PM Daily Market Commentary - 6/15/2016

davefairtex
By davefairtex on Thu, Jun 16, 2016 - 4:27am

Gold rose +6.00 to 1294.50 on moderately heavy volume, while silver climbed +0.15 to 17.54 on moderate volume.  Not surprisingly, today was all about the FOMC meeting; Fed sounded dovish and kept rates unchanged, which caused gold and silver to spike higher.

Gold enjoyed the FOMC announcement, moving up about $10 in the hours following.  It peaked out at round number 1300 exactly before it fell back.  Gold managed to close just barely above 1294.40, which means the next stop is that 1307 level that dates back to early 2015.  A close above 1307 could lead to a follow-on rally as more traders pile in on the breakout.

After the US market closed, gold broke through 1307 peaking out at 1316.  It looks as though Asia traders had some concerns about a possible rate hike that were removed following the FOMC announcement today.  Gold still needs to hold above 1307 by the close tomorrow.

Silver did relatively well today, making a new high but the volume was a bit low and to my mind it should have done better given the huge move in copper.  Still, its hard to argue when silver keeps making new highs.  Silver popped up following the FOMC announcement, but it was a bit less enthusiastic than gold.

Miners did well today, with GDX up +3.87% on heavy volume, while GDXJ climbed +4.20% on very heavy volume.  Once again we see the 9 EMA acting as support.  It isn't a perfect guide for the miners; perhaps it works a little more than half the time.  The strong volume looks bullish, however unlike gold, the miners did not make new highs today.  My sense is they are still lagging the metal to some degree.  If gold holds above 1307 through Asia and London, miners should break out to new highs tomorrow.

Platinum fell -0.08% on heavy volume, palladium dropped -0.13%, and copper staged a massive rally, up +2.33% on some really heavy volume.  What's up with copper?  The timing of the move in copper had nothing to do with FOMC - copper peaked out at 08:30 Eastern, with most of the rally happening during the London session.

The buck fell today, dropping -0.38 [-0.40%] to 94.66.  The buck sold off prior to FOMC, and then sold off even more right after the announcement, but managed to rally back regaining most of the FOMC losses.  Although today was a down day, the buck remains above its 50 MA and my guess is it will retain a bid until the BRExit vote next Wednesday.

WTIC managed to rise, up +0.08 to 47.98, but it printed a spinning top candle that looks an awful lot like a shooting star - a failed rally.  That's because oil did indeed rally after the 10:30 Petroleum Status report that showed a bullish draw of -0.9 million barrels; WTIC popped about a buck on the news, but then it sold off for the rest of the day, closing near the lows.  Hmm.  Market sells off on good news?  What do we do again?  We sell too.  Run, don't walk!  If you aren't out after the 9 EMA crossing a few days back, you should probably have fled today.

SPX dropped just -3.82 [-0.18%] to 2071.50, after trading slightly positive going into FOMC.  Immediately after the announcement there was not much of a reaction from equities except for financials, which sold off somewhat, but in the last 30 minutes of trading, SPX plummeted about 12 points; it was clear that traders were not eager to hold equities overnight.  VIX fell -0.36 to 20.14.

TLT rose +0.38%; although there was the usual volatility around the time of the announcement, TLT was left largely unchanged from where it was immediately prior to the announcement.  TLT made a new closing high today, and is quite bullish right now.  20 year treasury rates are now at 1.99%, which is the lowest ever in history.  The 30 and the 10 year bonds have been at lower levels - but not much lower.  Risk off + reach for yield.

JNK fell again, down -0.11%, remaining below the 9 EMA.  Like equities, JNK sold off in the last 30 minutes of trading, after being more or less unchanged immediately after FOMC.  Risk off.

CRB dropped also, falling -0.24%, closing below its 9 EMA for the first time in six weeks.  Uptrend in commodities remains largely intact, but the drop below the 9 is the first sign of impending weakness.

Chair Yellen in her press conference suggested that the Fed's outlook for the "neutral rate" for Fed Funds has been steadily dropping over time.  They aren't quite sure why that is - demographics, productivity growth, they don't know.  (It certainly couldn't be globalization whacking incomes of the lower and middle classes, nor the current level of debt).  That's all gold-positive.

Next up next week is BRExit, vote to be held Wednesday June 23rd.  Now that FOMC is behind us, we'll be able to see how the various markets react to polls in the UK without any possible distortion from worries about rates.  My guess is of course that Leave is gold-positive.  If the vote ends up being Remain, my opinion is that we could see a fairly dramatic correction in the price of gold.  We'll be able to get a better sense of how true that might be as the referendum approaches - likely a Remain vote would be strongly dollar-negative, and a falling dollar might cushion the blow to gold at least to some degree.

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1 Comment

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5694
false breakout

It looks like gold may have run out of gas after the breakout above 1307.  Its quite possible that our friends the commercials bought to push prices above 1307 to run the stops, and then turned around and sold...and then went short once the longs ran out of steam.

Not sure where we finally close, but the current candle print looks bearish.

Its also possible we've made a low in SPX.  Certainly there's a nice hammer candle for DJIA.  JNK shows a hammer candle too, TLT shows a shooting star.  This could be a reversal day for a lot of things.  A lot of stuff is oversold.

 

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