PM Daily Market Commentary – 11/15/2017
Gold fell -2.60 [-0.20%] to 1277.80 on extremely heavy volume, and silver dropped -0.04 [-0.24%] to 16.98 on very heavy volume.
As with yesterday, gold and silver both suffered some “nonstandard selling pressure” which ended up forcing a failed rally. Prior to the event, both metals had staged reasonably strong rallies, and at the same time, SPX had sold off about 10 points overnight in the futures markets.
At the US market open, SPX sold off hard, dropping perhaps 10 more points in 5 minutes, putting SPX down maybe 20 points total. SPX chopped sideways for a few minutes, and it was 9:44 that “someone” started to unload on silver; 6000 SI contracts changed hands over an 8 minute period, and this caused silver to drop 18 cents. Gold was pulled lower also. Around that same time, SPX started to rebound.
Something I’ve become more attuned to lately is the relationship between SPX and gold, silver, and to some extent copper because of my work trying to forecast markets. If you want to solve “the market forecast puzzle” for gold, you need to incorporate price changes of SPX to do it. The same is true for forecasting SPX, but you need to add in oil, and interest rates, and a few other things into your model to make SPX resolve. Why does this matter?
Well, if I wanted to keep SPX from tanking, and I knew “the computers” at the big trading firms understood these correlations, then I could hit silver and platinum (small markets) which would then affect gold (a larger market) which would in turn cause money to flow into SPX (the market I wanted to support).
I’ve said this before, but its always worth repeating: “Give me a lever long enough and a fulcrum on which to place it, and I shall move the world.”
So these days, I’m suspicious when I see a reversal in SPX, which occurs slightly after silver gets the crap kicked out of it in the futures market, 15 minutes after SPX endured a scary-looking morning downdraft. If the buck had rallied hard at the same time, I wouldn’t be saying all this, but when its just gold, silver, and platinum moving sharply in a direction all by themselves – knowing the correlations as I do, I get suspicious.
After the hit at 9:44 am, gold chopped sideways for the remainder of the day. Candle print for gold was a shooting star – which the code felt was neutral. You might expect the failed rally to be negative; forecaster says otherwise – up +0.47 to +0.39. That’s a strong buy signal for gold. This is a bold call from the forecaster; which is another way of saying I’m not sure I agree! But forecaster knows more than I do, so don’t listen to my worries.
COMEX GC open interest rose by 3,994 contracts = 12 tons of paper gold.
Rate rise chances (Dec 2017) remains at 97%.
Silver appeared to be the primary target, and as with gold, it too never recovered from the assault at 9:44 am, moving sideways into the close. Candle print for silver was also a shooting star – a failed rally – which the code felt was also neutral. Silver’s forecaster moved up +0.02 to +0.07. That’s just barely bullish; gold looks a lot more bullish than silver.
COMEX SI open interest rose by 1,313 contracts.
The gold/silver ratio rose +0.02 to 75.25. That’s neutral.
Miners actually moved higher today, with GDX up +0.27% on moderately light volume, while GDXJ rose +0.66% on moderate volume. The miners sold off as a result of the 9:44 am assault, but then … buyers showed up bidding price back up into the green. How’s that for a shock? Candle prints were innocuous short black (GDX) and short white (GDXJ) candles, which were both neutral. Forecasters were quite positive: GDX +0.58 to +0.20 (buy) and GDXJ: +0.34 to -0.09. HUI supports the direction, up +0.30 to -0.12. Intraday, I saw a group of miners that were well into the green. Dip buyers showing up in the mining shares is good news for PM. HUI suggests we are not out of the woods just yet, but things are improving.
Today, the GDXJ:GDX ratio rose, while the GDX:$GOLD ratio was largely flat. That’s somewhat bullish.
Platinum rose +0.54%, palladium dropped -0.20%, and copper moved down -0.10%. Platinum was also hit during the 9:44 am assault, but its forecaster leapt +0.63 to +0.07, which is a buy signal for platinum. (Warning: the sideways chop in platinum – with large daily movements in both directions – has resulted in 4 buy and 3 sell signals over the last 10 sessions.) Volume today in platinum was very heavy as well. Copper and palladium both remain in downtrends. Copper printed a southern doji, which the code gives a 62% chance of being a reversal.
The buck was largely unchanged, falling -0.01 to 93.54. The buck sold off in Asia and Europe, bottoming out (at down -0.42) just after the Retail Sales report that was released at 8:30 am, but then rallying back steadily as the day wore on, ending the day back at the starting point. That resulted in a takuri line candle print, which had a 49% chance of being a reversal. Forecaster fell -0.01 to -0.88; buck remains in a strong downtrend.
Crude rallied +0.35 [+0.64%] to 55.46, managing a small rally after yesterday’s big sell-off. The EIA report was substantially less-worse than yesterday’s API report, showing crude +1.9m, gasoline +0.9m, and distillates -0.8m. Market rallied immediately following the report. Candle print was a bullish harami, but the code felt it was a bearish continuation rather than a reversal. Forecaster moved up +0.29 to -0.36, which is still a downtrend, just a slower one.
SPX fell -14.25 to 2564.62. As previously mentioned, the damage happened overnight and at the open, with SPX staging one of those sharp early-morning rallies. However, the rally didn’t hold through end of day, with prices trailing off into the close. Energy led lower (XLE:-1.13%) along with materials (XLB:-1.06%), while financials did best (XLF:+0.27%). Almost all sectors were down today. The sector map didn’t look specifically bearish today. Candle print was a spinning top, which had a 46% chance of being a bullish reversal. Forecaster didn’t agree, dropping -0.20 to -0.52.
VIX shot up +1.54 to 13.13. It was substantially higher, but gave back much of its gains on the early-morning rally.
TLT rallied hard again today, jumping +1.06%, vaulting over its 9 MA. The long white candle was a bullish continuation, and the forecaster jumped +0.53 to +0.60, which is quite a strong uptrend. The 10 year treasury (TY) finally confirmed today, issuing a buy signal (up +0.52 to +0.11) but rising just +0.29%. In a bond market rally, you want as long a duration as you can get, and that’s TLT. Risk off.
JNK fell just -0.08%, plunging along with SPX on the morning sell-off and making a new low, only to rally back strongly during the day, almost back to even. The spinning top candle had a 60% chance of being a bullish reversal – that’s a very strong rating for this candle type. Forecaster dropped -0.36 to -0.82; JNK remains in a very sharp downtrend right now, but the candle suggests we may be near a low.
CRB fell -0.22%. 3 of 5 sectors fell, led by energy (-0.46%). So far, the drop in CRB isn’t too substantial – as long as it remains above the 50 MA, the longer term uptrend remains intact.
The retail sales report was mostly a non-event; all it seemed to do is (more or less) mark the top in the Euro for the day. Except for some momentarily volatility, it did not affect anything else.
The assaults on gold and silver are starting to become a daily occurrence. At the same time, I’ve noticed that SPX has opened down for 4 days in a row, only to run into a bunch of buying relatively early in the day. Still, with prices moving steadily lower every evening in the futures, that means if you chase the rally and you choose to hold SPX overnight, you will get more steadily in the red as the days wear on. Pretty soon, traders will chase the rally initially, but will opt to ring the cash register before the close, so as to avoid the overnight loss in the futures markets – and that late-day selling pressure will more or less nix the early-morning rally. We might have seen this happen today.
Gold’s buy signal along with the possible reversal in the miners is a positive sign. Much of PM is back in (a forecaster) uptrend. However if the buck’s reversal ends up holding, that will continue to pressure PM. And while SPX is heading lower, its quite possible that JNK might have put in a near-term low here today.
Maybe – with PM continuing to trade violently back and forth in a fairly narrow range, we should expect more assaults. One option might be: take advantage of the dips and buy them. Hold for a time, and then sell the rallies. If the pattern continues, you’ll make small amounts of money – but you’ll help to cushion the drops, and profit from the assaults rather than being annoyed by them. I’m really just thinking out loud.
Downside to that strategy of course is if PM breaks out of its range sharply to the downside.
Not financial advice, YMMV, futures markets have a high risk associated with them, etc.
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Bitcoin broke out above the previous closing high of 7600 late yesterday, touching a new high of 7997 (bitcoin loves those round numbers – 8000 is resistance) before reversing. The 4h forecaster still has bitcoin in a strong uptrend, with a rating of +1.20. The shooting star candle that ends the most recent 4h period is a bit of a worry, but so far the forecaster remains in its uptrend, and it seems to be fairly accurate so far.
Data from bitstamp. Your exchange may vary.
Enjoying this ride for GLD. Not sure if it is a technical breakout or maybe a reversal of the recent assaults.