PM Daily Market Commentary - 4/7/2016

davefairtex
By davefairtex on Fri, Apr 8, 2016 - 7:19am

Gold rose +18.00 to 1242.00 on moderately heavy volume while silver rose just +0.16 to 15.23 on moderately heavy volume also.  Gold's gains came long before the US market opened; copper started dropping

Gold broke cleanly through its downtrend line today, and on relatively good volume.  The chart is telling me that managed money is winning the battle against the commercials.  In Europe, gold managed to close above its 9 EMA for the first time in four weeks.  If I weren't sitting on an island right now listening to the ocean, I'd be considering buying this breakout.

Silver rallied strongly today but was only able to keep half its gains, closing every so slightly above its 50 MA.  It looks as though both the downtrend line and the 50 MA are providing resistance to silver.  In addition, a big drop in copper may have contributed to silver's relative weakness.  The gold/silver ratio rose +0.30 to 81.55.

Miners gapped up at the open and rose modestly today, with GDX up +3.13% on moderate volume, while GDXJ climbed +2.67% on moderately light volume.  The rising volume on the mining shares over the last several days is a positive sign, especially because the up-day volume is higher than the down-day volume.  If gold continues moving up, miners will definitely break out.

Platinum rose +1.30%, palladium fell -0.84%, while copper more or less collapsed, dropping -2.96% [6 cents] on some really heavy volume.  Something is wrong somewhere for this to happen to copper.

The USD rose +0.06 to 94.50, but the trading range was relatively large, with the buck making a new low to 94.04 intraday. 

Oil had a bit of trouble today, falling -0.20 to 37.53, dropping back below its 9 EMA.  Its probably just taking a rest after two days of a strong move higher.  The candle print my code saw was a "high wave", which doesn't generally lead to reversals.

SPX started selling off in the futures markets, and just continued dropping after the US open, losing -24.75 to 2041.91, closing back below its 9 EMA.  Financials (-1.88%) and materials (-1.45) led the market lower.  SPX also printed a swing high.  Equitites are starting to look a bit more fragile, the financials look as though they are turning medium-term bearish, and the bank stocks look even worse.  VIX rose +2.07 to 16.16.

TLT did very well, rising a big +1.23% and making a new high for this cycle.  Bonds like to see weak equities, and right now TLT is poised to challenge its previous high set back in February.  That's a risk off signal from bonds.

JNK fell -0.59%, but it remains within its recent trading range.  It is a risk off signal, but it will have to sell off a lot harder than this to move into a real downtrend.

CRB dropped -0.41%, a decent performance given copper's near-collapse.  It remains above its 50 MA, but below its 9 EMA - in a sort of no-mans-land, trend-wise.

So gold finally managed to break above its downtrend line.  The patterns that follow a trendline breakout include 1) a brief move higher, followed by a reversal and a plunge below support, 2) a retracement back to the downtrend line followed by a breakout higher, and 3) a straight line breakout from here.  Its hard to know which one gold will elect.  Maybe the safest trade would be to buy any dip that found support on the (former) downtrend line, with a stop below the 50 MA - i.e. betting on option #2.

And I might decide to do this using the mining shares rather than gold itself, since the miners continue to outperform gold.

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