PM Daily Market Commentary - 5/26/2016

davefairtex
By davefairtex on Fri, May 27, 2016 - 3:53am

Gold fell -4.50 to 1219.80 on moderately heavy volume, while silver was unchanged at 16.34 on moderate volume.  Gold staged a $10 rally in Asia, then traded sideways up until the US market opened, when it was pounded lower repeatedly, and then drifted sideways into the close.  A weaker dollar was not enough to rescue gold from today's assault.

Intraday, it really did look like the shorts were out in force; there were a fairly large collection of intraday price formations that ended up with small price spikes lower.  Unlike the relentless liquidation from two days ago, this felt like far more of a struggle, with one group trying hard to force prices lower.  Gold avoided making a new low, but the nascent rally from yesterday and early in Asia was definitely was stuffed during US market hours.  The longs didn't have enough conviction to overwhelm the short assault.

On the chart, we see the failed rally attempt from today.  As of this writing, gold has made a new low in Asia to 1212, but has rebounded.  Gold is fairly oversold (RSI-7 = 20) and the bounce in Asia shows that dip-buyers remain.  Whether they are numerous enough at these price levels...that's the question.

If prices can be forced through 1206, we could see another round of long liquidation.  There are probably a large number of stops sitting under 1206, and if I were a commercial, that would be my goal.

Silver rallied more strongly than gold, moving back up to its 9 EMA, but it was unable to maintain the gains, printing a tall doji (indecision) candle on the day.  Possibly this was due to copper having a failed rally also, or maybe silver just followed gold back down.  Today's candle print by silver wasn't a pattern I recognize; doji candles usually represent indecision, so let's say this was neither good nor bad.  Silver remains just above its 16.00-16.25 support zone.

Miners fell today, with GDX off -0.35% on light volume, while GDXJ dropped -0.83% on moderate volume.  Miners opened higher on gold's Asia rally but then sold off as gold was pushed back into the red.  The 9 EMA continues to act as resistance for the miners - both for GDX and GDXJ.  Volume today was light, which matches up to what happened three days ago immediately prior to a fairly hefty sell-off.  If gold can rally here, miners will break higher for sure; if not, we probably see a move by the miners through the 50 MA.

Platinum was basically flat (+0.02%); it also showed a failed rally.  Palladium was up +1.89% and printed a strong swing low (this is exactly what we'd like to see happen with gold), while copper fell just -0.12% but also showed a failed rally - code says it was a bearish harami.  Might this mark the end of our two-day copper rally?  If so, silver may well break below 16.  Code suggests that's only a 20% chance, however, which is good news if true.

The buck fell -0.18 to 95.16, selling off strongly but then rebounding during US market hours.  Likely, the dollar's bounce helped those commercials push gold around.  Certainly, I saw that all commodity prices seemed to suffer once that dollar decided to bounce back up again.  In spite of the bounce, the buck printed a swing high today, although it wasn't quite as convincing as it might have been had that bounce not happened.  Few of the other currency charts look particularly strong right now, and some of them would definitely have to rally for the dollar to continue falling.

WTIC fell -0.34 [-0.68%] to 49.40 after first making a brief new high to 50.21.  It felt a bit like the new high was a bridge too far - oil was not ready for $50.  Still, there are no warning signs from the candle patterns, oil remains in a strong uptrend and is above all 3 moving averages.

SPX was mostly flat, closing down -0.44 to 2090.10.  SPX traded in a very narrow range today; really not much happened.  It looked like the market just took a rest today.  Perhaps traders don't really want to open new positions ahead of the memorial day weekend.  VIX fell -0.47 to 13.43.

TLT rose +0.52%, back above the 50 but still not looking particularly strong.

JNK climbed +0.23%, making another new high, but selling off - printing a "bearish belt hold" which turns out to be about 30% chance of a high.

CRB rose +0.15%, making a new high.  Commodities continue to look strong. 

Well the buck printed a semi-convincing swing high today, but it wasn't enough for gold to rally.  The commercials seemed able to muscle the price lower; they do not appear to be interested in covering just yet.  Copper didn't cooperate, neither did platinum or silver.  Miners seemed to go with the flow.

Gold needs help from its friends right now.  If it doesn't get a more serious drop in the dollar, and a move higher in copper, I think the highly-motivated commercials may be able to force gold through 1206, which would almost certainly lead to a fair amount of near-term difficulty for gold and especially the miners.  That's our major risk right now.  Gold is oversold and ready for a bounce, but I'm not sure enough things have lined up to bring the COMEX (and other western) buyers back on board.

Martin Armstrong says that a weekly close below 1206 will most likely bring about a sharp decline.  I agree with him.  I will leave you with this weekly chart.  It shows an accelerating drop in gold.  Sometimes I can get caught up in the day-to-day moves.  Weekly chart shows trend a bit better.

Conclusion: risk is high: be careful out there!

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