PM Daily Market Commentary – 1/18/2016
Gold fell -13.00 to 1203.70 on moderate volume, and silver dropped -0.15 to 17.07 on moderate volume also. A strong dollar rally caused both gold, silver, and the miners to sell off, with silver making a new high prior to the drop.
The cause of the trouble today was the buck; after the big dollar sell-off yesterday, today it rebounded, rising +0.60 to 100.88. Yen lost all its gains from yesterday, falling -1.70%, while the pound dropped -1.22%, and the Euro fell -0.75%. Was this move enough to reverse the buck’s downward trend? Today’s “bullish harami” candle pattern is relatively positive: 43% chance of marking the low. The buck started the rally from a somewhat oversold position, with the RSI-7 = 25 before today’s rebound. This all lines up with a reasonable chance for the buck to put in a low today.
Gold actually held up relatively well for most of the day even though the buck was moving higher. It was only after 11:00 when the mood seemed to change. From that moment, the buck started a rally that would end up +0.80, which in turn pulled gold down almost $13, with gold closing near at the lows of the day. Candle print for gold was an “opening black marubozu” which the candle code says is only mildly bearish: a 19% chance of marking the top. The candle looks more bearish than that to me, but what do I know? The low volume today is more bullish than bearish – you want to see low-volume selling days and high volume buying days.
Open interest at COMEX for GC rose by 13,476 contracts.
Rate rise chances (May 2017) rose to 30%.
Silver initially looked more bullish than gold, as it was able to make a new high to 17.36 just before 11:00. But then as gold fell, silver did also. Candle print for silver was a closing black marubozu, which the candle code felt was quite bearish: a 62% chance of marking a top. I’ve noticed the candle code can get upset when a rally fails after a new high is made, and that’s what happened today. Silver closed at the dead lows of the day. Silver under-performed gold just slightly, which pushed the gold/silver ratio down -0.14 to 70.49.
Miners did poorly today, with GDX off -1.50% on moderate volume, while GDXJ dropped -3.22% on moderately heavy volume. Miners rallied initially as silver made its high around 11:00, but then sold off for almost the entire rest of the day. GDX candle print was a two-candle swing high, which the code tells me is a 68% chance of a top – a medium-bearish rating for a swing high. Candle code has been fairly bearish on the mining shares for a while now. The sole bit of good news was a sharp, end-of-day rally which saw GDX move up 1% in the last 15 minutes.
Platinum fell -1.30%, palladium dropped -0.28%, and copper fell just -0.15%. Platinum printed a swing high today, which the candle code didn’t like at all: 76% chance of a top. Both platinum and palladium appear to be starting corrections. It might be a tell.
Crude fell -1.11 to 52.10, printing a swing high, a bearish engulfing, and a host of other bearish patterns, which summed to a 47% chance of a top here in crude. Oil has once again fallen below its 9 EMA, and it looks to be in the process of forming a lower high, which is a bearish sign. Crude really isn’t looking great; the petroleum status report is due out today at 10:30, and if we don’t get a happy response from the market, I’m guessing crude will drop down to test 50, if not lower, based on the size of the recent drops and the downside momentum. Today’s API report showed a bullish 5 million barrel draw in crude inventory, but a bearish 9.7 million barrel build in gasoline. The price of crude did not react to the report release.
SPX rose +4.00 to 2271.89. Candle print: spinning top, which is mildly bullish. SPX is now back above the 9 EMA. SPX has been more or less chopping sideways for the past 11 trading sessions, and today’s move doesn’t change that at all. Today financials recovered (XLF:+0.83%) while energy fell (XLE:-0.23%). VIX rose +0.61 to 12.48, a surprising move given nothing really happened today.
TLT fell -1.28%, printing a swing high and dropping back below its 9 EMA. Is this it for the bond rally for now? Maybe so.
JNK rose +0.05%; it continues to chop sideways as it has for the past few weeks.
CRB fell -0.91%, a big drop that was caused almost entirely by the drop in energy prices.
PM continues to dance, but it is the buck that is playing the tune. If the dollar has put in a reversal today, PM will almost certainly top out, and gold will drop back into a downtrend. The buck was a bit oversold, so today could mark a near-term low for the dollar – but right now I’m not seeing any clear signals. The only thing I’m seeing consistently is steady selling pressure in the mining shares over the past week or two, and that’s generally bearish for PM. Gold is in overbought territory, so it would not be too out of line for a correction to start now.
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If the Trump hype of "Making America great again" has stimulated the US economy, are the supply/demand issues of a tighter supply in both NG and oil signaling a softer PM's market for the near future? Will higher NG/Oil prices "throttle" the perceived economic recovery? Or are the markets going to become more price sensitive without government "stimulation". Euro still soft and looks like they are going to continue printing. January 20th could be interesting!
" Will higher NG/Oil prices "throttle" the perceived economic recovery?"
I don't think so. I think the biggest risk is the debt bubble that is getting harder and harder to keep inflated. if debt bubble pops, it going to kill off the credit market which will cause commodity prices to fall as people & business are forced to cut consumption. That said its possible that higher energy prices might initiation a credit/debt event.
2017 should be an interesting year since Trump will be president, & the UK is leaving the EU. Something is going to happen that triggers an global economic event this year.
First part of the interview is here;
The second half can be found on the interviewer's website. The first half is excellent (IMO) – I actually managed to understand what he was saying this time 🙂 If you're short of time I'd recommend watching from 36 mins of the youtube clip – especially where they predicted a terrorist attack using his financial modeling system. To be continued over the weekend…