PM Daily Market Commentary - 1/4/2016

davefairtex
By davefairtex on Thu, Jan 5, 2017 - 5:16am

Gold rose +4.80 to 1164.20 on moderate volume, while silver climbed +0.13 to 16.48 on moderate volume also. A fall in the dollar meant that the mild rally in gold today was more or less just a currency effect.

Gold steadily moved higher today, climbing slowly throughout the day. Trading was uneventful. Candle print was a simple long white candle, which does not appear to mark a top. Longer term, the decision point for gold appears to be at or around the 50 MA, which also happens to be round number 1200, which also happens to be an old support level dating back to May 2016. I expect the commercials to jump in and short the market around this level; if gold can make it convincingly through 1200, that tells me this is more than just a short-covering rally. Possibly the denouement happens sometime next week.

Open interest at COMEX for GC rose +1,086 contracts.

Rate rise chances (May 2017) remains unchanged at 33%.

Silver rallied along with gold, managing to outperform again today. Candle print was a “short white” candle, which does not mark a top. As with gold, the danger point for silver remains the 50 MA, which happens to be near round number 17. That struggle appears to be several days away. The gold/silver ratio fell -0.27 to 70.64.

Miners encountered some selling today – first gapping up at the open, selling off, only to rally into the close. GDX moved up +0.74% on moderate volume while GDXJ rose +1.66% on moderately heavy volume. Candle print for GDX was a “spinning top”, which does not appear to mark the high.  GDXJ printed a doji, which isn't a top either.

Platinum rallied +0.60%, palladium shot up +4.07%, while copper jumped up +2.85%, a huge move. Copper's “closing white marubozu” probably marks the low (76%), platinum managed to close above its 50 MA, and palladium is just going nuts, up $60 in 3 days.  Metals are looking quite strong right now.

USD fell -0.49 to 102.70, dropping back below its 9 EMA. There was no trigger for the dollar's drop, it more or less moved steadily lower all day long. The minutes from the last FOMC meeting were released today – the concerns about inflation revealed by the minutes seemed to have little effect on prices. Candle print for the buck is a “bearish engulfing”, which the candle code rates as a 50% chance of marking the top. That's fairly bearish. Technically, it appears as though the buck is getting ready to correct.

Crude staged a strong rally today, up +1.06 to 54.05. Just before the market close, the API report showed a very bullish inventory draw of -7.4 million barrels. That was tempered by a gasoline build of 4.25 million barrels. Market rallied slightly on the news. The real impact will come tomorrow from the weekly petroleum status report from the EIA.  The “bullish harami” candle print showed a 73% chance of marking the low. I guess yesterday's sell-off wasn't all that significant after all - most of today's rally came long before the results of the API report was released.

SPX rose +12.92 to 2270.75, moving SPX into striking distance of the all time high at 2277.53. Candle print is an opening white marubozu, which does not mark a top. Best sector was materials (XLB:+1.46%) probably driven by the big copper rally, while the worst sector was energy (XLE:-0.21%). VIX fell -1.00 to 11.85. Instead of a correction going into the new year, it appears as though we're going to set new highs instead.

TLT rose +0.38%; TLT has now rallied for the last five days, and is continuing to slowly recover off its lows set three weeks ago.

JNK rallied +0.44%, breaking above its previous high, and is now less than 0.33% from the 2016 high set back in October 2016. JNK looks strong once again.

CRB rallied strongly today, up +1.49%, wiping out much of yesterday's big loss. CRB has regained its 9 EMA. Every commodity group rallied today, with the largest gains in the agriculture sector.

My sense is that money is moving from cash into almost everything else. TLT up, SPX up, JNK up, crude and other commodities up, gold and silver up. This could be the “January Effect”: new pension/401k contribution cash appears in the different funds, and this can result in a lot of buying. It doesn't have this effect every year, but currently consumer sentiment is fairly bullish, and so people could be in the mood to buy rather than sell.

[Note: money doesn't actually “move into” these things – rather, prices of those things just get bid up by people with a bunch of new cash that now need to figure out where to put it]

Friday we have Nonfarm Payrolls at 08:30, which has the potential to really move the markets. With the FOMC minutes talking about inflation, this suggests “good news” from the employment report might be interpreted as increasing the likelihood for a rate increase. That's dollar-positive, and (probably) gold negative.

In spite of my fixation on the 50 MA, technically, the PM rally is on course and doing well. The dollar has (more or less) been chopping sideways for the past 12 trading days. I don't think that's a coincidence.  Let's see how gold fares after the upcoming payrolls report.  That might give us a clue as to what the near-term future holds for PM.

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3 Comments

Adam Taggart's picture
Adam Taggart
Status: Peak Prosperity Co-founder (Offline)
Joined: May 26 2009
Posts: 2440
Gold Bump Today Due To BitCoin?

Dave -

How much, if any, of gold's jump today (+18.20 as I type) do you think may be a result of last night's BitCoin plunge? (meaning: if the Chinese are suddenly less confident in BC, is more safety-seeking capital now going to flow into the PMs?)

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 3943
BITC vs USD

Adam-

So just looking at the simple correlations, I see gold's major rally start right around the same time the buck topped out -  around 08:15.  The gold rally continued in pretty much of a straight line until about 11:05, when the buck hit its low.  The top of gold and the bottom of the buck weren't perfectly in sync, but they were pretty close.

Not to mention the buck was off -1.10, which was a really big move.

Lastly, the BTC drop started right around 12:00 (and finished right around 13:15), and gold had already topped out for the day by then.

Its the buck, not bitcoin.

Big move in BTC though.  Just for fun, I asked the candle code what it thought.  Not surprisingly, it thinks this probably marks the top, at least for the next 10 days anyway: two candle swing high (92%), bearish tasuki line (89%).

If it were me trading this BTC reversal pattern, I'd probably wait for at least a few days for the dust to settle before thinking about "buying the dip".  As we saw after the last top, BTC can come down just as fast as it goes up.  Risk right now is extremely high, and I suspect there are a metric shitload of "trapped longs" who bought in around the 1100 level way back in 2013 who are - right now - just praying to be able to get out even.  That's resistance.

Its no accident this big reversal bar happened at 1100.  BTC follows the rules of TA like anything else because, after all, TA is about people and their emotions.

Markhemp's picture
Markhemp
Status: Member (Offline)
Joined: Nov 29 2013
Posts: 11

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