PM Daily Market Commentary - 1/26/2016

davefairtex
By davefairtex on Wed, Jan 27, 2016 - 1:58am

Gold rose +11.80 to 1119.90 on very heavy volume, while silver climbed +0.28 to 14.52 on heavy volume.  Cash came out of hiding today - pretty much everything was bid today pre-FOMC, and gold and silver were no exceptions.  A falling dollar also helped.

Gold has now officially broken out of its cup & handle pattern, no doubt causing the managed money shorts some amount of grief.  The move higher is not particularly violent, but it has been relatively steady.  It appears that the commercials are running another gold up-cycle, although this one is fairly mild.  The last gold rally in mid-October had problems once it reached the 200 MA; right now the 200 is sitting at 1134.    I'd expect the sellers to re-appear once the 200 is breached, although we'll know more once we see the COT report this Friday.  It is interesting how this price target is approaching coincident in time with the FOMC announcement coming out tomorrow.

Silver's broke sharply above its downtrend line today and is moving into position to challenge the previous high at 14.64.  However, the current rally strikes me as somewhat mild, compared to what usually happens when silver finally decides to rally.  Blame it on commodities, on deflation, on oil - its hard to know why, but silver isn't really catching fire just yet.  Perhaps after FOMC we will see some fireworks, but silver has a great deal of work ahead of it to break out of its longer term downtrend.

Buyers are back in the miners, with GDX rising +4.41% on heavy volume, and GDXJ up +4.45% on moderate volume.  GDX broke convincingly above its 50 MA today, and has recovered about 3/4 of its losses from the sharp sell-off it experienced a few weeks ago.   The GDX:$GOLD ratio is not yet back in bullish territority.  You can see that while gold has broken above its previous high, GDX still has a ways to go to accomplish the same task.  That sell-off was pretty vicious.

Platinum rose +1.88%, palladium was up +0.88%, and copper had a big day, rising +2.23%.

The buck fell again today, dropping -0.21 to 99.13, falling below its 9 EMA.  My guess: traders are slowly selling their long positions in the buck in anticipation of a dovish FOMC announcement tomorrow.   The buck remains in an uptrend, for now at least.

SPX traded in tandem with oil once again, selling off in Asia, but then rallying once oil bottomed out.  SPX gained +26.55 [+1.41%] to 1903.63, and is now back above its 9 EMA.  However, the bearish engulfing from yesterday has not yet been invalidated.  This particular low in SPX has been a tough trade, unlike those that have happened in recent years, which have been more "V-bottom" lows that, once made, were more or less off-to-the-races higher.  This suggests to me that the "buy the dip" sentiment is fading in SPX.  VIX fell -1.65 to 22.50.

JNK rose +0.86%, wiping out losses from yesterday, regaining its 9 EMA, but like SPX it is more or less chopping sideways over the last few days.

TLT rose +0.05%, actually a fairly strong showing given the move higher in equities.  Bond prices seem to be signaling a dovish rate-rise announcement tomorrow from FOMC.  TLT remains in an uptrend.

CRB rose +1.38%, moving back above its 9 EMA.  Commodities are struggling to put in a low.

WTIC fell in Asia hitting 29.25, but then rallied strongly for most of the rest of the day, pulling SPX right along with it, then fading into the close.  After market hours, the API oil inventory report released at 16:30 showed a massive 11.4 million barrel build, which promptly caused oil to sink even further.  WTIC closed the day up, but only +0.71 to 30.51, after hitting 32.41 at its intraday peak - more than $2 off the high.  We can call that an almost-failed rally.  Oil (and oil traders) are having a really tough time right now - immense trading volume, price whip-sawed back and forth with an 10% intraday trading range several days in a row.  Cat is definitely on the wrong side of the door right now with oil.  If you have a cat, you know what I mean.

Gold is rallying steadily pre-FOMC, so is silver, and so are the miners; that, plus strength in the long bond projects a dovish rate rise announcement coming out of the Fed.  That said, gold is getting a bit overbought, and is approaching its recent nemesis - the 200 MA.  It will be instructive to see what happens to gold once it reaches the 200, assuming gold can continue its rally post-FOMC.

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7 Comments

Arthur Robey's picture
Arthur Robey
Status: Diamond Member (Offline)
Joined: Feb 4 2010
Posts: 3936
A Silver Shill

I don't the form, but there seems to be substance to this video. 

 

sand_puppy's picture
sand_puppy
Status: Diamond Member (Offline)
Joined: Apr 13 2011
Posts: 1754
Dancing nearer and nearer the exits

1.  Is it time to get worried yet?

2.  How quickly can I get out the exit when premiums do rise? 

Bigger picture here

Acronyms of note for PM investors:

SYAO= stack-your-ass-off
SBIC= stack-before-it-crashes
SNODS= stack-now-or-die-sooner
BPWS= banks-print, we stack
FOSI= fiat-out, stacking-in
ITASIYPOAYJGTSM? = is that a stack in your pocket or are you just glad to see me?
WBS= we be stackin’
SNOFHYF= stack now or forever hold your fiat
ISWT= in stack we trust
ASADKIA= a stack a day keeps inflation away
STRT= stack today, rich tomorrow
NSNE= no stack? no eat!
GS= got silver?
FED= fiat-evil-demons
JPM= Jesus-prefers-metals

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5058
any bets?

Armstrong noted at one point that the big banks had this tendency to play tricks on the market by moving stuff around - at one point they moved all the silver out of the COMEX vault and off to London, so that everyone thought there was a shortage - as a part of a price pumping scheme back in the 1990s.

Do I think the lack of registered gold will lead to a COMEX default?  No.  This casino is way too valuable to the commercials to let this happen.  There is 670 tons of gold (presumably) inside GLD.  There are 186 tons of eligible gold at COMEX.

I can get a 400 oz bar from HAA for 2.15% over spot in NYC.  PHYS is trading at a -0.82% discount to NAV.

"Will the Disney movie have a happy ending?"  Well duh.  Can't tell you the details, I'm just sure that - in this environment anyway - one will occur.

Try thinking about it from the "suppression campaign" perspective.   Do you imagine "they" will sit helplessly by while the COMEX blows up (letting all 1200 tons of "paper gold" demand loose on the physical market) even though there are 186 tons of gold sitting right there at COMEX which just needs its category changed?

I think they'll manage to find a way to keep the party going.  This month anyway.

Next month, who can say?

I don't predict such a happy ending for those bankers who lent money to the shale drillers, however.  They may wriggle on the hook for a while, but eventually those losses will come home to roost.

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5058
Oil jumps on bearish inventory report

Oil took off like a scalded cat after the Petroleum Status Report this morning at 10:30 Eastern.  API had reported a very bearish 11 million barrel increase in inventories yesterday, but today the EIA reported a build of "only" 8.4 million barrels - still a very large build, but the market reacted quite positively to the news.

Oil is now up +0.94 to 32.50 - but in reality its a more substantial gain than that, since oil was hovering around the 30.75 level when the report came out.  If we close here, oil is well above its 9 EMA.  That's a big "if", of course.

FOMC rate announcement at 14:00 - about 2.5 hours from now.  If FOMC sounds dovish on future rate raises, equities "should" react positively.  But the initial moves after FOMC are sometimes not the ones that end up holding through to the close.  ==

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5058
spx didn't like FOMC

SPX sold off almost immediately following the announcement, eventually closing down -20.  Its not a happy outcome, especially given that oil staged a reasonably decent rally closing at about 32.

 

Arthur Robey's picture
Arthur Robey
Status: Diamond Member (Offline)
Joined: Feb 4 2010
Posts: 3936
Al to the rescue.

It looks as though the Algos are on to it. 

That spike is being dragged down. 

 

Mark Cochrane's picture
Mark Cochrane
Status: Diamond Member (Offline)
Joined: May 24 2011
Posts: 1216
Night shift

Someone is working hard to get rid of any hint of a safe haven trade signal in gold after the FOMC debacle today...

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