PM Daily Market Commentary - 6/16/2016

By davefairtex on Fri, Jun 17, 2016 - 12:43am

Gold fell -13.00 to 1281.50 on extremely heavy volume, while silver dropped -0.34 to 17.20 on heavy volume.  Both gold and silver made new highs, with gold breaking above the 1307 high dating back to 2015, but then both metals sold off hard for the remainder of the day, closing at or near the lows.

Gold broke above 1307 in the afternoon in Asia and climbed until the US market opened, peaking out at 1318.90 at about 10:30 Eastern time.  Surprisingly, the dollar and gold peaked at almost the same time; usually they move inversely to one another, but today they moved more or less together.  The dollar and gold both fell into the close.

On the chart we see a dramatic new high, a breakout above 1307, followed by a reversal resulting in a very high volume spinning top candle.  The RSI-7 indicator has now dropped back below 70, which is a sign of a reversal in momentum.  Code says this is 40-50% chance of marking the top for now - its in the top 1% of "bearish spinning top" candles.  I can see why: it sure looks unpleasant, and the volume is very heavy.

Like gold, silver made a new high today, then sold off into the close.  Silver's high came earlier in the day, during the afternoon in Asia.  Silver then traded mostly sideways until it started to sink - roughly alongside oil, and silver prices dropped right into the close, with silver closing almost at the lows for the day.

On the chart we see the new high, and the subsequent sell-off down almost to the 9 EMA, where silver looks to have found support.  Volume today was relatively high - highest its been in the past 8 weeks, dating back to the silver breakout above 16 back in April.  Candle print is a bearish engulfing, which my code says is an 32-46% chance of a high here.  Bearish engulfing is a relatively high percentage reversal pattern, but this particular one is about in the middle of the group.  "It could be worse."

Miners also had a bad day, with GDX down -3.17% on heavy volume, while GDXJ dropped -2.81% on heavy volume also.  Miners gapped up at the open, and then sold off as gold fell, closing near the lows of the day.

The chart shows the new high for the miners, as well as the all-day selling affair resulting in a nasty-looking big red candle.  That's a "bearish belt hold" single-candle pattern, but if you combine it with yesterday's rally, it becomes a "dark cloud cover".  Call it a 31-46% chance of marking the top; like silver, about in the middle of the group.  GDXJ looks slightly worse at 32-49%.  As with silver and gold, miners remain above the 9 EMA.  This was yet another distribution day for the miners. 

Platinum fell -0.56% on heavy volume, palladium rose +0.23%, and copper reversed course and plunged, dropping -1.79% wiping out most of its gains from yesterday.  Copper is really struggling to put in a low here around the 2.05 level - big daily trading ranges and high volume suggest the market is unsure of what comes next.

The buck had a very large trading range today but ended up just +0.05 to 94.71, after moving up +0.75 at one point, making a new high.  Candle print was a long-legged doji - indecision - which in this context is no help for determining direction.  USD remains above its 50 MA.  The one odd thing about the buck is how it moved so closely alongside gold.  Flight-to-safety changed into risk-on at around 10:30 Eastern.

WTIC fell today, losing -1.45 [-3.02%] to 46.53, coming to rest right around its 50 MA.  I see this as follow-through off the unpleasant reaction to the mildly bullish Petroleum Status report from Wednesday.  Oil may be headed (eventually) back to $100 but right now it seems to want to correct a bit first.  That said, the chart says oil remains in its longer term uptrend, and its probably best to consider buying the dips rather than selling the rallies.  Oil equities hinted that today might be a low; XLE printed a bullish hammer candle (30-40%) and lost just -0.48%, which looks pretty good compared to the -3% drop in WTIC.  The candle print from WTIC was bearish; no hints of a reversal from oil itself.

SPX rose +6.49 [+0.31%] to 2077.99.  During the first hour of trading, SPX sold off, but then made a low just about the same time gold and the dollar made their highs; flight-to-safety turned into risk-on, and SPX rallied for the remainder of the day, printing a spinning top candle that happens to be a 40-50% chance of a reversal.  (Not every spinning top is so bullish, however this one ranks in the top 2%).  Market still doesn't look so healthy; utilities led (XLU:+0.63%) while energy brought up the rear (XLE:-0.48%).  If oil does manage to put in a low, we could see a stronger rally out of SPX in the next few days.  SPX managed to close back above its 50 MA by a few pennies.  VIX fell -0.77 to 19.37.

TLT rose +0.49%, making a new high, but printing a bearish-looking spinning top candle which didn't sell off quite enough to be a shooting star.  Its not quite risk on, but this could mark a high for TLT (20-30% chance), as bonds are fairly overbought with the RSI-7 at 85.

JNK fell -0.03%, basically flat on the day, but an early-morning sell-off found support at the 50 MA, and JNK rallied alongside SPX, printing a bullish hammer candle (35-45% chance of marking a low).  Possible reversal to risk on.  Volume was high today in JNK.

CRB dropped hard, losing -1.48% and plunging well below its 9 EMA.  Mostly that was about the drop in today in energy and industrial metals.

There are more than hints of a reversal in a number of items today; a possible top for gold, a low for SPX and JNK, and possibly a top in bonds.

What news from BRExit-land?  The broad-daylight murder of a high profile pro-Remain UK member of parliament resulted in the temporary suspension of the "Leave" campaign - the murderer shouted a pro-Exit slogan several times prior to attacking her, and then apparently to make sure he was heard, shouted the slogan again afterwards.  Predictably, this is causing a public backlash against Leave.   Pound and Euro both rallied on the news.  Given the investigation may well not conclude prior to the vote, one might ask, is Brussels pulling out all the stops to keep the UK inside the EU?  Certainly from a "cui bono" standpoint, it couldn't possibly be Leave that executed this attack.

Could this event and its aftermath be the reason why everything reversed today?  I sure don't know, but it certainly could be.  I believe a Remain vote would be gold-negative and risk-on overall, and it would be bearish for treasury bonds too.  Market seemed to weigh in today and it is more-than-hinting at risk on.

We'll know more tomorrow if this has legs.  In the meantime...I think its time to be careful out there.

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