PM Daily Market Commentary – 5/9/2016
Gold fell -24.30 to 1265.40 on heavy volume, while silver dropped -0.44 to 17.06 on moderate volume. Gold started selling off late in Asia trading, and kept dropping through end of day. Silver waited until it saw oil start to sink, then it too plunged and never recovered.
Lots of commodity prices dropped today; copper, oil, other industrial metals, and the overall CRB, but copper was the first commodity to start falling, early in the Asia session. It felt like copper led the overall commodity market lower today. For both gold and silver there were no overnight spikes, gold saw just a steady bearish pressure for most of the day, while silver made a waterfall decline at the same time oil jumped off its little cliff.
Today gold wiped out all of its gains from Friday’s rally and then some, ending up well below its 9 EMA. The hopes I had for a breakout last Friday ran into a big commodity sell-off and (probably) a great deal of encouragement from the commercials. Next support is at the 50 MA at around 1250.
Ah, I remember my excitement last Friday. Maybe that was the tell. I may be a good contrary indicator; when Dave gets too bullish on gold, its time to sell!
Silver was hit worse than gold, plunging further below its 9 EMA. Silver doesn’t have a lot of chart support until perhaps 16.25, which is right around the rising 50 MA also. Silver is at a high risk for further declines, especially if the rest of the commodity complex continues to drop. If we see copper start to head sub $2, silver may well follow right along behind.
Miners were sold heavily too, with GDX off -6.41% on very heavy volume, while GDXJ fell -7.45% on exceptionally heavy volume. Both miner ETFs opened down on the drop in the metals, and sold off all day long, closing at the dead lows. Both miners are now below their 9 EMA lines also. In one day, this wipes out almost two days of rally from last week.
The drop below the 9, the bad close, and the heavier volume on the down days all suggest a bearish future for the miners, at least in the near term. The market is telling us that if gold has a bad day, the miners will have a far worse day in response. In my opinion: it is much too soon to start thinking about buying. Risk is high right now.
Platinum lost -3.31%, palladium fell -4.06%, and copper was hit for -2.30% – that’s 5 big red candles in six days for copper. Perhaps last week’s falling copper prices were one clue for how things would turn out today. Copper is now back down to 2.10, and if it breaks below the previous low at 2.07, there is a lot of air on the chart – we might well see sub-$2 copper in the next week.
Again, when the price of a major commodity like copper goes into more or less free-fall, its a sign something is wrong. In this case, probably something in China.
The USD rallied +0.23 to 94.11 today, not a particularly large move and certainly not the cause for today’s plummeting commodity prices. I mean, it didn’t help, but such a small dollar move can’t be blamed for today’s big sell-off. This marks 5 straight up days for the buck. The aussie dollar is plunging alongside copper; it was off -0.72% today and down a big 7% over two weeks. You’d think all they do Down Under is pull copper from the ground.
WTIC fell too, losing -1.32 [-2.96%] to 43.24, printing what would be a bearish engulfing if the price of oil weren’t already heading lower. Oil avoided making a new low by a couple of pennies, but the intraday chart looked a lot like gold’s chart – lots of selling, with a close at the dead lows of the day, except that oil started selling off long after gold did.
Today, oil marked a “golden cross”, where the 50 MA crossed over the 200.
SPX moved up +1.55 to 2058.69, eeking out a very minor gain and also printing a not-very-convincing swing low. Energy (XLE:-1.46%) and materials (SLB:-1.30%) equities plummeted, while sickcare (XLV:+1.14%) gained leaving the market only slightly above where it started. VIX fell -0.15 to 14.57.
TLT moved higher, up +0.31% and wiping out last Friday’s losses. TLT remains in a reasonably sturdy uptrend, which hints at risk off.
JNK surprisingly fell just -0.06%, remaining below its 9 EMA but showing scant signs of entering a correction. This is a surprise given oil’s large drop. Junk credit is managing to hold up well – for now.
CRB dropped -1.60%, a big fall making a new low. Commodities appear headed for a retest of their 50 MA. Commodities are being pulled lower by energy and industrial metals, while PM taken along for the ride. The industrial metals group looks especially ugly.
I believe that plunging industrial metals prices, possibly due to disappointing manufacturing numbers out of China, has encouraged the commercials to drop the hammer on PM. A continuing decline in other commodity groups will tend to weaken buy-side enthusiasm for PM, all else being equal, and this provides an opening for the shorts to pounce. This is why I tend to prefer that there be at least a neutral stance for commodities before I jump into PM or the miners, and if they are rallying, that’s even better.
Risk is high now for PM, especially if the industrial metals continue dropping. Today’s miner drop may just be a down payment of what is to come. Until we mark a convincing reversal, I’m standing aside. Another quote from Jesse Livermore to brighten your day:
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The leak from Greenpeace about the TTIP made all the shadowy concerns into real, live issues for the Europeans. Thank God they don't want American-style rule-by-big-money inflicted on them through the back door of the EU.
Governments all through this process have been lying about everything having to do with TTIP, presumably pressured to do so by big money. Each exposed lie of this nature results in a steady drip-drip-drip weakening of confidence in government.
Has anyone else noticed the seemingly accelerating trend and pace of leaks these days?
- Chelsea Manning/Gulf War
- Panama Papers/Offshore black money
- IMF meeting minutes/"Let's create a crisis in Greece to get them off the dime"
I remember thinking six months ago, "If only someone would leak those TTIP papers, we'd see an end to this crap soon enough."
There seem to be a small army of Daniel Ellsbergs out there inspired by the idea to bring to light all the crappy, immoral things that the governments are doing. And these are the ones we know about. How many prospective leakers were silenced by governments because they were sloppy, or unlucky about process? We will never know.
The foundation of the human capacity to form consensual cognitive models of reality rests on the assumption of mutual good will and that we are telling the truth to each other.
Sometimes that assumption is shattered.
After all that doom and gloom I wrote yesterday, here I am seeing buyers show up for gold at 1260. Miners like this, of course. Oil bounced too, and copper seems to have stopped declining. Lower risk is to wait until tomorrow of course…
Just thought I'd mention it.