PM Daily Market Commentary – 9/12/2016
Gold rose +0.10 to 1327.80 to 1338.30 on moderate volume, while silver fell -0.07 to 18.98 on moderately heavy volume. Gold fell for most of the day, but then bottomed out a little after 13:00, during Fed Governor Brainard’s much-awaited speech and rebounded rapidly thereafter. Silver largely followed, but with more enthusiasm in both directions.
So it turns out, all three Fed governors that spoke today were more or less dovish, with Brainard capping it all off with a speech which basically suggested she’d probably vote no. How much of this stuff is real, and how much theater? Did Brainard decide to give a speech all on her own, voicing her personal opinion, or was this at the behest of the group she represents (she’s a CFR member, former Treasury Undersecretary in the Obama administration, Harvard, MIT, etc)? Or was she (and the other governors that spoke today) asked by “the Fed” to walk back the whole rate-rise proposition due to the brisk market correction that happened Friday? Hard to tell from a distance; my feeling comes down on the side of “deliberate walkback” but it could also be political too. (“they can’t possibly raise rates”, “its just theater” – those are all reasonable possibilties too.)
On the chart, we see gold printing a doji candle – the decline has stopped, but there were not enough buyers to move price back up into the green. Dojis are only occasionally reversal bars – this one has a 15-20% chance on its own. We really need confirmation tomorrow; a two-candle swing low would do the trick. The fact that gold just managed to stay flat while the dollar dropped suggests that gold is still a bit weak.
Rate-rise assessment for September has retreated down to 15%.
Gold open interest at COMEX fell by -5,729 contracts.
Silver behaved similarly to gold, selling off for much of the day, then rebounding following Brainard’s speech. On the chart, silver printed a “dragonfly doji” (also, a “gap down doji”, and a “doji star”) – the dragonfly doji is generally more bullish than the standard garden variety doji. This one gets a 25-34% chance of marking the low. Volume was fairly high, which helps the reversal case. A swing low tomorrow would probably end up being a fairly strong signal.
Miners did a lot better than the metals; GDX rose +2.39% on moderately heavy volume, while GDXJ climbed +4.73% on heavy volume. Senior miners printed a “piercing” candle pattern, a 33-48% chance of marking the low, while the juniors printed a “bullish belt hold” – substantially better at 41-57%. It looked to me as though the miners were looking for a chance to rally. Even a flat gold price was enough to get them to race higher. Juniors outperforming seniors is another bullish indicator also. While senior miners remain below the 9 EMA, if the metals can avoid falling further, we might see more recovery today.
Platinum dropped -0.74%, palladium fell -0.07%, and copper rose +0.12%. Copper has managed to crawl back about 2 cents off its lows. Let’s hope it can continue.
USD sold off today, dropping -0.26 to 94.944, following Brainard’s speech. Its all about rates and expectations right now. The buck has dropped below the 9 EMA; its hard to know what the current direction is; the trend keeps swinging back and forth. Let’s say down, for right now. Until we hear from another Fed governor.
Crude came back from a fairly large deficit today, up +0.37 to 46.08, printing a “spinning top” that my code says is actually relatively bullish: 25-32% chance of marking the low. Most spinning tops are useless, but this one looks a bit like a hammer candle; maybe that’s why the code likes it. Direction will probably be set following the petroleum status report due out on Wednesday.
SPX staged a big rally today, up +31.23 to 2159.04, wiping out much of Friday’s move lower. Candle print was a highly ranked “piercing” which provides a 57-79% chance of marking the low. Leading sectors were consumer staples (XLP:+1.88%) and utilities (XLU:+1.77%) – a big bounce back for the utilities after a terrible day last Friday. Rate-sensitive utilities have been trading more like tech stocks – I exaggerate, but not by much. VIX printed a massive red candle – gapping up at the open, and selling off all day, falling -2.34 to 15.16. Unfortunate if you bought puts at end of day Friday. I’m guessing a bunch of people did.
TLT rose +0.05%, a very feeble move and a stark contrast to equities, especially the utilities which these days are a cousin to bonds. Bonds appear to be weak right now overall. Might this be the start of something larger? Something to keep an eye on.
JNK rose +0.33%, finding support on the 50 MA. The “thrusting” candle pattern is a 39-48% chance of a low here.
CRB rose just +0.22% – it was a mixed bag in commodities, and no change in trend, which remains down.
The Fed would like to project that they are independent, and data driven and working for the nation’s good, but in fact they are subject to pressure from all sorts of interest groups. JPM CEO Dimon expressed his opinion that “rates need to rise now”; I’m sure this wasn’t a surprise to the gang at the Fed. How do you look “data driven” when you follow Dimon’s orders raising rates into a weakening economy? And then there are all the Democrat-appointee governors (like Brainard), who (presumably) want Clinton to be elected. Do you think they want a rate increase, which will quite clearly cause a serious market correction, immediately before the election? Yeah probably not.
As the people outside the room, we have to guess which way it will turn out. Will the banks prevail, or will political alignment? Who wins will end up driving money flows, which in turn move prices.
In the meantime, the move down in gold appears to have been arrested for now. We’ll see tomorrow if buyers show up to mark any swing lows. Certainly the equity market seemed happy, but I’m not sure I’d expect new highs unless we have some breakthrough in restricting oil supply.
Next week we have the actual Fed meeting, but the current sense is – no rate hike for now.
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Another bad day for the PM miners. Certainly feels like the momentum is turning down in this sector. Many more selling days lately than buying. Gold/Silver reversed down nicely also.