SD Outlook: Lock-n-load. Gold & silver are under attack as this is the most critical week of the year…
First things first. Let me see your war face:
In 2017, that corresponds to today.
In 2016, silver also bottomed around the FOMC:
Silver was smashed the day after the FOMC, and silver then bottomed six days later.
If silver follows suit, this could be a very nerve-wrecking week.
The problem, however, is that silver is very oversold right now:
This is not to say we can’t go lower. But looking at the chart back in July when silver printed at $15.14, we seem to be right there again as far as the technicals go.
Gold is also oversold right now:
Looking at gold going back to the end of 2016, we see how where we are today compares with prior troughs. Just like with silver, we could still go lower. In fact, the way the 50-day moving average is pointing down and looking like it could be closing in on the 200-day, if the blue 50-day breaks the 200 to the downside, that would be what we call a “death cross”. Analysts and traders would look at that a very bearish.
But putting it into perspective:
The price of crude oil is helping to keep the metals from simply plunging below all hope.
Crude looks ready to test the resistance at $58. If crude breaks through, we could be looking at $60 in short order. On the other hand, a stall here could paint a right side shoulder into what would be a bearish head-n-shoulders pattern. The price action over this week will certainly show crude performing one way or another.
Speaking of head-n-shoulders patterns:
Downside target on the dollar would be at least 91 if the chart pattern holds up.
But back to the metals.
Platinum shows the same level of “oversold” as gold & silver:
But once again, the stand-out is palladium:
Palladium is neutral on the technical indicators, and like it has all year, palladium is riding the 50-day moving average, and also like it has most all year, the price is currently above the 50-day.
Copper also looks to be turning:
Although one could argue that is a bear flag forming in copper, which would point to another price drop.
Two fundamental factors, however, are also keeping more or less a floor on the base metal as well. First, there is the increased cost of mining with the rising price of crude oil. Secondly, President Trump is talking “infrastructure” spending again, and taking possible infrastructure spending here in conjunction with infrastructure spending certainty with the development of China’s ambitious Belt & Road Initiative, there will be increased demand for copper.
And if all of those Bitcoin fans are going to improve their networks, well, most of the internet is still based on copper wire.
The yield on the 10-year is still “wait and see”:
Although with the Fed making a move (or not) on interest rates on Wednesday at 2:00 p.m. EST, the yield most likely won’t be in wait-n-see much longer.
That’s not the only important event this week.
On Tuesday we get the Producer Price Index (PPI) and on Wednesday we get the Consumer Price Index (CPI):
The PPI and CPI are measures of inflation. The PPI is more wholesale, as in what manufacturers are paying for raw materials, and the CPI is retail, as in the prices showing up on Main Street.
On Thursday and Friday we get two more important data releases:
Retail sales and Industrial production. It will be interesting to see the retail sales number because that will show how well this holiday shopping season is or is not performing.
The bottom line on the events calendar is there is going to be plenty of data points that could move markets one way or another.
For us, the most significant is Wednesday, because all eyes are on the Fed and they love to smash into anything Fed related, especially an FOMC with press conference, but as we showed in the first two graphs, there could be problems on either side of the FOMC statement.
As far as the stock market, well:
The S&P looks poised to put in another record high.
Of course, it’s being helped by subsequent selling of VIX:
People call the stock market a bubble, and everyone’s cool with calling it that.
But this, however, is not a bubble?
Let’s end with some great news:
The gold to silver ratio is trying to tell us something.
– Half Dollar