PM Daily Market Commentary - 3/23/2016

davefairtex
By davefairtex on Thu, Mar 24, 2016 - 2:10am

Gold fell -28.70 to 1220.10 on heavy volume, while silver plunged -0.65 [-4.09%] on very heavy volume.  The metals were hit by selling early in Asia with follow-through in London; by the time the US markets had opened, gold was already down around $30, and silver was down 50 cents.  Commodities were down hard too.  Oil started selling off before the US market opened, and a bearish-looking Petroleum Status Report kept prices moving lower.

Gold's fall today was the logical conclusion in the face of an possibly topping commodity market, a rising dollar, and a dreadfully bearish COT report.  I think we would have seen such a correction last week, if not for the dovish FOMC which provided gold a $30 pop and a 2% drop in the buck.  Much of that dollar move has now been retraced - as has the entire FOMC gold rally.  The high volume, long red candle, and support break all point to (probably) lower prices ahead.

I see some chart support at 1200 - plus the "round number" support that usually accompanies such a price level, plus the rising 50 MA.  It is our first logical point for COMEX gold buyers to show up.  That might be a bit early; a trader I respect has a chart showing the 50% retracement off the 1287 peak stands around 1166.  These projections are all just guesswork; those COMEX buyers will determine what really happens.  And it is important to remember - gold's longer term trend has changed, negative rates haven't gone away, so there is no reason to expect this decline to turn into a bloodbath.

At the same time, no need to jump in prematurely.  Those buyers need to show up first.

GLD's tonnage was unchanged today.

Silver printed a dramatic swing high today, smashed through its 9 EMA on huge volume, and ended its fall just above 15.20 support.

It appears that silver had just been living on borrowed time.  When I looked at today's chart, I said, "wow, that's a big red candle."  Silver tends to do this; perhaps its a sign of "too much paper" compared to production?  Its hard to know for sure, but as a trader, all we care about is that when silver cuts loose, it really moves hard - in both directions.

With silver tending to follow copper, commodites, and oil - since all three of them dropped substantially today, its not too surprising that silver followed them right over the cliff.  My guess is that silver's future will be tied in with the larger commodity market - and not to spoil the surprise or anything, but the commodity group appears to be topping out.

Since gold had already dropped $30 by the time the US market had opened, the mining shares gapped down at the open, sold off hard, then dip-buyers pushed prices back up, only to sell off again at end of day.  In the last two minutes of trading, GDX tacked on another 1% loss - a bad ending to a bad day.  GDX fell -7.53% on massive volume while the junior GDXJ dropped -6.72% on massive volume also.

Today's price action drove GDX well below the 9 EMA, printed a swing high, and the huge volume underscored the activity.  GDX is perched just above 19 which looks to be a support level - however I have my doubts that it will hold.  The swing high and the volume point to lower prices ahead for the miners, and today's candle print (a "closing black marubozu") is not a high percentage reversal bar.

Platinum fell -3.69% printing its own big red candle, palladium dropped -3.83%, printed a swing high, and smashed through both the 9 and the 200 MA, and copper also sold off, losing -2.31%, also printing a swing high, and driving through its 9 and 200 MA too.  It wasn't just gold and silver today that had problems.

The dollar rose for the fourth day, up +0.42 [+0.44%] to 96.06.  The buck is now back above its 9 EMA, and is well on the way to reversing the FOMC-announcement losses.  Commodity currencies have started to top out also; AUD fell -1.23% driving through its 9 EMA, and CAD dropped -1.19%, closing below its own 9 EMA, and printing a swing high.  Momentum indicators for both currencies appear to be signaling an imminent trend change.  A strong dollar is usually not good for commodities.

WTIC had a bad day also, falling -1.46 [-3.54%] to 39.76.  This marks a swing high for oil, and a close below its 9 EMA for the first time since late February.  Yesterday I wondered if oil would end up rallying after the Petroleum Status Report - I was ready, but prices didn't cooperate.  That was my signal to get out of the water.  You can spin whatever story you want, but if things don't go your way, you need to abandon your story and reverse direction.  The report showed a build of 9.4 million barrels, far larger than last week's 1.3 million barrel build.  Gasoline demand remains quite strong: a 7% increase year over year, but the market was not pleased.  The 9 EMA crossing and the swing high both signal: "likely trouble ahead for oil."

See, its ok to be wrong.  Reverse your position - no crying about manipulation, dog ate my homework, about markets not following fundamentals, about anything really.  Market doesn't go your way: its fine: bail out, and wait for your next chance.

SPX fell today along with everything else, losing -13.09 [-0.64%] to 2036.71.  This marks a swing high for SPX, but the move lower didn't feel particularly urgent just yet; moves in the commodities were much more dramatic.  Naturally energy equities led prices lower, with XLE off -2.19%, along with materials (-1.24%) and financials (-0.75%).  VIX rose +0.77 to 14.94.  It was a modest decline - a bit less exciting than I had anticipated in view of the topping commodity complex.  SPX remains above its 9 EMA.

TLT had a good day, up +1.13% - it has broken above its downtrend line and appears to be getting ready for a more general move higher.  TLT is signaling risk off.

JNK fell -0.52%, following through on yesterday's swing high.  It remains just barely above its 9 EMA, but is now starting to signal risk off too.   The 9 EMA crossing will be a key sign for JNK, if it occurs.  Momentum indicators signal an imminent trend change for JNK.

CRB fell hard today, dropping -2.19%, printing a swing high, and closing below its 9 EMA for the first time in six weeks.   Its a danger sign, to go along with copper, oil, palladium, gold, silver, and junk debt.

The group of markets I follow are strongly suggesting trouble ahead for commodity prices, which for now include gold and especially silver.  Risk is high.  Cash, as they say, is a position too.  You enjoyed the wash, and now it seems that it is time for the rinse.

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2 Comments

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

And it is important to remember - gold's longer term trend has changed, negative rates haven't gone away, so there is no reason to expect this decline to turn into a bloodbath.

A higher low around that $1160 you mentioned w/ a cleaned out CoT would be extremely encouraging.  

Regarding negative rates, they prob are coming, but another token rate hike (IMO) is at least somewhat likely in June, before the back pedaling towards NIRP/easing/helicopter $ begins.  That could potentially be a catalyst to send the metals lower than we hope/anticipate. Personally, I'll be looking to add some physical and a few miners somewhere b/t the 50 & 200DMAs and keep some powder dry in case they're somehow able to round trip PM back towards the lows of Dec. 

Thx again for for all the hard work in connecting these dots.  Myself and a lot of PP members have been learning a lot from your analysis. 

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5423
long term advice from Michael Belkin

So I listened to a KWN interview with Michael Belkin, who suggested buying gold stocks last November; I remember that interview, and of course in this one, Eric King gushed about how well the predictions had done.  Doubles and triples and whatnot.  The whole point being, KWN was offering a "special discount" to buy Belkin's "gold stock" newsletter: $900/year.  (What is Eric's cut?)  I was momentarily tempted, thinking "wow this Belkin fellow sure caught the turn in the miners, maybe he really is a genius."

Then I did a little searching, and I found this:

http://www.minesandmoney.com/blog-item/blog-interview-with-michael-belkin-part-1/

Turns out, Belkin also called the bottom on the miners back in July 2013.  That call didn't work out quite as well as this one.  You would have had to endure a 50% loss to capital, and you would just now be back to even had you followed his advice back in 2013.

So - I think Belkin is a smart guy, and he may even be right this time around, but - again I renew my call for a "review board" on people who give advice.  What did they say, and how did it turn out?

Here's the interview - along with your "discount code" for the $900/year newsletter:

http://kingworldnews.com/michael-belkin-3-22-16/

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