PM Daily Market Commentary - 7/6/2016

davefairtex
By davefairtex on Thu, Jul 7, 2016 - 4:36am

Gold rose +7.00 to 1365.70 on moderate volume, while silver climbed +0.15 to 20.16 on moderately heavy volume.

Gold broke to a new high today, touching 1377.50 but today's price action had some aspects of a failed rally to it.  The candle print was a spinning top - but it looked more than a little like a (bearish) shooting star to me.  Code says not to worry; only an 8-16% chance of the top.  Gold did manage to close above the previous high, which is good news, and the volume remains pretty good.

Given the steady upward movement, and the lack of previous highs on the daily chart, I thought we should pull back to the weekly chart to get a sense of where next resistance might be found, as well as to get a sense of when the current cycle might come to an end.  On the weekly chart below, we see the previous high at 1392.60 that dates back to early 2014.  We see the weekly RSI(7) is now well into overbought territory.  Given this, I'd look for there to be some more serious selling pressure once we start getting closer to 1400.

Silver tried rallying again toda, and made it as high as 20.58 before falling back, losing 40 cents off its high.  It felt like another failed rally; candle print today was a "high wave" which is somewhat bearish in this particular instance (20-30%) but not nearly as bad as yesterday.  Based on the recent candle prints and the current very high daily RSI (93.82), silver will have some tough sledding ahead to make new highs.

GDX rose +3.14% on moderately heavy volume, while GDXJ was up +4.58% on heavy volume.  Both miner ETFs made new highs once again, and the candle prints were bullish-looking "closing white marubozu" which have only a small chance of marking a high (4-6%).  Things continue to look good for the mining shares.  I especially like the slow steady progress on increasing volume.  Miners are starting to get a bit overbought, but until the chart gives off some sort of bearish signal, just keep watching and enjoying.

Platinum rose +1.39% breaking to a new high that dates back to mid-2015, palladium rose +0.75%, but copper dropped -1.33% confirming yesterday's bearish engulfing and printing a swing high.  This is the second fairly large drop for copper.  While it hasn't specifically entered a downtrend, today's swing high is starting to be a concern.

The buck fell -0.13 to 96.13, which is only a modest change.  That concealed a new 30-year low for the pound (-0.70% to 1.29) and a high for the yen.  While everyone is focused on GBP and its big recent drop, JPY has had an incredible 25% rally over the past 12 months - this for a country that is printing money like crazy and completely monetizing its deficit.  Its up about 2% just this week alone.  You tell me why that is.   Japanese companies repatriating cash?  Mrs Watanabe unwinding carry trades?  At the same time, normal private credit growth has ground to a halt.  As in, 0%.

WTIC managed to rally back today, closing up +1.03 [+2.20%], mostly on the strength of an API report that showed a bullish inventory draw of 6.7 million barrels.  Earlier in the day oil had dropped and then rebounded somewhat - but the API report at 16:30 caused oil to spike up a full dollar after the market closed. Candle print is a "closing white marubozu" - which in this context is a 30-40% chance of a low.  Crude managed to squeak back over its 50 MA.  If the EIA confirms the big draw tomorrow, oil may manage to avoid the more significant correction that seemed to be the setup just yesterday.

SPX staged a reasonably strong rally, up +11.18 to 2099.73, recovering after being down early in the day.  Sickcare led (XLV:+1.12%), with utilities and staples bringing up the rear.   Candle print was bullish; a mid-range closing white marubozu which also happened to be a bullish engulfing.  Both suggest we probably don't go lower (39-42%).  VIX fell -0.62 to 14.96.

TLT climbed +0.16%, making a new high by a few pennies even in the face of the SPX rally.  Someone really wants to own US treasury bonds.  I suspect the increased prospects of a rate cut is partially responsible.

JNK rose +0.48%, more than wiping out yesterday's losses.  After the brief BRExit-inspired dip, JNK is back to a steady uptrend, above its 9 EMA.  Risk on.

CRB found support on its 50 MA, closing up +0.16 after being down much more substantially earlier in the day.  CRB is in a longer term uptrend, but the short term is a bit more in doubt.

Gold continues to move steadily higher; the setup for higher metals prices remains in place: rates are negative in many competing asset classes, and the momentum towards even lower rates seems inexorable.  Miners are following.  Sentiment is not yet at excessively optimistic levels, chart still looks good - we may have some more room to run in gold.

Silver is looking more iffy, both on the chart as well as sentiment, which is at excessively optimistic levels that have marked prior highs.

This Friday we have Nonfarm Payrolls at 08:30 Eastern - that's two days from now.  That's usually a market-moving event.  As always, the market's reaction to the news is the key, and sometimes the first impulse ends up being a headfake.  I'm not sure how much more positive things can be for gold, even with a particularly bad number; if we get some bullish surprise, that might mark a top.  But that's all just a guess.

I hope you're all enjoying gold in the mid-1300s.  Its a nice change from where it was six months ago.

Note: If you're reading this and are not yet a member of Peak Prosperity's Gold & Silver Group, please consider joining it now. It's where our active community of precious metals enthusiasts have focused discussions on the developments most likely to impact gold & silver. Simply go here and click the "Join Today" button.

15 Comments

cmartenson's picture
cmartenson
Status: Diamond Member (Offline)
Joined: Jun 7 2007
Posts: 5568
Silver slam underway

Silver tried rallying again today, and made it as high as 20.58 before falling back, losing 40 cents off its high.  It felt like another failed rally; candle print today was a "high wave" which is somewhat bearish in this particular instance (20-30%) but not nearly as bad as yesterday.  Based on the recent candle prints and the current very high daily RSI (93.82), silver will have some tough sledding ahead to make new highs.

My view is that with record commercial shorts, and the fact that the commercials have not even flinched at going even record-er short into the face fo rising prices that we're going to be treated to many, many gold and silver slams.

These may happen during normal Comex hours but are far more likely to happen during the overnight sessions.

They are marked by sudden, enormous volume surges as the price plummets.

Such as this one this morning:

They usually seem to happen after a period o weakeness.  

If this were my scam, what I'd do is utterly cap any advance, preferably by creating a shooting star candle...something where the high was backed off from significantly.

Then I'd apply plenty of steady selling pressure to create a downtrend....then, when the moment was right and I'd successfully chased away enough buyers and the price seems to be teetering at the top of a staircase, I'd give it a swift kick in the back.

Boom!  A massive sell dump designed to destroy the bid stack and eat through to lower prices.

Hopefully I would be able to clear out some of my open interest holdings at a price that earns time some money, not at all unthinkable if I were the one capping the rally at much higher prices.

Assuming I have a large enough trading account, this seems 100% certain to win, and it pretty much has been a 100% money maker over the past five years.

Of course, I don't just have a futures account going here, but have been both selling calls and buying puts, as well as shorting miners to provide extra 'oomph' to the fun and games.

I am also comfortably secure in my notion that the SEC and CFTC will not be investigating any of these practices because my actions are in alignment with official policy (which is anything that creates the appearance or illusion of confidence in the rulers is allowed).

But the larger opportunity for people paying attention is that these price raids in the paper markets set the price in the physical markets...and over there we note that people in China and India love lower prices.

Unlike their counterparts in the west who seem to like buying things at higher prices, the higher the better, people in the east seem to like lower prices.  Go figure.

So even as the battles are 'won' over in the paper futures ""markets"" the larger war is being steadily lost as the physical supply heads, nay stampedes, east.

Win the battle, lose the war.

 

 

 

 

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
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Posts: 5059
silver slams

Again, I ask the question, how come we didn't see any "silver slams" during the long uptrend we just experienced?

How come it is you think we are seeing them now, and not back then?

If they have record short positions, one might assume that if they truly had an infinite trading account and were thus capable of stuffing any rally, they would have stuffed this rally long ago - making money is always better than losing it, especially when your bonus depends on making money.

Your set of assumptions plus logic asserts that we should have never seen the recent silver rally.

Yet silver did rally.  Therefore, either logic no longer works, or one of your assumptions is faulty.  :-)

cmartenson's picture
cmartenson
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Need to follow it along more fully
davefairtex wrote:

Your set of assumptions plus logic asserts that we should have never seen the recent silver rally.

Yet silver did rally.  Therefore, either logic no longer works, or one of your assumptions is faulty.  :-)

Remember the old Peanuts routine where Lucy would pull the football away over and over again?

The key part of that is setting the football up.

The wash-rinse-repeat part of this cycle requires setting up the football.  It means you have to let the price rise to attract new capital in that eagerly buys the positions.  You let them do this and you even encourage them to go as far as you think they will./  But at a certain level you just cap it.  That was about the $21.10 level a few nights ago.  That was the line in the sand.  The football was set on the ground right there.

The point isn't to never let Silver (or gold) rally, the point is to get people to play your stupid game.

Rise, hold, smash.  It's the Hulk version of trading.

The wonder of it all is that they keep doing it over and over again and people still keep playing.

My advice is to just buy physical and let the fools keep playing their games.

 

davefairtex's picture
davefairtex
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wash-rinse-repeat

Ok, I'll follow like you say.

So they capped the rally a few days back.  I can definitely go with that logic, because it aligns well with the evidence.  From what I saw, the 21.10 "cap" cost them (at most) about 1000 contracts.   At most.  My strong sense is, they are very good at figuring out when the buyers are all tired out, when they've shot out all their ammo, and are down to almost nothing.  Then they step in and "cap" the rally - like using your pinky to push over the almost-dead fighter exhausted from the battle.  Push....smash.  Rally "capped."

And once the momentum shifts, then they jump in short.  And all the momentum traders switch directions too.  And then managed money starts to bail out.  Ultimately, this all leads to a trend change.

Yep, that pretty much aligns with how I see things.

As for the stupid market game - is that the one where prices rise, top out, then fall again, find support, then rise again, top out, and then fall - in a sort of "cyclical" action?  And this happens repeatedly during both uptrends and downtrends?

And this is where we can use standard tools like RSI to determine when a top is likely to be near, as well as a bottom?  And where we can look at sentiment indicators to see when all the traders are on one side of the boat and maybe take the opposite view and potentially make money that way?

I just want to make sure we're talking about the same stupid game here.  :-)

Last two questions:

1) is this something new?

2) does it only happen in gold and silver?

davefairtex's picture
davefairtex
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silver sentiment

There's a sentiment trading service I subscribe to.  Often when sentiment moves into "excessive optimism", silver tops out.  "All the traders are on one side of the boat."

They have this sentiment indicator for literally everything you can imagine.  SPX too, of course.

So am I shocked to see "silver slams" when sentiment is quite high and when the RSI is > 93?  Not so much.  One might call that "smart" to sell the high - if one were into trading, that is.

And even if you just want to buy and hold - do you think its smarter to buy when the RSI is high and sentiment is in "excessive optimism" or when RSI is low and sentiment is closer to "excessive pessimism?"

davefairtex's picture
davefairtex
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and in non-silver-slam-news...oil pounded...

The EIA's Petroleum Status report today showed a nominally bullish draw of -2.2 million barrels, which promptly caused oil to tip over and sink $2 in about 60 minutes.  It did NOT confirm the very bullish API report from last night.

When something sells off on what seems to be reasonably good news - it's time to run, not walk, especially if that thing already has a pattern of lower highs and lower lows.

If you remember back a few months, oil would rally on reports of an inventory build.  Now it tanks on news of an inventory drop.

This just says we're in a downtrend.

I believe the shale drillers "capped the oil rally" at $50.

dryam2000's picture
dryam2000
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Posts: 279
Makes sense

USD/JPY down, U.S. 30yr bond yield down, and gold down today.  Spot the odd one out.  Overlay the USD/JPY & the gold spot price today as it's almost a complete inverse of the very typical pattern.  To deny that there are very strong motivations well beyond a bank(s) trying to make money is either simple thinking, or being an apologist for the system.  The OI is massive and has only been going up since brexit.  There has been about $10 trillion new NIRP debt added over the past month, and bond yields are cratering worldwide.  US bond yields hit all-time record lows last week.  This demand for debt is unrelenting, yet the banks are doubling down again & again to make money?  The fundamentals for gold have never been greater.

 

davefairtex's picture
davefairtex
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we were talking about...

dryam-

USD/JPY down, U.S. 30yr bond yield down, and gold down today.  Spot the odd one out.  Overlay the USD/JPY & the gold spot price today as it's almost a complete inverse of the very typical pattern.  To deny that there are very strong motivations well beyond a bank(s) trying to make money is either simple thinking, or being an apologist for the system.

Well, there's a third explanation: you are confused.  We were talking about silver, not gold.

It may surprise you, but I'm in agreement with you regarding gold.  Gold OI daily net change:

2016-06-24 2749
2016-06-27 50010
2016-06-28 -526
2016-06-29 1158
2016-06-30 7644
2016-07-01 -493
2016-07-05 22216
2016-07-06 12612

That's some big OI changes, especially on the day of BRExit, and in the last couple of days.  Could be official intervention.  I wouldn't put it past them, especially right now.  If they do it too long and the demand is too strong, we should see premiums start to increase - according to my belief system.  GLD tonnage jumped by 28.8 tons on 7/5 too.  Lots of demand for gold right now, good fundamentals, I definitely agree.  And its not the first time I've said this.  I've said it several times over the last few days in my commentary.  Perhaps you missed it.

Silver OI:

2016-06-24 5992
2016-06-27 -1665
2016-06-28 -3984
2016-06-29 -2041
2016-06-30 -2882
2016-07-01 3041
2016-07-05 3106
2016-07-06 -3413

Its not the same picture at all.  Certainly not supportive of a claim that someone capped the rally in silver by printing unlimited contracts.

Ultimately, my point today was: silver looks iffy right now.  Gold doesn't.

 

Luke Moffat's picture
Luke Moffat
Status: Gold Member (Online)
Joined: Jan 25 2014
Posts: 364
Grant Williams on Debt

Enjoy!

 

Luke Moffat's picture
Luke Moffat
Status: Gold Member (Online)
Joined: Jan 25 2014
Posts: 364
And another

I meant to post this last week but got distracted by Epigenetic videos :)

Raoul Pal (Grant's buddy) on Global Trends

 

davefairtex's picture
davefairtex
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Posts: 5059
forgiving tit-for-tat

Luke-

Yes.  I'm on video #3.  Not long ago I caught myself trying to decide between utilizing Tit-For-Tat, or the more benign Forgiving Tit For Tat.  After all I wouldn't want to be driven to extinction by a better algorithm, while still avoiding being taken advantage of...

Every lecture has a gem.  Who else can say in a conversation, "show me two skulls of a male and female animal, and I can tell you generally how they behave in their society - who cheats on whom, what the female looks for in a male, etc."

Ok, who would want to say such a thing, but still.

I have to say, attending university lectures is far more fun when you get to giggle at the questions that sum to, "so what's on the midterm."

KugsCheese's picture
KugsCheese
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Posts: 1428
davefairtex wrote: Again, I
davefairtex wrote:

Again, I ask the question, how come we didn't see any "silver slams" during the long uptrend we just experienced?

How come it is you think we are seeing them now, and not back then?

If they have record short positions, one might assume that if they truly had an infinite trading account and were thus capable of stuffing any rally, they would have stuffed this rally long ago - making money is always better than losing it, especially when your bonus depends on making money.

Your set of assumptions plus logic asserts that we should have never seen the recent silver rally.

Yet silver did rally.  Therefore, either logic no longer works, or one of your assumptions is faulty.  :-)

Dave, you seem to assume others play fair.   That is a faulty assumption in spades.  -- Dan

dryam2000's picture
dryam2000
Status: Gold Member (Offline)
Joined: Sep 6 2009
Posts: 279
Playing Fair

Dan,

So, you are saying humans don't always play fair when it comes to money?  That's some wild thinking. 

\s

Actually, that's the simplest and soundest argument I've read in regards to whether the financial 'markets' are heavily manipulated.  Of course they are heavily manipulated as man has tried to out scheme each other since the beginning of time in trying to obtain resources.....lie, cheat, rig, steal, murder....whatever it takes.  Why did Willie Sutton rob banks?  Because that's where the money was.

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5059
playing fair??

Dan-

Dave, you seem to assume others play fair.   That is a faulty assumption in spades.  -- Dan

Can you point out where I supposedly made this assumption - that bankers play fair?  I'm really confused.

My operating model for the bankers is, if they can shove the market around and make money, they will, because they can't resist making a quick buck, any more than a hungry dog can resist eating a bowl full of food sitting on the floor.

As a result, if there is a rally in PM, and the bankers are short, the rally is most probably genuine rather than some "grand long game" they are playing just to trick us all.

Luke Moffat's picture
Luke Moffat
Status: Gold Member (Online)
Joined: Jan 25 2014
Posts: 364
Tit-for-tat, sanction and head-fakers :)
davefairtex wrote:

Luke-

Yes.  I'm on video #3.  Not long ago I caught myself trying to decide between utilizing Tit-For-Tat, or the more benign Forgiving Tit For Tat.  After all I wouldn't want to be driven to extinction by a better algorithm, while still avoiding being taken advantage of...

Every lecture has a gem.  Who else can say in a conversation, "show me two skulls of a male and female animal, and I can tell you generally how they behave in their society - who cheats on whom, what the female looks for in a male, etc."

Ok, who would want to say such a thing, but still.

I have to say, attending university lectures is far more fun when you get to giggle at the questions that sum to, "so what's on the midterm."

Regarding tit-for-tat, is there not a third option? i.e. "sanction". So that you'd have forgiveness, retribution or abandonment? Perhaps the opportunity of sanction is not always available but I'm generally quite selective (cautious) of what/who I get involved with.

The whole process of partner selection in video #3 really interests me as it's stuff I'd never thought about before, i.e. whether homo sapiens are tournament species or pair bonding species - and it seems to be a mix between the two depending on who you're observing. From a societal viewpoint it has all sorts of implications - especially surrounding fidelity and marital conditions/contracts. What is to be reasonably expected if you marry a tournament species? Going through the lectures it's becoming apparent how far our legal system is behind the science of what homo sapiens actually are.

The part about tournament species (i.e. apes) made me chuckle - i.e. females aren't looking for males who will stick around and raise kids as it's more than they can reasonably expect so instead they're just on the look out for high quality genes via good sperm. And that males compete to head-fake females into believing they have good genes - flash cars and fancy watches bought with debt? Spot the head-fakers :)

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