PM Daily Market Commentary – 5/23/2017
Gold fell -9.70 [-0.77%] to 1250.80 on very heavy volume, while silver dropped -0.10 [-0.55%] to 17.06 on heavy volume. Gold traded sideways in Asia and London, only to start its plunge right when the US market opened. Gold didn’t stop falling until the close. Silver was substantially stronger, making a new high at the US market open, then falling for the remainder of the day. The dollar staged a rally today, which roughly coincided with the drop in PM.
Gold tried several times to make a new high today, but was unable to surpass the 1265 mark set last Thursday, with the last attempt happening right at the US market open. After the last attempt, gold fell off a minor cliff, and didn’t stop dropping until the market closed. Gold’s closing black marubozu was seen by the candle code as quite bearish: a 70% chance of marking a top. That’s very high for a single-candle print. The decline took gold through its 50 MA. It looks like that 1260 resistance level is fairly strong at this point.
Open interest at COMEX for GC rose +15,488 contracts. It could be that the commercials were the sellers at 1265.
Rate rise chances (June 2017) rose to 88%. That’s up 10% from yesterday’s mark. All the economic news releases yesterday looked unpleasant; I’m not sure why it jumped up so significantly.
Silver made a new high to 17.30 right at the US market open, and then proceeded to sell off for the remainder of the day, closing right at the lows. It looked substantially better than gold, and the spinning top candle print was bearish, but with only a 40% chance of marking the high. That’s still disagreeably high, but its much better that what we saw in gold.
Open interest at COMEX for SI fell -2,111 contracts. Commercials appear to be covering in silver.
The gold/silver ratio fell -0.16 to 73.32. This highlights silver’s outperformance. That overhang of managed money shorts – probably – means that silver won’t plunge all that vigorously. Theoretically.
Miners gapped up at the open, and then sold off all day long. GDX dropped -2.25% on moderate volume, while GDXJ plunged -3.68% on moderate volume also. GDX printed a bearish engulfing, which the code found to be a 63% chance of marking the top. GDX also blew through its 50 MA and the 9 EMA also, which is bearish. GDXJ printed a confirmed bearish NR7, which the code felt was a 78% chance of marking a high. GDXJ also smashed through its 9 EMA. This looks like one of those “run, don’t walk” situations for the miners. The metals are holding up relatively well – especially silver – but the miners have grown ill. Yesterday’s unenthusiastic rally was “the tell”.
That drop below the 9 EMA should not be ignored either.
Platinum fell -0.25%, palladium climbed +0.63%, and copper moved down -0.15%. Palladium continues to recover, while platinum may have put in a top (30%), while copper’s NR7 looks bullish. That sums to “somewhat bullish” – it appears that only gold & the miners have started to turn down in a meaningful way.
The buck rallied today, rising +0.38 to 97.13,. This was neither a swing low, nor a reversal; the code felt the bullish engulfing candle pattern was only very mildly bullish. That said, the Euro did appear to print a swing high, dropping -0.51% to 111.83. The Yen fell also, down -0.46%. The Yen also looks to have topped out here; the Yen chart is quite a bit weaker than the Euro chart.
Crude rose another +0.45 to 51.49, continuing its climb into the OPEC meeting scheduled for May 25th. Oil continues to make new highs. Today’s candle print was a spinning top which the code felt was mildly bullish. Once again, the commercials seemed to have had it right; managed money went heavily short crude right at the lows. The API report shows bullish inventory draws across the board. Tomorrow the EIA report comes out; I’m guessing it will be overshadowed by the OPEC meeting. Will the meeting result in a sell-the-news event? That’s the risk. If all we get is a 6-month extension, oil probably sells off.
SPX continued to grind higher, up +4.40 to 2398.42. That all-time-high moves ever closer. Financials led today (XLF:+0.77%), while cyclicals trailed (XLY:-0.38%). The bounce in financials is finally starting to look slightly more bullish overall for SPX.
VIX dropped -0.21 to 10.72.
TLT sold off hard, falling -0.67%, finding support at its 9 EMA, printing a confirmed bearish NR7 (and a swing high) which the code feels has a 65% chance of marking a high. Today’s move lower in TLT has me concerned for gold; when TLT drops this much, its a strong risk-on sign. They can play with the silver market, and sometimes the gold market, but not bonds. When bonds drop, it does not bode well for gold – at least for right now anyways. There may come a time when bonds and gold diverge, but that awaits a crash of confidence in government, and we’re not there yet.
JNK rose +0.03%, another new high by a penny.
In spite of the energy rally, CRB fell -0.55%, pulled lower by the plunging agriculture sector. 3 of 5 groups fell today. CRB remains in a short-term uptrend, with its next stop a close above the 200.
In order to “look through” the sometime manipulation in silver and gold, I try to use the larger markets for my “tells” – in this case, currency and bonds. Right now, the buck might have put in a low, and TLT has most likely printed a high. Gold’s candle print is also disagreeable, as are the miners.
Why isn’t the market more worried about Comey’s testimony? I’m not sure. I had assumed the worry over that would keep prices up, but TLT’s sell-off and the dollar rally would seem to indicate otherwise. Maybe things just got too extended.
In the current environment things can change at a moment’s notice, but as of right now, gold, miners, and TLT have all reversed direction. If nothing else appears to change the current picture, those three all probably head lower from here.
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How can TLT, Equties, PMs, and the Dollar all be up? Somebody is not being truthful here. Hmmm….