PM Daily Market Commentary - 11/12/2015

davefairtex
By davefairtex on Thu, Nov 12, 2015 - 9:38pm

Gold fell -1.20 to 1084.50 on very heavy volume, while silver dropped -0.03 to 14.26 on very heavy volume also.  There was a bit of drama today as gold came only 70 cents from breaking through the 1072.30 low set back in July.  This all happened a few minutes before the US market open; after the open, gold was ripped higher, hosing the shorts on a massive volume spike.  The rally back didn't last, however, casting a bit of doubt on the sustainability of the whole affair.

I like to see a certain amount of fireworks at a low - lots of volume, traders capitulating, and whatnot.  Based on volume, at least, it is possible we set this low today.  The intraday chart was definitely curious, and even the daily chart shows a bit of the drama.  Comparing today's experience with the clear reversal on July 26th, we see a bit lower volume, and a somewhat weaker reversal; gold didn't close green today, nor did it form a new low and then reverse back up - instead it bounced off support and couldn't quite close in positive territory. The volume was pretty good, but I'm a bit concerned the reversal wasn't strong enough to terrify the shorts into covering.  We need a close above today's high of 1089 to confirm the reversal.

Silver dropped for the 11th straight day, making a new low, reversing alongside gold, but the bounce didn't hold long enough for silver to close green.  Like with gold, I'm a bit concerned that the shorts aren't scared enough for the market to reverse direction.  It is possible this is the low, but I want confirmation - a close above today's high at 14.47.

Miners were initially happy by gold's bounce off 1073 and rallied, but the rally in the miners faded along with gold's rally.  GDX closed down -1.32% on light volume, and GDXJ dropped -0.93% on light volume also.  Both miners printed inverted hammer candles, indicating a failed rally.  The failed rally in the miners is a bit of a "no confidence" vote in the whole gold-made-a-low story.

The buck had a rare bad day, falling -0.45 to 98.71, but finding support on its 9 EMA.  The buck might just be entering a correction, but until it crosses that 9 EMA, it remains in an uptrend.  If the buck does correct, that should help gold to rebound.  If the buck does correct, and gold doesn't rebound, that's a really bad sign and we should prepare for another leg down for gold.

The equity market correction is accelerating.  SPX fell -29.03 [-1.40%] to 2045.97, as SPX fell through its 200 MA, printed an ugly red candle, and closed at the dead lows of the day.   The energy and basic materials sectors led the market lower.  VIX rose +2.31 to 18.37.  My computer is now short SPX, and long VIX.

The JNK decline accelerated today as well, dropping -0.75%, which is a relatively large move for JNK.  JNK is continuing to signal risk off, aligning fairly closely with the equity market.

Bond ETF TLT rallied +0.48%, a feeble rally given the large move in SPX.  It was up higher mid-day, but could not retain its gains; it too had a failed rally on the day.  If this is the best we get after a brisk equity market sell-off, it tells me that bonds remain weak.

The CRB fell -1.02%, a large move lower given the fall in the dollar.  CRB is quite close to the previous low, set back on August 26th.  I'm guessing we will break below that previous low within the next few days.  That won't be good for PM.

Selling in WTIC accelerated today, with crude dropping -1.47 [-3.41%] to 41.60.  After breaking below its 44-48 trading range, crude is now on course for a re-test of the 37.75 low set back on Aug 24th.  In truth, that low is not so far away.  Will the low hold?  Maybe, but the timing might be a bit soon.  OPEC has a meeting on Dec 4th; articles I read suggest many OPEC nations are angry at the Saudis for continuing to produce at full capacity.  How inter-connected is Syria, Russian intervention, ISIS, the Iran nuclear deal, the sudden and surprising flood of refugees into Europe, US shale drilling, and the low price of oil?  Is the US really trying to stamp out ISIS?  What - or who - caused the refugee stampede?  So many tangled threads.  Will the Saudis decide to end the oil part on Dec 4th?

We also have another Fed meeting Dec 15-16.

That's why I'm saying the low in WTIC might not come for a few weeks yet.  The timing might not be right.

We also have tax loss selling season fast approaching.  Gold, silver, and the miners are once again in the negative column for the year.  No doubt this will put more pressure on PM as we move deeper into November and December.

Its not a pretty picture - not in commodities, not in PM.  Is today the low for gold?  I think the odds are less than 50/50, based on the inability of gold to close green today.  Buck was off perhaps 0.4%, yet gold couldn't close green.  And the miners weren't impressed.  We might have to see a new low, below 1072.30, for the real low to form.  I hope I'm wrong, but that's how I see things lining up right now.

It did feel like big money didn't want gold to break down just yet.  Intraday activity once gold touched 1073 was awfully curious.  The rip right after market open was short, and sharp forcing a bunch of shorts to cover, but wasn't sustained enough to cause a reversal.

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6 Comments

robie robinson's picture
robie robinson
Status: Diamond Member (Offline)
Joined: Aug 25 2009
Posts: 1148
well

i'm in for more too cheap to sit around

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5072
another weekend right at support

My sense is, we're setting up for another weekend right at support for gold.  It is a dangerous place to be.  The big money didn't pound gold through support last weekend, but with gold at 1081, such a thing is still in the cards if we close right around the 1080 level today.

I have no idea if it will happen this Sunday, but after doing my study and realizing that most of the "bad gold events" happen in the situation we are in right now, I remain on full alert.

The COT report will be helpful in figuring some of this out.

Its nice the miners continue to do relatively well.  One bright spot anyway.

Jim H's picture
Jim H
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Joined: Jun 8 2009
Posts: 2379
You got it Dave

DaveF said,

Its nice the miners continue to do relatively well.  One bright spot anyway.

That's the big news of the day... stock market down pretty hard, Gold down.. but .. miners up?  Yes, the miners are up.  Gold mining stocks ain't buying it.  Once again the mining stock action is actually disconnecting from the paper Gold action.. and should this necessarily be a surprise to us as we near the end game of the paper Gold scheme?  I say no, this should be expected.  Why?  Simple:  Gold is priced as a derivative... in the paper futures markets.  Stocks are priced in the primary market, i.e. a supply vs. demand market for stocks.  Can stocks be manipulated.. sure.. but still, the stock market is one step closer to being a supply vs demand market than the Gold futures market.  Makes sense, right?

Gold in the ground, bought via miners.. can be incredibly cheap right now.  Smart money is accumulating. 

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5072
gold miner rationale

JimH-

I think your rationale is a good one.  Miners are a leveraged play on gold - in this case though, its real gold, not just a paper claim that might eventually be defaulted upon.

Plus, miners are at their cheapest price relative to gold - literally ever.  As long as "ever" goes back to 1996 anyway.  Combine the cheap price with the clear bid we are seeing now and its a good combination.  I always maintain that cheap isn't good enough - you need to see other people buying before jumping in.  Now we're seeing just that, and that's why I'm optimistic, at least in the medium term.  All we need now is for gold to stop plunging to complete the picture...

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

Nice chart of miners-to-Gold.  PP investors take note:   a rare sighting of DaveF and JimH unanimity.  This probably means Gold will indeed plunge to unfathomable lows quite soon  sad     

KugsCheese's picture
KugsCheese
Status: Diamond Member (Offline)
Joined: Jan 2 2010
Posts: 1429
Inflation-Adjusted Gold Price

 

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