PM Daily Market Commentary - 3/14/2017
[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.
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