see a liquidity crisis.

Penny551's picture
Penny551
Status: Silver Member (Offline)
Joined: Nov 8 2012
Posts: 154
-30/+70 RSI

Dave,

People are paying a lot 'O hard earned Federal Reserve Notes on TA Subscriptions for far inferior analysis.

I'm (re)putting this page back to the top of my daily sites.  Thanks again for all the hard work; the piece on the PP mainpage was outstanding!

I suspect that simple data point of watching the -30/+70 on silver's RSI will help in making some profitable trades down the road.

Steve

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5686
manipulation and RSI

Steve [Penny]-

Thanks Steve!

Its interesting, gold was bouncing nicely in the RSI channel, both in its downtrend, and also in the uptrend, except for the little kerfuffle when gold was slammed through support by the most recent attack.  Gold definitely recovered from that in good order, but in the middle of all the fuss, RSI went deeply negative.

So RSI is a good guide - but I just want to make sure you don't think 30/70 are magic boundaries that gold cannot sink below!  Or rise above!  People get excited or fearful enough, RSI can get very big or small.  But that's good to know about too - RSI(7) levels of 5-7 tend to be "panic/capitulation lows" from which nice rebounds "usually" occur.

They do seem to work often enough to keep around as one of my constant tools.  Keeps the emotions in check.

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