PM Daily Market Commentary - 7/19/2016

By davefairtex on Wed, Jul 20, 2016 - 4:14am

Gold rose +3.00 to 1332.30 on heavy volume, while silver dropped -0.07 to 20.01 on light volume.  The buck staged a strong rally today providing headwinds for commodities and PM.

Gold traded in a narrow range, printing a relatively innocuous spinning top candle. That's a decent performance given the dollar rally.  Current trend remains down.  Gold remains below its 9 EMA, and above the 1320 support level.  Gold needs a close over that EMA 9 (1337.43) to get the ball rolling to the upside again.

Not much changed today.  The only oddity was the curiously large volume.  Intraday I didn't see any high volume events.  It could be commercials covering, but its hard to say.  It would be really nice to have a daily COT report.  Add that to the wish list.

Gold's OI increased by +1582 contracts, while GLD inventory was unchanged.

Silver continued its slow decline.  It avoided making a new low, but it did close below its 9 EMA for the first time in 7 weeks.  Silver's drop cannot be blamed on industrial metals, which did relatively well today in spite of the dollar rally; perhaps it was just the bottoming out of the gold/silver ratio, which has been slowly rising for the past 3 days, and is up +0.38 to 66.59.  That's still a fairly low level, relative to where it was back in March, but silver is starting to slowly look more bearish.

Regardless of the cause, the close below the EMA 9 should not be ignored, even if it was just by a penny.  I think its time to buckle up, especially if the buck continues to move higher.

Miners fell today, with GDX down -1.03% on light volume, while GDXJ dropped -2.21% on moderately heavy volume.  Both miner ETFs are now below their 9 EMA lines, which is bearish, although both remain within their recent trading ranges.  GDXJ printed a swing high today.  Both the EMA 9 crossing and the swing high are bearish.

The GDX:$GOLD ratio may be topping out.  This would be bearish too.

Platinum fell -0.27%, palladium rose +1.60% and made a new high, and copper also climbed, up +1.16%.  Copper continues to do well - as do industrial metals in general.  Industrial metals are the best performers in the commodity space in recent weeks, with PM in second place.

The buck broke out sharply today, up +0.52 to 97.11, finally deciding on a direction.  This was because of a drop in the Euro (-0.49%) and a somewhat larger drop in the Pound (-1.11%) which is still struggling to recover from losses due to BRExit.  Money is starting to flow more sharply into the US.  The dollar rally happened mostly during European trading hours.

WTIC fell again today, down -0.49 [-1.07%] to 45.45, coming to rest just above the previous low at 45.16.  Oil is looking weak.  If the Petroleum Status report (tomorrow at 10:30) shows an inventory build, we could see oil sell off hard.  We might even sell off hard on an inventory draw.  I don't have a crystal ball so I can't tell how it will play out, but the chart suggests weakness - odds are, the trend will hold.  A big drive through 45.16 could easily take us down to the high 30s/low 40s.  Of course there's also the chance of a headfake through support followed by a reversal, which would be a bullish outcome.

SPX fell -3.11 to 2163.78.  Equities have been chopping sideways for the past three days.  SPX is mildly overbought, and sentiment is now excessively bullish - the VIX fell -0.47 to 11.97.  VIX hasn't seen these levels since August 2015, just before the big move lower.  Energy and basic materials led the market lower.  Puts are quite cheap.  Might be time to buy some - although you might want to try a weaker sector such as financials and/or banks, which will probably drop more during any correction.

TLT rallied, up +0.56%.  While TLT hasn't printed a swing low yet, if SPX sells off, that's likely to happen.  TLT is signaling risk off.

JNK fell -0.30%, remaining within its recent 7-day trading range.  JNK is still in a strong uptrend.

CRB fell -1.11%, following through on the break below the 50 MA yesterday.  Commodities are continuing to weaken; today's drop was led by agriculture, along with livestock.

Apart from the dollar breakout, the current situation didn't change much from yesterday - downtrends in gold, silver, crude, and commodities overall remain in place.  If the buck continues to rally, that will continue to pressure the commodity complex - silver more so than gold.  ECB meets on Thursday - they'll have an announcement at 11:45 GMT.  Maybe they'll announce something exciting that will fix everything...but I'm going with the odds.

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