Chris Capre's  Instablog

US and Chinese Manufacturing Data Lifts Global Equities
Global markets rallied with risk back on the board as the sessions started the week with the Chinese surprise PMI reading with an expected 50.8 level but the print coming out at 53.1, instantly sending Aussie and Kiwi higher vs. the USD which is what caused them to gap strongly on the open.

Of course, Europe dampened sentiment a bit with factory data coming in lower for the French PMI (too busy drinking wine and eating croissants) while the German PMI came in pretty much as expected (the blitzkrieg must go on).

But the US ISM came in above expectations making it a 2-for-3 day at 53.4 when 53 was expected, and that was enough for people to forget (or have enough short term amnesia) weakening the dollar with the big winners on the day being commodities with Gold, Silver and Oil being the big winners across the board. Between the three, Oil jumped $2.85 closing at $104.85, with Gold ending NY just above $1680 and Silver maintaining the $33 level, up $.50 on the day.

This week is a busy week for announcements ahead of the holiday weekend so we are expecting volatility sparsed with brief pauses before the key announcements such as NFP, ECB, BOE & AUD Rate decisions, FOMC Minutes and several other announcements which should drive short term volatility so expect some solid moves before the liquidity zapping pagan bunny holiday comes weekend.

Silver - Canary In The Coal Mine?
After spending all but three days below the daily 20ema, silver has formed a HL (higher low) and from a daily pin bar setup last Thursday. Since then, it has held the gains, and for the first time in over three weeks, closed North of the daily 20ema. The SL / LL / HL formation suggests the $6 drop from $37 has found some solid buyers with a change of hands in play.

If I had to guess, the drop from $37 was definitely part of the price manipulation that is so common to gold and silver, trying to reduce speculation from retailers while shaking out any uncommitted players who are concerned about volatility. But this bottoming formation suggests accumulation buying if it can sustain these levels.

I suspect a possible medium term bull run coming, but am a little cautious until it clears $33.30. If price action can hold above this level and the daily 20ema, then I will suspect a short term bottom is in place for precious metals with silver being the canary in the coal mine being the first to close above the daily 20ema amongst the two. I also like buys on dips to the $31.75 and $31.25 region for an eventual run back up to $37 medium term.

(Click to enlarge)

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