PM Daily Market Commentary - 2/9/2016

davefairtex
By davefairtex on Wed, Feb 10, 2016 - 5:59am

Gold fell -0.20 to 1189.40 on very heavy volume, while silver dropped -0.07 to 15.25 on heavy volume.  Gold attempted to rally above 1200 for the second day, and failed.  A relatively large drop in the buck was not enough to propel gold higher today; that's not a great sign.

Gold actually took two shots at the 1200 level today; both attempts were met with selling.  My sense is the commercials have decided to enter short following the break above the previous high.  We will know more come Friday after the COT report tells all.  Given how severely overbought gold is at the moment, I believe we are at a high risk of a decline.

Silver also ran into trouble; at end of day it sold off a bit more dramatically than gold.  So far the selling has not become general, and silver is not nearly as overbought as gold.  Still, weak oil prices and weak commodity prices in general aren't doing silver any favors.

The miners were sold hard today; GDX fell -4.12% on very heavy volume, while GDXJ dropped -4.23% on moderately heavy volume.   GDX printed a dramatic swing high today on very heavy volume; I take this to indicate lower prices ahead.   Miners are up 40% over the past 4 weeks; a 50% retracement of that move would not be a surprising outcome.  If the 200 MA holds, that's only a 38% retracement which I would view as a positive outcome.  The 50% retracement is right around $15.00.

Platinum rose +0.99%, palladium climbed +0.41%, but copper was hit for -2.58%.  Copper printed a swing high a few days back, and this appears to be some follow-through.  Copper looks to be back in a downtrend once more, along with the rest of the commodity complex.

The buck attempted to rally back above the 200 MA today and failed; the 200 MA now appears to be resistance.  The major beneficiaries of the dollar weakness are the Euro (+0.84%) and the Yen (+0.61%).  The Yen is quietly going crazy - although the yen rally isn't helping the Japanese stock market, which continues to fall: down -5.4% just today.  Apparently, the big money is buying JGBs, of all things; 10 year JGB yields have gone negative.   Not what I expected.  I'd much rather own - say gold - than a 10 year JGB where I end up paying the government.  This has to be peak something-or-other.  Peak crazy?

The continued selling in the dollar suggests money is fleeing the US; this likely contributes to the current general weakness in equities.

SPX traded in a range today, the spinning top candle a picture of indecision.  SPX closed down -1.23 [-0.07%] to 1852.21.   Under the covers, energy equities (XLE) was hit for -2.41%, while a number of other sectors rallied modestly.  Financials mostly were flat.  VIX rose +0.54 to 26.54.

JNK fell -0.47% making new lows today.  The descent seems to have slowed, but JNK is still signaling risk off.

TLT made a new high by a slim margin, closing up +0.11%.   TLT is quite overbought; any rally by the equity market will likely result in selling in the long bond.

CRB had a big drop today, losing -2.49%.  It is not far from its previous low, set three weeks back.  No relief yet in the commodity space.

WTIC was sold hard today, dropping -1.77 [-5.88%] to 28.35.  Low for the day was 27.74, less than 20 cents above the previous low of 27.56.  Oil looks ugly right now, and based on the current downside velocity, it does not look like the previous low will hold.  Brent oil looks a bit better - it remains more than $3 above its previous low.

Today's miner sell-off and swing high is a shot across the bows of the gold rally; miners often lead metals lower.  I think its possible we could see new highs for gold if the equity market sells off hard, but to me the odds favor a correction in gold in the near term.  However those commercials can be tricky; gold might bounce along the top here for a while rather than selling off immediately.  You may recall that is more or less what happened back in October: gold didn't just tip over and sink right away.  It will be instructive to see what happens if gold takes another shot at 1200.

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3 Comments

HughK's picture
HughK
Status: Platinum Member (Offline)
Joined: Mar 6 2012
Posts: 761
NASDAQ failed rally?

I have a question about reading yesterday's candlestick on the NASDAQ.

First, I can see the spinning top candle in the S&P:

In the NASDAQ, I would call yesterday's candle a sign of a failed rally.  Is this the case?  Also, is there a name for this candle?

Whatever it was, it seems that markets are poised to jump higher today on anticipation of some dovish jawboning by Yellen during her testimony before the House Committee on Financial Services.  While I believe that the tech route will continue this year, I wouldn't be surprised if tech has a little recovery after the abysmal start to the year.  But that's just my belief.  What is this chart suggesting?

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5417
tech

Hugh-

If you want to isolate how tech is doing, you might want to check out the tech sector ETF, XLK.  That one looks like it might be in the process of a double bottom - although it needs a decent rally to confirm this.

As far as yesterday's candle - the body is a bit long for a failed rally - but it does give me the impression the market is struggling to rally off the lows.  It didn't make a new low, it tried to print a swing low, but the traders weren't interested in holding overnight.  Call it "chopping sideways".

When stuff doesn't look conclusive, try looking at other things.  Tech leaders.  I'd wait for a 9 EMA crossing for most of them to prove they have enough gumption to reverse.

INTC, CSCO, AMZN all suck.  AAPL scooping out a bottom, maybe.  FB, hard to say.  NFLX - maybe today its starting to show signs of life. 

pieffe's picture
pieffe
Status: Member (Offline)
Joined: Nov 3 2013
Posts: 6
gold NO volume !!!!

ciao Dave.....incredible no volume today on gold.......Some clues about ????

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