PM Daily Market Commentary - 11/8/2017

davefairtex
By davefairtex on Thu, Nov 9, 2017 - 1:36am

Gold rose +6.30 [+0.49%] to 1282.00 on very heavy volume, and silver climbed +0.09 [+0.53%] to 17.03 on heavy volume.  The buck chopped sideways today; rallies in gold and silver weren't caused by currency moves.

Gold rallied steadily in Asia and London, topping out just before noon in the US.  After hitting a high of 1288.10, gold faded into the close, giving back about 50% of the day's rally.  Candle print for gold today was a spinning top, which the code felt had a 33% chance of being a reversal. The forecaster agreed with the modestly bearish outlook, dropping -0.14 to +0.02. Gold remains in an uptrend, but not by much. Interestingly, gold in Euros looks substantially better; its forecaster actually rose +0.18 to +0.30. In the chart I've highlighted what seems to be a slow choppy uptrend channel.  Forecaster doesn't do well with moves like this.

COMEX GC open interest rose by 2,234 contracts.

Rate rise chances (Dec 2017) remains at 97%.

Silver was quite a bit more volatile than gold, seeing a very strong, almost vertical spike higher at 11 am in the US topping out at 17.27, followed by a steady sell-off into the close which ended up wiping out most of the gains for the day.  Silver printed a shooting star candle, but the code felt it was just neutral rather than bearish. Forecaster ticked up +0.03 to -0.13; silver remains in a downtrend. On the chart, silver remains within its uptrend channel.  The failed rally today looks a bit worrisome, as does the forecaster's bearish assessment, but until silver breaks that uptrend line, its probably not a sell signal.

COMEX SI open interest fell by -1,098 contracts.

The gold/silver ratio dropped -0.03 to 75.28. That's neutral.

Miners gapped up in the morning, but then chopped largely sideways during the day. GDX rose +0.70% on moderately light volume, while GDXJ climbed +0.65% on light volume. Short black candle for GDX was a bullish continuation.  Forecasters for both miners are now in downtrends: GDX -0.02 to -0.09, GDXJ -0.32 to -0.16 (sell). That said, the HUI's forecaster remains in an uptrend; -0.19 to +0.07. Determining the trend is tough right now.  I'm giving you the HUI chart today because it looks a bit cleaner than GDX.

Today, the GDXJ:GDX ratio fell, while the GDX:$GOLD ratio rose. That's neutral.

Platinum rose +1.06%, palladium jumped +2.10% breaking out to new highs, while copper rose +0.36%. Copper's spinning top could well be a bullish reversal (66%). Platinum, palladium: uptrend, copper: downtrend. Palladium looks very strong – this is the second strong breakout for palladium in the past six weeks.  Palladium is now also clearly above 1000.

The buck fell -0.04 to 94.61, basically unchanged on the day. DX forecaster fell -0.03 to +0.34. The buck continues to chop sideways – as it has for the past 9 days.

Crude fell -0.10 to 56.92, first making a dramatic new high to 58.02 before unwinding all those gains a few hours later. The EIA report was a disappointment: crude build (+2.2m) gasoline draw (-3.3m) distillates draw (-3.4m). It looks mixed, but the market sold off fairly hard immediately after the report. Candle print for the day was a high wave, which has a 45% chance of marking the top. Forecaster caught the same vibe, dropping -0.42 to +0.36. Volume today was massive – the sell-off following the EIA report had high volume, then the rally higher to 58 caused a lot of shorts to bail out, which created more volume, and then the reversal back to even generated even more volume.

The geopolitical risk out of Saudi Arabia should not be underestimated.  According to the following article, the recent events could be a really big deal.  Arresting a bunch of rich people (wealth totaling $800 billion) and threatening to confiscate their cash for the state (I'm shocked, simply shocked, to hear about all that corruption in Saudi Arabia) is one way to raise money for your kingdom during a time of low oil prices, but its incredibly risky.  There are a lot of moving parts here.  Several former kings, lots of princes, one of them a commander of the Saudi Army...a flock of presumably well connected billionaires who have friends with tanks and guns...problematic.  I'd call it all fairly problematic.

http://www.atimes.com/article/inside-story-saudi-night-long-knives/

A top Middle East business/investment source who has been doing deals for decades with the opaque House of Saud offers much-needed perspective: “This is more serious than it appears. The arrest of the two sons of previous King Abdullah, Princes Miteb and Turki, was a fatal mistake. This now endangers the King himself. It was only the regard for the King that protected MBS. There are many left in the army against MBS and they are enraged at the arrest of their commanders.”

To say the Saudi Arabian Army is in uproar is an understatement. “He’d have to arrest the whole army before he could feel secure.”

So view the crude oil chart below with that in mind.  While oil may appear to be topping out here from a technical perspective, If Saudi Arabia falls into civil war, the price of oil could simply scream higher.  $10, $20, maybe more, depending on how serious things get.  Black Swan territory.

SPX rose +3.74 to 2594.38. 49 to 2590.64. The melt-up continues, with SPX making a new all time closing high again today. Forecaster remains at +0.72, which is very bullish. Staples led (XLP:+1.09%), while financials trailed (XLF:-0.49%). Tech is looking very strong right now, while financials may be entering a downtrend.

VIX fell -0.11 to 9.78.

TLT fell -0.22%, finally taking a pause after a strong, week-long move higher. Print was a bearish harami, which the code felt was neutral. Forecaster dropped -0.24 to +0.34 – TLT remains in an uptrend.

JNK plunged -0.49%, a huge drop for JNK. This marks the 6th straight down day for junk debt. Canary in the coal mine is saying risk off pretty strongly right now. Maybe that's why XLF is starting to sell off as well. The Russell 2000 has been steadily moving lower for the past 6 weeks – down 2% off its highs.

CRB rose +0.02% - basically unchanged. 3 of 5 sectors rose, led by agriculture (+0.76%) and PM (+0.75%). Looking at the PM sector (symbol $GPX) in the chart below, it actually appears to be double-bottoming here. The GPX (PM) sector as a group seems much better-behaved than the individual components.

The buck continues to chop sideways, and although the individual PM components are a mixed bag, the overall sector appears to be putting in a low. Very slowly, and with lots of chop back and forth.

We should not ignore JNK and what it is saying.  When money flees junk debt, its a bad sign for risk assets.  JNK has dropped 6 days in a row.  Something is up.

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6 Comments

Cornelius999's picture
Cornelius999
Status: Gold Member (Offline)
Joined: Oct 17 2008
Posts: 357
Thanks for all you do Dave.

Thanks for all you do Dave. I'm doing nothing about oil for the moment ( greed & fear )

cmartenson's picture
cmartenson
Status: Diamond Member (Offline)
Joined: Jun 7 2007
Posts: 5438
Top?

If I were a NIKKEI ""investor"" who bought anything recently I'd be especially worried about that massive volume spike top that just got printed.

Looks ugly.

And well deserved.

Cold Rain's picture
Cold Rain
Status: Gold Member (Offline)
Joined: Jul 26 2016
Posts: 287
Selling

These morning PM selloffs are amazing.  Overstock.com doing a great job with their share price now that they're in the crypto space.

Snydeman's picture
Snydeman
Status: Gold Member (Offline)
Joined: Feb 6 2013
Posts: 376
Oooh

Lookey at the stock markets today. Someone wake up the Plunge Protection Team ASAP!

Cold Rain's picture
Cold Rain
Status: Gold Member (Offline)
Joined: Jul 26 2016
Posts: 287
Buying

I guess buyers decided to show up both for PMs and equities.  Never underestimate the 1:30 + time frame buying power for stocks.

davefairtex's picture
davefairtex
Status: Diamond Member (Online)
Joined: Sep 3 2008
Posts: 4770
oil: greed & fear

I know what you mean.  Longer term I'm mostly convinced this breakout is probably the real move (as opposed to the headfake that happened in January) but its tough to buy after such a large run up.   I'm waiting for this move to tire out, price to drop a bit.  Maybe back down to 54 support, or so.

Mostly I'm holding onto my services companies for dear life (as they recommend over in bitcoin-land).  Latest ride was BRS, an oil services aviation company that has been bouncing around the bottom for a while, but reported "less-horrible-than-expected-earnings" today and jumped 44%.  In one day!  Bitcoin-like returns, how cool is that?

Related: saw a "book value" rating for BRS that had it somewhere between $25-$35 per share, with the stock currently trading at $13.  Not every sector is in bubble territory.

How much of the current move in oil is related to geopolitics vs how much is people saying "ok, the glut is probably over?"

Maybe its 50/50?

 

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