PM Daily Market Commentary - 3/30/2016

By davefairtex on Thu, Mar 31, 2016 - 1:40am

Gold fell -17.50 to 1225.00 on moderately heavy volume, while silver dropped -0.14 to 15.22 on moderate volume.  Gold was weak all day long - although the buck was falling for most of the day, so did gold and silver, and as soon as the dollar started to rebound even slightly after 11:00 Eastern, gold fell off a small cliff and it never recovered, closing near the lows of the day.

Gold's weakness on a day when the buck sank is not a great outcome, as is gold's inability to close above its downtrend line.   Gold is now back below the 9 EMA, and the burst of buying that happened after Chair Yellen's speech yesterday seems to have been short-lived.

Gold had a contract roll today - first notice day is tomorrow, and so traders that aren't looking to take delivery (which is most of them) are selling their April gold contracts and rolling to the June contract.  This means that trading is now happening on the June contract, but stockcharts continues to track April gold as the "front month" , and so today's volume in the chart below is not representative of what actually happened.  Perhaps first notice was part of the reason gold did poorly; gold often sells off right around this time.

While gold looks a bit bearish in dollars, the bearish picture is a lot clearer when viewed in Euros.  "But I don't own Euros, why should I care?"  My guess is, gold's trend is being largely set by European money due to the ECB's negative rate policy; if the bulk of the buying and selling is happening over there, and as a result they are setting the trend, if we want to eliminate movements of USD as a factor, looking at gold priced in Euros is a useful exercise to see what gold's real trend happens to be, independent of currency.

Here we see a clearer picture - gold's downtrend is more pronounced, the 9 EMA has acted as resistance for the past four weeks, and gold has now closed below its 50 MA.  In Europe, there was no swing low yesterday, and gold never closed above its 9 EMA.  If the trend is being set in Europe, its quite clearly down.

Silver's drop today entirely eliminated yesterday's rally; silver is chopping sideways above the 15.20 support level, but sellers still appear to have the upper hand.

Miners fell today, with GDX down -1.51% on moderately light volume, while GDXJ dropped -1.61% on moderate volume.  The miners sold off initially on gold's weakness, but managed to rally back by end of day, printing a doji candle which represents indecision.  That's about as good as you can hope for on a day when gold drops $17.

Platinum fell -0.62%, palladium dropped -2.35%, and copper was down -1.33%.  Copper's five-day-old correction has me concerned, as it suggests problems in China and/or the overall economy, and I take it as a signpost for commodities overall.  Copper could just be having a minor correction in a larger move higher, but if it doesn't find support soon, that would be a bad sign, especially for silver.

The dollar fell again today, losing -0.33 to 94.82.  The buck made a new low today for this cycle, and while it managed to bounce back somewhat after making the low, it still looks like it is on a path to testing 94 support in the near future.  The weakness in the buck did not help commodities at all, which suggests to me that commodities are very weak at this point, and are likely to continue lower

WTIC fell just -0.19 to 38.30.  While this drop seems modest, today was actually a failed rally attempt by oil: oil rallied strongly going into the Petroleum Status report, but after a brief spike higher at 10:30 where oil momentarily touched 39.85, it then sold off for the remainder of the day.   While the report showed a lower-than-expected rise in inventory, the market used the initial enthusiasm for the results as an opportunity to sell.  When market sells off on bad news, that's bearish.  Stay away until that dynamic changes.

SPX climbed today, rising +8.94 to 2063.95.  The move higher in SPX was much stronger initially, but the rise in equity prices was tempered somewhat by the weakness in oil.  Not long after oil peaked, the equity market sold off and lost perhaps half of its gains on the day.  While SPX did not (quite) print a shooting star, falling commodity prices do not appear to be supportive of a move higher in equities.  VIX fell -0.26 to 13.56.

TLT sold off hard today, dropping -1.05% - and that was after a decent-sized rally which occurred after the equity market topped out.  While bonds did manage to find support on the 50 MA, they definitely had a bad day today.

JNK rose +0.35%, a nice gain on a day when oil fell.  JNK has now moved back over its 9 EMA by a few pennies.  Momentum still seems to be down, but the bounce on JNK bears watching.  Call it a mild risk on signal.

CRB dropped -0.29%, remaining below its 9 EMA.  It is a poor performance on a day when the dollar fell.

Dollar weakness helped gold only briefly; my only diagnosis is that the gold-buyers in Europe have turned into gold-sellers, and this has continued to pressure gold prices lower.  Miners are still doing well.  The right answer in almost every case has been to buy every big one-day sell-off in the mining shares.  This can be seen more easily through the GDX:$GOLD ratio, which continues to chug higher irrespective of the recent drop in gold.

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