PM Daily Market Commentary - 6/28/2016

davefairtex
By davefairtex on Wed, Jun 29, 2016 - 4:51am

Gold fell -13.10 to 1314.50 on moderate volume, while silver rose +0.02 to 17.80 on moderately heavy volume.  The initial impact of BRExit has started to moderate; GBP rebounded, as did the Euro, along with equity markets around the world.  Safe havens were swapped for risk.

Gold and the buck fell together today, as traders exited some of their safe haven trades, with gold hitting a low of 1308.20 before rebounding.  On the chart, we see that gold remains above 1300 support, and that the volume on today's sell-off was relatively low - certainly compared with the last few days.  The candle print was an opening black marubozu, which in this circumstance is not a concern.

Open interest declined slightly today - down about 500 contracts.  The commercials did not cause today's drop.

In this chart (July 2016 Silver) we see a doji candle print for the second day in a row; this time, silver bounced off the 9 EMA.  Silver has been chopping sideways since the big rally last Friday, and I'd have to say that's a relatively positive thing.  Commodities overall have been pretty choppy, as have the currencies, but silver has remained relatively immune.  As long as silver remains above its 9 EMA, it continues to be in an uptrend, and if the rebound in commodities continues, silver should do well also.  Unless conditions related to BRExit worsen, silver might even outperform gold going forward.

GDX fell -1.70% on moderate volume, while GDXJ dropped -1.87% on moderate volume also.  Miners opened lower today, tried to rally at mid-day but the rally failed.  The doji candle print for GDX wasn't any help at determining direction.  Miners remain above the 9 EMA - and in an uptrend, but really not much happened today of note.

Platinum rose +0.05%, palladium rallied +2.38%, and copper closed up a big +2.23%.  Copper is doing very well, breaking out to a new high and is now back above its 200 MA.  The losses from BRExit Friday have been completely wiped out by today's rally.  China must be doing well.  Copper is definitely signaling risk on.

The buck fell -0.37 to 96.33, dropping back below its 200 MA.  USD safe haven flows reversed today, although a more substantial sell-off in the buck was bought.  Euro was up (+0.37%) as was the Pound (+0.89%).  Is everything better?  I don't know; I've never watched a country leave the EU before.  This is uncharted territory for me.  We might have another leg down if and when the UK invokes Article 50 and actually starts negotiating the withdrawal; there might well be some ongoing hope that the politicians will simply annul the referendum and pretend like it never happened, and/or renegotiate the UK conditions of EU membership.  If that hope is eliminated, its probably bearish for GBP.

WTIC rallied +1.50 to 48.11, closing back above its 50 MA and printing a two-candle swing low/bullish engulfing candle pattern, which has a relatively high probability of being a low (42-66%).  Crude was helped by a bullish API inventory report released at 16:30 which showed US crude inventory had dropped by -3.9 million barrels.  If the EIA confirms this tomorrow, yesterday's breakdown below the 50 may well have just been a headfake.  Perhaps this is all the downtrend we get out of BRExit - at least for oil.  If this is true, then a rally in oil equities will help the overall equity market also.

SPX rallied today, up +35.55 to 2036.09, moving back above its 200 MA.  SPX printed a two-candle swing low pattern, which has a 47-55% chance of marking a low.  Market was led higher by energy (XLE:+2.78%) and financials (XLF:+2.56%).  Perhaps the stabilization of the currencies helped to steady equities; certainly the oil rally helped the oil equities to rebound.  Bank stock chart still looks ugly.  VIX cratered, dropping -5.10 to 18.75.

TLT moved up slightly, climbing +0.21% and printing a "northern doji" candle pattern.  This one isn't particularly bearish, marking a top just 10-15% of the time.  I would have expected TLT to sell off in the face of all this "risk on" behavior - its rally is a slightly sour note.

JNK bounced back strongly today, up +1.36%, wiping out yesterday's losses completely.  JNK managed to squeak back across its 50 MA, and printed a "bull tasuki line" pattern which is actually pretty bullish: it marks a low 47-75% of the time.  JNK remains in a downtrend, but today's move suggests a possible return to risk on.

CRB rallied a big +2.12%, closing back above its 9 EMA.  Today's rally was all about energy and industrial metals.  Can CRB erase the lower-high/lower-low pattern?    If copper and oil keep rallying like this, it will.

Gold, the buck, and TLT are the first line safe havens, and two of three fell today.  I take that as a hint rather than a sign of a trend change; the immediate danger is perceived to be ebbing somewhat.  The rally in equities worldwide was also fairly widespread.  US equity market looks to be the strongest; perhaps part of this involves US assets being somewhat of a safe haven.  On a 52-week basis, US equities are off about 2%, while the rest of the world's equity markets have fared far worse - even after today's rally, the other nations are down from 10-30%.

Also, we saw rallies in copper and oil, as well as JNK also, which help confirm the risk on mood.

The EU and especially the periphery are far from being out of the woods.  The US, on the other hand, looks relatively solid.  Buck remains relatively elevated at 96, while the Euro is chopping sideways at 110, and the pound remains at multi-decade lows at 1.33.  I'm not sure I'd be short US equities right now, but the EU is another story.  Charts across the pond remain bearish, and the further you move into the periphery, the more bearish they look.  UK equities (FTSE) are actually recovering nicely; they have wiped out most of the losses from BRExit.  Perhaps UK equities look cheap what with the 10% drop in GBP.

If you want to short something, perhaps wait for a rally in Italy or Spain, and then short that.  That's my thought for the day.   That, and be happy if you own dollars and gold.  They should continue to do well.  The fun in the EU is a long way from being over; whether its crappy Italian banks, the necessity of rigging an election in Spain, or the confusion from BRExit, I suspect the EU will be the source of volatility until it resolves things more permanently.

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2 Comments

Jim H's picture
Jim H
Status: Diamond Member (Offline)
Joined: Jun 8 2009
Posts: 2391
Silver break out...

Pt and Pd now participating too.  Gold lagging.. 

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5685
commodity rally

Feels like a commodity rally - silver apparently like this.  Silver might be playing catch-up with copper today.

Fascinating the commercials only increased their short positions for gold.  See, I'm always happy to talk about official manipulation - I just want to see the evidence.  I think this is it.  Such a massive positive increase for gold, and a decrease for silver!

(OI on the first 5 contracts)

Silver's OI changes:

2016-06-21 4930.000000
2016-06-22 -4722.000000
2016-06-23 7370.000000
2016-06-24 5992.000000
2016-06-27 -1665.000000
2016-06-28 -3984.000000

Gold OI changes:

2016-06-21 -1086.000000
2016-06-22 -9623.000000
2016-06-23 -4935.000000
2016-06-24 2749.000000
2016-06-27 50010.000000
2016-06-28 -526.000000
 

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