PM Daily Market Commentary – 11/29/2016
Gold fell -6.40 to 1190.00 on moderate volume, while silver was unchanged at 16.68 on moderately heavy volume. Even though the buck ended up dropping fairly substantially, gold still ended up in negative territory. That’s not a great sign.
The buck rallied strongly for the first half of the trading day, peaking out about 08:30 eastern; not surprisingly, that’s about when gold marked its low of 1182.60. The reversal in the buck led to a bounce in gold, but it wasn’t all that impressive – while the buck ended the day well into negative territory, gold never quite managed to regain its losses.
So when the dollar rallies, gold falls. When the dollar falls – gold rallies, but not very much.
On the chart, gold printed a “spinning top” candle, which is fairly bearish; 35% chance of a top here. While gold did print a swing low yesterday, the fact it could not rally today when the buck fell says that the buyers in the west are thin on the ground. I suspect if it weren’t for the commercials ringing the cash register, we’d have made another leg down in gold by now. Over the past 15 trading days, the open interest has dropped from 503k contracts to 375k contracts – about 400 tons of paper gold have been removed from the COMEX. While the western gold longs continue to bail out, the commercials ring the cash register.
Rate rise chances fell to 92%
Gold open interest at COMEX fell -6,601 contracts.
Silver did a bit better than gold – it managed to rally back up to flat as the dollar retreated off its highs and then moved into negative territory. However, the “doji” candle print was actually bearish; a doji in this context is a 34% chance of marking a high. Who knew? Usually dojis are useless. The gold/silver ratio dropped -0.41 to 71.36, which is a mildly bullish sign. Silver too remains below its 9 EMA.
The miners couldn’t rally today either; GDX fell -0.79% on light volume, and GDXJ was off -0.57% on light volume too. Both miner ETFs gapped down at the open and spent the day trying to claw their way back to positive territory. GDXJ managed to get back to flat just briefly, before retreating into the close. GDX never did quite make it back into positive territory. My guess is that gold’s weakness in the face of the dollar decline didn’t inspire confidence in the miners.
Platinum fell -0.78%, palladium climbed +0.96%, and copper fell -2.03%. Copper confirmed yesterday’s bearish reversal, printing a two-candle swing high and/or a “confirmed bear high wave” which is a 95% chance of a 10-day top here. The momentum in copper has slowed, RSI is showing a bearish divergence, and while it remains above its 9 EMA, its quite likely copper will now start to correct. Palladium on the other hand is looking very strong; it is doing the best in the PM space.
The USD rallied strongly for the first half of the day, but ended up sinking after the US market opened, eventually closing down -0.43 to 100.85. While yesterday’s swing high wasn’t so compelling, today’s “spinning top” candle has a 60% chance of marking a high, which is a pretty ugly outcome for a single-candle pattern. We probably have a high in the buck. If the buck’s topping-out doesn’t help gold soon, it probably means we haven’t yet hit the low for gold.
Crude was hit hard, falling -1.67 [-3.56%] to 45.23, on fears that OPEC was not going to be able to come to an agreement. Meeting starts tomorrow; failure to seal a deal of some sort would probably drive crude down into the 30s. Candle print is an “opening black marubozu”, which is fairly bearish (42%) for a single-candle pattern. Crude made a new low today. Crude is an entirely news-driven market, and the series of back-to-back strong reversal days says that the market is quite nervous going into the meeting, exhibiting my favorite psychological behavior pattern: “the cat is always on the wrong side of the door.” Here’s the latest about the upcoming OPEC meeting.
Iran and Iraq are resisting pressure from Saudi Arabia to curtail oil production, making it hard for the Organization of the Petroleum Exporting Countries to reach a deal to limit output and boost the price of crude when it meets on Wednesday.
OPEC sources told Reuters a meeting of experts in Vienna on Monday failed to bridge differences between OPEC’s de facto leader, Saudi Arabia, and the group’s second- and third-largest producers over the mechanics of output cuts.
On Tuesday, tensions rose further after Iran wrote to OPEC saying it wanted Saudi Arabia to cut production by as much as 1 million barrels per day (bpd), much more than Riyadh is willing to offer, OPEC sources who saw the letter told Reuters.
SPX rose just +2.94 to 2204.66. Most sectors were positive except for energy (XLE:-1.23%) which fell hard because of the uncertainty about oil. SPX has printed a swing high, but remains above its 9 EMA, at least for now. A drop through the 9 would be a further bearish sign. VIX fell -0.25 to 12.90.
TLT rose +0.42%, rising for the third day in a row. TLT is now back above its 9 EMA, and looks to be moving into a short-term uptrend.
JNK fell -0.18%, which really isn’t so bad considering the drop in oil prices today. JNK remains above its 9 EMA but below the 50, in a sort of trend no-mans-land.
CRB fell -2.01%, a huge drop, with all five commodity groups falling, with big losses in both energy and industrial metals. This takes CRB back below its 50 MA. CRB printed a fairly dramatic swing high today.
Not even a big red candle in the buck could get gold off the pavement today; gold just does not look ready to rally just yet. When something can’t rise, the most likely place for it to go next is downhill. My guess is, if the buck continues to fall gold might move up somewhat, but once the buck finds its footing, gold will probably take another leg down. At least – that’s how it looks right now.
I wish I had better news.
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Positive comments today at the OPEC meeting – oil is up big, not surprisingly.
If this particular deal is actually signed, a 2 million barrel cut in supply would move the market into deficit. I'd just guess that would take oil to $55 in a flurry of short-covering.
Futures jumped as much as 8.8 percent percent in London Wednesday. OPEC is very close to a deal that would remove 1.4 million barrels a day of collective production, a delegate to a ministerial meeting underway in Vienna said. An agreement would include an additional 600,000 barrels a day of cuts from non-OPEC suppliers, the delegate said. Russia, the biggest producer outside the bloc, has said that if OPEC agrees individual country quotas, it is ready to participate, including possibly by reducing its output, a person familiar with Russian thinking said.
Standing rock, not withstanding. A new cowboys and Indians scenario if Trump okays XL?