PM Daily Market Commentary - 3/14/2016

davefairtex
By davefairtex on Tue, Mar 15, 2016 - 2:24am

Gold fell -15.10 to 1236.00 on heavy volume, while silver dropped -0.15 to 15.36 on heavy volume also.  Both metals rallied steadily in Asia and London, but sold off sharply as soon as the US market opened.

Today's price action was some more follow-through from Friday's new high that ended up being a failed rally.  Price contined dropping today pushing gold convincingly below the 9 EMA, and printing a swing high as well.  The likely outcome of this is lower prices ahead.

Cycles happen in all living things; for this market, there is a time to rally, and a time to correct.  The indicators suggest we are entering that correction phase right now.  This happening immediately prior to the FOMC meeting suggests that western gold buyers are concerned (at least somewhat) about what the Fed might do at the upcoming meeting.

If FOMC sounds hawkish, and they may well be given the recent rise in the CPI, the dollar may end up jumping substantially higher, and this would most likely hurt gold.

GLD lost -8.63 tons of gold, leaving 790 tons remaining.

Silver managed to make a new high for this recent three-week cycle, but then it promptly sold off hard.  This new high invalidated the previous swing high printed last week, but it looks like it will be fairly easy for silver to print a new swing high tomorrow.  Silver also closed below its 9 EMA, although silver's price trend has not been as clear as gold's, so the 9 isn't as important an indicator.

Miners sold off hard today, with GDX dropping -4.30% on heavy volume, while GDXJ fell -3.65% on moderately heavy volume.  For me, the volume bars have been the "tell" for GDX.  This is the fifth "distribution" day for the miners, and all that selling has finally ended up with GDX plunging convincingly through its 9 EMA.  Money is flowing out of the mining shares right now, momentum has tipped over, and prices are likely to follow.

Newsletter writers I have been reading have been screaming "now is the time to buy mining shares!"  I think after this correction, that will be the time to buy, but not now - unless you really enjoy buying the high.  I say: wait for the sale, and then buy.  Why pay full price?

Platinum fell -0.49%, palladium dropped -0.43%, and copper was up just +0.16% after attempting to push past the 200 MA and failing.

USD staged a moderately strong rally today, moving up +0.44 to 96.67.  The dollar rally was not aligned with the drop in PM - that is, on the intraday charts it did not look like the move higher in the buck happened at or near the same time as gold's sell-off.  The buck's rally started in Asia and it zig-zagged higher into the NY close.  That said, a higher dollar will put pressure on commodity prices overall, including gold and silver.

SPX had a very narrow trading range today, ending up lower by -2.55 to 2019.64.  SPX remains above its 200 MA by a whisker.  Selling in the energy and materials sectors dragged the index down.  VIX rose +0.42 to 16.92. 

TLT rose +0.31%, but it remains solidly in a downtrend.  Hints of risk off here.

JNK fell -0.23%, but it remains solidly in an uptrend.  Hints of risk off here too.

CRB fell -0.66%; if the buck continues to rally, CRB will have a hard time moving higher.

WTIC also fell, losing -1.12 [-2.91%] to 37.37, printing a swing high on the day.  WTIC managed to find support on its 9 EMA, but the RSI momentum indicator is showing signs of a bearish divergence - this means momentum in the oil rally is slowing down.  A close below the 9 EMA would be my sign to reduce risk in oil.

We seem to go from one Central Bank meeting to another.  This time its FOMC, which starts its meeting tomorrow, with an announcement on Wednesday at 14:00 ET, and a press conference at 14:30.  My guess it that Chair Yellen will be more hawkish than previously because of the rising CPI and rising commodity prices.  If this occurs, the dollar will probably rally and gold will correct.  I'm fitting policy to the gold cycle - but it does seem to match up with where we are, and I suspect those commercials are pretty plugged in.

Oil too may have reached a near-term high and may be setting up for a correction.

The high commercial short position is the backdrop to the whole play in PM.  Is there a gold cycle based on FOMC meetings?  There could be, I haven't checked.

Anyhow, for now, be careful out there.

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1 Comment

Penny551's picture
Penny551
Status: Silver Member (Offline)
Joined: Nov 8 2012
Posts: 154
FOMC

 My guess it that Chair Yellen will be more hawkish

I agree, but doubt she will actually raise rates.  The market already has a "no rate hike" fully priced in, so I'm kinda expecting a "buy the rumor (no rate hike), sell the news" type of event on Wed.  I suspect a more hawkish forward guidance ("We're really really going to hike in June") will be enough to send PM/Equities lower.

Just my uneducated guess... that and 5 bucks might get you a small cup of coffee at Starbucks. 

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