PM Daily Market Commentary - 3/14/2018

davefairtex
By davefairtex on Thu, Mar 15, 2018 - 5:41am

Gold fell -1.80 [-0.14%] to 1325.00 on moderate volume, while silver dropped -0.05 [-0.30%] to 16.55 on moderate volume also. The buck was largely unchanged [+0.03%] on the day.

Trading range for gold was narrow, resulting in a spinning top/NR7, which had a neutral rating. Forecaster issued a buy signal, up +0.16 to +0.11. Gold in both weekly and monthly timeframes remains in a downtrend. Today I'll show a chart of GC.EUR, which looks a whole lot worse than GC in dollars.  Gold in Euros really needs to reverse the downtrend before gold can really start to move higher.  I'm not sure this is the low.

COMEX GC open interest rose 11,579 contracts today. That's the third day of large increases in open interest – 36 tons of paper gold.

Rate rise chances (March 2018) remains at 89%. FOMC meeting in 6 days.

Silver printed a short black/spinning top candle which was neutral; forecaster ticked up +0.02 to even, a very tentative buy signal for silver. That's one more whipsaw as silver trades sideways. The forecasters are useless when the market just chops sideways.

COMEX SI open interest rose 3,399 contracts today – an additional 528 tons of paper silver.

The gold/silver ratio rose +0.14 to 80.08. That's slightly bearish.

Miners ticked higher, with GDX up +0.28% on x volume, while GDXJ edged up +0.03% on y volume. XAU also ticked higher, up +0.11%, and XAU forecaster rose +0.05 to +0.31, which is an uptrend.  While the chart shows that the miners are slowly breaking out - by moving sideways - I'd still like to see something slightly more conclusive before saying we've marked a low.

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

Platinum fell -0.41%, palladium edged down -0.01%, while copper rose +0.45%. Platinum's forecaster issued a sell signal, as did copper, while palladium had a failed rally. That doesn't sound very positive.

The buck rose +0.03 [+0.03%] to 89.25, basically going nowhere on the day. Candle print was a doji/NR7 – unchanged, with a narrow trading range. It looked like a bearish continuation. Forecaster edged down -0.02 to -0.41.

Crude rose +0.11 [+0.18%] to 60.97. The EIA report was mixed but relatively bullish: [crude +5m, gasoline -6.3m, distillates -4.4m], but crude ended up selling off fairly hard immediately after the report.  However, dip-buyers appeared and pulled prices back up to even. The doji candle print was neutral, while the forecaster slipped -0.12 to -0.18.

OPEC's monthly oil market report was released today, and it projected that non-OPEC supply will rise faster than previously estimated: 1.66 mbpd vs 1.4 mbpd from last month's report. Oil demand will rise by 1.6 mbpd over that same period. Supply rises faster than demand = a problem for OPEC and its desire to reduce the oil oversupply.

https://oilprice.com/Latest-Energy-News/World-News/OPEC-Admits-Rival-Oil-Supply-Will-Outpace-Global-Demand-Growth.html

SPX fell -15.83 [-0.57%] to 2749.48. SPX printed a swing high today, which had a 42% chance of being a reversal. Forecaster fell -0.43, but that's not enough for a sell signal just yet. Today's plunge brought SPX back down to rest right at the 50 MA. Materials (XLB:-1.23%) led the market lower, along with financials (XLF:-1.13%), while utilities did very well (XLU:+1.03%). Yield is now getting a bid, while the rest of the market is looking bearish.

VIX rose +0.88 to 17.23.

TLT shot up +0.88%, breaking out sharply above its recent trading range. It took 5 weeks, but it looks as though bonds have finally put in a low. TY agrees, rising +0.15%, but it has yet to break above its trading range, and both the weekly and monthly forecasters remain in downtrends. Still – it looks as though dip-buyers have finally appeared for bonds.

Not junk bonds though - JNK fell -0.11%, moving deeper into a downtrend.  JNK is echoing the risk-off sentiment in equities.

CRB rose +0.11%; only 2 of 5 sectors rose, led by livestock (+0.47%). It was an uneventful day in the commodity space.

Wolf Richter had an article about a substantially more extensive trade war with China that is on the way, detailed in a Japanese newspaper.  It has to do with non-tariff restrictions that China places on US companies, that the US does not place on Chinese companies, among other things. This would be substantially more involved than simply tariffs on aluminum.  https://wolfstreet.com/2018/03/13/leaked-trumps-next-shoe-to-drop-on-us-china-trade/

So was today's equity market weakness about increased worries over trade wars? Certainly the bigger companies had more problems: DJIA fell 1%, while SPX dropped 0.57%, and RUT moved down 0.49%. Presumably the larger companies (like Boeing: -2.48%) were more exposed to China tariff retaliation than the domestic market. So trade concerns were probably a factor. The market may be trying to discount trade impacts in advance.

Bonds are also finally bouncing back now, after weeks in the wilderness. 10-year treasury yield is back down to 2.81%. It looks like a combination of risk-off, dip-buying, perhaps some short covering, and maybe a flight to safety over trade concerns.

Meanwhile, PM is just chopping sideways – with a big increase in open interest. We will have to wait until end of week to see who has been adding all the shorts.

Next week is the FOMC meeting. That will be Powell's first press conference. It should be interesting, especially if he says something about speeding up the balance-sheet roll-off.

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