PM Daily Market Commentary - 3/8/2016

davefairtex
By davefairtex on Wed, Mar 9, 2016 - 3:40am

Gold fell -6.00 to 1262.00 on heavy volume, while silver dropped -0.30 to 15.36 on heavy volume also.  Gold tried to rally to new highs, touched 1279 well before the US market opened, but then sold off for the rest of the trading day.  A number of other things dropped today also - copper, oil, and US equities.

Gold actually performed the best among many other things today; its relatively mild failed rally still leaves gold well above the 9 EMA.  Momentum indicators suggest that the move higher in gold has slowed and gold could be vulnerable to a correction, however I've said that before and gold has ignored it.  So far the bid remains, but if rest of the PM complex sells off, it will probably drag gold lower.  A close below the 9 EMA could lead to a fair amount of selling.

Silver sold off hard today; it made its intraday high early in Asia and then slowly weakened, with the serious selling in silver starting right around the time of the US market open.  While silver did not print a swing high day and it remains above its 9 EMA, the current chart pattern reminds me of the topping pattern from four weeks ago, after which silver sold off hard.  I think its possible that silver is following copper right now - and copper had a bad day today after running into resistance at its 200 MA.

Miners sold off hard today, with GDX off -4.80% on very heavy volume, while GDXJ lost -4.90% on heavy volume.  Both mining ETFs printed bearish engulfing candles as well as swing highs, and the large down-day volume on GDX was the fourth distribution day in the past 8 trading sessions.  While GDX remains above its 9 EMA, it is not by very much.  As suggested by the bearish engulfing candle, yesterday's rally was entirely wiped out (and more) by today's sell-off.  This puts GDX right back in the danger zone.  With three different bearish indicators in place, I am not certain how much longer the miners can remain above that 9 EMA.

Platinum fell -1.74%, palladium dropped -2.76%, while copper was hit for a big -2.62%, selling off hard after encountering resistance at the 200 MA.  If copper starts seriously correcting here, it will likely drag a lot of things down with it - one of them being silver.

The buck seemed to find support on its 200 MA, rising +0.16 to 97.24.  While it did not appear that the dollar was a significant force in today's price movements, if it does start to rally here it might help to push PM and commodity prices lower.  The brief Euro rally may be at an end - prices are confirming the migrant-related difficulties in Europe.  The EU's two-pronged plan to restrict immigration (without appearing to restrict it) boils down to migrant concentration camps in Greece as well as Turkey.  Except, Turkey seems to be getting vast sums of money, while Greece appears to get the hind teat.  Long term, that's not going to work out.

SPX fell today, losing -22.50 to 1979.26.  Energy equities were hit hardest, with XLE down a huge -4.20%.  SPX ended up printing a swing high today but it remains above its 9 EMA for now.  VIX rose +1.32 to 18.67.

TLT shot higher, up +1.10% and moving back above its 9 EMA.  Bonds remain in a downtrend, but that will most likely be changing if the equity market tops out here.  Today's rally was a sign of risk off.

JNK fell -0.68%, printing a swing high along with many other things.  JNK's drop today was another sign of risk off too.

CRB fell today, losing -1.30%.  While this wipes out most of yesterday's rally, CRB remains above its 9 EMA.  The modest commodity rally we've been experiencing is not over yet.

WTIC fell -1.65 [-4.34%] to 36.33, a big drop for oil but no swing high just yet.  Oil is overbought right now and could definitely correct here.  Interestingly, the XLE:$WTIC ratio shows that all during the last few weeks of the oil rally, traders have been selling their oil equities - the ratio has done nothing but drop.  Today's API inventory report showed a build of 4.4 million barrels this week - much milder than last week's huge build.  WTIC dropped perhaps 50 cents in response to the API report.  Petroleum Status Report tomorrow may decide direction for the next five trading days.

Commodities may not have topped out just yet, but a lot of things are right on the edge of starting a correction.   It will be instructive to see how the mining shares do tomorrow.  Will traders step up to buy the (substantial) dip?  The clear signs of distribution in the mining shares over the past two weeks suggests big money is bailing out.

My computer, which can be inaccurate for mid-week readings, is now short gold, silver, copper, the miners, as well as equities.  It remains long oil.

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4 Comments

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5072
Chinese Govt Venture Investing

So having been in the valley and having been part of a fundraising effort, I can say its a tough business; both getting venture money, and also figuring out where to put it.

China has decided to go big into venture investing.  And they've collected a crapload of money to do it - the biggest collection of venture money in the world.

This is a really hard job in capitalism - this capital allocation task that the venture funds do.  Banks don't even try.  You need a process, subject-matter experts, as well as people who have been through it before and seen what can go wrong.  It is also subject to a whole host of bubbly incentives; the pressure to put the money to work, herd-following investments on the latest eyeball-capturing fad, etc.  And then you have to ride herd on the investment through its development stage and hopefully help the founders avoid making fatal mistakes.

It is not something you can just wake up one morning and start doing.

It is a hard job, even assuming no corruption, which in China, is not a particularly safe bet.

The last line I copied is the money shot.  "Its hard to see how this doesn't end poorly."

http://www.bloomberg.com/news/articles/2016-03-08/china-state-backed-venture-funds-tripled-to-338-billion-in-2015

China is getting into the venture capital business in a big way. A really, really big way.

The country’s government-backed venture funds raised about 1.5 trillion yuan ($231 billion) in 2015, tripling the amount under management in a single year to 2.2 trillion yuan, according to data compiled by the consultancy Zero2IPO Group. That’s the biggest pot of money for startups in the world and almost five times the sum raised by other venture firms last year globally, according to London-based consultancy Preqin Ltd.

... the sheer size of the policy funds dwarfs venture capital in the private sector. The growth is part of an explosion of private equity in China, where there are now some 15,857 limited partners that have disclosed investments in PE and VC funds totaling 6.1 trillion yuan, the consultancy said.

Fan Bao, China’s most prolific Internet dealmaker, recently issued a stern warning about the dangers facing investors in “lawless” venture capital and startup markets, urging regulators to step in and curb irrational investment and asset bubbles.

Rieschel said it’s wrong to assume more money will drive innovation. Instead, the government should work on offering greater freedom of information and better education to promote entrepreneurship.

“It’s hard to see how this doesn’t end poorly,” he said.

Penny551's picture
Penny551
Status: Silver Member (Offline)
Joined: Nov 8 2012
Posts: 149
Abiotic Oil?

Prob off topic, but anyone have any thoughts on Abiotic Oil?  I've dismissed it in the past, w/o too much investigation, based mostly on SRSRocco's points about falling EROI.  Lately, I've come across some respectable and very intelligent people who are proponents.  Most recently, Jerome Corsi and F. William Engdahl (Link Below)...

http://journal-neo.org/2016/03/05/needless-wars-over-oil/

kd6iwd@gmail.com's picture
Status: Bronze Member (Offline)
Joined: Nov 17 2011
Posts: 25
Abiotic oil

Hi, well as a geologist I am familiar with the abiotic oil arguments, There is a fatal flaw in the premise that oil is derived from mantle sources and that is that when molecular weight of a hydrocarbon increases the stability in reference to increasing temperature decreases, In practice this means that as you drill deeper the oil window closes and all that is left is natural gas. The heavy hydrocarbons aka oil, decompose to natural gas and carbon so there are no accumulations of heavy hydrocarbons in the earths mantle because they decompose at those temperatures. During drilling samples can be collected to determine if you are in the oil window. There are many areas where wells have penetrated trough the oil window to the gas. This is the opposite of the abiotic hypothesis which would have you believe that there would be more oil as you drilled deeper. A drilling effort in Sweden to find abiotic oil failed completely and only found small amounts of hydrogen and some methane, both gasses are well documented in the literature as being of magmatic origin. Do the Russian scientists were wrong.

 

Best Regards

 

Jim

Mark Cochrane's picture
Mark Cochrane
Status: Diamond Member (Offline)
Joined: May 24 2011
Posts: 1216
What are the chances?

1. The IMF called for coordinated QE or some equivalent.

2. Draghi has to come out tomorrow with some kind of positive news injecting liquidity into the markets.

3. The COT statements and open interest are all lined up to potentially 'correct' the gold price.

Either:

A. No matter what Draghi says there is miraculous instantaneous market support  that is sustained across the various market opens, validated by crashing gold prices.

or

B. Draghi disappoints, gets no support outside the EU and gold shoots over 1280.

Personally, I am hoping for option A followed by a rapid collapse of the manufactured sentiment indicating the markets no longer buy the crap being dished out by the Central banks.

I can dream...

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