PM Daily Market Commentary – 8/15/2016
Gold rose +3.00 to 1340.40 on light volume, while silver climbed +0.11 to 19.83 on light volume also. The buck drifted lower, energy staged a strong rally, and gold went basically sideways in a narrow trading range.
I could use a lot of words, but it would sum to “nothing much happened today in gold.” No new highs, no new lows, volume was quite light, trading range was narrow, and gold remains below its 9 EMA.
Gold open interest fell by -1,732 contracts today.
Silver did a bit better than gold – it staged a strong rally a few hours before the NY open, but the spike higher didn’t last; still silver managed to print a “bullish harami” candle – only mildly bullish, as it turns out, with just a 12-18% chance of marking a low. I see no real clues as to direction from today’s price action; trend remains down.
Silver remains below its 9 EMA, within its trading range.
GDX fell -0.61% on very light volume, while GDXJ dropped just -0.12% on very light volume also. Senior miners printed a swing high, but managed to avoid closing below the 9 EMA. It didn’t look particularly dramatic, and since the high was officially on Thursday, it wasn’t a two-candle swing high so my code could not assess it. To my eye, it doesn’t look particularly bearish. Still, for GDX to drop on a day when gold rose, even slightly, is a modestly bearish sign.
Platinum fell -1.15% following through off its swing high and break below the 9, palladium moved up +0.21%, while copper managed to gain +0.54% – a relatively small rally considering the big drop it took on Friday. Copper made a new low today prior to rallying back.
The USD fell -0.10 to 95.55 – it wasn’t much of a move, and the trading range was narrow. The current trends appears to be slowly lower. My computer said on Friday that the DX trend is down – and today’s price action certainly didn’t change that.
WTIC rose again today, up +1.11 [+2.48] to 45.80. While the gold market appears to be almost asleep right now, the oil market is seeing a substantial amount of action. Crude has risen for 7 of the last 9 days, about 15%, on good volume, and today’s rally came to an end just below the 50 MA. You have a choice: you can read the news and worry about gluts and the tanks at Cushing filled to the brim, or you can watch prices. Prices look pretty bullish, and that was reinforced last Thursday with the massive bullish engulfing candle pattern. Does this rally have legs? Is this the real thing? Is the glut over? I have no idea. Price is rising, and until I get a different signal, trend remains up. Next step: can oil close above that 50 MA? Oil is starting to get overbought, but only slightly.
SPX rose +6.10 to 2190.15, and…guess what? A new all time high. Rally was led by materials (XLB:+1.01%) and energy (XLE:+0.80%), while utilities (XLU:-1.53%) were crushed. That’s six months of dividend payments wiped out in one day over at XLU which printed a fairly disagreeable two-candle swing high (43-62% chance of the top). You all may be thinking “oh boy, not another all time high in SPX”, but there is a lot of rotation of capital between sectors that is happening. Banks also did well: BKX:+1.22%. Its hard to project a crash when the banks are rallying. VIX rose +0.26 to 11.81.
TLT fell -0.94%, dropping TLT back below its 9 EMA. Bonds are more or less moving sideways over the medium term, but today looked to be risk on.
JNK made another new high – up +0.27%, which also happens to invalidate the previous (lower) high made back during May 2015. With JNK flashing “everyone back in the water”, its hard to project a crash from this perspective too. That’s risk on.
CRB popped up +1.35%, breaking more convincingly higher on the back of the strong move in oil. CRB isn’t quite back to its 50 yet, but today’s move was good for some cautious optimism for commodities.
My sense is, with the buck meandering slowly lower, gold is in a bit of a holding pattern right now. No new actions from central banks are expected, there’s no crisis on the horizon (DB’s 15% share price rally tells us that the Italian banking crisis is probably put back to sleep for the moment), US elections are still months away, and so money is rotating into energy, at least for now. There have been a number of false rallies in oil. The old saying is, “right when you get tired of watching it, that’s when it will take off.”
As I write this, the buck is down hard in Asia (-0.85 to 94.74) – and that has helped gold to rally about $10. That’s better than a poke in the eye with a sharp stick, right? Buck drops, gold rises, that’s the current pattern. If the move in the buck holds, miners should gap up nicely at the open.
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Today a BofAML analyst upgraded the energy sector – the article entitled, "buy oil stocks now!"
My problem is, I agree with what they're saying, and this always makes me nervous. I don't often see analysts signal "buy" when stocks are near their lows. Usually they flip to SELL right at the lows. But these guys are suggesting you buy the lows. Its very unusual. It makes sense.
And as I look at the larger oil picture, with all the moving averages – the weekly chart is starting to look downright constructive. We might be in the process of forming an inverted H&S pattern, which would be the coolest thing ever, given my current positions. Confirmation would come on a convincing weekly close above 50.
BofA Merrill Lynch strategist Savita Subramanian and team upgraded the energy sector to Outperform–while its analysts raised their ratings on Marathon Oil (MRO), Patterson-UTI Energy (PTEN), and Noble (NE), and added Devon Energy (DVN) to the firm’s US 1 list. They explain why…