PM Daily Market Commentary - 2/29/2016

davefairtex
By davefairtex on Tue, Mar 1, 2016 - 4:41am

Gold rose +16.50 to 1239.30 on heavy volume, while silver rose +0.21 to 14.90 on moderate volume.

Western gold buyers continue to provide support for the yellow metal.  As an example, GLD gained a huge 15 tons just today, and it seemed that any intraday weakness in equities just sends gold higher.  On the charts gold is definitely struggling to continue to move up - at least in dollars - but so far there is no break of the 9 EMA and as long as that happens, gold will eventually break above its old high at 1263.

Technically, that MACD crossover doesn't seem to be putting any pressure on gold to speak of.  I know that the commercials are loading up short here, but the demand for (COMEX) gold as well as GLD shares in the west appears to be overwhelming the usual cycle this time around.  Gold continues to draw support from its 9 EMA.  We saw this last during the great 2009-2011 rally.  At several points, commercials had loaded up short, and yet prices continued to move higher, and the commercials were forced to (at least partially) bail out.

I think the answer for gold's strength can be found in Europe.  Gold in euros is almost a straight line up, rising +1.86% just today.  Whether its migrants driving the EU to a breakout, BRexit, or negative rates, or likely some confluence of all of it, gold continues to catch a serious bid over in Europe.  A gold chart that looks a bit iffy in dollars looks like a clean breakout from an ascending triangle over there in Europe.

Silver did manage to bounce today after receiving a pounding last Friday, but has yet to regain its 200 MA.  It did better than I thought it would, but it is not out of the woods just yet.  More (naked) short selling would be expected to appear right around silver 15.00/the 200 MA.

Like gold, miners remain well-supported by their 9 EMA.  GDX rose +3.69% on heavy volume, while GDXJ broke to a new closing high up +4.30% on moderately heavy volume.  So far that MACD hasn't rolled over just yet, and another miner breakout would definitely keep the uptrend alive.  Although momentum is slowing, money flow into the mining shares remains strong.  Goldcorp's 10% drop on Friday (big writedowns, unexpected loss for the big miner) doesn't seem to have soured traders on the rest of the mining shares at all.

Platinum rose +2.06%, palladium was up +1.92%, and copper climbed +0.46% to a new closing high of 2.12.  While copper isn't looking strong per se, it remains above the 9 EMA and the 50, and looks to be slowly recovering.  Perhaps China isn't ready to tip over and sink just yet.  (I think it will - but copper is saying "not today")

The buck was largely unchanged, up +0.04 to 98.22.  That covered a drop in the Euro [-0.57%], a rise in the Pound [+0.32%] and a big rise in Dollar/Yen of +1.15%.   Euro continues to drop.  This reinforces my thesis that a lack of confidence in Europe is the primary driver under gold right now.

In spite of a nice oil rally, SPX sold off today, losing -15.82 [-0.81%] to 1932.33, dropping below its 50 MA.  Utilities led, while healthcare, energy, and financials led the market lower.  That's bearish.  The drop in energy equities was perplexing given the decent rally in oil.  That's the second day XLE has behaved oddly (and since I'm long XLE, oddly = "bad").   There was a disappointing Pending Home Sales report in the US, and also a negative Chicago PMI (manufacturing) report, but they didn't line up in time with the move lower in equities - the SPX sell-off didn't happen until about noon - so its hard to say they were the driving force behind today's correction.  Swing high today in SPX, but for now it remains above its 9 EMA.

VIX rose +0.74 to 20.55.

JNK staged a big rally, up +1.09%, leaving no doubt that it is now above that 50 MA.  Likely some amount of that is short-covering driven by the rally in black gold, but the usual linkage between risk-on JNK and the selling in the equity markets seems broken at least for now. 

TLT rose +0.44%, managing to crawl back above its 9 EMA. TLT is tracing out a rough pennant formation, but it is not looking particularly strong at the moment.  Most likely a continued correction in equities will lead to a move higher for bonds.

CRB was up +0.96%, up for 3 days out of the last 4.  CRB might have double-bottomed two weeks ago, but we'll need another 3% rally for that to be confirmed.  Right now its just a slow recovery for commodities.

WTIC crude (CLJ16) climbed +1.06 to 33.90, a sizeable rally that took crude to right under its 50 MA.   It also is a new closing high for this cycle.  Oil looks set to break higher.  Of course we have that Petroleum Status Report coming on Wednesday, and the API report tomorrow at 16:30 after market close, and they could always throw a wrench into the rally.  Its a news driven market, but the current trend for oil definitely does seem to be up, at least for now.

Oil, gold, and junk debt all rallied together today, while Euro and Yen fell.  This is new behavior.  This suggests to me that gold's rise may now be more related to Europe and Japan than the oil + junk debt situation, at least for the moment.  So what might affect the price of gold?

  • BOJ confidence issues/negative rates
  • solving (or not) the migrant issue in the EU
  • BRExit

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