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PM Daily Market Commentary – 1/6/2016

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  • Wed, Jan 06, 2016 - 10:06pm

    #1

    davefairtex

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    PM Daily Market Commentary – 1/6/2016

Gold rocketed higher today, rising +16.30 to 1093.30 on very heavy volume, while silver rose just +0.03 to 13.99 on moderate volume.  Gold moved up steadily all day long, defying plummeting commodity prices and an almost-total collapse in crude oil.

Gold’s rally today wasn’t a big short-covering spike, it was a steady move higher that ended up closing quite near the day’s high.  By the time the day was over, gold ended up breaking above its previous high of 1088.30, and that also resulted in a close above the 50 MA.  These are both very positive signs.  This is also the third straight up day for gold – something we haven’t seen since last October.

Silver struggled higher today, attempting a modest rally but largely failing.  It appeared that falling commodity prices kept a lid on silver prices today.  Silver’s failure to rally is telling me that gold’s move higher is safe haven in nature.  From what I’ve seen, solo moves by gold – i.e. when gold rallies and silver doesn’t – tend to be short lived.

GDX rose +1.64% on light volume, while GDXJ climbed +1.71% on light volume also.  Juniors are starting to stand out, breaking above their previous high.  I had to use the thin orange line to see the breakout, but it is definitely there.  This is the third day above the 50 MA for the junior miners.  The junior breakout is a positive sign for PM.

Platinum fell -1.26% on moderately heavy volume, while palladium basically collapsed, falling -5.73%, smashing through support, making a multi-year low that dates back to 2010.  This is another sign that gold’s rally is a safe haven move.

The buck fell -0.13 to 99.31, the first drop in about a week.  Its possible the buck is just taking a break; to me the dollar uptrend still looks intact.

After moving slightly higher yesterday, SPX continued dropping today, losing -26.45 [-1.31%] to 1990.26 and making a new low for this cycle.  While the pace of the move lower doesn’t seem to be accelerating, neither is it slowing down.  So far I’m not seeing any real buy-the-dip; yesterday’s “rally” looked more like a dead cat bounce than anything else.  VIX rose +1.25 to 20.59.  While the Shanghai market rallied, it appears that US equities are not convinced that all is well in China.

JNK fell -0.09%, a surprisingly small move given the magnitude of the drop in oil today.

Bond ETF TLT had a great day, climbing +1.35% and moving back towards bullish territory.  Bonds have been a tough trade recently, as direction seems to change weekly.

CRB plunged -2.09%, making a new all time low for this index.  The commodity downtrend continues.

WTIC sold off all day long, falling a massive -2.08 [-5.76%] to 34.06 and blasting through the previous low of 34.53 set just two weeks ago.  In early trading in Asia, oil has now also violated the 2009 low, marking an intraday low – so far – of 32.77. There is no hint of buy-side support for oil as far as I can see. 

Gold’s rally is finally happening, as predicted by the COT report, however gold is looking a bit lonely in its move higher.  Silver struggles to follow gold, while platinum and palladium are dropping.  Oil is just a disaster, and the overall commodity complex is setting new lows.  It seems that bad news out of Shanghai seemed to be the trigger that gold needed to take off.  Who knew?

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  • Thu, Jan 07, 2016 - 08:46am

    #2

    davefairtex

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    shanghai trading suspended again: off -7% in first 30 min

The longer this continues, the more terrified the longs will get.  There is nothing worse than not being able to get out of your trade in a falling market, especially if you're on margin.

And this market drop is with the explicit support of the Chinese government.

US equity market is off 2% in the futures markets as I type.

As Chris pointed out in a different section, oil is now hovering around $32.50.  We may have another day or two before the capitulation in the oil space is through, and at $2 per day, that suggests we might see $28 oil before we see a bounce.

That's just a guess.

  • Thu, Jan 07, 2016 - 01:27pm

    #3

    KugsCheese

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    davefairtex wrote:The longer

[quote=davefairtex]

The longer this continues, the more terrified the longs will get.  There is nothing worse than not being able to get out of your trade in a falling market, especially if you're on margin.

And this market drop is with the explicit support of the Chinese government.

US equity market is off 2% in the futures markets as I type.

As Chris pointed out in a different section, oil is now hovering around $32.50.  We may have another day or two before the capitulation in the oil space is through, and at $2 per day, that suggests we might see $28 oil before we see a bounce.

That's just a guess.

[/quote]

1929 is 2016.   Can the Chinese go back to the farms…

  • Thu, Jan 07, 2016 - 01:42pm

    #4

    KugsCheese

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    Chinese Markets Closed After 30 Minutes Trading Thursday

“I am speechless. I was about to clear my position but I couldn’t since the stock already fell by its 10% daily trading limit,” said Gu Yuan, a Shanghai-based retail investor.  Ref: http://www.wsj.com/articles/china-stocks-trading-called-off-for-second-time-this-week-1452133928

  • Thu, Jan 07, 2016 - 04:46pm

    #5
    Russellp

    Russellp

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    Question

Dave,

Please let me know if I am reading you correctly here:

Are you saying that because gold moved without silver, and that other commodities are being crushed, that gold is likely just a safe haven move for some people at the moment?  And, that once that mode of support dies off a bit that the move lower by commodities will likely pull gold back down a bit?

Not that I am rooting against PM finally taking off exactly, but I am new to this and still in the accumulation phase……..

  • Thu, Jan 07, 2016 - 06:15pm

    #6

    davefairtex

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    silver & gold

Russell-

Yes that's what I was saying.  Normally gold and silver move together, and normally, silver moves up faster than gold.  Yesterday silver barely moved, while gold shot higher.  This always makes me nervous.

Of course today silver actually started to catch up to gold – possibly an artifact of the potential low in crude oil today.  Miners also took off – almost a 4% gain at this point, much more enthusiastic than the very modest move yesterday.  The fall in the buck might have helped.

The usual pattern is, miners outpace silver, with junior miners moving faster than the seniors.  In metals, silver tends to outpace gold.  This pattern "generally" holds both to the upside and the downside.

Today everything looks pretty strong in the PM space, and so if current prices hold through to the close, today will look a lot more bullish in terms of the overall PM space than yesterday.

In spite of my happy comments, today is not an entry point – you'd be buying after 4 rally days, which is (probably) closer to a near term top than a near term bottom.  What I'm happy about is the impact on the overall trend.  If all the stuff starts moving higher, that suggests the next dip might be a high percentage buy point.

  • Thu, Jan 07, 2016 - 07:12pm

    #7
    Russellp

    Russellp

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    On the same page

Davefairtex,

Good to know I was on the right track.  As a total noob, and someone who feels like they might need to catch up with physical PM a bit before something big goes down in the near future, I have really had to work to keep my emotions in check.  When you are sitting at home watching the price move higher it is hard not to kick yourself for not buying those extra buffaloes/maples at 1100.  It is also hard not to think that "this must be IT!!!!" and run out and stock up before it skyrockets.

I just have to breathe and let the cycles move as they do…..

I always read your posts at about 5:00 am my time, so I will be sure to pounce when you think we might have hit the dip for a high percentage buy.

Thank you for your help,

Russell

 

  • Thu, Jan 07, 2016 - 10:30pm

    #8

    Arthur Robey

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    Simply the Best.

It's all very personal.  I spoke against gold and for silver yesterday. 

I pride myself as being the best contra-indicator in the business.

  • Thu, Jan 07, 2016 - 10:36pm

    #9

    Mark Cochrane

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    Regret works both ways…

I for one wish that I had waited longer to burn my dry powder…

Not sure how it changes the outlook for PMs but someone sure wanted to take silver home today!

  • Fri, Jan 08, 2016 - 08:56am

    #10

    davefairtex

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    missing out

Russell-

That feeling of missing out on a rally is common as dirt.  We all feel it.  Emotions are the enemy, as it seems you have realized.  Thats a big deal.  Many people never figure this out.

Try this technique, perhaps it will help.  Each day, write down your "missing out" feeling intensity, on a 1-10 scale, alongside price.  My bet is, you will write down the largest number right around the price peak.  Its at that point that "retail" tends to buy, and the big money commercials tend to unload short.  They have it all carefully calculated – big banks have giant computers that can figure out when goldbug Pa Kettle finally throws in the towel and buys – right there at the top.

I recall a poster asked me, within days of the top of the last gold rally, if I thought the trend had changed and now was the time to buy.  Sure sign of the top.  Not knocking the poster at all – he was the voice of 100 other people who were all thinking and hoping the same thing.  Its just how both people and the market works.

That, and the goldbug press seems to get more excited the higher the price goes.  Predictions of imminent COMEX defaults, articles about gold running out, and they get more frenetic and excitable as price increases.  It is almost like they are being written by the big commercials to fan the flames of "missing out" which eventually culminates in the retail buyer going all-in right at the cycle high.

My sense: emotional articles are not helpful.  Pulse should never go above resting.  Gold is just an insurance policy, nothing more.  Who gets excited about boring old insurance?

Or so the theory goes anyway.  🙂

Dollar cost averaging is another way to remove emotion from the trade.  Just buy regardless of price every Friday.  Or whenever.

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