PM Daily Market Commentary – 8/23/2016
Gold fell -1.60 to 1337.60 on moderately light volume, while silver was hit for -0.06 to 18.83 on moderately heavy volume.
Gold tried rallying modestly today but the rally failed. Most of gold’s modest move seemed to be driven by the buck, which dropped early but rebounded and closed flat by end of day. Gold in turn avoided making a new low, and for the most part, there was no material change in direction today.
On the chart, gold remains below its 9 EMA but above the 50. The volume is declining, which suggests that the selling pressure is not particularly strong at the moment. If you see rising volume during a downtrend, that’s bad; falling volume is actually somewhat positive. Gold is still fairly far above 1310 support.
There were a couple of 2k-contract intraday spikes down for gold earlier in the day today in Asia; they were rapidly bought and ended up having no effect on trend. Spikes don’t seem to be working so well in gold these days. It also suggests there might be some decent support around 1340. I’m not sure how long that will hold up if silver keeps dropping, but for now things look all right.
Gold open interest fell by by -1,585 contracts today.
Silver tried rallying today, moving up to about 19.10, assisted by that intraday drop in the buck. Once the buck started to rebound, silver fell, and the selling in silver didn’t stop until the close. Silver printed a “spinning top” candle today, but its a fairly bearish-looking spinning top. Next strong support for silver is about 18. Copper’s big drop today probably didn’t do silver any favors.
Miners had another down day, with GDX down -1.49% on moderately light volume, and GDXJ fell -2.33% on moderate volume. Mining shares rallied at the open due to gold’s intraday rally, but as gold fell, miners fell faster, finally ending the day right at the lows. Juniors are now dropping faster than seniors; that’s a bearish sign.
On the chart, we see GDX closing just below the 50 MA, printing a “black marubozu” candle which tends to project more losses ahead. I’m not sure the 50 will hold; selling is starting to pick up. The close today was quite a bit more bearish than it has been over the past week.
Platinum rose +0.18%, palladium rose +1.16%, while copper fell -1.40% on some heavy volume for the second day in a row. Copper made a new low, and is now below its 200 MA. Copper (currently at $2.11) appears to be headed for a retest of $2.00 support. It lost -0.03 just today. Dropping below the 200 MA is not a good sign for the longer term. Perhaps something is wrong in China.
The USD closed unchanged at 94.46, dropping intraday but managing to rebound by the close. The buck seems to have some support at 94, but it remains in a downtrend.
Crude rebounded today, rising +0.47 [+1.00%] to 47.57. The big news of the day was that Iran has indicated that they might go along with some sort of OPEC production limitation regime. This spiked oil through 48, but at end of day the API inventory report showed a bearish inventory build of 4.8 million barrels, dropping oil down off its highs. Candle print was a bullish harami, which gives us 24-35% chance of a bounce here. Likely, direction will depend on the market’s reaction to the petroleum status report at 10:30 tomorrow. My guess: I think Iran’s statement will put a floor under crude, but since that’s my position too, take it with a grain of salt.
SPX rose +4.26 to 2186.90, once again trading in a narrow range today. It was another energy-and-materials rally, probably driven by oil, but once again the broader market didn’t move much at all. VIX rose +0.11 to 12.38.
TLT rose +0.11%, moving towards the upper end of its recent trading range.
JNK popped up +0.44%, eliminating the losses from yesterday’s drop, close to a new high. Risk on.
CRB rose +0.69%, with energy leading. CRB’s recent rally is almost all about energy.
There is a lot of positive press right now about gold – enough to make a member of the herd feel really good about buying. However, prices are dropping – especially in silver and the miners – and we have no idea how long this current correction will run. Hopefully it won’t be long, but you don’t want to just jump in now only to suffer through a further 10-20% correction that turned out to be a surprise to everyone. We could see $1300 gold and $17.00 silver before the next move higher.
Its probably best to wait for the market to give you a sign that the buyers have returned. In the meantime, figure out what you’d like to buy, so you can pull the trigger when the turn comes. (Well, you are supposed to “press” the trigger, at least that’s what I’ve been told, but it doesn’t sound as nice to say it that way.)
In the meantime, its probably a good idea to be careful out there.
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