PM Daily Market Commentary – 11/4/2015
Gold fell -10.20 to 1107.00 on heavy volume, while silver fell -0.19 to 15.06 on moderate volume. PM traded sideways during trading in Asia and London, but started diving shortly before the US market opened, bottoming out by the afternoon in NY.
The latest move lower in PM corresponded roughly with a large rally in the dollar, which was up +0.81% on the day. Chair Yellen testified before Congress today saying how well the economy is performing, and that a December rate hike was "more likely than ever." Her statements could well have been part of the impulse that moved the dollar higher on the day, and PM lower. The Non-Manufacturing ISM report that was released today at 10:00 was quite strong and appeared to back up Yellen's statements, as it hinted at a potentially strong Nonfarm Payrolls report coming this Friday.
This is the sixth straight down day for gold following the semi-hawkish comments out of the FOMC. There is no serious buying yet at COMEX. If gold breaks below 1097 support, the uptrend will be over, and at that point, dips should only be bought for a short term trade. Gold is strongly oversold and could bounce at any time. If 1097 fails, next support is 1080. Its ugly out there for gold.
Selling at COMEX in silver is also now starting to accelerate. Silver dropped below its 50 MA today, and appears headed for the support zone down around 14.50. It is possible that silver could stop short of that area (and in fact my computer – surprisingly – is now long silver for no reason I can fathom) and silver has yet to break its uptrend line, but gold's terrible chart and strong momentum lower has me concerned for the rest of PM.
GDX lost -2.14% on moderately light volume, while GDXJ fell -1.52% on moderately light volume also. Neither mining ETF made a new low, and GDX is just ever so slightly below its 50 MA. Support is still holding for the miners, which continues to be a pleasant surprise. That won't last if gold keeps selling off but for now the chart for GDX looks reasonably strong.
The buck screamed higher today, rising +0.79 [+0.81%] to 98.03. The dollar is now up a full three points over the last ten trading days. The Euro has dropped almost 5% during that time. These large currency moves do not help commodities or gold at all. The DX currency moves are all about expectations of that Fed rate hike, as well as ECB money printing.
SPX dropped today, closing down -7.48 to 2102.31. Its tempting to imagine that the SPX rally is fading, but since SPX refuses to drop below its 9 EMA (which currently at 2085), that's just not the case. Until I see a violation of that 9 EMA, SPX remains in an uptrend. VIX was up +0.97 to 15.51, a fairly large move, and it managed to close above its 9 EMA for the first time in five weeks.
JNK fell -0.14% today, yet remains above its 9 EMA. JNK is thus still nominally in bullish territory, but it may be in the process of forming a lower high. Upside momentum has stalled for JNK. A turn lower would signal risk off in general, and it might be a "tell" for a move lower in equities too.
Bond ETF TLT rose slightly, climbing +0.12%. TLT remains in a short term downtrend, but I would expect that to reverse if the equity market ever weakens.
The CRB was hit hard today, dropping -1.73%. No doubt some of that was due to the strength in the dollar; the rest, due to the sell-off in oil.
WTIC fell -1.10 [-2.31%] to 46.58, giving back much of yesterday's rally. Most of the selling happened after the Petroleum Status Report was released at 10:30, which showed yet another inventory build. Oil remains in a short term uptrend, but my computer turned bearish because of today's price action.
There isn't even a hint yet of a low for gold, even though it is now starting to be quite oversold. In two days, we will see the latest Nonfarm Payrolls report. A weak report might well burst the bubble of those imagining they will get a December Fed rate hike, causing a reversal in the buck and hopefully the PM shorts at COMEX would cover, marking a low. A strong Nonfarm Payrolls report – well that's another matter entirely. Given the current mood at the COMEX, we might just see a violation of the 1075 support level for gold if that happens, as well as a new high for the buck.
So until we actually see the buyers at COMEX show up and/or the shorts start to cover…be careful out there!
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We have Nonfarm Payrolls tomorrow at 08:30 Eastern. This could either mark the low for PM – or it could end up driving gold substantially lower, depending on how things come out.
Trend is lower currently for the NFP report. My guess: I don't think services will make up for the continued decline in manufacturing.