PM Daily Market Commentary - 4/5/2016

By davefairtex on Wed, Apr 6, 2016 - 1:35am

Gold rose +15.90 to 1232.90 on moderate volume, while silver climbed +0.24 to 15.14 on moderate volume also.

Gold rallied right up to its downtrend line today and poked briefly through it intraday, but was unable to close above it.   Gold is at a decision point; it will either break above the downtrend line possibly heralding a breakout to new highs, or it will move below the 50 MA, which will probably lead to some more serious selling.  I can't tell which way it will go.  Normally I'd place my money in the direction the COT report is pointing...but "things could be different this time" so I'm just going to wait for the market to reveal itself.  Tomorrow we have the release of the minutes from the FOMC's prior meeting; sometimes that ends up moving prices in one direction or another.

What is gold-in-Euros telling us?  Gold has been unable to close above its 9 EMA over in Europe.  That's bearish.

Silver rallied off its 200 MA but ran into resistance at the 50.  While it was a nice day, silver remains in a strong downtrend and today's performance doesn't change this.  Down day volume remains massive, while the rallies are much less exciting.  Silver needs a close above that downtrend line to start its recovery.

In recent months, every miner down-day has been followed by a dip-buying rally, and today was no exception.  Today GDX rose +3.07% on moderate volume, while GDXJ climbed +2.95% on moderate volume also, wiping out yesterday's losses.  The move pushed GDX back above its 9 EMA, but the downtrend line remains intact.

Platinum rose +1.21%, palladium dropped -0.90%, and copper was largely flat, printing a doji on the day.  For copper, indecision definitely looks better than the steady stream of red candles.  A low for copper here would help commodities overall.

The USD rose +0.11 to 94.64, a more or less sideways move, pretty much what it has been doing for the past three days.  The buck is chopping sideways right at its lows, unclear on where it will go next.  The Yen, for some reason, is breaking out to levels not seen since late 2014.  A dollar bounce would probably send gold lower, but the near-term direction for the buck is far from clear right now.

WTIC finally had an up-day, climbing +1.10 [+3.10%] to 36.56, with much of the gains coming after the 16:30 API oil inventory report that revealed that US oil inventories dropped by 4.3 million barrels.  Oil promptly rallied about 50 cents following the release.  Oil printed a bullish harami candle pattern, which my code says is a 38% chance of a low in this situation.

SPX fell -20.96 to 2045.17, closing below its 9 EMA for the first time in eight weeks.  While SPX avoided printing a swing high by a narrow margin, it may be starting to break down; the drop below the 9 EMA is definitely a warning sign.  Curiously, it was utilities led the market lower, with XLU dropping -1.88% - which is not the normal thing to start a correction.   Normally utilities rally when the market weakens.  VIX rose +1.30 to 15.42.

TLT jumped higher, rising +1.09% and making a new cycle high.  If the equity market starts to correct in earnest, it looks like bonds may do well.  TLT is signaling risk off.

JNK dropped again today, losing -0.41% and signaling a return to risk off.

CRB also fell, losing -0.34% and continuing its move lower.

Gold's rally today was encouraging, but until gold closes above that downtrend line, it is just another rally in a downtrend.  Miners remain strong, buck isn't sure if this is a low, and SPX looks like it might just start to correct.  Ultimately, I think the gold in euros chart wins: gold remains below its 9 EMA over in Europe, and until it can close above the 9, the overall trend will continue to be down.

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1 Comment

davefairtex's picture
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5681
oil rally

Looks like we got a decent buy signal for oil - WTIC took off (after some back and forth) following the 4.9 million barrel inventory draw reported at 10:30 Eastern.

Gold and silver both seem happy about this too.

We have the FOMC minutes release coming at 14:00 Eastern.


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