PM Daily Market Commentary – 11/2/2016
Gold rose +8.70 to 1297.80 on heavy volume, while silver rose +0.12 to 18.49 on heavy volume also. PM did even better than that intraday, but ran into some selling following the FOMC announcement at 14:00.
Gold continued higher after yesterday’s breakout, at one point punching through its 50 MA before retreating to close back below it by end of day. Sellers appeared after the FOMC announcement at 14:00; perhaps they triggered off the phrase “the economic case for a rate rise has strengthened further”, but this did not manifest in a higher assessment of the chances a rate increase in December.
In Europe, gold managed to close above its 50 MA for the first time in months; the retreat after gold’s pit close brought price back down, but it was still enough to finally have gold break out.
Right now, gold is hovering just below its 50 MA, having run into resistance in the zone between the 50 and the significant resistance zone starting at 1303. This area is a logical point for sellers to appear – people who “bought the dip” a few months ago, held all the way through the recent drop, and now want to bail out once they get back to even. That’s resistance. Today gold printed a “spinning top” candle – it has about a 20% chance of being the top.
The December rate-rise projection fell 2% to 66.8%.
Gold open interest at COMEX rose by a big 12,768 contracts. Looks like someone is loading up short.
Silver was initially able to plow through resistance at its own 50 MA, but then it too sold off after the FOMC announcement at 14:00. Silver didn’t get any help from copper today, and the gold/silver ratio was more or less unchanged. On the chart, silver printed a shooting star, which the candle code gives a 15-23% chance of being the top.
The miners gapped higher at the open, and traded sideways right up until the FOMC announcement, after which they sold off hard into the close. GDX fell -1.47% on heavy volume, while GDXJ dropped -1.83% on heavy volume also. GDX printed a “bearish engulfing” candle pattern; candle code says that’s a 32-47% chance of a high. That all looks fairly bearish.
Platinum fell -0.16%, palladium moved up +0.06%, and copper dropped -0.63%. Copper may be getting a bit tired following its breakout; before today, it had rallied for 7 days in a row.
USD continued falling today, dropping -0.28 to 97.36. While the FOMC meeting results did cause a rebound in the buck, it was not nearly enough to bring the dollar back into the green, and the candle code says the “opening black marubozu” is probably not a reversal bar (13-21% chance of being the low). We probably have lower dollar prices ahead.
Crude continued lower again today, dropping -0.83 to 45.51, with the bulk of the damage happening after an incredibly bearish EIA petroleum status report showed a massive 14.4 million barrel inventory build. Given the “worst report of all time” the most surprising thing is that oil didn’t fall more dramatically. The loss immediately following the report was about 70 cents, but by end of day oil had recovered perhaps 40 cents of that decline. In my experience, when oil “has a bad day” the selling just goes on and on, no buyers appear, and oil closes at the dead lows. That is most emphatically not what happened today. Here’s oilprice.com to explain their view:
SPX continued falling, dropping -13.78 [-0.65%] to 2098, closing below the important “round number” 2100. SPX made a new low today, printing just a “long black” candle which is not a reversal bar according to the candle code. Today’s plunge was led by utilities (XLU:-1.26%) with consumer staples doing best (XLP:-0.25%). That’s an odd combination for a correction, but its a sign of the times. My guess: foreigners who bought US utilities as better-yielding bond-surrogates are bailing out due to worries about Trump and the falling dollar. Small cap index $RUT did even worse, down -1.33%. VIX rose +0.76 to 19.32.
TLT finally managed to rally, up +0.44% and managing to squeak back above its 9 EMA. How can a rally look bearish? A small rally in the middle of a decline that looks like a short-entry opportunity, that’s how. I’m still not a believer in bonds right now.
JNK plunged once again, dropping -0.58%, falling for the 7th straight day. Traders appear to be steadily bailing out of junk, which is a strong sign of risk off. Two short weeks ago: an all time high.
CRB dropped -0.82%, dropping below its 50 MA which pulls CRB into a medium term downtrend. Today’s fall in CRB was almost entirely about energy.
The political race continues to narrow. Silver now gives Trump a 33% chance of winning. Nevada is now in play, at 51/49 Clinton, with North Carolina and Florida more solidly Trump. Paddy power now has Trump a 2/1 underdog, up from 5/2 two days ago. Once again, the winding electoral path to victory: http://projects.fivethirtyeight.com/2016-election-forecast/#plus
Prices continue to be “voting Trump” as well. We see continued flight from the buck, out of risk assets like equities and junk debt. Even US bonds are weak. While the charts show that PM may be running into trouble here, especially the miners, how the election plays out will probably overwhelm everything else.
I talk about the election because it is very clearly driving prices right now. Markets hate uncertainty, and Trump is more or less Uncertainty Personified. Ergo, the closer Trump gets to victory, the more strongly risk assets will sell off, and – most likely – the higher gold will rise. And the market has apparently expected a Clinton victory until just last week, so now things are being repriced accordingly.
I think it was Jim Rickards who said he saw an “assymetric opportunity” here; if Clinton wins, the markets don’t do much, while if Trump wins, gold jumps $100 and SPX drops 10%.
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If all the election news wasn't exciting enough, we have the ISM Non-Mfg Index tomorrow (which tends to be a real market-mover), as well as the always popular Nonfarm Payrolls report coming on Friday, followed by a flock of Fed governors giving speeches. "Here comes the rate increase!"
Its enough to make you want to go sit on an island somewhere, sip mojitos, and watch the sunset.
This site purports to track, in real time, the money flows going into bitcoin.
I don't know how they would do this, but assuming they've got it right. China is on a tear!
Wait so is the consensus that Trump drives PM up and Equities down, Hillary, Equities more or less continue a toppy complexity, does that then mean if Hillary, PM prices will revert to below 1300 in gold for ex?
BTW: on the street report from NYC. Trump campaign is pounding on Hillary over the airwaves in the metro area. Mostly feels aimed at creating apathy in Hillary's wavering voter base.