PM Daily Market Commentary - 5/10/2016

By davefairtex on Wed, May 11, 2016 - 2:27am

Gold rose +1.90 to 1267.30 on moderate volume, while silver climbed +0.09 to 17.15 on moderately light volume.  Gold initially drifted lower, but after a move lower to 1258, gold found buyers who were able to push prices more or less back to even.  Silver was supported by a general recovery in commodity prices, especially oil.

Yesterday it appeared as though nobody was interested in buying gold at all at COMEX - the selling was relentless all day long.  Today felt different, with prices drifting lower but without that same feeling of distribution behind it.  There was one concerted burst of selling that happened after 10:20 Eastern, but buyers appeared once price dropped to 1260; you could see decent volume right at that level.  Price fell no further.  I can't tell you why there were no buyers yesterday and today they decided to show up, but that's what happened.

Except for the move at 10:20 Eastern, it did not feel as though anyone was trying particularly hard to push prices lower; as a result, volume wasn't large enough for me to call a low here on its own.  I always like to see a big push lower defeated by the buyers, since that's a more conclusive result than what happened today.  We can't be sure how strong support is at 1260 unless it is strongly tested.

Silver made its low early in Asia trading, but then bounced alongside oil, which made its own low at about that same time.  The low volume for silver suggests the support at 17, like gold, was not very strenuously tested today, so we cannot really know conclusively if this is the low.  It is a positive sign, but silver's future seems tied in with oil and possibly copper.

Miners were initially sold, but rallied after seeing gold hold support at 1260.  Miners appeared to lead PM higher - GDX started to rally several hours before gold moved back into the green - with GDX up +3.74% on moderately heavy volume, and GDXJ up +3.55% on moderately heavy volume also.  Today's move took GDX back above its 9 EMA, which is good, and the candle pattern was a relatively bullish harami (+31%), but today's up-day volume was less than yesterday's down-day volume, and that's not as bullish.  Miners still appear to be under distribution, although they continue to rally given even the slightest encouragement from gold.

Platinum recovered +0.85%, palladium rose +2.03%, but copper lost -0.29%.  Still no signs of a low for copper, but the other PM elements rallied encouragingly.

The USD rallied for a sixth straight day, up +0.15 to 94.27.  The buck isn't setting the world on fire, it is just slowly chugging higher after the dramatic bounce off 92.  Is upside momentum starting to fade a bit?  Perhaps.  A near-term top for the buck would probably help PM substantially.

WTIC rallied strongly, up +1.29 [+2.98%], moving back above its 9 EMA, printing a bullish harami of its own (+37%), and recovering much of yesterday's losses.  The API report at 16:30 (+3.45 million barrel bulid) pulled oil off its highs, but only by about 30 cents.  Energy equities (XLE:+1.76%) did well also, printing a swing low.

SPX had a strong day, moving up +25.70 to 2084.39, with the heavy lifting done by energy (XLE:+1.76%), industrials (+1.72%), and materials (+1.67%).  While yesterday SPX printed a technical swing low, today made it look a whole lot more convincing.  The moves in SPX remain mostly about commodities.  My sense is, the big beat-down that commodity equities have received over the past 2 years continues to attract value buyers.  VIX plummeted, losing -0.94 to 13.63.

TLT was almost flat, up just +0.01% which is a pretty good performance considering the strength in equities.  TLT remains in an uptrend.

JNK rallied strongly, as one might expect given oil's strength, up +0.78% moving back above its 9 EMA.  No new high yet from JNK.  It likely follows oil, and is now back to looking relatively bullish.  Dips are being bought in JNK, it would seem.

CRB rose +1.83%, wiping out yesterday's losses and moving back above its 9 EMA.  It has been a choppy week for CRB, moving strongly up one day, then down the next.  It remains in a medium term uptrend, but is moving generally lower in the short term.

Today buyers showed up around gold 1260; it wasn't the dramatic and conclusively violent test I was hoping to see, but it was a lot better than the relentless selling we saw yesterday.  Miners as usual were strongly bid whenever gold has even a neutral day.  Commodities also did well, except for copper which shows no sign of a bounce just yet.  Oil handled the bearish inventory build from the API report with only a small retreat; we'll have to see how the petroleum status report goes tomorrow.  Oil could be a buy if it reacts positively; XLE certainly looks as though it may have marked a low.

Buying PM right now remains high risk - but lower than it was yesterday.  If we get another green day for gold, and commodities can improve somewhat, that's probably a buy signal for PM.  If the buck is neutral to bearish, that's even better.

For these buy signals - remember this is a daily commentary, so this is more of a "daily chart trading buy" rather than some "everyone into the water" buy-and-hold suggestion.

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davefairtex's picture
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5683
short term dollar top?

Buck may have topped out for now, its off -0.40.

Gold seems happy about that, so does silver - they've both marked some pretty convincing lows today.

Copper is up, at least to some degree.  Oil isn't so sure, probably waiting for the petroleum status report.

Miners are rocketing higher, of course.  I still marvel at the change in the miners from just six months ago.

If the buck keeps moving south for a few more days, we might see new highs for miners, and possibly gold too.

davefairtex's picture
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5683
petroleum status report: surprise draw; -3.4M barrels

Oil is now $2 higher as a result of the release.  Oil market really liked the inventory draw; oil close to a new high.

Something is wrong with the miners.  After they opened higher, they started selling off fairly strongly even though gold remained strong; they are continuing to drop now that gold is fading.  It feels like big-money distribution.  This gold rally could have been an intraday setup/"opportunity" for the big guys to distribute their mining share inventory.  We'll see what volume looks like at end of day, but so far it looks unpleasant.

Miners should not be red with gold up $10 and USD down -0.50.



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