PM Daily Market Commentary - 4/10/2018

davefairtex
By davefairtex on Wed, Apr 11, 2018 - 3:40am

Gold rallied +3.40 [+0.25%] to 1343.00 on moderate volume, while silver climbed +0.09 [+0.52%] to 16.57 on heavy volume. A falling dollar helped the metals to move higher; the buck ended up down -0.29%, which accounted for gold's move today. However, the real star of the show was the equity market, which rallied strongly on Chinese President Xi Jinping's speech which, instead of threatening to engage in a tit-for-tat tariff war, promised instead to open China's market “even further.”

Of course, Xi has made such promises before, and China's markets have remain closed. We will have to see if Xi lives up to his promises, but it does seem as though China may be willing to compromise rather than fight a trade war they are sure to lose. The market appears to be giving Xi the benefit of the doubt.

Gold started its rally after Japan closed, moving slowly higher into the close in New York; that roughly paralleled the move higher in the Euro. Trading range was fairly narrow; the spinning top was a bullish continuation, and the forecaster moved up +0.15 to +0.25. Gold is slowly moving higher – in dollars anyway. Gold in Euros fell, with the GC.EUR forecaster dropping -0.29 to -0.50.

COMEX GC open interest rose +7,037 contracts.

Rate rise chances (June 2018) rose to 89%.

Silver followed gold higher. Candle print was a long white/bullish continuation. Silver's forecaster was unchanged, at 0.00. Silver is right on the cusp of a buy signal, but it has not yet managed to cross the 0 line just yet.  Silver did manage to re-cross the 50 MA, but stopped right at the downtrend line.

COMEX SI open interest fell by -8,325 contracts today, or 1294 tons of paper silver.

The gold/silver ratio fell -0.21 to 81.07. That's bullish.

Miners did ok, with GDX up +1.27% on moderate volume, while GDXJ rose +0.84% on moderate volume also. The spinning top candle was neutral, while the XAU forecaster fell -0.07 to +0.07. The miner uptrend appears to be slowing.

Today, the GDXJ:GDX ratio fell, as did the GDX:$GOLD ratio. That's bearish.

Platinum fell -0.34%, palladium shot up +2.08%, while copper rallied +2.06%. Those are some big moves today for palladium and copper. While palladium is just beginning to recover from its recent downtrend, copper has retraced more than half of its recent losses. The copper rally is a strong risk on signal, both for equities, as well as the global economic outlook.

The buck fell -0.26 [-0.29%] to 89.22. Today's print was a long black/bearish continuation, but the DX forecaster actually rose +0.05 to -0.25. Even so, the buck remains in a downtrend. The recent three-day plunge in the buck has pulled the weekly and monthly DX forecasters back into a downtrend too.

Crude shot up +2.24 [+3.54%] to 65.52, moving up to the top of crude's recent trading range. The opening white marubozu candle was a bullish continuation, and the forecaster jumped +0.41 to +0.18, which is a belated buy signal for crude. The API report was a bit bearish [crude: +1.75m, gasoline: +2.0m, distillates: -3.8m], but the report only took crude down 10 cents. Crude's rebound was most likely driven by the reduced fear of a trade war, combined with a heightened concern about geopolitical risks. Crude needs to get through 66 resistance in order to break out to a new level. I think that outcome is more likely than not. Crude is in an uptrend in all 3 timeframes.

SPX rose +43.71 [+1.67%], with most of the move happening in the futures markets overnight, triggered by Xi Jinping's speech. SPX printed a short white/bullish continuation candle, which sent the forecaster up +0.58 to +0.38. Looking at the chart, the buy signal feels right to me. Energy led, staging a huge rally (XLE:+3.31%) along with tech (XLK:+2.46%), while utilities trailed (XLU:-0.77%). That's a relatively bullish sector map.

VIX fell -1.30 to 20.47.

TLT fell -0.18%, a fairly mild move down given the strong move higher in equities. TY dropped also, losing -0.15%. TY remains in a downtrend on the daily chart, but the weekly and monthly TY forecasters are still in an uptrend.

JNK rose +0.36% - another new high for JNK. JNK forecaster moved up +0.16 to +0.66, which is a strong uptrend. Risk on.

CRB jumped +1.10%, another big move for CRB. 4 of 5 sectors moved higher, led by energy (+2.91%). CRB has surged above the recent trading range.

Is the tariff war over?  It might be;  we will know more soon enough.  In the meantime, the risk on mood has returned to both equities as well as junk debt.

At some point the market will start to remember about rising interest rates, but that is for another time.

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7 Comments

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5365
safe haven bid returns

Gold new high 1364.40, silver 16.87, and crude new multi-year high 67.45.

Even bonds have a bid today: TLT +0.64%; TNX +2.77%. 

Factoid: Gold's previous (recent) high was 1365.40.  We're very close to a breakout.

Cold Rain's picture
Cold Rain
Status: Gold Member (Offline)
Joined: Jul 26 2016
Posts: 359
Good Day...

...so far.  It seems like a lot of our "safe haven bids" over the last couple of years have left silver largely out of the mix.  It's catching a bid now.  Hopefully, it gets over $17 and holds, because it definitely has room to run, at least from a COT perspective.  The miners are doing amazingly well also.

Any thoughts on whether or not there will seriously be action in Syria?  On one hand, from everything you read, it's a 100% dead lock.  On the other hand, the last time we did something over there, there wasn't all this bluster in the media/twittersphere about it.  We learned about it via watching missile launch footage.  This all sort of feels like a sideshow.  But at least the safe haven traders seem to believe it.

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5365
Trump & Syria

I see two possible outcomes with Trump and Syria.

1) He's putting on a show, because he's expected to act.  Its clear he wants us out of the place.  He's also not a stupid man.  So he will select the flashiest option that ends up doing no real harm.  Like last time.  Sound and fury with no body count.  The tweet sets this up.  "Whatever I'm going to do, it will really hose you."

2) He attacks for real.

My money is on #1, I'd say 70/30.  I'm assuming he's a) smart, b) serious about getting out of Syria, and c) after more than a year in the Washington game, he can now tell when he is being played.  He has learned that he can't simply refuse to act, so now he just puts on a show instead.

After all, it worked last time.

 

 

Cold Rain's picture
Cold Rain
Status: Gold Member (Offline)
Joined: Jul 26 2016
Posts: 359
Good Thoughts, Dave

I agree with you assessment.  On another note, these equity markets are amazing.  Very resilient.  Just shake off every possible headwind.  Bears couldn’t hold the S&P below the 200 dma.  Probably head back toward the highs now.

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5365
equity market

Instead of looking at the broad index, check out XLF and/or $BKX.  That's a clear pattern of lower highs/lower lows.  XLF is usually a leader of market direction, along with tech.

Tech looks substantially better.  Not sure which one wins.

 

Cold Rain's picture
Cold Rain
Status: Gold Member (Offline)
Joined: Jul 26 2016
Posts: 359
Makes Sense

Thanks, Dave.  That makes sense.  Also, it looks like gold once again got right up to the $1065 level (quite a move today) and bounced right back down again.  It just simply cannot get through there.

And, you'll notice that every time it gets there, the dollar reverses and heads higher.  We've had several days of weakness in the dollar.  Another day or two would virtually assure gold breaks through.  But the dollar will probably head higher for a couple of days, and we'll watch gold head back to the lower $1300s...again.  That's my guess.

Cold Rain's picture
Cold Rain
Status: Gold Member (Offline)
Joined: Jul 26 2016
Posts: 359
Hawkish Fed Minutes

Funny how you can blame hawkish fed minutes for a surge in the dollar and a collapse in gold, but equities?  Nah, no big deal.

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