PM Daily Market Commentary – 12/12/2016
Gold rose +2.70 to 1164.10 on moderate volume, and silver climbed +0.23 to 17.14 on moderate volume also. Gold sold off in Asia, making a new low to 1152.50, but support from a weakening dollar pulled gold back into positive territory. H owever, the dollar’s move down was about twice the size of gold’s move up, which suggests that gold continues to have problems even on days when it rallies.
While gold did manage to rally today, it did not move very far. On the chart, gold remains below its 9 EMA as it has since the swing high printed a few days before the US election. Candle print today is a “high wave”, which did not appear to be a reversal bar (sub-10% chance of marking a low).
We do have the FOMC meeting which starts tomorrow and ends Wednesday; this meeting comes complete with a Chair press conference at 14:30. A 25 basis point rate rise is virtually guaranteed, but I’d guess participants will be focused on guessing when the next rate increase might come. Currently, the futures markets have pegged a further 25 basis point rise for June, assigning a 43% probability.
If the FOMC says something that is more dovish or hawkish than the market expects, that will move prices. Currently, the setup for gold would seem to be for a reversal – gold remains oversold but momentum is slowing, we’ve already had a bullish MACD crossover, and all we really need is some kind of trigger to start the rebound. However to date, we haven’t seen any other indications that the buyers are ready to rush back in.
Rate rise chances fell to 93%.
Gold open interest at COMEX fell -617 contracts.
Silver’s rally was much stronger than gold’s; silver is moving slowly upwards towards its key 50 MA. Candle print today was a bullish tasuki line, which isn’t particularly bullish – or bearish. The volume bars for silver look positive, with up-day volume exceeding down-day volume over the last 5-6 trading sessions. While silver remains above its 9 EMA, I believe the key test will come at the 50; the last time around, it appeared that there was some very strong selling pressure once the 50 was reached, which led directly to a large sell-off in silver. The gold/silver ratio fell -0.76 to 67.90.
Miners rallied for the first half of the day, but the rally peaked at around mid-day and then the miners sold off into the close. GDX was up +0.39% on light volume, while GDXJ climbed just +0.12% on light volume also. On the chart, we see the rally ran into resistance at the 9 EMA. Right now, the miners appear to be following gold rather than silver. The spinning top candle is surprisingly bearish, with a 40% chance of being a near term high.
Platinum climbed +1.76%, palladium fell -1.02% and copper dropped -1.86%. Copper is once more below its 9 EMA. I think copper is probably ready to correct more seriously in the near future.
USD fell -0.58 to 100.92, with the buck finally coming to rest just above the 9 EMA. Candle print was a bearish engulfing, which the code says isn’t so bearish: sub-10% of marking a high. I guess momentum is still to the upside. Even with today’s big move lower in the buck, gold still lagged. Gold is still struggling; I expect if the buck breaks higher following FOMC, gold will end up making new lows.
Crude gapped up and rallied strongly, making a new high to 54.51, but the rally largely failed, with crude losing $2 off that rally, end up just +0.96 to 52.44. This appeared to be a classic “sell the news” event.
The market had bid up oil on the expectations of a non-OPEC oil producer production limiting agreement, which was indeed signed over the weekend. Once trading opened on Monday, oil lost no time breaking out to new highs, causing the shorts to cover, however the new highs didn’t last. Once the US market opened, there appeared to be immense selling pressure, and all that selling pounded oil well off its highs, until it had dropped back down to the previous high around 52.
If I had to guess, today’s price action was probably about shale drillers rushing to hedge prices in the mid-50s, combined with traders that decided to ring the register after a nice run up. After all, this was the news event we’ve all been waiting for – a perfect time to cash out. On the chart, we see a bearish high wave, which has a 32% chance of marking the top. If we get a confirmation tomorrow, that will ratchet this chance a whole lot higher.
Sell the news. Its a concept worth remembering. When a much-anticipated bullish event actually happens, that’s the time to expect this sort of event. “Market prints reversal bar on great news.”
Oil services showed a large set of bearish reversal bars in the various names: dark cloud cover, bearish belt hold, even a bearish strong line for SDRL, which had a 15% trading range on the day.
SPX fell -2.57 [-0.11%] to 2256.96, marking a new all time high intraday but was unable to hold onto the gains. Candle print was a bearish harami, which the candle code finds quite bearish – a 64% chance of marking a top. Utilities did best (XLU:+1.04%) while financials trailed (XLF:-0.97). It feels to me that SPX traders may be starting to ring the register after the long move up. VIX rose +0.89 to 12.64. Puts are still cheap, but won’t remain so if we get a confirmation tomorrow. The timing of the FOMC meeting may play into a reversal in SPX also.
TLT rose +0.19% after first making a new low, and ended up printing a “thrusting” candle pattern which is normally fairly bullish; not this one, however. Today’s print has a sub-10% chance of marking a low. TLT remains in a medium term downtrend, below all 3 moving averages.
JNK fell -0.11%, printing a mildly bearish engulfing – another sub-10% chance of marking a high. JNK remains in a medium-term uptrend, above all 3 moving averages.
CRB shot higher, up +0.71% – not quite a new high, but close. 4 of 5 sectors were up, led by energy. Commodities continue their slow, year-long recovery off the lows set back in early 2016.
Silver continues to improve, while gold and the miners are lagging. Until we get some kind of indication that the buyers have returned for gold, its probably best to wait on the sidelines – every few days gold makes a new low, and there has been very little in the way of bullish reversal candle prints. If SPX tops out, if we are at Peak Trump Enthusiasm, then that too could help mark the low in gold. Perhaps the FOMC meeting will provide some clarity, but we have to wait until Wednesday afternoon to see.
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Volume on the New York Stock Exchange was moderate, with 983.20 million shares traded. Decliners outnumbered advancers by roughly a 2-to-1 margin.Wall Street sprinted into the latest week hoping to extend the powerful rally in place since the November election, an upsurge that intensified mightily last week, when the major large-cap indexes all surged to all-time highs in a buying frenzy unleashed by expectations that the President-elect and his incoming Administration would push hard for a massive infrastructure spending program, reduced regulations, and popular tax cuts.