PM Daily Market Commentary - 12/16/2015

davefairtex
By davefairtex on Thu, Dec 17, 2015 - 3:34am

Gold rose +11.10 to 1071.50 on moderately heavy volume, and silver climbed +0.41 to 14.17 on heavy volume.  Today was all about the FOMC meeting; PM rallied strongly in advance of the announcement, and sold off somewhat following.  There were no surprises today from the Fed; they raised rates as expected, from 0.00-0.25 to 0.25-0.50.

It is customary on Fed announcement days for prices to oscillate violently immediately following the announcement, and today was no exception.  A friend of mine says that you generally cannot trust the initial direction immediately after release.  True to form, the buck first made new intraday highs, then made an intraday low, and then it took off higher again. 

All of gold's gains today came prior to the announcement; it looked to me like either the shorts were covering ahead of time (in case the Fed didn't raise rates, which would be gold-positive), or it was a case of cover-short-on-the-news.   Gold is now back above its 9 EMA; to me, it appears to be setting up for a higher low.  If it can close above 1088.30, it will have marked a higher low and a higher high, which is the start of an uptrend.

Silver marked a swing low and then some today, with a very large move that occurred in advance of the FOMC announcement just like gold.  It appears that somebody ripped prices higher starting about 08:10 Eastern; I'm not sure what the trigger was.  Sometimes I think that big money just decides to buy, all at once, to hose the shorts.  Any way you slice it, the silver sell-off from the last two days has just been wiped out.

Miners did well also, with GDX climbing +3.96% on heavy volume, while GDXJ rose +4.42% on moderate volume.  Today's move wiped out most of Monday's big sell-off, and brings the senior miners back above the 9 EMA once again.  A close above 14.86 will mark the beginnings of an uptrend for GDX - a higher low (made yesterday), followed by a higher high on that hypothetical close above 14.86.

Platinum staged a nice breakout too, +2.16% on heavy volume, and palladium rose +0.71% also.

On stockcharts.com, they have the USD dropping -0.34 to 97.88, but that's because the DX futures close at 15:00 Eastern.  Because its Fed Day, there was a lot of activity after 3, and the actual end of day close for USD was 98.39, up +0.17.  In early trading in Asia, the buck is up even more, hitting 99 as the high so far.  It appears that the Fed was somewhat more hawkish than the market expected, and so now the dollar is reacting higher in response.

SPX continued its rally off Monday's lows, climbing +29.66 to 2073.07 and vaulting over all three moving averages to move back into bullish territory.  Most of the gains came after the FOMC announcement.  VIX dropped -3.09 to 17.86, a big loss.  Did Janet Yellen manage to convince the market that raising rates 0.25 basis points doesn't represent the end of the 6-year bull market for equities?  If so, it was a masterful job.  Let's see how long it lasts.  Equities still have marked a lower high and a lower low; that's a downtrend.

JNK continued its rally off the swing low printed yesterday, climbing a big +0.86%.  Quite possibly the move higher in junk, which came immediately following the FOMC announcement, helped the equity market to continue moving higher.

Bond ETF TLT fell -0.21%, dropping below its 200 MA; bonds were all over the map today, selling off prior to the announcement, rallying strongly at 14:00, and then selling off during the press conference after 14:30.  Net-net though, there was not much change.  I'm still wondering what the direction for bonds will be.

CRB fell a big -1.39%, making yet another new all time low.

WTIC fell -1.00 [-2.72%] to 35.74; the Petroleum Status report released at 10:30 Eastern showed a large inventory build, which is bearish for crude oil.  Oil sold off promptly after the release.  While crude didn't make new lows today so the swing low is still in play, it isn't looking particularly strong.

US Natural gas ($NATGAS) actually managed a rally, climbing +0.94% after hitting a new multi-decade low of 1.77 intraday.

Now that the uncertainty from the FOMC is over, my guess is gold will start to rally, subject to moves in the dollar.  If the buck decides to rally strongly, that will make a gold rally more difficult, but as I have said for the past few weeks, the COT report shows that the commercials are positioned to make money from a rise in gold prices.  Now that FOMC is behind us, I believe its likely that process will start unfolding relatively soon.

Well that's my theory anyway.

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2 Comments

HughK's picture
HughK
Status: Platinum Member (Offline)
Joined: Mar 6 2012
Posts: 764
Norcini's 'Whither silver?'

Dave and all,

Trader Dan Norcini posted an article on his blog on the 14th sharing his bearish views on silver prices.

I have a lot of respect for Trader Dan's technical analysis and he certainly deserves big credit for swimming against the goldbug tide and using market data to describe the PM market moves of the last few years in a realistic way.

That doesn't mean I agree with this post on silver, as his discussion of retracing Fibonacci levels down to a 2008 price of $8.40 seems very hard to believe and overly reliant on technical patterns, although a combination of fear and market manipulation may channel capital flows in such a way that silver price does fall into the $12 range for a short period of time, especially if the stock market follows commodities downwards.

Here is his post an open interest chart for hedge fund positions on silver, showing that they're just about as long as they've been for a decade.

How do you see this lining up with the commercials' position on silver and how do you reconcile what seems to be Trader Dan's short-to-medium term bearish outlook for silver with the shorter term bullish call for silver that your latest commentaries contain?

Thanks,

Hugh

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5694
dan norcini & silver

HughK-

I saw the same thing he's talking about in the silver COT report.  Its why I'm a bit less enthusiastic about silver than I am about gold.

I'm not sure if this is a harbinger of $8 silver, or its just a sea change in what the hedge funds view of the longer term silver price might be.  So far they've been hanging tough.   I can see arguments for both sides on this one.

Ultimately, I believe that silver follows gold on this one, and if gold can get up off the floor, silver will too.  Oil finding a low will help also.  I put those other factors higher than the silver COT report, but I do think we might see new lows in silver based on today's price action.

Unfortunately.

Boy.  $8 silver.  I'd definitely buy more if it ever got down that low again.  There is just something about buying a commodity at 2/3 the cost to produce it that just sounds unbelievably attractive to me.

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