PM Daily Market Commentary - 6/9/2016

davefairtex
By davefairtex on Fri, Jun 10, 2016 - 4:17am

Gold rose +7.00 to 1272.50 on moderate volume, while silver climbed +0.23 to 17.28 on moderately heavy volume.  The move higher in the metals today came in the face of some strong headwinds, including falling oil, copper, and commodity prices, as well as a rising dollar. 

Today we can see that gold managed to close above its downtrend line, which is a bullish sign.  The declining volume is a sign of weakness, but perhaps that's to be expected when the dollar rallies +0.42%.  If the dollar starts to rally more strongly going forward, gold will probably have a tough time moving higher in USD terms, but today's rally in the face of all these headwinds is a distinctly bullish sign overall.

Next resistance point: the previous high at 1290.

Silver once again outperformed gold.  Today's silver move was more than double what gold did on a percentage-wise basis, and the volume bars just look stronger too.  And when we see that copper more or less fell out of bed today (it hit a new low of 2.013 intraday), the decent silver rally today is nothing short of a miracle - at least in my opinion.  The gold/silver ratio has dropped about 2.5 points (to 73.64) in the last two days, and that's bullish overall for PM.

Miners continued moving higher today, with GDX up +1.54% on moderately light volume, while GDXJ was up +1.74% on moderate volume, with GDXJ making a new high on the day.  Both miner ETFs shrugged off yesterday's selling, moving slowly higher all day long, rising alongside gold.

On the chart we see some light volume and a "last engulfing top" bearish candle pattern; basically that's a bullish engulfing in the context of an uptrend.  According to lore, this particular pattern could go either way, but my code suggests this particular one isn't very bearish - as in around 10%.  If we get a strong dollar move higher, we could see the miners correct, but if not - likely GDX will continue to rally.   Perhaps the juniors are the tell: they made a new high today, they outperformed the seniors, and that's bullish.

Platinum fell -0.73%, palladium dropped -0.34%, and copper took it right on the chin, falling only -1.16% but it made a new low which touched 2.013.  In spite of the intraday bounce back up to 2.041, the copper chart continues to look quite bearish and a test of 2.00 seems inevitable.

The buck rose +0.39 to 93.99, printing a swing low/bullish engulfing candle pattern on the day.  If this marks a temporary low in the buck, it could make some trouble for the metals - although they managed to do well today in the face of the swing low, I am not sure that good fortune will continue if the buck decides to climb more emphatically.  Code says that's a 32-45% chance of marking the near term low.

WTIC fell today, down -1.07 [-2.08%] to 50.46.  Does this mark the top for oil?  Let's see: candle print is a bearish harami, which my code tells me is about 20-30% chance of being a near-term high.  Is XLE a tell?  If so, it printed a swing high and dropped -0.76% today.  Oil too might depend on where the dollar heads next.  The rally off the bullish Petroleum Status report was ok, but not great and so the balance of forces between longs and shorts might be relatively even at this point.  Still, oil remains above its 9 EMA, and until we cross the 9, the uptrend remains intact.  Its nice to have the moving averages as signposts; it helps take the emotion out of the analysis.

SPX fell -3.64 to 2115.48 today; SPX sold off in the futures markets prior to the open, but managed to rally back after lunch in New York almost back to even.  Utilities led (XLU:+0.86%) while energy (XLE:-0.76%) and financials (XLF:-0.72%) fell.  If commodities top out here, that will pull SPX lower.  VIX rose +0.56 to 14.64.

TLT climbed again, up +0.65% making a new high.  Actually, that's a new all-time high for TLT, and almost a new all-time low for the 20 year treasury yield, which now will provide you the handsome annual return of 2.05%.  Don't spend it all in one place.  With the equity market a heartbeat from the all time high too, that's a marker for too much money sloshing around the system looking for a home.  If we ever get an equity market correction, TLT could really go nuts - there's no overhead selling pressure once we start making new all-time highs.

JNK printed a swing high today, dropping -0.45%.  The signal is risk off, but the swing high isn't so dangerous according to my code - just a 15-25% chance of it marking a near-term top.  Interesting how that matches up with the modest drop in SPX and the not-so-bearish harami in crude.

CRB fell -0.37%, but it still remains in its strong, almost vertical move higher.  The "descending hawk" pattern isn't particularly decisive; no stats because I can't get daily OHLC data for CRB.

Without a continuing move lower in the buck, can gold continue to rise?  Maybe it can.  Miners still look bullish, silver is outperforming gold, so far at least the signals all remain positive.  No need to punch out until that changes, I think.  Plus, the buck could be rising for reasons other than rates - for instance, the upcoming BRExit vote that will hit June 23rd.

And speaking of that, I did a quick survey of "Leave/Remain" indicators.  Bloomberg (Mouthpiece-of-Banking) says Leave only has a 24% chance after the poll data underwent a bunch of data-massaging worthy of the BLS, while the Economist has a straightforward recurring poll that lets you chop the data up by group.  Right now, Economist has it overall 43/42 Leave, with 12% undecided.  For me the fascinating bit is that the Conservatives want to Leave 51/37 - and that ratio pretty much explains the split in the Tory party.  Cameron is going against his own voters here; I wonder why he's so motivated to Remain?  (Hint: rich people want to Remain 50/38).

http://www.economist.com/blogs/graphicdetail/2016/06/britain-s-eu-referendum

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