PM Daily Market Commentary - 4/11/2016

davefairtex
By davefairtex on Tue, Apr 12, 2016 - 3:44am

Gold rose +19.70 to 1259.80 on moderate volume while silver screamed up +0.58 [+3.74%] on very heavy volume.   Gold climbed steadily for most of the day, while silver had a big spike higher at 08:25 eastern and just never looked back.

Gold continued moving higher off last Thursday's break above the downtrend line.  Up-day volume is stronger than the down-day volume, gold is closing near its day highs (candle is called "white marubozu" which is seldom a reversal bar), and as long as this picture is in place, I don't see any reason for the move to stop.  We also had a bullish MACD crossover today as well.  Previous high is 1287.80, and based on what we are seeing now, a break above that would probably lead to a flood of buying, similar to what we're seeing now in the miners.  Traders look to be willing to buy breakouts, and so presumably a break above 1287 would be no different.

Most probably today's move is about managed money going long and perhaps covering short also, but if the COT report shows that the commercials are covering too - that would be earth-shaking.  We'll only know that after the close on Friday.

Silver ignored copper's relative weakness - perhaps it was moving in sympathy with oil.  Anyhow, it shot higher, closing near the highs, on massive volume.  Silver is not far from its previous high at 16.17, and judging by today's move, a move above the previous high might well lead to another explosion higher.  I think there is an element of short-covering to today's rally, but its probably also a fair amount of buying by managed money.

Miners gapped up again at the open today breaking convincingly above the previous high, and it just continued to climb, with GDX up +5.88% on heavy volume, while GDXJ shot up +6.92% on very heavy volume.  Volume is increasing as the mining shares move higher - that's bullish.  Miners are clearly leading the PM complex higher, and the juniors are leading the senior miners also.

Platinum rose +2.38%, palladium climbed +0.83%, while copper tried to rally and failed, dropping -0.19%.  Copper is oversold, chopping sideways, but for now unable to rally.

The USD fell -0.31 to 93.94, breaking below round number 94 support and making a new low, touching 93.74 briefly intraday.  The falling dollar continues to support PM and commodity prices, and to me is a sign that the market increasingly believes that no rate rises are going to happen.  Perhaps that is what is underpinning gold also.  There is still support for the buck under 94, but it ends at 92.52 - a break below that price could be catastrophic for the buck.  There is no chart support for a very long way below 92.

Oil blasted higher today, up +2.08 [+5.24%] to 41.74, closing above its 200 MA for the first time since July 2014, when oil was trading around $100.  While oil hasn't made a new high for this cycle just yet, the close above the 200 is a sign that - just perhaps - the worst of the "oil glut" is behind us now.  We'll know more after Wednesday's Petroleum Status report.  Curiously, energy equities (XLE) printed a bearish engulfing candle, with XLE down -0.42% on the day, but my code says it is only a 34% chance of a top.  Still, it is quite a contrast from what is happening with the mining shares.  That's probably because the XLE:$WTIC ratio is at relatively high levels, while the GDX:$GOLD ratio is still down substantially from its 2011 high.  Miners are cheap, while energy equities are expensive, relative to the underlying commodity.  Oops, I mean "gold is money."  :-)

SPX rallied in the first half-hour of trading, but then sold off for the rest of the day, ending down -5.61 [-0.27%] to 2041.99.  SPX remains below its 9 EMA, and appears to be headed lower, albeit somewhat slowly.  Current short-term trend is down.  VIX rose +0.90 to 16.26.

TLT fell slightly, losing -0.13% but remaining above its 9 EMA - still in an uptrend.  I'd guess this is more an artifact of foreign selling, since the buck dropped on the day.

JNK rose +0.18%, continuing its slow climb on the back of the oil rally.  To me this relatively feeble move given oil's $2 rise makes JNK look a bit weak.  It feels like risk off.

CRB climbed +0.46%, a modest move considering the moves in PM, energy, and the drop in the dollar.  Commodities look to be struggling to move higher at this point.  Copper tells us this too.

Miners broke out, and are leading PM higher.  So far it looks like managed money is winning the struggle against the commercial shorts.  Could gold break out above its previous high?  It could, especially if the buck continues to fall.  I get the sense that gold also likes a weak equity markets too.  This correlation is relatively recent, but its also pretty strong.

A medium-risk buy point was the break above gold's downtrend line.  Buying now - that's higher risk, especially in the miners.  They remain undervalued, but it will probably be a very volatile journey back to "properly valued"-land.

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