PM Daily Market Commentary - 1/20/2016

davefairtex
By davefairtex on Thu, Jan 21, 2016 - 8:09am

Gold rose +13.70 to 1101.00 on heavy volume while silver rose +0.13 to 14.15 on moderate volume.  Gold's move higher was driven mostly by the falling equity market; once the equity market's fall stopped, that's when gold topped out intraday, dropping into the close.

Gold managed to climb all the way up to the 1110 level by 12:40 Eastern, but once the equity market topped, gold declined into the close, losing about half the gains on the day.  It sure seemed like a mostly safe haven bid to me.   Gold could be forming a cup & handle formation, which much of the time ends with a breakout.  The fact that gold held the 50 MA is supportive of the story.   This outcome might depend on how equities perform, however.  Computer model just watches the prices: it is now long gold.

Silver's rally also peaked at the equity market low, but it managed to retain a higher percentage of its gains into the close.  It also managed to close above its 50 MA for the first time in three months, which is a positive sign.  Silver needs to close above that downtrend line; if it can avoid one of those 40 cent overnight sell-offs, it just might be able to do that relatively soon.  You can see the green 9 EMA line starting to curve higher.  If the 9 EMA can cross the 50 MA, that will also be a positive sign.  Computer model remains long silver.

The miners managed to recover somewhat today, with GDX up +3.05% on heavy volume, while GDXJ rose +2.05% on moderate volume.  Senior miners had a decent rally after yesterday's pounding, but recovered about half of yesterday's losses.  This formed a "bearish engulfing" pattern - which just says that the momentum is still down.  Energy-wise, you can think of it as "two steps back, and one step forward."  The juniors made a new low intraday, but managed to rally back from that low.  That's actually a better sign since a swing low could be printed tomorrow with even a modest gain, if held through to the close.  There is something magical about making a new "scary" low, and having the buyers show up.  That's what happened in the juniors today.

Platinum fell -0.83% making a new low, Palladium fell -1.19%, and copper climbed +0.66.  Computer model remains long copper - of all things.  If copper can actually recover, that would be quite helpful overall for commodities.

The dollar fell -0.03 to 99.16, practically unchanged on the day.  The buck remains in an uptrend.

SPX was down 30 points prior to market open, and continued falling until just after lunch, hitting a new low of 1812.29 (down -69), which was a price last seen in early 2014.  But at about 12:40, oil bottomed out and started rising, which appeared to drag SPX back up along with it.  SPX ended the day down "just" -21 at 1859.33.   Right now, SPX and oil seem to be joined at the hip.  That's not a general truth, but it does seem to be the truth this week.  VIX rose +1.54 to 27.59.  In spite of the strong rebound, the computer model is short SPX.

JNK fell -0.49%, making a new closing low and continuing to signal risk off.

TLT rose +1.34%, a big move higher and was clearly a product of the drop in equities.  TLT printed a more-or-less inverted hammer, which could mark the top for bonds for this cycle.

CRB dropped -1.98%, which is yet another new closing low.  No good news for commodities.

WTIC oil formed a new low today, hitting 27.56 (March contract) prior to staging a rally which pulled prices back up to 28.33.  There was some late-day selling in oil stemming from a bearish-looking API inventory report which said that oil stocks have continued to increase.  This report knocked about 50 cents off oil at end of day.  Computer model remains short oil.

Gold looks poised to break out, silver is slowly getting better, and equities seem to be finding some buyers as long as oil even starts to hint at a recovery.   That's the key, though: oil price recovery is required or else - probably - equities will continue to fall.  Miners have found some buyers; we can hope the selling is over, but we will need to see a swing low and/or more buying today before we can draw that conclusion.   The bearish engulfing candle makes me nervous that the selling isn't quite finished yet.

2 Comments

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5408
Oil rallies on bad news

Petroleum Status Report showed a (nominally bearish) build in oil inventories.  Oil rallied.  Its Not Manipulation.

When bad news ends up causing a rally, that's a sign of a low.  No more sellers remain.   Inventories were up +4M barrels at Cushing, and oil dropped 25 cents, and then after a few minutes reversed and shot higher - now at 29 and change, up 0.70 on the day.

As always, we have to see where the close is - will the traders take home oil overnight - but its a positive sign so far.

[EDIT]

Hmm, the lack of liftoff of SPX from oil's rally is making me a bit cautious.  I expected SPX to take off if oil rallied (and oil is now up +1.28) but so far SPX seems remarkably uninterested in moving higher.  Its a warning sign.

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5408
unpleasant close for SPX

The market didn't cooperate with my prediction; the long-awaited oil rally (a clear and convincing swing low in oil today - see "USO" or "USL" for what I mean) ended up pushing XLE higher, but it did not lift the rest of the market as I had anticipated.  Financials were even off -0.50%, which is never something you want to see if you are expecting things to move higher.  The close also looked unpleasant - 7 point drop in the last 30 minutes is not a happy ending to the story.

No swing low for INDU, RUT, NDX, or SPX.  Small caps even were red.

Only bit of good news was a swing high in TLT.  JNK missed a swing low by one cent.

 

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