PM Daily Market Commentary - 6/8/2016

By davefairtex on Thu, Jun 9, 2016 - 12:29am

Gold rose +19.30 to 1265.50 on moderate volume, while silver shot up +0.67 to 17.06 on moderately heavy volume.  Both metals started rallying in Asia, and continued moving higher in London; prices during US hours mostly just moved sideways into the close.  A softer dollar and a strong commodity market rally seemed to help.

On the chart, we see that gold tested 9 EMA support yesterday, and today gold broke higher once it became clear that the balance of forces was on the side of the longs.  Yesterday's volume was quite light; while today's volume wasn't spectacular it definitely outweighed the relatively feeble selling pressure from yesterday.  Gold managed to keep its gains into the close.  The pattern is bullish - a confirmed bullish spinning top.

To me, it appears that the current move is about rates; no rate rise = higher gold prices.  Is it that simple?  I think so.

Silver's pattern looks similar to gold; a sell-off yesterday that was mostly bought, with a strong rally today in response.  Volume in silver was heavier, and the rally was more enthusiastic.  What changed?  Maybe it was the fact that commodity prices are now going (quietly) vertical.  Copper also avoided making new lows, which also takes some of the pressure off.  Whatever the specifics, silver's breakout today looks strong.

Miners broke higher on gold's strength, with GDX up +3.27 on moderate volume, while GDXJ rose +4.67% on heavy volume.  While both miner ETFs made new highs, we did not see a typical breakout where eager buyers pile in, afraid to miss out on the big move.  Instead it looked like traders took profits; on the daily chart, we see a gap up at the open, an attempt to push prices higher which failed, with GDX closing at the lows of the day.  GDX printed a spinning top - not a disaster, but not bullish either.  Miner charts were the weakest in the PM sector.

Here's a look at what that GDX spinning top looks like on an intraday chart: a gap up at the open, a brief initial rally, followed by a rest-of-the-day selloff right into the close.  GDX didn't close at its dead lows, but it certainly didn't close very well.  Conclusion from this is simple: traders were taking profits after the 10-15% miner rally over the past three days.  The juniors look a bit better, but lots of miners printed bearish-looking candles like this.

Platinum rose +1.02%, palladium climbed +1.38%, while copper managed to gain +0.61%; all three metals staged rallies, but lost much of their gains by end of day.  While prices did move higher, the candle prints looked a bit weak.  Gold and silver were standout performers in the metals space.

The buck fell -0.24 to 93.60; this is the fourth straight down day after that disagreeable nonfarm payrolls report last Friday.  This is allowing the Euro to stagger higher, while the commodity currencies CAD and AUD are both on a bit of a tear; AUD is up about 4% while CAD is up slightly less.  While the dollar is not collapsing, it would appear that the market is fairly convinced at this point that no rate rise will be coming soon.  That's good for gold, good for commodities, and bad for the buck.

WTIC rallied yet again, up +1.10 to 51.53, setting a new high and closing convincingly above round number 50.  Today's Petroleum Status report confirmed yesterday's API report, showing a (bullish) inventory draw of -3.2 million barrels.  The oil market's immediate reaction was generally neutral (although there was the usual huge volume spike and a large number of stops were taken out), but by end of day the longs pushed prices to new highs.  As with the miners, traders took the opportunity to sell oil equities: XLE fell -0.23%; not what you'd expect on a big rally day for oil.

SPX rose +6.99 to 2119.12, closing above the prior November 2015 high by 3 points.  While this is not an all time high (May 2015: 2134.72) the all time high is not so very far away.  At the same time, sentiment indicators suggest the market may be approaching a top.  If you are tempted to go short, its probably best to wait for a sign that the market has stopped moving higher first; a swing high would be nice to see, also a 9 EMA crossing too.  Lastly, you might want to wait for JNK to start dropping.  We aren't there yet.  VIX rose +0.03 to 14.08.

TLT rose +0.54%, actually making a new high for the cycle.  Is that a reach for yield (2.08% for a 20 year bond!) or a flight to safety?  Other indicators don't look risk-off so I'll say reach for yield.  At 2.08%.  Per year.

JNK made another new high again today, up +0.45%.  JNK is extremely overbought.  Risk on.

Yet another new high from CRB too - it rallied +1.76% and like JNK, CRB is quite overbought, with the RSI-7 at 93.05.  CRB is going vertical.  Such moves generally don't last that long.

Gold and silver are in an uptrend now.  Dip buying is encouraged.  That said, miners gave us a bit of a warning sign today; my code suggests its not something to get overly worried about, but if they sell off more strongly tomorrow that could change.  Rising commodity prices generally help gold and especially silver.

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