PM Daily Market Commentary - 4/12/2016

By davefairtex on Wed, Apr 13, 2016 - 1:42am

Gold fell -2.40 to 1257.40 on moderate volume while silver jumped another +0.28 [+1.76%] to 16.22 on very heavy volume.   Gold traded sideways within a narrow range, while silver dipped a bit in Asia and then rallied through the close in NY.

Gold took a rest today, but the rest was mildly disagreeable: volume was as high as during yesterday's rally, while the trading range was quite narrow.  Narrow trading range and decent volume suggests to me that the commercials are probably unloading short at these price levels once again.  However no dangerous candle print occurred; just a spinning top, which gives us no clue as to future direction.

Gold did print a new high today, which means a swing high would be a relatively simple matter to see tomorrow.  A trader I respect sent me a chart showing a potential head & shoulders pattern forming on gold.  If gold prints a swing high, that pattern becomes a lot more real.

Silver continued to jump higher, breaking out to a new multi-month high by a five-cent margin and closing quite near the highs of the day.  Silver was encouraged by big rallies in both copper and oil.  Volume was once again massive.  A more conclusive break above the previous high could lead to a big move.  As you can see from the recent moves, silver does tend to go crazy once it decides it wants to move.

Miners sold off in the morning, but rallied back relatively quickly as the dip-buyers showed up, with GDX closing up +0.79% on moderate volume while GDXJ climbed +1.26% on heavy volume.  Both miner ETFs made new highs.  Candle print was a "high wave" which by itself tells us nothing: indecision.  We'll need more evidence tomorrow regarding direction.  Miners at this point are a bit overbought, but if gold continues higher, they probably will too.  And yet, how many goldbugs are feeling the pain of "missing out" on this miner rally?  While its ok to buy breakouts in strong markets, we are past the breakout stage and now is definitely not the time to go long.

Platinum rose +1.11%, palladium was up just +0.04%, while copper staged a huge rally, rising +3.27% blasting back above its 9 EMA and printing a "bullish strong line" candle - which are relatively rare, and in this context, may mark a low in copper for a time (64% chance).  Copper's rally was a day-long affair - steady buying starting early in Asia and running through to the close in NY.

The USD was unchanged on the day at 93.94, but had a wide trading range, making a new low at 93.62, and printing a "long legged doji" (20% chance of a low).  The dollar appears once again to be trying to put in a low, but has not done so yet.  A reversal in the buck might well cause gold to print its swing high.  At the very least, the buck does seem to have buyers down here below 94.

Oil rallied again today, up +1.27 [+3.04%] to 43.01, breaking above its previous high and making a new multi-month high in the process.  Part of this new high came from contango from a contract roll which happened yesterday (I didn't notice!) - but even without that, the current CLM16 contract did manage to put in a new high.  The oil rally was sparked by a rumor that Russia and Saudia Arabia have agreed (again!) to freeze production, regardless of what Iran decides to do.  However after market close, the API inventory report shows a build of 6 million barrels - this chopped off 70 cents from oil's move today, and oil has continued to drop in Asia.  It will be interesting to see if the oil rally can handle a big inventory build from the Petroleum Status report tomorrow at 10:30 Eastern.

SPX was trading unchanged until that "price freeze" oil rumor hit the wires: immediately afterwards SPX tracked oil higher, eventually closing up +19.73 to 2061.72, and closing back above its 9 EMA.  The SPX rally was led by oil equities which had a terrific day, with XLE +2.98%, as well as materials (+1.39%) and financials (+1.26%).  The moves make sense: oil and commodities both rallied sharply, so related equities rallied too.  VIX dropped -1.41 to 14.85.

TLT fell -0.61%, closing below its 9 EMA and looking as though it is entering a short term correction.  It is signaling risk on.

JNK rose +0.64%, finally putting in a good day following oil prices higher.  JNK closed above its 200 MA for the first time since June 2015.  JNK appears to be in the process of forming a choppy cup & handle pattern; a breakout higher would be a strong risk on signal.

CRB had a great day, rising +2.13%; it is moving up towards a re-test of its recent high.  Commodities appear to be improving at least for now.

No new information for gold or the miners; silver's rally looks to be an artifact of big rallies in copper & oil.  Trend remains up until the market tells us otherwise.  The potential H&S pattern for gold is a matter of some concern - it bears watching, and if the buck finally reverses, that could trigger the formation of that "right shoulder" leading to a potentially large sell-off in gold. That said, we need more information before we can draw any conclusions.  Today might just be a pause on the way to a breakout.

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