PM Daily Market Commentary - 3/15/2016

By davefairtex on Wed, Mar 16, 2016 - 12:04am

Gold fell -3.20 to 1232.80 on moderately heavy volume, while silver dropped -0.07 to 15.29 on moderate volume.  Both metals continued lower after yesterday's sell-off, but on the intraday charts it looked as though several attempts to push price lower were met with buying.

Not much happened today; gold did move lower but only by a few dollars.  The follow-through from yesterday's sell-off was minor, and it did seem as though there was buy-side support whenever price dropped below 1230.  This I take as a positive sign - I always like it when the dip-buyers show up - and if it weren't for the upcoming FOMC meeting and the dangerous-looking COT report, I might even be a buyer of gold at these prices, although I'd probably want to wait for a few more days of sideways movement before doing so.

GLD gained +2.09 tons of gold, moving the total in storage to 792 tons.

Silver also managed to keep its losses to a minimum today, which was a positive sign given overall weakness in energy and commodity prices today.  There was only a modest follow-through on the failed rally from yesterday.  Buyers seem to appear roughly around the 15.20 level; if that stops happening, silver will probably start to sell off more enthusiastically.

Miners bounced back today, with GDX up +2.14% on moderately heavy volume, while GDXJ rose only +1.11% also on moderately heavy volume.  The fact that the miners rallied on a day when gold fell is a good sign, and it shows that traders remain interested in buying the still-beaten-down miners at these prices.

However from a technical viewpoint, the 9 EMA is now acting as resistance, and the pattern of distribution continues.  Today's rally was on much lower volume than yesterday's sell-off.  Both of those things are bearish.

Platinum fell -0.17%, palladium dropped -0.68%, and copper went down -0.13%; things were pretty quiet today.

USD was completely flat today; no change.  USD has had a small two-day bounce following the big move higher in the Euro last week - it will end up looking like a dead cat bounce unless Yellen turns more hawkish.

SPX was little changed today, down -3.71 to 2015.93, dropping slightly below its 200 MA but still remaining in an uptrend.  VIX fell -0.08 to 16.84.  Its hard to know how SPX will respond to the FOMC; if Yellen is hawkish and the dollar rallies, SPX could see capital flows from overseas.  The move higher in SPX does seem to have slowed, encountering resistance at the 200 MA.  Money flows (CMF) into SPX still are quite strong.  The SPX rally may still be mostly about commodities and energy; if oil keeps rising, most likely, so will SPX.

WTIC endured more selling today, losing -0.65 [-1.74%] to 36.72, ending up closing below its 9 EMA by a very slim margin.  Since the swing high for WTIC was yesterday, this suggests the top for oil may be in for this cycle, although a more conclusive close below that 9 EMA would provide more clarity.  The API crude oil inventory report came out at 16:30 ET, and it showed a lower-than-expected build of 1.5m barrels, which was good for a 50 cent jump in WTIC.  That's relatively good news for oil.

TLT rose +0.09%, more or less going nowhere.

JNK fell -0.64%, printing a swing high.  Momentum in JNK has slowed, and while it remains above its 9 EMA it is a sign of risk off.  The future of JNK probably lies with oil, as it has for quite some time now.

CRB fell -0.76%, dropping alonside oil.   CRB printed a swing high yesterday, but it remains above its 9 EMA at least for now.

Once again, FOMC announcement is 14:00 ET tomorrow, with a press conference at 14:30.  I keep saying this because it will likely determine the near-term direction for a number of different markets, including the dollar as well as gold.  I do not think there is any chance that the Fed will surprise the markets with a rate increase this meeting.  However if the language of the announcement is seen to increase the likelihood of a rate rise next meeting, that will send the buck higher, and probably, gold lower.

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Penny551's picture
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Rickards on FOMC

Just one guy's opinion, but when it comes to forecasting Fed policy, Rickards has a very good track record...

"The Fed will acquiesce this time,but will spend the next several months getting markets ready for a June rate hike. (A September rate hike is off the table because of its proximity to the U.S. election. The Fed is in enough hot water with politicians and does not need the attention of seeming to favor one political party over another). If the Fed does not hike in June, they can forget about ever having enough dry powder for the next recession. So they will hike in June......Getting market expectations aligned with the intended FOMC policy path will not be pretty. Expect higher volatility and stock market drawdowns in April and May as markets reprice. A further stock market correction has been postponed, but not avoided.”

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4 contrarians expect a rate hike in March

Four of the 97 economists polled by Bloomberg expect a teeny tiny rate hike at this meeting in March.  Reasons: 1) inflation is showing a pulse; 2) emphasis is on domestic, not global, issues; 3) time is of the essence if The Fed hopes to get the rates high enough before recession officially strikes to be able to lower them, at least a little.  If I had to place a bet (and I DON'T because I'm on the sidelines), I'd wager my $2 that there will be another .25% increase in March.

Then there is the prediction by Brandon Smith I alluded to here on Jan. 13 that the Fed will keep raising rates this year not in spite of the economic turmoil it causes but BECAUSE economic turmoil is now it's goal.  Smith is not an economist but a leading voice in the prepper/survivalist/liberty movement.  His reasoning on the Fed is just devious enough to have captured my attention and his clear prediction of a late 2015 rate hike and 3-4 rate hikes in 2016 regardless of economic turmoil has given me a test case to see if he is actually on to something.  His credibility will go up in my book if he turns out to be right.

There is one predominant reality that must be understood before a person can grasp the nature of the Federal Reserve and the decisions it makes, and that reality is this: The Fed’s purpose is not to defend or extend American markets or the dollar; the Fed’s job is ultimately to DESTROY American markets and the dollar. I have been repeating this little fact for years because it seems as though many otherwise intelligent people simply will not accept the truth, which is why they have trouble comprehending the actions that the Fed initiates.

When analysts make the claim that the Fed has positioned itself "between a rock and a hard place" in terms of policy, this is not entirely true.  The Fed is exactly where it wants to be in terms of policy; but the central bank has indeed positioned the U.S. ECONOMY between a rock and a hard place, by design.

Globalists see the U.S. dollar and the U.S. economy as expendable (for the most part), and this sacrifice is meant to create distracting chaos as well as geopolitical advantage towards a new fully centralized world economic system.  You can read the considerable evidence for this agenda in my article 'The Fall Of America Signals The Rise Of The New World Order'.

If you believe the Fed is the sole purveyor of the global economic crisis and is at the top of the internationalist pyramid, then you probably predicted that the privately controlled central bank would “never in a million years” raise interest rates (many prominent people within the alternative economic scene did). If you believe that the Fed’s primary goal is to prolong the life span of the “American empire,” again, you probably predicted that the Fed would never raise interest rates. There is a serious normalcy bias when it comes to parts of the alternative economic world and their position on the Federal Reserve. They refuse to acknowledge that the Fed is a deliberately preset time bomb meant to vaporize the U.S. economic system and currency. And as long as this continues, they will never be able to determine what is likely to happen next within our fiscal structure...

Based on this pattern of policy actions leading to fiscal disaster, I believe alternative analysts can predict with some certainty what is likely to happen now that the Fed has raised rates in the middle of the most pervasive economic contraction since the Great Depression was initiated (as Bernanke admitted) by central bankers. Here are some trends that I believe will become exponential as we move into 2016.

Market Turmoil Going Critical

This might seem like an easy prediction to make; the IMF and the Bank for International Settlements have both been publishing “warnings” on a possible negative financial event if the Fed were to raise rates. I just want to point out first that the Federal Reserve takes its marching orders from the BIS, so the BIS would certainly know if a Fed policy change will result in collapse.  We don't have to make predictions, we only have to look at where the BIS is positioning itself in order to appear as though it is a prognosticator with our "best interests" at heart...

I believe the Fed will continue to hike rates throughout 2016 despite any current or future negative economic signals. It has ignored the global contraction so far and will ignore future events. Why? The Fed is setting the stage for a collapse. Period.

Mainstream analysts claim skepticism over the Fed’s publicly announced “dot plot”schedule of at least four rate hikes in 2016. I am not skeptical. I think they are going for broke and opening the gates to fiscal hell.

But wouldn’t rate hikes result in a stronger and more desirable dollar? Possibly, in the short term. However, many people are unaware that a supposedly “strong” dollar index relative to other national currencies is just as much a death knell for the greenback as a weak dollar index.

And if Brandon Smith is correct and a stronger dollar is one of the results, he will be in league with Charles Hugh Smith who has been an outlier predicting a rising dollar, though they come at it from somewhat different reasoning. That rising dollar would tend to depress gold/silver prices (in dollars) and provide me with the window I've been waiting for.  Yay!

"Welcome to the Hunger Games. And may the odds be ever in your favor."

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That is dramatic.

Penny551's picture
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davefairtex's picture
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rickards and me - both wrong

Rickards may have been a fantastic forecaster in the past, but he sure was wrong this time.  So was I.

Looks like FOMC was very dovish today; buck sank almost a full point, gold and the miners went screaming higher again...its enough to make a short cry!  Fortunately, I had a low risk position.  I didn't dare to be either short or long going into this meeting.

Here's a trick you can use if you don't want to take the full downside risk of being long, but still want to participate in the upside if it actually happens.  If you have an event that you know will occur at a time certain, buy some short-dated calls that expire not long after this magical event.  Say, calls on GDXJ that expire this Friday, maybe 50 cents out of the money.  Lets say they cost around 0.20 each.

That way when GDXJ jumps +1.50 over two hours, you make +0.70 on each call, and you blow out after you get the sense that the bulk of the rally is done.  You don't want to hold them very long, because they're going to expire Friday.

Its basically a lottery ticket.

But you have to have a sense as to what the upside is best case, and how much your lottery ticket will return.  Most of the market was leaning south, so this lottery ticket seemed cheap.

More often than not, these things don't pay off.  But sometimes they do.

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Mark Cochrane
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So what, if anything does this mean for the COT set up and all that? Did the Commercials just get hosed to no effect or will everything just delay for another day when the odds are in their favor again?

davefairtex's picture
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Posts: 5683
COT reports


My sense is that the commercials weren't planning on this to happen.  The setup looked pretty good for a move lower in gold, and the exact opposite happened.  Now we see how far down the buck will go, and if gold can make new highs.   The gold-in-Euros chart may be telling us "that was the correction, just now, and now we take off to new highs."

Same thing with the miners.  The past few days might be all the correction we get.

Every once in a while, the commercials get it wrong.  During the 2010-2011 period, the "all-powerful commercials" (which really do seem to get it right most of the time) were seriously wrong-footed by the strength in the gold & silver rally at that time.  It could happen again.  In fact, I believe at some point, it will happen again, but I'm just not sure if "now" is that time.

Because they do sometimes call the move wrong, that's why I say they aren't really all powerful.  If they were, they would never be wrong.  They are the smart money, so its one of those "the odds favor this setup" sorts of things.  Same thing happens in copper too, FWIW.

Something else to realize - the total number of "shorts" (paper gold) created over the past two months more or less approximates global gold production over that same period.  Some of those shorts could well be mining companies selling forward their gold production.  After having a NDE down at gold 1050, some mining companies may well have decided to lock in price once it got back to 1200-1250.

See for a mining company, "going short" lowers their risk, because for a certain amount of their production, they now have a guaranteed price for their product.  Going short for a trader means taking on risk.

I can virtually guarantee that some of those oil drillers will be seriously going short if oil gets above 50 again, so that they can lock in those prices.  That is what kept their companies alive for the past year: all those hedges.

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