PM Daily Market Commentary - 6/1/2016

By davefairtex on Thu, Jun 2, 2016 - 4:16am

Gold fell -2.30 to 1215.20 on moderately light volume, and silver dropped -0.02 to 15.98 on moderate volume.  Mostly, gold moved sideways in a narrow range while silver made a new low - a poor performance given the brisk move lower in the buck.

Gold was unable to confirm yesterday's reversal bar; its not the end of the world, but gold really should have done better given the drop in the buck.  Right now gold is chopping sideways on light volume.  Dip-buyers don't look frantic to get cheap gold before its too late.  Gold remains below both the 50 and 9 EMA lines: downtrend remains in place.

After yesterday's support break, silver continued to fall today, likely because copper had a difficult day also.  Copper did bounce back, and so did silver, but neither looks particularly healthy right now.  Falling dollar should have provided some support.  Perhaps it would have fallen more otherwise.

Silver remains above its uptrend line, at least so far.  We might see some buyers appear around 15.65 if copper can stabilize.  If not, then next stop is the 200 MA at 15.21.  Unlike gold, silver remains in an uptrend until it breaks its previous low at 14.79.  In spite of silver's recent misbehavior, the gold/silver ratio is still well below where it was at the beginning of April.

The miners managed to eek out a small gain today; GDX rose +0.62% on light volume, while GDXJ fell -0.15% on moderately light volume.  Miners are at a decision point; they do not seem to be able to move above the 9 EMA, but there seems to be decent support at 22.  They'll make a decision soon, I suspect.  A break above the 9 will probably lead to a lot of buying by goldbugs who missed out, while a break below 22 will lead to selling from the momentum traders.  If I had more sense that buyers at the COMEX GC buyers are ready to step up, I'd buy here, but those COMEX buyers just don't seem that enthusiastic.

Platinum fell -0.89%, palladium moved down -0.05%, and copper fell -0.55% but was down much more substantially at one point, making a new low to 2.05.  Buyers did show up for copper and volume was heavy; is this enough to signal a low?  Not conclusively.

The buck fell -0.42 to 95.46, printing a swing high today.  It remains above its 9 EMA and is still in an uptrend, but momentum seems to be slowing down for the buck.  RSI-7 is showing a bearish divergence, and the MACD is starting to turn down.  The Euro may have found support at its 200 MA and it is starting to break out of its downtrend line, rising +0.55% today.  So far its not conclusive, but it certainly looks more positive than it did two days ago.  Pound continues to fall, down -0.45%.  BRExit fallout.

WTIC rose +0.08 to 48.91, managing to come back from a brisk sell-off earlier in the day, making a new low at 47.75 and printing a "southern doji" - enough to keep WTIC above its 9 EMA and for its uptrend to remain in place.  It looks like there is a serious struggle going on here around 50; shale drillers vs speculators buying the rally, and who knows who else.  While I thought oil might top out at 50, the market is telling me that a serious bid remains underneath crude.  "Buy the dip" happens at 47.75.  Petroleum Status report tomorrow; today's API report shows a (bearish) build of 2.3 million barrels.

SPX rose +2.37 to 2099.33; it too sold off early and rallied alongside oil to close back in the green.  The very modest rally today didn't look particularly exciting, led by consumer staples (XLP:+1.03%) which usually is a safe haven sector.  Tech fell (XLK:-0.25%).  VIX rose just +0.01 to 14.20.

TLT broke higher today, up +0.41% and is now back above both the 50 and the 9 EMA.  TLT has been chopping sideways for the past 3-4 months; this move takes TLT towards the higher end of its recent range.

JNK rose +0.05% along with oil; it was down early, but rallied back as oil recovered.  JNK remains in an uptrend.  Still risk on.

CRB rose +0.36% and made a new closing high.  Like crude, and JNK, CRB remains in an uptrend, above all 3 moving averages.

So far, COMEX buyers haven't shown much enthusiasm for gold-on-sale, and silver is being dragged lower by falling copper prices.  Even a fairly large drop in the buck wasn't enough to give the buyers at COMEX any encouragement.  Gold remains in a downtrend, so does silver, and so do the mining shares, although the miners look the most healthy of the three.

Gold topped out May 1, and we've been moving lower since then.  Gold needs a close above 1220.60 to print a swing low.  That shouldn't be very hard to accomplish.  If it can't even do that, I'm just going to watch.

We have Nonfarm Payrolls this Friday at 08:30 Eastern.  This will be the last payrolls report prior to the upcoming Fed meeting (yes!  another one!) complete with press conference starting on 14:30 on Wed June 15th.  An increased impression of a rate rise from payrolls will probably be gold-negative; a strong payrolls report could well send gold blasting right through 1200.  Taking a position in gold prior to payrolls is risky, especially with GDPNow reading 2.9%.  Q2 is looking substantially better than Q1.

Conversely, the Fed meeting itself (and a more-likely-than-not rate rise) might actually be the reversal event for gold; bad news will be out, a sort of "sell the news" event.  That's my current vague thinking about the timing of how the current cycle might play out.  I'm just guessing that traders don't really want to take a long position in gold prior to payrolls and/or the Fed meeting, so in the meantime, shorts remain in control.

I should add Fed meeting days to my set of training data for gold and see what pops out.  Hand-entering all those dates is not something I'm looking forward to doing.

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