PM Daily Market Commentary - 12/5/2017
Gold fell -10.20 [-0.80%] to 1268.40 on moderately heavy volume, while silver dropped -0.23 [-1.41%] on moderate volume. The metals continued selling off today. Managed money appears to be liquidating. Part of the problem was a huge drop in copper prices, which plunged -4.39%, the second largest single-day drop in copper this year. Why? Supposedly it was caused by an LME warehouse inventory number released in the morning – stocks of copper at the LME increased for the first time in months.
Gold more or less steadily moved downhill today, although there was a slight bounce at end of day. The resulting opening black marubozu candle had a 47% chance of being a reversal. It does look as though gold's plunge was halted at the previous low of 1263, at least for now. Forecaster declined -0.13 to -0.42. Slope of the downtrend is increasing. I'm not sure I'd bet on 1263 support holding. A break through 1263 could get ugly - next support is 1200.
COMEX GC open interest rose by 32 contracts.
Rate rise chances (Dec 2017) remains at 90%.
Silver also moved steadily lower, and it too had a slight bounce at end of day, however silver's candle print was a bearish continuation. Silver's forecaster fell -0.09 to -0.38. There is not much support on the daily chart until 15.50 or so. Looking on the weekly & monthly charts, if we can't close the month at 16, we could end up dropping down to 14. I'm not seeing much in the way of buying signs in silver right now.
COMEX SI open interest rose by 3,152 contracts.
The gold/silver ratio rose +0.48 to 78.73. That's bearish.
The miners fell along with the metals, with GDX off -1.04% on heavy volume, while GDXJ dropped -1.41% on heavy volume also. GDX printed a high wave candle: 60% chance of a reversal, while GDXJ printed a spinning top/bearish continuation. GDX forecaster dropped slightly (-0.08 to -0.06: sell!) and GDXJ fell -0.06 to -0.14. These are not big moves, especially compared to the moves in the metals. Perhaps that's why the forecasters weren't too unhappy today. HUI looks worse, plunging -0.28 to -0.33.
Today I'm pulling back to the weekly chart to show the upcoming support levels. If we lose HUI 160, the selling could really pick up. Traders who have held their miners until now might well change their minds. Perhaps this only occurs if silver falls through 15.50. For now, miners continue to look relatively strong.
Today, the GDXJ:GDX ratio fell again, as did the GDX:$GOLD ratio. That's bearish.
Platinum fell -1.16%, palladium dropped -1.05%, while copper plunged a huge -4.39%. It was a bad day for the other metals – all of them are in downtrends. Copper's closing black marubozu might actually be a reversal (40%) - sometimes a plunge is just so large, it ends up marking a low.
The buck rose +0.15 [+0.16%] to 93.05. The buck did not play much of a role in today's commodity price moves. Buck is in a very early uptrend; today's print was a bullish continuation.
Crude mostly went nowhere, rising +0.04 [+0.07%] to 57.49. It had rallied earlier in the day, but the API report at 4:30 pm resulted in a plunge, erasing the day's gains. API reported: crude -5.5m, gasoline +9.2m, distillates +4.3m. The large builds in oil products were bearish. Today's print was a long-legged doji, a bearish continuation. Forecaster rose +0.02 to -0.12. In spite of the sell signal on the daily chart, the weekly chart still shows crude in an uptrend. Given the sell-off in the metals, crude actually did fairly well.
SPX tried to rally today but the rally failed; SPX closed down -9.87 [-0.37%] to 2629.57. Print today was a swing high, which only had a 40% chance of marking the top. Forecaster fell -0.11 to +0.48. However, SPX remains in an uptrend, and also above its 9 MA. Sector map shows tech leading (XLK:+0.03%) while utilities did worst (XLU:-1.27%). It was an odd configuration – I can't quite make out what it means.
VIX fell -0.35 to 11.33.
TLT charged up +0.50%, rallying strongly on the drop in the equity market. TLT broke out to new highs today, and TLT forecaster jumped +0.40 to +0.69. I'd expect the rally to get much stronger if the equity market sell-off continues. TY printed a swing low today (61% chance reversal). We might even have a low for the 10-year. The yield curve continues to slowly flatten.
JNK managed to rise +0.05%, more or less going nowhere today. JNK remains in a downtrend.
CRB fell -0.65%; 4 of 5 sectors fell, led by industrial metals (-2.57%). Both industrial metals and PM are looking ill right now.
At this point, the moves are less about gold or silver, and more about the entire metals complex selling off. Gold and silver are just going down along with everything else. While the miners have managed to hang on fairly well to date, that's not a guarantee they will continue to do so. I'm specifically worried about what happens if the HUI 160 support level is broken. That's a lot of air underneath 160.
Currently, the metals are all in downtrends of varying severity. We don't know when the downtrends will end, so it is safer to be watching from the sidelines until we get a reversal sign from the technical indicators.
If we have an eye on the longer term, we should be hoping for one last big smash going into the holidays. Armstrong calls this a slingshot rally - one last smash prior to the elections in Italy which are utterly certain to bring excitement that Mario Draghi cannot fix by buying another trillion Euros in bonds. The deeper the smash, the stronger the ultimate rally will be.
And if you are feeling that gold will never rally - that's good too. Its a sign that, truly, nobody cares. Once people start to care, no game-playing by the commercials will be able to stop the move higher.
I also think there is a certain element of fatigue and envy in the metals space caused by bitcoin. "They are having the rally that should have been ours." That's the sense I have anyway. I suspect this is causing the morale of some metals owners to break - transferring their money out of PM and into the crypto space - here at bitcoin 12,000! This is just in time for mainstream exchanges to start futures trading on December 10th, only 5 days from now. Will bitcoin start experiencing wash & rinse cycles just like gold and silver? I think that's entirely likely. And from the government's perspective, money flowing into crypto is money that isn't going to stocks and bonds. Even if the government doesn't want to destroy crypto, they certainly don't want it to be more attractive than government debt. "Go forth and rinse out some of those bitcoin buyers."
The bitcoin effect should also help to cause the slingshot.
In the meantime, watch from the sidelines until the buyers return to the metals. We could rebound tomorrow at silver 16, or at silver 15.50 - or maybe even at silver 14. We'll just have to see what happens.
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