PM Daily Market Commentary - 2/13/2018

davefairtex
By davefairtex on Tue, Feb 13, 2018 - 11:36pm

Gold rose +6.90 [+0.52%] to 1332.00 on moderately light volume, while silver moved up just +0.03 [+0.18%] to 16.54 on moderately heavy volume. The dollar fell substantially, dropping -0.58% - this makes the metals rally look a bit lackluster, especially the move in silver which was barely able to remain green.

Gold rallied in Asia, sold off in London, and then rallied back to end the day up.  Candle print was a short white candle, which was a bullish continuation. Forecaster moved up +0.15 to +0.29 – the forecaster thinks the uptrend is getting stronger. Given the drop in the buck, gold's move today was just a currency effect, and intraday gold appeared to be under a fair amount of selling pressure. Still, gold managed to move back above its 9 MA today, which is a positive sign.

COMEX GC open interest rose by 2,978 contracts today. Commercials are back to going short.

Rate rise chances (March 2018) fell to 77%.

Silver followed gold, except the selling pressure during the London session drove silver much lower; it was just able to claw its way back up to even by end of day.  Candle print for silver was a spinning top/northern doji, which was a bullish continuation. Forecaster was slightly bearish, dropping -0.06 to +0.14. That's still an uptrend, albeit not a very enthusiastic one. Silver's weak move was surprising in light of the big all-day rally today in copper – but it was not one of those “good” surprises. Volume on silver has been declining for the past 5 sessions. That's not bullish either.  Silver looks as though it could reverse tomorrow.

COMEX SI open interest fell -757 contracts today.

The gold/silver ratio rose +0.27 to 80.56. That's bearish. The gold/silver ratio above 80 suggests that silver is historically cheap relative to gold.

Miners more or less went nowhere, with GDX up +0.14% on very light volume, while GDXJ climbed +0.88% on moderately light volume. XAU forecaster jumped +0.33 to +0.55, which is a strong uptrend, however XAU remains below its 9 MA. Either this is just a day of rest before a move higher – or else we're probably headed lower.

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

Platinum rose +0.37%, palladium was up +0.24%, while copper shot up +2.49%. Copper had a very strong follow-through off yesterday's swing low; the forecaster issued a buy signal, and copper appears to have recovered most of the losses from its recent sell-off. The rebounds in palladium and platinum both look fairly weak, especially given the move in the dollar today.

The dollar was hit fairly hard, dropping -0.52 [-0.58%] to 89.39. Candle print was a swing high. Forecaster fell -0.19 to +0.11; one more day and we'll see a sell signal in the buck. Today's move was about the yen (JPY:+0.77%) as well as the euro (EUR:+0.51%). However, the strong currency move was not enough to move gold all that much – gold in Euros has been chopping sideways now for the past 8 trading days.

Crude mostly traded in a range today, but ended the day down -0.39 [-0.66%] to 58.85. More than half of the loss was due to the bearish API report at 4:30 pm: (crude: +3.9m, gasoline +4.6m, distillates +1.1m). This was definitely not good news, but the market didn't crater – it just moved lower, which I'd take as a positive sign. Interestingly, the crude forecaster jumped +0.28 to +0.13, which is a buy signal for crude. What does the forecaster see? The spinning top candle was a bearish continuation – but it did not make a new low today.

US crude oil production has now topped 10 mbpd for the first time ever – up 350k bpd over the last report. https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=WCRFPUS2&f=W

SPX climbed +6.94 [+0.26%] to 2662.94. Not much happened – especially compared to the recent fireworks. Cyclicals led (XLY:+0.52%) while energy trailed (XLE:-0.41%). I can't really draw much from the sector map today. Volume was light. Maybe I'm reading into things, but it feels like we are waiting for the next shoe to drop.

VIX fell -0.64 to 24.97.

TLT rose +0.45%, following through off yesterday's buy signal. Might this be a temporary low for bonds? Let's see: TY rallied too, up +0.17%. Its forecaster moved up +0.29 to +0.19, which is a buy signal for TY. The 10-year has been chopping sideways for the past week or so; I'm starting to think there could be a relief rally coming soon. Friend of the site Wolf Richter mentioned that there are record short positions in the 10-year at the moment.  Certainly a brisk short-covering rally seems possible, and – just maybe - the forecaster is sniffing that out. It would help if the equity market sold off too. https://wolfstreet.com/2018/02/13/record-short-bets-against-10-year-treasury-promise-turmoil/

JNK fell -0.28%, dropping in spite of the move higher in equities. Still, the forecaster jumped up +0.54 to -0.01, which is almost a buy signal for JNK. I guess today's move is an improvement from the cratering we saw last week.

CRB rose +0.40%; 4 of 5 sectors rose, led by industrial metals (+1.78%) - i.e. copper. CRB remains well below its 50 MA after selling off for about 3 weeks, but it seems to have arrested the downtrend for now.

The possible reversal in bonds is intriguing.  While I think that longer term the selling pressure from the US government as well as the Fed rolling off its balance sheet will push yields higher (and bond prices lower), if Wolf is right and everyone has moved to one side of the boat, the near-term reversal could be pretty impressive, especially if the equity market sold off hard as a catalyst.

Silver is looking a bit weak, but if the buck continues to sell off, silver and the rest of PM should manage to continue moving higher.  Still, I don't see a strong PM rally if silver remains an under-performer.  The COT report from last week suggested that a low is probably either here or quite near - but so far at least the metal itself is just showing sporadic signs of strength.

Perhaps the ongoing weakness in crude is a contributing factor.  Certainly the resurgence of shale production (now above 10 mbpd!) isn't helping re-balance oil supply & demand.

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4 Comments

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5059
CPI: 6% annualized

CPI report at 8:30 am showed a 0.5% m/m increase, which is 6% annualized.  PM sold off initially, but bounced back almost immediately.  Whoever programmed their futures sell order triggered off the CPI made the wrong choice - traders treated the dip as an opportunity rather than something to be worried about.

There was also a 50 point drop in SPX at that same time, but the dip in SPX wasn't bought quite so enthusiastically.

Even "core" inflation was up 0.3% m/m, which is 3.6% annualized.

Crude remains under pressure, but gold silver & the miners are up - and surprisingly, so is the buck.

 

Cold Rain's picture
Cold Rain
Status: Gold Member (Offline)
Joined: Jul 26 2016
Posts: 321
Panic Buying Back

Buying equities is back, baby!  The stagflation trade didn't last long.  What a move in PMs and miners today.  Getting close to 2.9% on the 10 yr.  That was the magic number last week but seems to matter not this week.

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5059
miners

Gold & the Miners appear to have been waiting for that CPI report.  Gold +21!!

Yield continues to be sold.  TLT down -0.55%.

I'm not sure equities continue moving higher unless oil recovers.  Do you see how SPX is just now back to its pre-CPI starting point, while gold and the miners are both well beyond?  It doesn't feel like a panic, at least in that sense.

Cold Rain's picture
Cold Rain
Status: Gold Member (Offline)
Joined: Jul 26 2016
Posts: 321
Interesting Action

Really interesting action today.  Just a panic bid on equities, gold, and crude.  10 year yield soaring, well over the "death level 2.90", now at 2.92, and the dollar is cratering...almost with an 88 handle.  Can't get enough of those stocks, though.  Glad to see gold and silver and the miners having a good day.

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