PM Daily Market Commentary - 6/7/2016

davefairtex
By davefairtex on Wed, Jun 8, 2016 - 4:36am

Gold fell -1.50 to 1246.20 on light volume, and silver dropped -0.10 to 16.39 on moderate volume.  Lots of moving pieces today: copper was hammered, oil broke out to new highs along with CRB and JNK, while SPX had a failed rally.  In the face of all this fuss, gold ended the day largely unchanged while silver fared a bit worse.

Intraday, gold sold off along with copper until about an hour before the US market opened.  Copper continued to fall but gold rebounded, recovering almost all of the day's losses, and printing what looks like a bullish dragonfly doji but is actually a spinning top because the trading range wasn't quite large enough.  Regardless, buyers showed up, and that's a good outcome from where I sit.

On the chart, gold ended the day back below its 50 MA, but it appears as though the 9 EMA is now acting as support; the intraday drop stopped right at the 9.  Volume was very light, which suggests that any profit-taking was relatively minimal.   It's bullish to see a heavy volume up-day, followed by a light volume down day, especially when the drop is then bought.

Silver doesn't look quite as strong as gold - it dropped more, the bounce-back was less enthusiastic, the volume was heavier, and the 9 EMA didn't act quite as strongly in support.  Likely that's because copper had a terrible day, and that usually drags silver down in sympathy.  Silver also printed a spinning top.

Miners sold off a bit, with GDX down -1.34% on light volume, and GDXJ fell -1.32% on moderate volume.  Miners traded in a relatively narrow range, volume was relatively light, and both ETFs remain well above their 9 EMA.  New uptrend remains unchanged for the miners.

Platinum rose +0.34%, palladium fell -0.54%, while copper fell a massive -3.05%, printing a dramatic swing high on very heavy volume, confirming the "northern doji" from yesterday and closing at 2.05.  Given the intensity of the selling in copper, I'm concerned copper will now drive through support and re-test $2, and I'm not sure $2 will hold.  Copper's two week rally was entirely erased by today's move down.

The buck fell just -0.06 to 93.83.  It continues to fall after last Friday's poor showing from Nonfarm Payrolls.  Here's a fun chart - apparently Chair Yellen likes to watch this particular statistic, which is the FRB's statistical summary of how the labor market is doing overall.  Short answer: not so great, and while the slope downhill isn't looking as bad as it was in 2008, it is starting to accelerate.  If this is truly what Chair Yellen watches, it is tough to imagine that the Fed will raise rates this year.  Contrast this with the U3 "propaganda value only" unemployment rate which is at 4.7%.

http://www.federalreserve.gov/econresdata/notes/feds-notes/2014/assessing-the-change-in-labor-market-conditions-20140522.html

WTIC rallied again, up +0.72 to 50.43, closing above round number 50 for the first time in almost a year.  Nigeria is down 1.2 million bpd due to attacks from insurgents that vow to drop oil production to 0, while Canada has lost 1 million bpd due to fire.  If I were an OPEC member frustrated that the Saudis won't agree to production cuts, arranging to temporarily knock out out Nigeria's production would be a reasonably easy short term solution.  The difference between $30 oil and $50 oil is about 2 billion dollars per day.  How much do you think it would cost to fund a bunch of "insurgents" in Nigeria?  ROI on such an operation would be massive.  You could probably fund it from gains from futures trading alone.  API reported a bullish inventory draw of -3.6 million barrels after normal market hours.  Oil equities (XLE:+2.26%) broke to a new high.

SPX rallied +2.72 to 2112.13, rallying for the first half of the day, then selling off in the afternoon, printing a bearish-looking spinning top.  Without the gains in oil equities, SPX would have probably closed red.  VIX rose +0.40 to 14.05.

TLT rose +0.24%, recovering some of yesterday's losses.  TLT remains in a strong short term uptrend.  Risk off.

JNK made a new high again today, up +0.48%, presumably encouraged by oil's breakout.  SPX probably won't correct until JNK does.  Risk on.

Another new high from CRB - we've gone a couple of weeks now with nary a down day for CRB.  CRB closed up +0.61%, and is up 28% off the lows set back in mid-February.  Industrial metals are having a tough time, but agriculture and energy are more than making up for it.

In spite of copper's swan dive today, I think we still see higher PM prices - gold held up quite well in the face of the big move down in copper.  Traders at COMEX appear to be buying the dip, and based on the moves in the buck, the overall market appears convinced that the Fed won't be raising rates anytime soon.

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