PM Daily Market Commentary – 4/21/2016
Gold rose +3.70 to 1249.50 on very heavy volume, while silver climbed +0.03 to 17.00 on massive volume. Silver spiked higher in Asia, and twice more in London prior to the ECB meeting announcement at 07:45 Eastern, with gold roughly following silver higher. Then during the press conference, Draghi made comments about inflation expectations and future policy moves, saying: “we should be patient.” It was around this time that PM started selling off, eventually losing almost all its gains by the close.
On the daily chart, gold popped briefly above the downtrend line, but the rally failed, printing a rough gravestone doji candle: 42% chance of this marking the top for gold. It looks to me like a headfake; I’ll have to redraw the downtrend line tomorrow, but I have to agree with my code: the high volume failure looks bearish. This is piling onto gold’s bearish harami from yesterday.
As mentioned, silver led gold, spiking higher three separate times prior to the ECB announcement at 07:45 Eastern making a new high of 17.72 intraday, but then sold off along with copper, gold, and the Euro late in Draghi’s press conference when he started talking about being patient. Silver’s trading range was a massive $1, and given the huge volume, the whole affair looks bearish to me. Silver is significantly overbough (RSI-7 = 85) and so this sort of crazy action on the day of an ECB announcement is not all that surprising. It feels to me like stuff that generally happens at or near a top.
There is no change in trend (or forecast) for the mining shares, which managed to continue moving higher; GDX climbed +1.80% on moderate volume, while GDXJ was up +2.79% on very heavy volume. Miners did not make new highs, but they definitely recovered the losses from yesterday.
If we ignore gold and silver, the miner chart remains quite strong. They continue to astonish.
Platinum climbed +0.71%, palladium rose +2.01%, while copper was up +0.74%. All the metals had varying degress of “failed rally” about them today.
The buck sold off hard after the ECB announcement touching 93.85, but rebounded strongly during the press conference, eventually closing up +0.10 to 94.57. The rebounding dollar contributed to the fall in gold and silver; my guess is that the PM market had hoped to hear about even more deeply negative rates, or perhaps even a mention of helicopter money. When Draghi started talking about patience, it felt as though traders decided at that time to bail out. “No more Central Bank crazy coming soon” so take profits and move on. That was the rough timing I saw after looking at the intraday price charts and matching it up with the video of the press conference.
WTIC fell today, dropping -0.54 to 43.43. Oil made a new high of 44.49 intraday, but started selling off mid-way through Draghi’s press conference and it just never really recovered. Its tough to get a candle print out of oil because of the contango effects; the WTIC chart looks like a bearish harami, but the adjusted chart I use shows just a long black candle today.
SPX sold off today, dropping -10.92 [-0.52%] to 2091.48. Utilities (-2.09%), staples (-1.56%) and financials (-0.89%) led the market lower – utilities being a very odd group to tip over and sink in this way. That’s most likely about interest rates; a 2% drop is a large move for the usually slow-moving utility index. SPX confirmed yesterday’s “northern doji” today, which is a 71% chance of a near-term top. Supporting this is DJIA’s bearish tasuki line (73%) and the small-cap RUT with a bearish engulfing (38%). VIX rose +0.67 to 13.95.
TLT fell also, dropping -0.58%; normally it should have done well given the drop in SPX, but my guess is that we’re seeing selling by foreigners as rates in Europe are not going lower anytime soon.
JNK did not like the drop in oil, falling -0.34% and printing a bearish engulfing (49.7%) today. If this marks the top for JNK, likely we’ve seen the high for SPX too, at least for now.
CRB almost touched its 200 MA intraday, but then sold off, losing -0.86% and printing a bearish-looking dark cloud cover candle pattern. (I don’t have data for CRB so I can’t predict the reversal chance). We might be seeing a top for commodities also.
While I know some goldbugs are disappointed that silver isn’t back to 50 just yet, if you look at how everything else performed today, PM appeared to reflect the more general market disappointment that Draghi did not hint at a future rate move but instead counseled patience. My guess is, higher PM prices will have to await future disaster and/or future-crazy from our central planners. Buck seems to be putting in a low, SPX a top (finally!), and just possibly oil also.
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I really get a kick out of watching the miners right now… If I may anthropomorphize a bit, they are acting like a kid who has gotten his hand slapped so many times reaching for cookies that he is really scared and timid about reaching for more. The assumption is that Gold and Silver are going to continue getting crushed regularly, so at open this morning the Gold miners were down, even the Silver miners (even though Silver was up > 1%) were down.. in anticipation of the next beating. Although the bullion bankers raised their hand, feigning to slap.. there was no follow through. Now the miners are flying again.. MUX up 3.85%.
This can change a few more times today.. my gut is that something has changed.
We won't know for sure if something has changed until we see a real correction. Its like: you don't know what someone is really like until you have an argument.
But in terms of different – all you need to do is look at the gdx:gold ratio and that says everything. Even if you pull back to the weekly chart, its still quite bullish.