PM Daily Market Commentary - 1/9/2017

davefairtex
By davefairtex on Tue, Jan 10, 2017 - 1:53am

Gold rose +8.30 to 1181.20 on moderate volume, while silver climbed +0.09 to 16.60 on moderate volume also. A drop in the buck helped gold and silver to recover from the losses suffered after the Nonfarm Payrolls report last Friday.

Gold rallied steadily today, making a new high to 1186.40 before retreating somewhat into the close. On the chart, we see an “opening white marubozu” candle print which does not signal a top. Gold remains above its 9 EMA and is slowly approaching its descending 50 MA. A break above the 50 would be a very bullish sign. While the COT report from last Friday remains bullish for gold, I still expect the commercials to make trouble when gold finally reaches the 50.

Open interest at COMEX for GC fell -2,481 contracts.

Rate rise chances (May 2017) rose to 34%.

Silver rallied also, but silver was unable to recover all the losses from Friday, as it sold off into the close a bit more briskly than gold. Candle print was a spinning top, which is slightly bearish. The gold/silver ratio rose +0.14 to 71.16, which is mildly bearish, and reflects silver's under-performance today. Silver remains above its 9 EMA, but its chart looks slightly weaker than gold. This ties in with a relatively weaker COT report for silver that shows only a small supply of managed money shorts for the commercials to attack.

GDX moved up +0.31% on moderate volume, while GDXJ rallied +1.58% on heavy volume. However, those positive numbers conceal a relatively more bearish picture; while the miners did gap up at the open and spent most of the day up about 2.5%, in the last hour of trading GDX sold off hard. It looked like traders did not want to take the miners home overnight; to me that's definitely a bearish sign. Candle print was an “opening black marubozu” candle, which the candle code says is relatively bearish. It could mark a top. GDXJ printed a shooting star, which the candle also find bearish: 44% chance of marking a high. Both miner ETFs remain above their 50 MA, but today's close was ugly.

Platinum rallied +0.92%, palladium fell -0.16%, and copper dropped -0.47%. Platinum is looking quite strong, making a new high today, while palladium printed a shooting star, which has a 31% chance of marking a top.

USD tried to move higher today but failed, encountering resistance at the 9 EMA and then selling off slowly for most of the day. The buck dropped -0.30 to 101.89, erasing about half of the gains from Friday's nonfarm payrolls report. The lack of follow-through from the payrolls report is a bearish sign for the dollar, and the “closing black marubozu” candle print is relatively bearish. The Euro might actually be ready to rally at this point; it found support at its own 9 EMA; if the Euro can hold it together and continue moving higher, it could really help PM.

Crude was crushed today, plunging -1.77 to 52.19. Candle print was – pick one – a bearish engulfing, a confirmed bearish doji, a swing high, all of which add up to an 81% chance of marking a top. It was a very ugly day for crude, which is now convincingly below its 9 EMA. Reasons for the plunge? While OPEC seems to be holding it together and adhering to their production quotas, US production is increasing, and the US has also decided to sell oil from the SPR – what a bunch of geniuses, selling SPR oil with the price in the low 50s; a decision that could only have been made by politicians.  Also, Friday's COT report shows that the commercials are heavily short, while managed money is heavily long – a situation that really just cries out for an oil correction. Perhaps the COT situation has the most explanatory power, and the drop today was all about the commercials pounding the price lower.  We have the API report tomorrow after market close.  That might rescue price if its bullish-looking enough.  Otherwise...look for support at the confluence of the 50 MA/round number 50.

SPX fell -8.08 to 2268.90, printing a “short black” candle which also happens to be an “NR7”, a new signal I'm tracking. (NR7 means “shortest candle in the last 7 days”, which sometimes leads to a trend change). In this case, candle code assigns a 20% chance of a top here.  Sickcare did best again today (XLV:+0.42%) while energy led the market lower (XLE:-1.46%). VIX rose just +0.24 to 11.56. Puts are still cheap.

TLT had another good day, up +0.80% which moved TLT to just below its 50 MA. Bonds have had a solid three weeks; they are in a near-term uptrend, and a 50 MA crossing is the next step on the road to recovery.  Once again, bonds and gold remain well correlated.

JNK rose +0.03%, basically unchanged on the day. JNK remains in a strong uptrend, above all 3 moving averages.

CRB fell hard, dropping -1.52%, taking CRB back below its 9 EMA. In truth, 4 of 5 commodity sectors rallied today, but the plunge in both oil and natgas was so strong it dragged the CRB average right down with it.

For PM today, it was a mix of good news and bad news.  Good news was a rally in gold, a somewhat more tepid rally in silver, and not only did we have no follow through from the USD after Friday's payroll data, the USD actually corrected.   The bad news comes from the last 60 minutes of trading in the miners, where the selling was relatively intense.  My money is still on the bullish-looking COT report for gold, as well as the possibility for a weakening dollar, but if the miners keep being sold, I'm going to cash because they do tend to lead.

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