PM Daily Market Commentary - 4/20/2016

davefairtex
By davefairtex on Thu, Apr 21, 2016 - 1:14am

Gold fell -6.00 to 1245.80 on moderate volume, while silver was mostly unchanged, up +0.01 to 16.97 on extremely high volume.  Silver made a new high today, but was unable to hold its gains through the close, printing a very high volume doji candle.  A strong dollar rally put a lid on PM, especially gold.

Gold tried to rally early in the day, but ran into selling at its downtrend line again.  Once the dollar started to rally more enthusiastically, this caused gold to eventually tip over and sink.   Gold ended up printing a bearish harami on the day, which in this context is a 41% reversal chance.  I think that chance increases if the buck continues to rally.  But you probably knew that without me saying it.

Silver tried hard to rally today, making a new high to 17.25, but the strong dollar caused trouble.  The massive volume with an "indecision" candle (pattern: "northern doji": 30% reversal chance) is worrisome; the struggle between bears and bulls came out almost exactly even today.  And by bears, I mean those commercial shorts who are probably loading up short big time right now.

Given the strong rally in oil and the other commodities, silver's non-move also looks a bit concerning too.  Silver is a high risk buy right now, as it is quite overbought.  If you worry that you are missing out on the big silver move...the more worry you feel, the closer we (probably) are to the cycle top.

After yesterday's less-than-convincing breakout for our senior miners, they sold off today after making new highs, with GDX off -1.81% on heavy volume and GDXJ down -3.83% on very heavy volume.  While the candle prints on the ETFs aren't anything my code specifically recognizes, a survey of the various individual company candle prints shows a collection of bearish candle patterns that range from KGC's "dark cloud cover" (-37%) to CDE's "bearish engulfing" (-66%).  Its not universally ugly, just mostly so - call it roughly a 40% chance of today being the high for the miners.

We should probably wait for a cross of the 9 EMA before calling the top, however; miners have been very well bid over the past few months and it would be a mistake to panic out too quickly, and even a 9 EMA cross isn't any sort of death knell, since that very event happened last month and the miners just consolidated sideways rather than breaking down.

Platinum climbed +0.40%, palladium rose +1.96%, while copper rose +0.43% and managed to struggle above its 200 MA.

As mentioned, the USD rallied strongly today, up +0.52 to 94.47; buyers showed up for the buck just below 94, ending the day printing a "bullish harami" candle pattern: 44% chance of this being the low.  Mostly it was the Euro that fell vs the buck, dropping -0.56% and printing an ugly-looking bearish engulfing.  No odds on this; my code doesn't track currencies, but if the Euro keeps dropping that won't be great for gold.  Yen also fell, down -0.51%.  ECB meets tomorrow; perhaps that's why the Euro sold off - traders don't want to be long Euro in case Draghi says something dovish.

WTIC shot higher, up +1.55 [+3.65%] to 43.97, making a new high for this cycle.  Oil had sold off earlier in the day, but the Petroleum Status report came out at 10:30 Eastern (inventory build: 2.1 million barrels) and that resulted in oil doing a moon shot, up +2.50 in a 2.5 hour period.  When something rallies on pretty much any news, that's bullish.  I can't tell you why the buyers are coming out of the woodwork, but I can say its probably best to stay on the Oil Train until it stops behaving this way.

SPX was mostly flat today, up just +1.60 to 2102.40.  Energy (+0.90%) and financials (+0.70%) led, while utilities were crushed (-2.50%).  Its unusual to see utilities hammered this hard.  VIX rose +0.04 to 13.28.

TLT also dropped hard, down -1.10% closing below its 50 MA for the first time this year, causing me to bail out of my long position.  Poor me!  Curious that both long bonds and utilities caved today.  That might be more related to the ECB meeting than anything else.

JNK rallied +0.20%, a bit of a feeble move given oil's big move higher.  It looks like there is selling pressure on "US assets that have a yield" today.

CRB blasted up +1.97% making a new high for the cycle.  All of a sudden, commodities are starting to look a lot better - CRB is up 17% from the lows marked in February.  That 200 MA is not far away.  This should help silver, at least to some extent.

Gold remains weak, silver has run into some serious selling, and the miners are starting to see some selling too, and may have put in a top - although I've said that before, and it hasn't happened yet.  Oil's rally continues - it rallies on pretty much any news right now, which is quite bullish.  So where to for PM from here?  Gold needs to close above its downtrend line, its as simple as that, or else it will correct.  That's the nature of a downtrend line.  If the sellers keep winning, price will drop.

As I write this, silver has broken out again in Asia, with a new high to 17.42.  Gold is not keeping up.

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10 Comments

Jim H's picture
Jim H
Status: Diamond Member (Offline)
Joined: Jun 8 2009
Posts: 2391
Paper markets vs. physical

For those of us who believe that today's paper markets are not representing (via price action) the true physical supply vs. demand.. I offer a few commentaries;

1)  Craig Hemke has done a great job of showing how the paper markets distort PM pricing.  I have pointed out here at PP.com for years the fact that the PM's.... ALL OF THEM... Silver, Gold, Platinum, and Palladium, are the most shorted (or highest open interest) materials in the Comex.  My take is that the market making bullion banks have found the levels of open interest necessary to control the markets, Silver taking the most;

    http://www.tfmetalsreport.com/blog/7576/fun-comex-open-interest

2)  An experienced commodity trader cries foul;

http://www.zerohedge.com/news/2016-04-20/one-commodity-trader-writes-wha...

Jim H's picture
Jim H
Status: Diamond Member (Offline)
Joined: Jun 8 2009
Posts: 2391
WOW... PM's up big on US open

This market is really trading differently.  Is this the market's breaking out due to China's new fix?  Is this sympathy with commodities? 

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5694
if-then statements

JimH-

My take is that the market making bullion banks have found the levels of open interest necessary to control the markets, Silver taking the most...

If true, then it is quite clear that the bullion banks must have wanted silver price to rise to 50 back in 2011.  Otherwise, it simply could not have risen.

Its one of those logic things.

If they can control the markets, and the price rises, then they must have wanted the price to rise.  No other conclusion is possible given your conditions.

 

sand_puppy's picture
sand_puppy
Status: Diamond Member (Offline)
Joined: Apr 13 2011
Posts: 2041
PMs way up, then ....

Silver this morning is way up!   Then:

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5694
ECB meeting

The buck is on a major roller-coaster right now.  After jumping up 0.50 yesterday, it dropped back down 0.80 this morning, and is now rebounding back up again.  That gyration is apparently causing prices of PM to bounce all around.  My guess: it is about the ECB meeting and Draghi's press conference.

Gold jumped 10 bucks earlier, and has now lost it.  Silver hit 17.72 and now is back down to 17.25.  Bonds down -0.80%.  Its the usual central banker driving the markets.

I should have mentioned the ECB meeting a bit more emphatically in my report.  Sorry about that.

SP: don't just look at silver in isolation.  Look at other stuff that is bouncing around violently at the same time.  Otherwise you'll imagine "manipulation" when its just a form of contagion and scared traders first panic-buying, and then panic-selling 30 minutes later.

If silver closes here, it's a high volume "shooting star" candle print which I'd say almost certainly signals a top.

Jim H's picture
Jim H
Status: Diamond Member (Offline)
Joined: Jun 8 2009
Posts: 2391
PM's puke...

http://www.zerohedge.com/news/2016-04-21/precious-metals-puke

What goes up... must not be allowed to...

Someone just decided this was the perfect time to dump over $2 billion worth of notional paper gold onto the markets...

20160421_gold_0.jpg

 

Over 16,000 gold contracts (and 7,500 silver) were dumped in that 5/10 minutes segment.

It appears Draghi did not like the impression of his impotence that precious metals were suggesting

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5694
one-way logic

Yeah Jim, the fact that silver is overbought, and the fact that the dollar is rallying implies that it must therefore be manipulation when the rally fails after rising $2 in the past 10 trading sessions.

You do realize that things eventually stop going up, right?

I didn't hear you talking about "manipulation" on the way up.  But here, when the rally finally fails, it's all about the evil banksters stopping your precious thing from climbing uninterrupted back to 50.

And even if it did that, and then corrected, you'd still be talking about the evil banksters controlling everything.

Unbelieveable.  Religious-fanatic thinking.  No rational thought need apply.

Did you notice that copper had a failed rally, as did crude oil?  Equities are selling off too.

But no.  It's banker manipulation of silver.   Because that's all you ever look at!

Luke Moffat's picture
Luke Moffat
Status: Gold Member (Offline)
Joined: Jan 25 2014
Posts: 384
Bearish Engulfing v2.0?

2nd attempt at a Bearish Engulfing in Stocks? Saw 1 on the 6th April now looking at one on the S&P 500, FTSE 100 and Dow Jones.

Or am I clutching at straws? :)

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5694
DJIA swing high

Looks like a swing high going into the close for DJIA and SPX.  I'll know more tomorrow when I run my update what the various sectors look like and what the odds are for the various reversals.

Also a swing low for VIX.

Also looks like an engulfing for JNK, which is a bearish sign overall.

Uncletommy's picture
Uncletommy
Status: Platinum Member (Offline)
Joined: May 3 2014
Posts: 637
Market control = volume control

Many years ago, an old cattle broker told me that any time you can control 30 to 35 % of the transactions at the auction mart, you can be pretty well assured of controlling the price, if you have the patience and watch the action carefully. Most of the cattle offered for sale on any given day are there to be sold and not purchased; therefore, the sellers will be price takers and not makers. This fellow had inside relationships with the owner of the auction mart and very few cattle ever left the stockyard.. Most were sold the next day. The first few lots through the chutes usually went at a discount, but prices slow rose through the day.

Every transaction came with a fee or commission. With the speed that high frequency traders move stocks and options through the financial markets, is it realistic to think there is NOT collusion amongst the major firms.

The really cool part of this scenario was that the cattle buyer was close to the Canadian-US border, so when the price was low, he'd move cattle to the country with the most favorable exchange rate. The beauty of PM's is that you don't have to feed them everyday. The cattle broker now lives in Costa Rico and is retired.

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