PM Daily Market Commentary - 6/21/2016

davefairtex
By davefairtex on Wed, Jun 22, 2016 - 2:12am

Gold fell -22.30 to 1270.70 on moderately heavy volume, while silver dropped -0.22 to 17.30 on moderately heavy volume also.  Gold sold off all day long; silver followed but fell less.  It appears that the BRExit safe haven trade continues to unwind.

Intraday, gold started selling off in Asia, and then during London hours, we started to see large volume spikes as the 1280 support level was violated.  It looked to me as though a fairly large number of long stops were triggered.   My sense is, the commercials have seized their moment and have started to move prices lower as a result of the reduced likelihood of BRExit.

On the chart we see that gold smashed through its 9 EMA today closing convincingly below it, while printing a swing high at the same time.  The long red candle doesn't form any special pattern, but the 1280 support break definitely looks bearish.  This moves gold into a short term downtrend.

Silver continues to outperform gold; while gold blew through its 9 EMA, we see that silver managed to remain above its own 9 EMA, and has yet to print a swing high.  Volume is increasing which is a warning sign, but silver has not yet broken down.  At least part of that was probably because of a strong rally in copper today.

Miners gapped down at the open because of gold's sell-off, and continued to slowly move lower throughout the day, closing right at the lows.  GDX fell -2.77% on moderate volume, while GDXJ fell -3.22% on moderately heavy volume.  Both ETFs are through their 9 EMA lines, and like gold, GDX has printed a swing high.

As sell-offs go this wasn't particularly terrifying; a 3% move isn't any fun but most of the loss happened on the gap down.  Not much selling pressure happened intraday - there was no big red candle, which tells me that there is no heavy selling pressure right now, although downside volume is starting to pick up a bit.

Platinum fell -0.76%, palladium rose +0.54%, and copper closed up a big +1.84%.  Copper is back up to its 50 MA, trading at 2.12, and is moving strongly off its lows.  Volume on the rally is good - and that's bullish.  I'm guessing this is why silver is outperforming gold right now.

The buck did well today, rising +0.51% and printing a bullish engulfing candle pattern.  The dollar's sizeable rally came mostly at the expense of the Euro, which fell -0.58%, as did the Yen which dropped -0.85%.

WTIC rose +0.36 [+0.72%] to 50.20.  The move higher was mostly due to a very bullish API inventory report, that shows oil inventories were down a big -5.2 million barrels.  If this is confirmed tomorrow in the EIA's Petroleum Status report, that should encourage oil to remain above $50 and perhaps even move higher.  After the large rally last Thursday, oil has been fairly strong, with buyers showing up to buy the dips whenever they occur.

SPX rose +5.65 to 2088.90.  The positive move was almost entirely due to a decent rally in energy equities (XLE:+1.19%), while sickcare (XLV:-0.35%) brought up the rear.  SPX appears to be struggling to move higher at the moment.  VIX rose +0.11 to 18.48 - it appears as though there is still some nervousness about BRExit and I suspect traders are picking up some downside protection, just in case.

TLT fell again, losing -0.46% and continuing to follow through off the swing high from last week.  The safe haven move continues to unwind.  TLT is in a short term downtrend.  That's risk on.

JNK rose +0.57%, moving back towards its high.  JNK rally is risk on.

CRB actually fell, losing -0.68% mostly because of a huge drop in agricultural products - corn was smashed, losing -5.59%, and wheat has been plummeting for a while now.  Not sure what that's about; I don't trade either one, but the moves are big enough to pull the commodity complex lower.

Gold is moving into dangerous territory now.  When gold rallies because of a safe-haven move, if the danger evaporates, so will the gains.  While the commercials could make no headway against the longs while the danger of BRExit was real and increasing, now that it is ebbing, some of the buy-side support for gold at COMEX seems to have evaporated.  What happens if BRExit ends up to be BR-Remain?  Gold could sell off hard - through 1200, hammered lower by our friendly commercials.  I'm not saying it will, but I am saying its a risk.  Certainly another visit to 1200 is possible.  It depends on just how many COMEX longs bought because of BRExit - they will all bail out in a hurry if the referendum fails.

The chart for gold is now showing weakness.  I think it would be a mistake to ignore it.

Of course if the referendum surprises everyone and succeeds, gold probably reverses and makes new highs.  Current odds based on betting sites: 76% remain.

There are still buyers for gold because of negative rates and the decreased likelihood of a rate increase from the Fed, but the variable in play at the moment is, how many of the current longs have bought because of BRExit fears?

So when will we know the results?  The gory details can be found here (http://www.telegraph.co.uk/news/2016/06/20/when-are-the-eu-referendum-results-what-time-will-we-know-the-wi/) but the quick answer is, between 06:00-07:00 GMT on Friday, June 24th, with early results starting at 05:00 and final results at 07:00.  London market opens at 08:00.  There will be no exit polls; I suppose we wouldn't want them to conflict with the vote count and cause suspicion.

So for those of us in US timezones, the party starts at 00:00 (midnight) Eastern, with final results available at 02:00.

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1 Comment

newsbuoy's picture
newsbuoy
Status: Gold Member (Offline)
Joined: Dec 10 2013
Posts: 324
Exit Polls

It is my understanding that hedge funds have hired their own exit polls which means a hedge fund can manipulate the market with a head fake, etc.

DANGER! Wil Robinson DANGER!

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