PM Daily Market Commentary - 7/2/2018

By davefairtex on Tue, Jul 3, 2018 - 12:19am

Gold fell -10.70 [-0.85%] to 1243.50 on moderate volume, while silver plunged -0.27 [-1.64%] to 15.89 on heavy volume. The buck shot up +0.45%, which accounts for some, but not all of the moves lower in PM. The other metals had a bad day also, led lower by platinum which absolutely cratered, plunging -4.2%, the largest drop this year for platinum.

Gold fell pretty much all day long, along with the rest of the metals and the Euro.  Gold's candle print was a long black/bearish continuation, gold made yet another new low (to 1240.60), and gold forecaster dropped -0.44 to -0.62. I said last week that gold "should" bounce soon – perhaps Friday's $3 bounce is all we get? Its hard to say. Based on the OI increase, it looks like managed money is really pushing prices lower. Gold is more or less right at the 1238 support level; a break of 1238 probably takes us down to round number 1200. COT report says we should be at a low, but with the rest of the commodity complex selling off, it is unlikely for gold to rally on its own.

COMEX GC open interest rose 14,310 contracts; 44 tons of new paper gold. That feels like managed money going short to me.

Rate rise chances (September 2018) remain at 71%.

Silver sold off along with gold, making a new low to 15.80; there were one big spike down good for about 15 cents and 5k contracts at 8:25 am.  The 8-cent bounce into the close wasn't all that impressive.  Candle print was a long black candle, which was a bearish continuation. Forecaster dropped -0.13 to -0.08, which is a sell signal for silver. The breakdown below round number 16 is not good news. The next price level to be concerned about is the previous low at 15.63. A break of 15.63 could lead to a whole lot more selling. No doubt silver was dragged lower by the poor performance by the rest of the metals group.

COMEX SI open interest fell by -582 contracts today.

The gold/silver ratio jumped up +0.62 to 78.23, which is bearish.

Miners fell along with the metals, with GDX off -1.03% on moderate volume, while GDXJ dropped -1.04% on moderate volume also.  However, the drop today only erased about half of Friday's rally, and XAU managed to find support right at the 9 MA.  Really, the miner chart continues to look reasonable, and the forecaster the day's results as positive, rising +0.07 to +0.27.  I can understand this, since while both gold and silver continue to make new lows, the miners have not done so.

The GDXJ:GDX ratio edged down slightly, as did GDX:$GOLD ratio. That's slightly bearish.

Platinum fell -4.20%, palladium dropped -1.01%, and copper moved down -0.64%.  Today's move takes the gold/platinum ratio to an all-time high of 1.51.  An article from tries to explain why: concerns over tariffs are driving down demand for cars, which are an important source (40%) of the end user demand for platinum.

The COT report for platinum from last week shows a near-record level of commercial longs in platinum, along with a record number of managed money shorts.  We are deep, deep into the "rinse" cycle for platinum; once it reverses, it should be a fairly dramatic move.  Of course when that happens is anyone's guess.  Does platinum "deserve" to be this low?  Its hard to know.  The number of shorts is immense.  Plunging platinum definitely puts pressure on both gold and silver.

The buck rallied +0.42 [+0.45] to 94.76, recovering much of the losses suffered on Friday, managing to close back above the 9 MA. DX forecaster fell -0.07 to +0.17, probably as a delayed reaction to Friday's big plunge. Buck remains in an uptrend in all 3 timeframes, although that weekly forecaster continues to move lower, suggesting the uptrend is slowing.

Crude fell -0.54 [-0.73%] to 73.75, spiking down hard at the open in Asia, but then moving higher for much of the rest of the day.  Candle print was a takuri line, which looked bullish. Forecaster didn't agree, dropping -0.21 to +0.03, which leaves crude barely in an uptrend. It isn't too surprising that crude is taking a rest after rising 8 of the last 9 days.  Forecaster is suggesting that oil might retrace in the near future.

SPX rallied +8.34 [+0.31%] to 2726.71, selling off in the Asia trading session, but then rallying strongly in the afternoon in the US. The closing white marubozu was mildly bullish, and forecaster jumped +0.36 to -0.31, which leaves SPX still in a downtrend. Sector map shows tech leading (XLK:+0.89%), while energy brought up the rear (XLE:-1.47%) - that's a big drop for energy. This was a relatively bullish sector map for SPX.

Contrast what happened to SPX with the move lower in the SSEC (Shanghai Composite), which dropped -2.52% on the day, making a new low that dates back to March 2016.  Friday's bounce appears to have been an opportunity for traders to sell.

VIX fell -0.49 to 15.60.

TLT fell -0.30%, following through off last Friday's peak and forecaster sell signal. TLT printed a swing high (58% bearish reversal). TY tried to rally and failed, printing a shooting star candle (41% bearish reversal) which caused forecaster to drop -0.18 to -0.03, which is a sell signal for TY. The 10-year rate rose +1.7 bp to 2.87%.

JNK plunged -0.48%; this was another big move down, and it appears that the problem in JNK is starting to accelerate.  Looking at my debt sector map, it appears that bonds sold off across the board, with JNK taking one of the larger hits.  Quality is starting to matter, it would seem.

CRB plunged -1.44%, a big move, printing a swing high for CRB which appears to have run into resistance right at its 50 MA. All 5 sectors dropped, led by agriculture (-3.08%), with supporting plunges by industrial metals (-1.62%) and energy (-1.41%).

Crude oil may be topping out, US treasury bonds probably are topping out, JNK debt is moving strongly lower, and the commodity complex is selling off a bit harder, led by the auto-industry metal platinum.  And yet - the miners are largely managing to resist the pull lower.  What a difference from their horrid behavior in 2013-2015!  It almost seems better to put money into the miners vs. the metal right now.

No reversal signs yet.  Momentum still remains to the downside.  I thought we might have had something last Friday, but today's burst of selling tells us otherwise.

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davefairtex's picture
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5806
platinum reversal?

We might have a low for platinum - it bounced off 800 today, its back up to 820, and it looks a whole lot like capitulation yesterday + reversal today.  I think everyone who wanted to sell, just did so today.

This might get us a low in the metals overall.

Managed money is very heavily short platinum.  The short-covering rally off this low could be intense.  And that will serve to drag gold & silver higher too.  Assuming it happens.


davefairtex's picture
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5806
so far so good

Platinum is up $43 off the lows, forming a massive hammer candle.   All those managed money shorts are fleeing, and that's dragging gold and silver up along with it.

Its all fun and games shorting platinum.  Until someone loses an eye.

I bet we see a big OI change at EOD today.

I'm sure crude's new high (through 75) doesn't hurt either.

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