PM Daily Market Commentary - 3/14/2017

davefairtex
By davefairtex on Wed, Mar 15, 2017 - 5:23am

[Sorry for no report yesterday.]

Gold fell -5.10 to 1198.50 on moderate volume, while silver fell -0.11 to 16.88 on moderate volume also. A reasonably strong day for the buck helped the PM group to correct. FOMC meeting started today; the announcement is tomorrow. A widely expected rate increase is scheduled; the variable is the forward guidance that the Fed will provide in its statement and the press conference to follow.

Currently, the market expects 2 (91%) and perhaps 3 (58%) rate increases this year. If this expectation changes, that will almost certainly move prices around. Increased rate chances benefit the banks, while decreased rate chances benefit bonds, utilities, and gold.

Right now the buck is more or less at the center of price moves; yesterday it bounced off the 50 MA, and today it followed through, printing a two candle swing low, which the code sees as a 51% chance of a low. In truth, this just reflects the market's current understanding of where it believes things will go, which could change on a dime if tomorrow the FOMC says something surprising. At the moment, the dollar is in a downtrend, having printed a lower high and a lower low, but showing signs of recovery. It needs a close above 102 to move solidly back into an uptrend.

Another influence is the election in the Netherlands. While the current thinking is that even if the PVV wins, nobody will form a coalition with them.  That said, polls suggest they aren't going to win. If they confound the polls and do well (and the recent fuss with Turkey calling the Dutch government “Nazis” seems to be supportive of this outcome) it could be interpreted as possibly predictive for the French election coming in two months.  The timing of the latest kerfuffle with Turkey is almost certainly not accidental.


 

Gold fell today, pushed lower by a rising buck; gold's drop today (GC:-0.42%) was almost entirely just a currency effect (DX:+0.38%).  Most of the losses came in the afternoon, right along with the dollar rally.  Candle print was a “confirmed bearish NR7”, which the candle code found to be bearish: its a 68% chance gold moves lower. Gold avoided printing a new low today. It looks as though gold is preparing for a hawkish outcome from FOMC.

Open interest at COMEX for GC rose +2,181 contracts.

Rate rise chances (March 2017) are at 91%.

Silver fell also, dropping slightly more than gold (SI:-0.65%); the candle print for silver was also a “confirmed bearish NR7”, but for whatever reason, the candle code found it substantially less bearish. I interpret this as meaning the code just isn't sure about direction right now; it is leaning bearish, but it really isn't certain where things will go for silver.

The gold/silver ratio rose +0.16 to 71.00.

Miners rallied briefly in the morning, and then spent the rest of the day selling off. GDX dropped -3.00% on heavy volume, while GDXJ plunged -5.98% on very heavy volume. It was an ugly day for the miners; gold did not fall substantially, while the miners just gave it up. The GDX:$GOLD ratio has started heading lower once more.   Candle print today was a “confirmed bearish NR7”, which the code says is 48% bearish. The near-term future of the miners probably depends on what the FOMC has to say tomorrow.

Platinum fell -0.26%, palladium plunged a big -1.77%, while copper rallied +0.65%. Copper has rallied for the last three days, it is back above the 9 EMA, and may have put in a low. Copper really needs a close above the 50 MA to move back into an uptrend.

Crude rose +0.10 to 48.88 on very heavy volume. Initially crude plunged, after the OPEC monthly report revealed that Saudi Arabia had increased production by 263,000 barrels; crude sold off hard, making a new low to 47.47.  Then, buyers appeared before noon, pulling prices back up off the floor, and then after the close, the API report showed a surprise inventory draw, which caused oil to rally back up to even. After all was said and done, the candle print for the day was a doji, which the candle code found to be quite bullish; a 68% chance of marking the low here. Oil is quite oversold, with RSI-7=18. We have the EIA report tomorrow at 10:30; if it confirms the API report, we have probably marked a near-term low for oil.  Even if the EIA report is bullish, it is not clear that oil will move immediately back up to the mid-50s, but we are probably so oversold here, we should see some sort of bounce.

FWIW, yesterday's small, lower-volume doji candle for crude was bearish.  From what I've noticed, the longer the shadow, and the higher the volume, the more bullish the code is during oversold conditions like this.

SPX fell -8.02 to 2365.45; it had dropped more substantially earlier in the day, but the bounce in oil equities helped SPX recover somewhat. All sectors fell, with energy leading lower (XLE:-1.13%) while consumer discretionary (XLY:-0.02%) was just slightly red. If oil recovers, the snapback in energy equities should pull the overall market higher.  VIX rose +0.95 to 12.30.

TLT rose +0.48%, managing to crawl slightly higher off the floor; if I had to guess, these were shorts covering ahead of the FOMC meeting. Ringing the cash register, as it were, taking some risk off the table. Who knows what the Fed will end up saying, after all. It might be less hawkish than suspected, and then bonds will probably rally.

JNK fell, dropping -0.38%, making a new low. The candle code isn't sure if this is a low or not. Volume continues to be very heavy. The last few weeks of plunge has erased months of slow movement higher. JNK continues to signal risk off.

CRB dropped -0.57%, with all 5 sectors dropping.  CRB made a new low today.  The commodity index is oversold on both a daily and weekly timeframe.

FOMC & Dutch elections tomorrow.  I'm guessing here, but I think the PM selling in advance of FOMC is overdone.  To me, the setup is either a rally in PM immediately following FOMC, or a head-fake lower followed by a rally within a day or two.  When things are oversold, the market usually finds a reason to rally.  Not always, but often enough.

We might even get oil, overall commodities, and PM to rally all together.  I find it curious that oil has probably printed a reversal bar right before FOMC.

We could go lower too, of course.  I just think its less likely.

Note: If you're reading this and are not yet a member of Peak Prosperity's Gold & Silver Group, please consider joining it now. It's where our active community of precious metals enthusiasts have focused discussions on the developments most likely to impact gold & silver. Simply go here and click the "Join Today" button.

11 Comments

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 4142
Treasury running out of cash

I said earlier that I felt Stockman was overdoing it on his march 15th deadline.

I have changed my mind after reading his recent piece.  Turns out, the debt ceiling agreement expiration is a really big deal, made more immediately important by a deliberate act by someone at Treasury who decided to pay off a bunch of US treasury bonds coming due with the available cash leaving only crumbs in the till to fund operations.

After today, from what I understand, no new borrowing will be possible. The government will have to run with that 66 billion cash on hand.  Plus tax receipts, which are always good in April.  But after April, it could get very ugly.

http://www.zerohedge.com/news/2017-03-14/stockman-explains-mystery-treasurys-disappearing-cash

Here's the chart that brought it home:

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 4142
FOMC: not hawkish

FOMC announcement was gold-positive, netting a rapid $10 move higher in gold immediately after the statement was released.  Buck dropped a good -0.60 points.

Miners look pretty happy, with GDX up +4.94% and GDXJ up +6.24%. 

Yesterday's move turned out to be a head fake.  Of course, its going to be important where we end up closing.  If gold & the miners can't keep these gains, that's a bad sign, but so far - so good.

My guess is, the commercials are all set for a gold rally here.  They've been covering for the past few weeks and they're ready for a move higher.

sand_puppy's picture
sand_puppy
Status: Diamond Member (Online)
Joined: Apr 13 2011
Posts: 1424
Forcing crisis

The "someone" at the Treasury Department failing to roll over (and instead paying off) government bonds seems like they are trying to force a crisis. 

Combining that with the debt ceiling limit, declining retail sales, a drop in credit creation and now a rate hike:  maybe the people saying that they are going to crash the economy on Trumps watch are right.

Nate's picture
Nate
Status: Platinum Member (Offline)
Joined: May 6 2009
Posts: 540
line item veto

As I understand it, Trump has an effective line item veto after the money runs out.  After he makes several much needed and overdo cuts, my guess is that he will be impeached.  Neat and tidy.  There's a war waiting somewhere with Pence's name on it..........

Cold Rain's picture
Cold Rain
Status: Silver Member (Online)
Joined: Jul 26 2016
Posts: 123
sand_puppy wrote: The

sand_puppy wrote:

The "someone" at the Treasury Department failing to roll over (and instead paying off) government bonds seems like they are trying to force a crisis. 

Combining that with the debt ceiling limit, declining retail sales, a drop in credit creation and now a rate hike:  maybe the people saying that they are going to crash the economy on Trumps watch are right.

It won't matter to the equity markets.  They are destined to go up from here on out.

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 4142
lots of moving parts

SP-

I agree with the "forcing crisis" concept.  Trump & crew doesn't know so well how the government functions.  He's new.  Obama, on the other hand, had 8 years to figure it out.  His team laid a mine, and it just blew up.  BOOM.  Same thing with the NSA distributing their "intel take" to all 17 organizations, without restriction.  New feature added just before Obama left office.  Wonder how many more mines there are.

Nate-

I do not want to see Pence in charge.  Sheesh.  A catastrophe.  But I agree he'd be the favored candidate of the mainstream Republican weasel-set.

CR-

The endlessly rising market may have a time limit on it.  Stockman suggested that the multi-billion repayment from Treasury acted as a cash injection into the market.  (Existing treasury bonds were replaced with cash - cash had to go somewhere - went into equities).  A cash injection that will not be repeated.  If this one-time cash injection is one of the true causes of at least part of the "Trump rally", we may have some interesting times ahead of us.

[If oil continues moving higher, we'll likely see new highs, because XLE is so depressed; once that runs its course...then all bets are off]

Cold Rain's picture
Cold Rain
Status: Silver Member (Online)
Joined: Jul 26 2016
Posts: 123
davefairtex wrote: SP- I

davefairtex wrote:

SP-

I agree with the "forcing crisis" concept.  Trump & crew doesn't know so well how the government functions.  He's new.  Obama, on the other hand, had 8 years to figure it out.  His team laid a mine, and it just blew up.  BOOM.  Same thing with the NSA distributing their "intel take" to all 17 organizations, without restriction.  New feature added just before Obama left office.  Wonder how many more mines there are.

Nate-

I do not want to see Pence in charge.  Sheesh.  A catastrophe.  But I agree he'd be the favored candidate of the mainstream Republican weasel-set.

CR-

The endlessly rising market may have a time limit on it.  Stockman suggested that the multi-billion repayment from Treasury acted as a cash injection into the market.  (Existing treasury bonds were replaced with cash - cash had to go somewhere - went into equities).  A cash injection that will not be repeated.  If this one-time cash injection is one of the true causes of at least part of the "Trump rally", we may have some interesting times ahead of us.

[If oil continues moving higher, we'll likely see new highs, because XLE is so depressed; once that runs its course...then all bets are off]

Makes sense, Dave.  The only thing I'd say is that the market these days never seems to run out of excuses to go up:  Cash injections, capital flows, Trump rally, algos/HFT, dovish Fed, hawkish Fed, oil rally, oil decline, Euro collapse, asteroid fly-by, moose farts, etc.

Anyway, looks like you have a bullish PM report to write, so I don't want to take up any more of your time! :D

Grover's picture
Grover
Status: Platinum Member (Offline)
Joined: Feb 16 2011
Posts: 689
One Riddle Solved

https://www.treasurydirect.gov/NP/debt/current

Current

Debt Held by the Public Intragovernmental Holdings Total Public Debt Outstanding
03/14/2017 14,384,776,077,277.45 5,517,828,324,360.47 19,902,604,401,637.92

The total public debt outstanding first crossed the $19.9 trillion mark on 11/22/2016. Since then, It has floated around that number. I wondered why it suddenly stopped the meteoric rise. That riddle has been solved. Did Trump's Lieutenants do this on purpose to aid negotiations with congress ... or was it done to undermine him? I can't imagine that this drawdown wasn't noticed by Treasury Secretary Mnuchin.

Grover

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 4142
Trump impeachment

Nate-

I thought more about your whole impeachment scenario.  Its actually fascinating.  Dems will impeach Trump over an unpaid parking ticket at this point, so they're already on board.  Mainstream Reps also would be happy to see him gone.  He isn't really one of them.

The only thing Trump has going for him is his popularity with his base.  He is talking about stuff that nobody has talked about for a very long time.  If the Republicans do vote to impeach him, the backlash could be very severe.  Its expected from the Dems, but its traitorous-back-stabbing behavior from the Reps if they do it, and they'd have a very hard time justifying it to Trump's base at the next election.

Trump needs to focus on those key supporters that got him elected.  If he loses that focus, then he'll be out in two seconds.

That's just my current thinking.

Boy, interesting times.

kaimu's picture
kaimu
Status: Silver Member (Offline)
Joined: Sep 20 2013
Posts: 124
SKINNING CATS

Aloha! What the Obama Regime did in the past was when the debt ceiling hit the limit and there was a GOP log jam US Treasury went into "non-marketable" debt whereby the Government Account Series debt was their weapon of choice. They just did not issue "marketable" debt! So it was a farce that the government was ever intentionally going to go broke. Obama did that back and forth with Congress until he finally did a  "compromise" with the GOP and for that he got to end the "debt ceiling limits" in exchange. Thank you John Bohner! After that "compromise" debt skyrocketed to where Obama was able to indebt future US citizens more than all the past Presidents combined. If you are impressed with Obama's ability to move the economy forward after Bush then make sure you overlook how much debt he went through to make the economy look tepid! Just don't ruin the fantasy for the Bernie lovers though! 

I am sure if I know that then someone on Trump's team knows that Obama debt tactic also, but if Trump was elected based on cutting the debt and cutting spending and he sticks to his guns rather than give up like the career Dems and the Reps did with Obama then we are in for a rocky road. I doubt there is a Bohner on the Dem side this time!

I don't know can you get impeached for being fiscally responsible and honoring your platform? It would not surprise me at this point!

For what its worth take a look at all that different debt the US Treasury has going and see the recent rates for non-marketable debt is actually lower than this time last year! The interest rates for non-marketable are higher than marketable debt, but if you aren't going to pay the debt back in your lifetime then who cares!

Edwardelinski's picture
Edwardelinski
Status: Gold Member (Offline)
Joined: Dec 23 2012
Posts: 270
Yeah,Front Row Back Row Kids:

Please see Chris Arnade ,from former Solomon Brothers trying to esplain America((Bad ASS Trader).He walks the talk and i respect him from the past knowing his life.....Every day he walks the talkPlease see Twitter...

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Login or Register to post comments