PM Daily Market Commentary - 4/19/2017
Gold fell -9.50 to 1282.00 on moderately heavy volume, while silver dropped -0.14 to 18.14 on heavy volume. Both metals were hit with spike assaults for a second day, this time at 09:56 vs yesterday's assault time of 09:47. Today, it appeared that gold was the target rather than silver – the fall in gold today was more pronounced vs yesterday, and the volume spike substantially larger.
It turns out, the London gold PM fix is at 15:00 GMT, which is 10:00 EDT. The big spike down in gold happened at 09:56, just 4 minutes before the PM fix. The spike took gold from where it was trading at 1285 down to 1279, which is where the PM gold fix was set.
Why would someone do that? Well, if a banker had a contract with their customer for a big batch of gold derivatives due to expire today, with the price set by today's London PM Gold fix, then the banker could save a whole lot of money if they could jam the price lower just long enough for the contract to expire, and then let price bounce back up again (or not). The bullion banks were found guilty of doing this very thing not long ago.
After the pre-gold-fix pounding that took gold down to a new low of 1275.40, gold bounced back and then traded sideways into the close. Candle print for gold was an opening black marubozu, which the candle code found to be somewhat bullish - but gold also printed a swing high, which was bearish. I'm guessing the swing high probably overrules the candle print. Still, gold remains above its 9 EMA, and that's bullish.
Open interest at COMEX for GC fell -390 contracts.
Rate rise chances (June 2017) rose to 49%. Apparently the Fed was not pleased with the market's assessment of rate rise chances, and sent a few people out to give speeches aimed at convincing the market to reverse course. That was good for a 5% move.
Silver's spike took it down at the same time gold was hit, but silver avoided making a new low today finding support around 18.10. Silver's bounce was negligible, however, and silver ended up printing a long black candle which the code found to be somewhat bearish. Silver ended the day just above the 200 MA. The silver COT report shows a heavy concentration of commercial shorts (highest level ever), which gives them a significant profit motive in moving silver prices lower.
The gold/silver ratio rose +0.04 to 70.69.
Miners fell too, with GDX dropping a big -3.63% on very heavy volume, while GDXJ fell -3.23% on heavy volume. Juniors were actually down much more severely until about 30 minutes before close. The sharp end-of-day rally brought GDXJ back perhaps 2.5%. Candle print for GDX was an opening black marubozu, which the code felt was bearish, while GDXJ printed a spinning top, which the code saw as neutral.
A number of junior miners I follow printed candles which were distinctly more bullish than even GDXJ. I'm not sure this means the low is in, but I'm definitely seeing traders buying the dip in selected junior mining shares. In a similar vein, the GDXJ:GDX ratio actually rallied today, after dropping steadily for the past five weeks. GDXJ:GDX ratio is very oversold. I'd like to see a reversal bar in GDX before thinking about jumping back in, but the improvement in GDXJ is a positive sign.
Platinum fell -0.82%, palladium rose +0.55%, while copper was mostly unchanged, +0.02%. Candle code didn't any reversals in any of today's candle prints. Platinum is now through its 9 EMA, and it also printed a three-candle swing high, which is bearish. Copper and palladium downtrends remain in place; platinum's swing high most likely move it into a downtrend as well.
The buck rallied +0.23% to 99.59, executing what looks like a somewhat feeble rebound after the big decline yesterday. Candle print was a short white/NR7 candle, which the code saw as somewhat bullish. For the buck to continue dropping, that means the Euro most likely must rise, and I'm not sure it will do that ahead of the French elections that are scheduled for this Sunday. With 40% of the French electorate unsure of who they'll vote for even at this late date, and the four candidates separated only by a few percentage points, really anything could happen. The most likely outcome is still Macron/Le Pen, who remain in the lead. Bottom line: we might see a bounce in the dollar leading up to the French election this weekend.
Crude was more or less crushed, falling -1.74 [-3.30%] to 50.97. Crude smashed through its 9 EMA and the 50 MA all in one day; a modest rebound at end of day didn't do much to repair the damage. The long black candle was seen as bearish. Big surprise there. The EIA report confirmed yesterday's API report: a crude inventory draw of -1.0m barrels, but a surprise/bearish gasoline build of +1.5m barrels. Shortly after the report was released, oil started its intense decline, losing about $2 over the space of a few hours.
Arthur Berman wrote a good (chart-filled) article that lays out the supply/demand fundamentals for oil: executive summary is, “its probably another 6 months before inventory levels are back to neutral, assuming demand remains relatively constant.” http://oilprice.com/Energy/Energy-General/Dont-Believe-The-Hype-Oil-Markets-Far-From-Recovery.html
SPX fell -4.02 to 2338.17. Market tried rallying and failed, selling off slowly into the end of the day. Energy led the market lower (XLE:-1.47%), while sickcare rallied (XLV:+0.30%). Really it was energy that dragged the market down today. Oil services were badly hit (OIH:-2.68%).
VIX rose +0.51 to 14.93.
TLT fell today, dropping -0.51%, somewhat surprising given the decline in SPX. Perhaps yesterday's big bond rally was overdone. Candle print was a bearish harami, which the code gave a 53% chance of marking a top.
JNK fell -0.05%; JNK tried rallying today and failed, printing a shooting star candle, which the candle code felt was bearish, giving it a 44% chance of marking a top.
CRB fell a big -1.41%, and is now very clearly in a downtrend. While 4 of 5 sectors fell, the move lower was led by energy.
PM is starting to break down but the longer term uptrend remains in place, especially for gold. Miners look weakest, although only the juniors have broken the longer term trend line. Gold looks strongest, as it generally does in a safe haven move.
My sense is that the macro environment is still supportive of the gold uptrend. Silver and the miners, I'm less sure about.
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