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PM Daily Market Commentary – 10/26/2016

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  • Thu, Oct 27, 2016 - 01:23am

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    davefairtex

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    PM Daily Market Commentary – 10/26/2016

Gold fell -6.80 to 1267.50 on moderate volume, while silver dropped -0.14 to 17.62 on moderate volume also. 

On the chart, gold printed a bearish harami, pulling gold back below both the 200 MA and the 9 EMA.  The harami candle print is just mildly bearish, with just a 15-20% chance of a top here.  Gold seems to be riding the 200 MA, slowly moving higher.  While the candle prints day by day don’t seem to be providing us with any real information, gold is continuing to rise.  This could lead to a more dramatic move higher, or it could lead to a strong sell-off once the buyers run out.

The December rate-rise projection is now at 72%.

Gold open interest at COMEX rose +1,048 contracts.

Here’s a possible clue from the gold in Euros chart.  The 50 MA has acted as strong resistance over the past few months; each time gold hit the 50, it sold off.  Gold touched the 50 once again yesterday, and sold off today.  If we don’t get a close above the 50 soon, its likely gold will sell off once more, and the risk is that gold will end up making a new low.  At least, that’s what this chart is suggesting.

Silver also sold off today, dropping back down below its 9 EMA.  Like gold, silver is slowly rising.  Candles aren’t giving us much information here either; today was just a long black candle which isn’t much help.  As long as silver remains above the 200, that’s a positive sign.  A drop below the 200 would probably lead to a drop down to support at 16.

The miners sold off today also, with GDX off -2.11% on moderate volume, while GDXJ dropped -2.62% on heavy volume.  GDX dropped back below its 9 EMA, but managed to find buyers at the 200.  As with silver, losing the 200 would be a bad sign – although not quite as bad for GDX as it would be for silver.  Juniors look a bit better than the seniors, even though they dropped more substantially today.

Platinum fell -0.17%, palladium moved down -2.19%, making a new low, and copper rose +0.28%.  Copper is now back above all 3 moving averages, after a big rally yesterday resulted in a dramatic swing low.

USD sold off hard yesterday, making its low right at the New York open at 9:30, but then bounced back, closing down just -0.07 to 98.56.  While the dollar appeared to have topped out yesterday, today’s lack of follow-through from yesterday’s failed rally suggests the buck may still have higher to go.  It remains above all 3 moving averages and remains in a strong uptrend.

Crude fell -0.07 to 49.23.  There was a spike higher slightly before the petroleum status release at 10:30, where a surprise draw of -0.6 million barrels was reported, as well as a -2 million barrel draw in gasoline inventories also.  However, the rally didn’t hold and oil sold off right back to its starting point, printing a high wave candle that most probably doesn’t mark a low.  Oil is now below its 9 EMA.

However, the week-long retreat from the new high at 52 could easily be just a correction in the context of a more general move higher.  Pulling back to the weekly chart, oil appears to be forming an inverse head & shoulders bottom.  I’m still operating under the premise that oil prices are going higher.  They say bull markets must “climb a wall of worry” – and I think this one is no exception.  We have a pattern of higher lows and higher highs.  Until that is violated, oil probably continues moving higher.

SPX fell -3.73 to 2139.43, dropping back below the 9 EMA.  Financials (XLF:+0.62%) did best, while sickcare (XLV:-0.61%) trailed.  VIX rose +0.79 to 14.24.  While SPX is hanging tough, the small cap (Russell 2000) index broke support today, making a new low.

TLT fell -0.68%, closing below the 200 MA.  While TLT has yet to make a new low, the drop today suggests that bonds remain quite weak.

JNK also fell, losing -0.46%, dropping below its 9 EMA and printing a swing high.  Although it may be a bit early, this does seem to be a more serious sign of risk off.

CRB fell -0.33%, dropping back below the 9 EMA.  CRB may be topping out here.  If so, that won’t help PM at all.

My sense is that gold is at a decision point; the gold-in-euros chart looms large in my thinking.  If gold in Euros can close above the 50, then we’ll probably see gold break higher in USD also.  If not – we probably see another leg lower in both gold and the miners, assisted by the ever-helpful commercials. 

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