PM Daily Market Commentary - 4/13/2016

By davefairtex on Thu, Apr 14, 2016 - 12:21am

Gold fell -13.30 to 1244.10 on moderate volume while silver rose just +0.02 to 16.24 on  very heavy volume.   Gold started selling off in Asia, and was down $15 by the time the US market opened.  It never recovered.

Gold went from mildly disagreeable yesterday to substantially more alarming today; the $13 drop resulted in a swing high, and while gold remains above its 9 EMA for now, the head and shoulders pattern that is forming tells me that risk is increasing dramatically.  My code says there is a 52% chance this swing high marks a near-term top for gold in this context.  The candle print is an "evening star", a bearish reversal pattern.  Volume remains consistently moderate.  Before we panic, let's see how everything else did.

Silver had a wide trading range today, but ended up closing almost flat.  This almost-doji candle (a "high wave") reflects indecision, and when you add the high volume, it suggests a big battle between shorts and longs.  Longs are trying to buy the breakout, while the shorts see an opportunity to possibly sell the high.  Code gives only a small chance of this being a high - but it doesn't factor in volume.  A high volume indecision candle can be a sign of a top.

Interestingly, the gold/silver ratio has plummeted to 76.63, losing -0.91 just today.

See how the volume has remained relatively constant over the past three days, but the first day had a huge move, while today's move was almost flat.  This tells us that the selling pressure today was equal to the buying pressure, something that was definitely not true three days ago.

Miners showed us today why I said "buying was high risk" yesterday: GDX fell -2.75% on moderate volume, while GDXJ lost -2.25% on moderately heavy volume.  GDX printed a swing high, and the "bearish tasuki line" candle print yields a 74.9% reversal chance in this context, according to my code.  While GDX remains above its 9 EMA, we may have seen the top for GDX for a while.  Miners might find support on the 9 EMA and continue higher, but the odds seem to be against it.

Platinum fell -0.09%, palladium dropped -0.32%, while copper continued moving higher, up +1.00%.  Copper is now back above its 50 MA, and is continuing to move higher off yesterday's "strong line" candle.

The USD staged a dramatic rally, climbing +0.82 to 94.76, printing a swing low.  My code says this is a 62% chance of a reversal in this context - a sort of a bullish "morning star" pattern.  The rising dollar will encourage the commodity shorts, and make it harder for PM prices (priced in dollars) to rise.  Its no coincidence that gold printed its swing high on the same day the buck reversed.

Oil fell today, losing -0.25 to 42.76, making a new high and then falling back.  The Petroleum Status report at 10:30 eastern showed a disagreeable inventory build, which was not a surprise given the API report from yesterday.  Oil price actually rallied following the report, but could not hold onto its gains and fell back by the close.  We may be out of gas for this phase of the oil rally, and oil is a tad overbought.  The higher dollar probably didn't help.  There is a meeting of OPEC in Doha this weekend.  Perhaps they will say something interesting.

Here's a curious article:

"You can't imagine all the pressure that is coming from Washington to ensure the failure of the efforts we have made during the last year to create a common strategy among OPEC and non-OPEC producers to stabilize the market and prices," Maduro said during his weekly televised broadcast.

"These are almost war-like pressure on governments, on heads of state," he said, adding that U.S. policy makers have a "fatal obsession" with Russia, OPEC and Venezuela's leftist government.

SPX rallied strongly today, up +20.70 to 2082.42, closing just above a previous high set back in December 2015.  Market was led higher by financials (+2.27%), industrials (+1.49%) and cyclicals (+1.41%), which is a standard "bullish market" sector configuration.  Earnings season is starting now; JPM reported an "earnings beat" vs (previously lowered) expectations - but was a drop of 10% year over year.  Still, it isn't the specific news, its the market's reaction, and that resulted in a +4.23% jump in JPM's stock price.  This led financials higher, and they led equities higher overall.  VIX dropped -1.01 to 13.84.

FWIW, I was short until yesterday.  When it became clear that XLE would carry the market higher, I bailed out.  Keeping losses small is the key to surviving being wrong.

Perhaps more important that JPM's "earnings beat", we also have an Italian bank rescue plan being put in place: 5 billion dollars will somehow plug a 360 billion dollar non-performing loan problem.  I think rather than the specifics of the plan (which seem dreadfully weak), the market is likely rallying because this is hard evidence that the European governments seem willing to continue to use taxpayer money (this time, more stealthily) to rescue the banks.  Good for shareholders & bankers (but bad for taxpayers) = market rallies.  Its all about picking winners.  DB also rallied hard today, up +8.50%.  Perhaps they have a lot of exposure to the Italian banking system.  I'm just guessing.

Long term, of course, it doesn't work; there's no way the Italian state can possibly plug the hole in its banking system.  But this is a daily commentary, so "long term" is generally above my pay grade.

TLT rose +0.35%, possibly because of money pouring back into the US with today's dollar rally.

JNK broke out above its previous high, up +0.70% and closing convincingly above its 200 MA.  JNK is signaling risk on.

CRB managed to eek out a +0.09% gain, a decent performance given the big rise in the buck.  CRB remains in a short term uptrend.

So the buck reversed, gold has printed its swing high, as have the miners, and the H&S pattern for gold is becoming clearer.  Storm clouds appear to be gathering for PM, and risk is high.  If the buck follows through off its lows, I see lower prices ahead for gold and the miners.  Also, the strength in the equity market (and specifically the financials) is a concern.  At the margins, who steps up to buy crash insurance when taxpayers still foot the bill for the bad bets of the bankers?  You may not like it, but its foolish to stand in the way of the (short term) oncoming train.

Again, daily commentary.  :-)

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davefairtex's picture
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5683
overnight spikes

I'm just noticing a couple of overnight spikes for both gold and silver.  Both gold and silver were hit - $10 for gold but only $0.08 for silver at 20:22 Eastern.  We haven't seen spikes for quite some time, and suddenly, after the swing high, they start to appear.

To me this is evidence that this sort of thing only works - or it works best - when prices are already moving downhill, and the buyers have already shown they are out of ammo.

As I said in the commentary, risk is high right now for PM.

Jim H's picture
Jim H
Status: Diamond Member (Offline)
Joined: Jun 8 2009
Posts: 2391
Rob Kirby's prediction

This may be the manipulation bombshell that Rob Kirby said was coming a week or two ago;

In a curious twist, the settlement letter reveals a stunning development, namely that the former members of the manipulation cartel have turned on each other. To wit:


“In addition to valuable monetary consideration, Deutsche Bank has also agreed to provide cooperation to plaintiffs, including the production of instant messages, and other electronic communications, as part of the settlement. In Plaintiff’s estimation, the cooperation to be provided by Deutsche Bank will substantially assist Plaintiffs in the prosecution of their claims against the non-settling defendants.”'

Still think that today's price represents the balance point between supply and demand of physical Gold and Silver?  

davefairtex's picture
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5683
kirby's bombshell

So Jim.  If you actually go read the article you quoted, its pretty clear this is talking about the "silver fix" manipulation, which was essentially an intraday game played by the bankers to hammer the price for silver for a 15 minute period on a relatively regular basis.

Price was pounded down, and 15 minutes later, price rebounded.  I saw this on a study I did several years ago.  Its pretty easy to see.

I have said before, and I will say as many times as you want me to, that banks engage in these sorts of mostly-intraday games in order to skim some extra money, picking their customers pockets, as it were.

I'm glad its all coming out.  It needs to.  Bank customers will benefit, since they won't be hosed on a daily basis, and hopefully they'll even get some compensation.  I wish people would go to jail for stuff like this, but they won't.

And regardless of what the outcome is, the trend will remain unchanged because this isn't trend manipulation we're talking about.  Its the equivalent to "banging the close."

Executive Summary: Still Not Trend Manipulation.


earthwise's picture
Status: Platinum Member (Offline)
Joined: Aug 10 2009
Posts: 848

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