PM Daily Market Commentary 5/31/2016

davefairtex
By davefairtex on Wed, Jun 1, 2016 - 4:11am

Gold rose +2.20 to 1217.50 on heavy volume, while silver fell -0.25 to 16.00 on moderately heavy volume.  On Monday, gold was forced lower, spiking down to 1201.50, breaking below the previous low of 1206.  It then rebounded, and by the close today it had regained all its losses and a little bit more.  A strong dollar and weaker copper prices contributed to the difficulties for PM.

Monday's spike down below 1206 support happened five minutes after the Tokyo market closed - a spike that resulted in a few thousand contracts being stopped out.  But the big move that I was concerned might occur just never materialized.  Are the commercials asleep at the switch?  I have no idea.  But once the low was made, price rebounded and never really looked back.

On the daily chart, we see a support break, a possible reversal bar (a bullish harami: 40%), and some reasonably good volume.  The support break means the long term uptrend is now in question; we can say Monday's spike lower was a game by the commercials to paint the tape (and I'm pretty sure that's true) - but in a strong uptrend, price never would have dropped this low for the commercials to easily paint the tape in this way.  The dip would have been bought a week ago.  The larger message is that the uptrend is weakening, and the odds are, even when we get a bounce, prices are likely to be moving lower rather than higher.

Silver is back to looking ill again - it broke 16.25 support and stopped dropping at round number 16.  The chart looks pretty ugly - if silver loses 16, there's not much support until the 200 MA at 15.20.  The rising volume underscores the bearish feeling.  Blame copper, which had a bad day, selling off and falling back below its 9 EMA.

Miners rose today, with GDX up +1.35% on moderate volume, and GDXJ up +2.77% on heavy volume.  That sounds good, but the daily chart doesn't look quite so nice.  On the chart we see that once again, the miners were unable to rally above the 9 EMA, and that today's candle print was a weak-looking spinning top which has the suspicious aura of a failed rally about it.  And sure enough, looking at the intraday action, we notice that the miners lost about 1.5% in the last 30 minutes of trading.  The end-of-day selloffs like this are generally bearish.  If big money doesn't want to take miners home with them, why should you?

GDX remains below its 50 MA, its 9 EMA, and the rally attempt today failed right at end of day.  Feels to me like lower prices are ahead.

Platinum rose +0.17% printing a high volume doji (indecision) candle, palladium was up +1.63%, and copper fell -1.26% printing a swing high on heavy volume, dropping below its 9 EMA once again.  Copper's renewed fall did not help silver.

The buck made a new high, rising +0.38 to 95.88, closing at the highs for the day.  Today's dollar move wasn't about the Euro this time - it was the Yen (-0.43%) and the Pound (-0.96%).  New poll from the Guardian shows UK voters leaning towards Vote Leave, 52/48.  That wasn't good news for the pound.  Migration appears to be the central driving force behind Leave. 

http://www.theguardian.com/politics/2016/may/31/uk-voters-leaning-towards-brexit-guardian-poll-reveals

Among skilled manual workers, known by pollsters as C2s, support for Brexit is running as high as 62%.

And another article from Telegraph, where the two big Vote Leave proponents Boris Johnson and Michael Gove propose an Australian points-style immigration system as soon as Vote Leave is passed:

http://www.telegraph.co.uk/news/2016/05/31/eu-referendum-boris-and-gove-pledge-tough-new-immigration-system/

Migrants will be barred from entering Britain after a Brexit unless they can speak good English and have the right skills for a job, Boris Johnson and Michael Gove have pledged as they set out their vision for the UK outside of the EU. In a joint declaration, Mr Johnson and Mr Gove announce plans for an Australian-style points based immigration system to come into force in the years after Britain leaves the EU. Their statement, which is also signed by employment minister Priti Patel, will infuriate Downing Street and represents a major challenge to David Cameron’s authority.

Migrants must be able to contribute upon their arrival.  How radical.  Last week I figured Vote Leave wasn't going to happen.  Now, I'm not so sure.  It may go the other way.  A Vote Leave result will probably cause some huge market movements.  My guess: its quite bearish for the Euro in the medium term.  Contagion.  If the UK succeeds outside the EU, it may tempt other nations with immigration concerns to do the same thing.

WTIC fell -0.73 [-1.47%] to 48.83,  after trying to move through $50 once again and failing.  Today's drop resulted in a swing high for oil.  While oil remains above its 9 EMA, that is only by a few pennies.  The RSI-7 shows a bearish divergence, and upside momentum does seem to have slowed way down.  Candle print was a closing black marubozu, and my code suggests that's a 54% chance of a high.  COT report shows commercial net position is relatively heavily short, and managed money is relatively long, so COT supports this being a medium-term high.  I saw an article in bloomberg over the weekend about how the oil shorts were really being hosed and had mostly bailed out.  That sort of thing always makes me feel better about calling a top.

SPX fell -2.10 to 2096.96.  It looks like round number 2100 could be resistance for equities.  A failure to move above the previous high of 2111 would likely lead to a fair amount of selling.  Utilities did best (XLU:+0.66%) which is never a good sign.  A top in oil would contribute to a top in equities.  VIX shot higher, up +1.07 to 14.19.

TLT rallied back from a big deficit today, rising +0.24% and moving back above both moving averages.  TLT remains in a near term downtrend in spite of today's move.

JNK fell -0.11%, but remains above its 9 EMA and also remains in its strong, four-month uptrend.  I'd wait for JNK to tip over before jumping in short on equities.

CRB rose just +0.01%, making a new high but printing a bearish-looking shooting star candle on the day.  CRB remains in a relatively strong uptrend - right alongside JNK and oil.

So, dollar makes a new high, gold makes a new low, breaks momentarily below support but also prints a potential reversal bar.  Miners look weak into the close, while silver sells off along with copper.  Overall picture still looks weak.  The increase in support for Vote Leave does not yet seem to be helping the yellow metal.  We did avoid Martin Armstrong's weekly close below 1206, but that just avoids disaster, it doesn't mean we're moving higher.

I'm in a show-me mode with gold.  I want to see the miners back above the 9 EMA.  I also want a confirmation of today's potential reversal bar.  And silver needs to stop dropping.

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