PM Daily Market Commentary - 7/18/2018

davefairtex
By davefairtex on Thu, Jul 19, 2018 - 1:55am

Gold edged down -0.01 [-0.01%] to 1227.30 on heavy volume, while silver dropped -0.02 [-0.13%] on moderate volume. The buck tried to rally today but failed, moving up +0.12% to 94.71, and reaching as high as 95.07 on the rally attempt.

Gold followed the Euro lower in Asia, making a new low to 1220.90 at around 4:40 am, and then rallied a bit in advance of the currency, moving back to even in the afternoon in the US. The doji star/southern doji candle print was a bearish continuation, but gold forecaster jumped +0.25 to -0.42. Its a hint of a low, but not a real reversal just yet. If momentum really has shifted, gold should have no problem printing a swing low tomorrow. Until it does – gold remains in a downtrend.

COMEX GC open interest rose 5,083 contracts. Still no short-covering.

Rate rise chances (September 2018) fell to 86%.

Silver more or less tracked gold, with a new low to 15.41around 4:35 am; the rally brought silver back mostly even. Silver's high wave candle was mildly bullish (25% bullish reversal), and silver forecaster moved up +0.14 to -0.36. That's still a downtrend for silver. No reversal here either.

COMEX SI open interest rose by 1,351 contracts today. No short-covering yet.

The gold/silver ratio rose +0.09 to 78.82, which is slightly bearish.

Miners were mixed; GDX fell -0.09%, while GDXJ rose +0.53%. The long white candle prints were somewhat bullish (roughly 32% bullish reversals), and XAU forecaster jumped +0.22 to +0.00, which is a very tentative buy signal for XAU. Are the miners signaling a low? If so, just barely.

The GDXJ:GDX ratio rose +0.62%, while the GDX:$GOLD ratio edged down -0.08%. That's somewhat bullish.

Platinum rose +0.12%, palladium dropped -0.53%, while copper rallied +0.71%. Both copper and platinum looked pretty good today; platinum's high wave had a 38% chance of being a bullish reversal and its forecaster moved up almost back to even, and copper's forecaster is right on the edge of a reversal too. There was a bit of short-covering in palladium, but not in platinum or copper. This all adds up to a good setup for a reversal tomorrow, but not an actual reversal today.

The buck rose +0.11 [+0.12%] to 94.71. Candle print was a bearish doji star, which was a 45% bearish reversal. Forecaster remains in an uptrend – all 3 timeframes, actually. We probably need to see the buck heading south before the metals rebound.

Crude rose +1.22 [+1.83%] to 68.03. Crude spiked down immediately following the EIA report, which looked bearish (crude: +5.8m, gasoline: -3.2m, distillates: -0.4m) but apparently it wasn't all that bad; buyers soon appeared and ripped prices higher, with crude closing near the highs for the day. Candle print was a swing low (56% bullish reversal), and forecaster jumped +0.30 to -0.11. According to forecaster, that's still a downtrend, but if we get a reasonable performance tomorrow, we might get a buy signal for crude.  You have to like the response to the EIA report - market rallies on bad news = bullish mood.  At the very least, it strongly suggests our recent decline may be over.

SPX rose +6.07 [+0.22%] to 2815.62, moving slowly higher. Short white candle was a bullish continuation, while forecaster dropped -0.17 to +0.15. The pace of the uptrend is definitely slowing. Financials led (XLF:+1.60%) while materials trailed (XLB:-0.93%). The big move in financials was driven by better than expected earnings from BOFA (earnings +24%, revenues -2%; curious, that drop in revenues).

VIX rose +0.04 to 12.10.

TLT fell -0.40%, following through off Monday's swing high. TY's move wasn't as dramatic, falling just -0.04%, but it too is now in a downtrend along with TLT. The 10-year yield rose +1.1 bp to 2.87%.

JNK rose +0.08%, erasing yesterday's minor drop. JNK is trying to decide if it wants to start dropping; JNK doesn't look very strong right now.

CRB moved up +0.20%, with 4 of 5 sectors moving higher, led by livestock (+1.35%). Looking at the commodity sectors, it is hard to say if the tariff-driven sell-off is done. Too soon to tell, I think.

We are seeing hints of a low in the metals, but only hints so far. It seems as though this most recent wave of selling pressure is abating in the commodity sector. The buck – I'm less sure about the buck topping out, because that would mean a Euro rally, and I'm not sure what would support that. When I look at the Euro chart, well it just looks weak to me. RMB is down 5% vs USD over the past 5 weeks. That's one way China is fighting back against the tariff situation - although its hard to know if this is an official response by the PBOC, or just big money moving on its own.  Here's that move in perspective:

Miners are back to looking reasonably strong once more. Is this a tell? Its really hard to say. I really want to see that swing low in copper. We are seeing a bullish RSI divergence in copper (which just means downside momentum is really slowing down), and that sometimes presages a reversal. What's more, a close above 2.80 would confirm the double bottom pattern that is forming, and that's a strong reversal pattern if it gets confirmed.   And if copper turns, it should drag the rest of the metals right along with it.

Well that's the theory anyway.

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