PM Daily Market Commentary - 4/18/2017
Gold rose +5.20 to 1291.50 on heavy volume, while silver dropped -0.13 to 18.28 on very heavy volume. Both metals were hit by a strong sell-side assault at 09:47 during the US trading session; gold bounced back strongly following the spike even recording a gain on the day, while silver's rebound was markedly less robust. The buck was hit hard, falling almost a full point.
The big news of the day, apparently unrelated to the spike assault on gold and silver, was an announcement by UK PM May that she will seek early elections, scheduled for June 7th. This resulted in a massive rally in GBP, at one point up almost 3% on the day. Fun article from Bloomberg (Voice of the Bankers) which can be summarized as: “PM May opportunistically calls for new elections in order to utterly destroy what remains of the opposition – which hardly seems fair!” I get the sense Bloomberg doesn't like May, or BRExit very much.
Gold was trading more or less sideways until the assault at 09:47, which took gold down to a low of 1280.50 and was accompanied by the usual large spike in volume. The rebound took about 30 minutes, entirely wiping out the loss. It was probably helpful for gold that the buck was steadily dropping during this whole time. Gold spent the rest of the day moving higher, closing near its day high. Gold-in-euros actually fell, since the Euro was up +0.81% on the day. Candle print for gold was a spinning top, which was slightly bullish. Uptrend remains in place.
Open interest at COMEX for GC rose +3,629 contracts.
Rate rise chances (June 2017) dropped to 45%. What seemed like a sure thing not long ago is rapidly evaporating.
Silver was hit far harder than gold by the spike assault, and silver's rebound was more feeble than gold's rebound, with silver not quite able to regain all the day's losses. Silver printed a two-candle swing high, which was somewhat bearish – but the candle code felt that today's spinning top was actually quite bullish. Net-net: the surprising answer is, more bullish than bearish. Silver is now below its 9 EMA, which is bearish. Volume was immense. It appears that a whole lot of stops were run today. It looks bearish to me, but what do I know?
The gold/silver ratio rose +0.78 to 70.65.
Miners fell also, with GDX dropping -0.82% on moderate volume, while GDXJ fell -0.75% on light volume. GDX printed a mildly bullish hammer candle, while GDXJ printed a high wave which the code felt was neutral. GDX made a new low on the day, which GDXJ managed to avoid. GDX also printed a three-candle swing high, which is bearish. While the GDX:$GOLD ratio is falling, the GDXJ:GDX ratio may be putting in a low. Is it safe yet to go back into the junior mining shares? I think I'll wait another day to be sure. The miners are a bit confused right now.
Platinum fell -1.02%, palladium fell -2.18%, while copper plunged a huge -2.61%. All three metals were seen as quite bearish by the candle code. Palladium smashed through its 50 MA, platinum printed a bearish engulfing, while copper made a new low and wiped out two days of gains. The charts of the “other metals” looked far worse today than either gold or silver.
The buck plunged -0.80 to 99.36, hit hard by rallies in the Euro (+0.81%) and the Pound (+2.18%). Candle print for the buck was a closing black marubozu, which means the buck closed at its lows of the day. Code thought it looked bearish, as is usual for the closing-at-the-lows days.
Crude fell -0.43 to 52.71, with most of its losses coming after market close. The API report released at 16:30 was surprisingly bearish, showing a crude oil draw of -0.840m barrels, but a gasoline build of +1.374m barrels. Oil market didn't like this, losing about 30 cents immediately after the release. Crude remains above its 9 EMA, and the candle code felt the long black candle today was just somewhat bearish. That said, crude did print a swing high, although since it took 4 days to do it, I have no assessment for just how bearish that is. The EIA report out tomorrow at 10:30am will be key.
SPX fell -6.82 to 2342.19. SPX gapped down overnight, and more or less traded sideways, printing a long-legged doji candle on the day; the doji means the market closed about where it opened. Sickcare did worst (XLV:-1.09%) while consumer staples did best (XLP:+0.45%). Financials (XLF:-0.94%) and energy (XLE:-0.94%) both looked ill too. Both SPX and XLF remain below their 9 EMA, in a clear downtrend.
VIX fell again, dropping -0.24 to 14.42.
TLT screamed higher today, up +1.31% breaking out to new multi-month highs once again. Bonds are up about 6.5% since their lows in mid-March; a drop of about 40 basis points (2.97% to 2.56%) in yield. It looks like the bond shorts are being squeezed. How long have I talked about this bond rally? It sure seems easier to make money going long bonds than it does shorting equities.
JNK fell -0.03%, basically no change. JNK remains within a narrow trading range, and it looks neutral right now.
CRB fell -0.45%, dropping back below its 200 MA and the 9 EMA all in one go. While all sectors fell today, industrial metals were absolutely crushed, with the overall group dropping -3.20%.
From what I could see, there was no “normal” reason for the drop in PM today at 09:47; there was no linkage with other markets, no big currency move, no economic report, etc. Likewise, while the gold COT report does show an increase in commercial short positions, we aren't at a major top, so there is no stop-running motivation (at least for gold) for the commercials to drive price lower.
We're also in an uptrend, so there is no reason for the attackers to think that momentum is on their side. Its tough to drive prices lower in an uptrend because traders tend to buy the dip – as they did today in gold.
TLT rallied, a safe haven move. Gold and TLT are (these days) fairly well correlated. Hammering gold on a TLT-positive day seems problematic.
Lastly, the buck fell today – and it wasn't a small move lower. Generally speaking, its going against the flow to hammer gold and silver prices lower against a backdrop of a briskly dropping dollar. From a trading perspective, you are really going against the tide.
So, once you eliminate the normal trading strategies, what you're left with is manipulation. Someone pounded silver in order to affect gold. Silver is a smaller market and is more easily moved, while gold is the larger market which costs more to move around. Or to use my new favorite meme, they killed a silver chicken to scare the golden monkeys.
Why? I wasn't invited to the meeting. Perhaps it was driven by a level of concern about the geopolitical stress right now with North Korea, the upcoming first round election in France this weekend, PM May's announcement of new elections (I'm guessing by now that Brussels really hates all these annoying elections), and a slow unwind of the Trump rally.
Still even with the pounding, a bid remains under gold, a bit less so under silver, while the rest of the metals are starting to materially weaken. I'm watching TLT for my clues. TLT tells me there is a safe haven move happening now, but money is also fleeing the buck, which makes things a bit confusing.
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