PM Daily Market Commentary - 1/12/2016

By davefairtex on Tue, Jan 12, 2016 - 11:47pm

Gold fell -7.70 to 1086.00 on heavy volume, while silver dropped -0.08 to 13.77 on moderate volume.  Continued selling in oil and commodities continue to prove troublesome for PM.

Gold's third day of losses resulted in gold dropping below its 9 EMA, which is a sign of trouble ahead.  The 50 MA is a more important signal but the drop below the 9 EMA is a bearish sign, especially given the volume.  Whatever force was propelling gold higher seems to be fading.

Silver fell through its uptrend line today, and now seems to be on course for a test of its 13.62 low.  It is hard for silver to rally when oil and the rest of the commodity complex continues to sell off.  If commodities continue to fall, silver will drop also.  The line on the chart is a place where buyers will appear, but I am not sure there will be enough of them if oil continues to move downhill.

No good news from the miners today; GDX fell -2.23% on heavy volume, while GDXJ lost -2.59% on moderate volume.  GDX fell through the 50 MA, its short term uptrend line, and its medium term uptrend line.  Whomever was buying the miners now seems to be selling them.  This all looks bearish to me.  There were some buyers at end of day for the miners, but I'm thinking they may have been shorts ringing the cash register.

Platinum fell -1.01%, palladium dropped -1.86%, and copper fell -0.81% to 1.96 - another new low.  The picture for commodities right now remains dismal.

The buck bounced around, but ended the day closing up just +0.06 to 98.99.  Dollar uptrend remains intact.

SPX rose +15.01 to 1938.68, printing a swing low - as did the Nasdaq 100, and the DJIA.  SPX is oversold, and so a bounce here would not be surprising.  VIX fell -1.83 to 22.47.  If money starts flowing into equities, that might hurt commodities and PM.

The Shanghai Exchange rallied slightly - printing a doji on the day.  Likely that helped SPX move higher.

JNK rose +0.24%.  I'm starting to feel as though JNK has priced in all the near-term trouble from the shale space, and it will take some significant economic trouble to push JNK prices lower.  May be time for the shorts to cover in JNK, at least for now.

Long bond ETF TLT had a big day, rising +1.44% and breaking momentarily above its recent trading range. I'm not sure what propelled US treasury bonds higher today, but the breakout looks bullish.  The 10-year (IEF) looks even stronger.

CRB fell another -1.32% today - yet another new low.  Not much to say.

WTIC fell yet again, losing -0.55 [-1.77%] to 30.58, dropping just briefly to 29.93 as its intraday low before recovering.  Oil is oversold on the daily, weekly, and monthly charts, but price just continues to fall.  As long as it continues to fall, it will pressure all the other commodity prices, including PM.  It is possible that "round number 30" will provide some support; it looked like it did intraday anyway.  How long 30 holds - that's an open question.

Same story different day.  Commodity prices continue lower, and this is continuing to pressure gold and silver.  Equities may be recovering; if they do, that will probably pressure gold and silver even more as money flows from commodities into equities.  COT report remains positive, but it doesn't appear as though it will matter as long as commodities continue to drop.  Computer model remains short PM, oil, natgas, and is long equities and the buck.

I wish I had better news.

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phusg's picture
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Thanks again for all your insights Dave.

> Oil is oversold on the daily, weekly, and monthly charts, but price just continues to fall.

What definition of oversold are you using? Google comes back with "sold at a price below its true value", which is independent of the time frame surely?


davefairtex's picture
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what's oversold


The way I'm using "oversold" is based on the relative strength indicator (RSI).  When the RSI(7) is below 30, that's oversold.  When the RSI is above 70, that's overbought.

On the daily, weekly, and monthly charts, the RSI value for WTIC is 12.8, 20.5, and 16.7.  Especially on the monthly timeframe, things are seldom that oversold.  Even during the 2008 crash, the RSI(7) for WTIC was about 21, and now its 16.7.

When all three timeframes are this oversold, typically its approaching a decent buying opportunity.  The trigger is when the daily RSI rises above 30.  Its a simple system I learned years ago for buying low.

Again, when prices drop below 30 for RSI 7 in all three timeframes, that's the signal to start watching for the rebound.  Once it happens (a swing low works) that's when you buy.

Now there are a thousand reasons why you shouldn't buy - there always are a thousand reasons not to buy at the low.  News is usually really horrid at that point.

This sort of thing only happens once every 5-6 years.  Last time, as I said, was the 2008 crash.

davefairtex's picture
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new low SPX [down -43; -2.25%]

So SPX has been selling off all day long, and it finally broke below the low set on Monday.  This totally negates the "swing low" regardless of where we close.

I'm not even sure the previous low set back in August will hold given today's performance.  So far the selling is still relatively orderly (i.e. no big gaps down) but it sure does look ugly.  The failure of the market to keep moving higher off that swing low is a really bad sign.

Selling is accelerating as we move into end of day.  Now we're starting to see some more volume.

cmartenson's picture
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Let's see what the 3:30 ramp has in store...

The other day the ramp started at 3:20 blasting 20+ S&P points in about as many minutes....let's see what the end-of-day rampers have in store today, eh?

If they can't get it done, then things are likely to get uglier in the overnight markets.

Edwardelinski's picture
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Standard&Poors Warning

S&P says corporate credit conditions of indebted companies globally have deteriorated at its fastest pace since 2009....So,there's that....

Mark Cochrane's picture
Mark Cochrane
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Collapsed ramp?

Looks like today's ramp was more of a stutter step than a quick repair.

davefairtex's picture
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Posts: 5694


So I didn't see any of this "ramp" behavior you are always going on about.  If they really were all powerful, presumably they'd have wanted to print a hammer candle today rather than the much more dreadful close-at-the-lows big nasty red candle that we got.  It would seem even more important to close on some kind of happy note after such a dreadful day.  How come that didn't happen?  Is it like when you take the car to the mechanic - the problem never manifests when he drives it?

Consider: if your model predicts an action, and that action doesn't take place, one might want to consider that the model might be flawed.


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