PM Daily Market Commentary - 7/25/2018

davefairtex
By davefairtex on Thu, Jul 26, 2018 - 2:27am

Gold rallied +7.30 [+0.60%] to 1231.80 on moderately heavy volume, while silver climbed +0.15 [+0.97%] on moderate volume. The buck dropped -0.28%, which definitely helped the metals, and a general updraft in overall metals sector seemed to support the move also.

After market close, there was a press conference at the White House where Trump announced that the US and EU would work towards implementing zero tariffs and subsidies on non-auto industrial goods, and that the US will hold off implementing further tariffs, and reassess existing tariffs on steel and aluminum. Reading between the lines, it appears that auto tariffs are not part of the deal. Markets overall liked the news, with copper jumping higher along with equities.

Gold's gains on the day came from rallies in Asia and London, running into a bit of trouble during the US session. Gold's candle print was a sort-of bullish engulfing, which was positive, and gold forecaster jumped +0.33 to +0.35. Gold's move today took it back above its 9 MA for the first time in more than 2 weeks.  Gold's uptrend appears to be a bit more solid after today.

COMEX GC open interest rose 5,659 contracts.  Traders (managed money?) are jumping in short as gold moves higher.

Rate rise chances (September 2018) rose to 90%.

Silver tracked gold, with most of the gains happening in Asia and London trading sessions. The long white candle print was a bullish continuation, and silver forecaster jumped +0.36 to +0.15, which is a long-awaited buy signal for silver. Silver is now back above its 9 MA, and silver also finally printed a swing low, 5 days after hitting the low of 15.18.

COMEX SI open interest rose by 3,030 contracts today. Rather than being squeezed out, it appears as though managed money is jumping in short on the rally.

The gold/silver ratio fell -0.29 to 78.81, which is bullish.

Miners moved higher today, with GDX up +0.83% on very heavy volume, while GDXJ climbed +1.15% on very heavy volume also. While both GDX and GDXJ forecasters issued buy signals today, XAU has yet to do so; for some reason the rally in XAU was a bit more feeble (+0.58%) than for the ETFs. Overall, the miners do not seem to be outperforming gold here, which is not a great sign.  No buy signal yet for XAU, which remains below its 9 MA.

The GDXJ:GDX ratio rose +0.32%, while the GDX:$GOLD ratio shot up +0.23%. That's somewhat bullish.

Platinum rose +1.33%, palladium rallied +2.87%, while copper moved up +2.16%. A good chunk of copper's rally came after Trump's trade announcement. OI for both palladium and platinum fell, while OI for copper increased. Gains in the other metals during this rally have been a lot stronger than gains in gold and silver.  Looking at the copper chart, we can see that copper is well above its 9 MA, and the forecaster uptrend is quite strong.  Contrast with silver, which just squeaked above its 9 MA today.

The buck fell -0.26 [-0.28%] to 93.99. The new low for the buck was driven by Trump's announcement, which drove the Euro up +0.40%, giving the Euro a relatively convincing close above its 50 MA. It also pulled the DX forecaster down -0.19 to -0.54, which is a more emphatic downtrend. The buck is now heading lower in both daily and weekly timeframes. This should help the metals, assuming it continues.

Crude rose +0.51 [+0.74%] to 69.27, making a new high. While the spinning top candle was a bullish continuation, the forecaster didn't like something about today's action, dropping -0.08 to -0.04, which is a cautious sell signal for crude. Today's move took crude back above its 50 MA, which is a positive sign. So do we believe the forecaster, or the moving averages? I'm not sure what the forecaster saw – the model is too complex! The EIA report was bullish (crude: -6.1m, gasoline: -2.3m, distillates: -0.1m), and after some back and forth, crude rallied on the news. The move wasn't as unreservedly bullish as I would have expected, which supports the cautious view from the forecaster. Crude is now in a downtrend in both daily and weekly timeframes, while remaining in a strong uptrend on the monthly chart.

SPX rallied strongly, up +25.67 [+0.91%] to 2846.07. The strong move took SPX to the highest close in 7 months, and was largely driven by the positive news on trade. The strong line candle is a bullish continuation; SPX is in a strong uptrend in all 3 timeframes. SPX is less than 30 points from making a new all time high. That said...after market close, FB's earnings report was a disappointment, resulting in a 26% drop in the after hours trading session. This massive move took the e-minis down 10 points in sympathy; its hard to know how the plunge in FB will affect trading tomorrow. Sector map shows industrials (XLI:+1.52%) sickcare (+1.28%) and tech (+1.25%) leading, with financials (XLF:+0.21%) doing worst. While this sector map looks relatively bullish, the lagging banksters provide a sort of “skeleton at the feast” aspect to the new high. If you want to short something, the banksters are probably a good candidate. From what I understand, you don't want to short the strong stuff – you should pick the weak things. They call it “throwing rocks at the wet paper bags.”

VIX fell -0.12 to 12.29.

TLT fell -0.16%, with the losses coming as a result of the trade announcement. Bonds don't like good news, usually, and today was no exception. TY also fell, losing -0.19%, making a new low, forecaster plunging further. TY remains in a daily & weekly downtrend, but the monthly is still pointing higher. +0.34%, clawing back a small portion of the losses sustained over the last few days. The bullish harami candle print wasn't actually bullish. TLT forecaster remains in a strong downtrend. TY confirms the bearish view, rising just +0.01%, printing a doji/bearish continuation, and TY forecaster moved deeper into downtrend. Why is a +0.01% move bearish? Probably because it is a dead cat bounce after two days of strong selling. TY is below all 3 moving averages, and is in a downtrend in both daily and weekly timeframes. Curiously, the 10-year yield fell -1.6 bp to 2.95%.

JNK rose +0.17%, with much of its gains coming as a result of the good news on trade.

CRB rose +0.76%, with 4 of 5 sectors moving higher, led by agriculture which rose +2.51%.

Ok, so I'm going to take a brief victory lap on today's announcement; I figured the Europeans would cave relatively soon, but the Chinese would prove to be a lot harder to convince to give up their advantage. The EU is fragmented, Merkel is relatively weak, populist forces are riding the “migration horse” for all its worth, and so the EU can't afford a trade struggle with wild man Trump along with the pile of other things they have to think about. Its the difference between a rising power – China – and a falling power – Europe.

Think for a moment of all the forces that Trump had to fight against to get this done. The large pile of current winners on both sides of the Atlantic got their tame media lackeys to say what a terrible thing it was to “harm our allies” to such an extent – meaning, of course, the harm to their bottom lines, their salaries, and share prices.

So what's the impact of the progress towards an US/EU trade settlement on gold and silver?  I mean, if this were a "daily copper report", it would be all puppies and ice cream.  But - its a gold and silver report.  What do we see?

Well rising "other metals" prices have definitely helped both gold and silver rise in sympathy, and the rising Euro/falling dollar has been helpful as well.  And yet...the miners are telling us that all is not well in the PM space.  XAU can't even move above its 9 MA, silver just crept above its own 9 MA today, and we are not seeing any short covering at all in either gold or silver.  The bounce in the other metals do not appear to have the shorts worried at all - in fact, more shorts are piling in even as gold and silver prices rise.

In "normal times" the commercials choose this moment to pile in, driving price higher and forcing the managed money shorts to cover.  But they do not appear to be doing so this time, for whatever reason.

That doesn't feel like great news to me.  It suggests the longer term downtrend will remain in place.

I mean, I'll be looking for changes in this posture as time passes, and we might get a bit more of a bounce if/when we get some more progress on trade - especially if China decides to bend - but right now, it still feels as though "nobody cares" in the PM space.  That, and managed money is really leaning heavily short right now.  Especially in silver.  I think they are looking for a breakdown to the January 2016 lows of 13.85.

Right now the miners, and changes in OI are what I'm watching, and so far, they aren't bullish.

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4 Comments

sand_puppy's picture
sand_puppy
Status: Diamond Member (Offline)
Joined: Apr 13 2011
Posts: 2014
Mish: When everyone is shorting gold

Mish posts and ZH picks up his assessment and adds a few charts

From the WSJ:

Investors are placing a record number of bets that a protracted slump in gold prices will continue as the metal is punished by a strengthening U.S. dollar and rising interest rates.

Hedge Funds are holding overwhelming short positions in gold.

And the MSM beats the drums for Gold's decline.

And Peter Atwater notes:

 

So what happens when the boat is loaded with everyone sitting only on the short side?

I'm pretty firmly in the camp that the prestigious MSM outlets are the vehicles through which the oligarchy guides the sheeple to the desired viewpoint, not simply a source of good informaion or anlysis. 

The goal is to get the herd moving the way that they want them to go.  What do our handlers want?

 

Michael_Rudmin's picture
Michael_Rudmin
Status: Platinum Member (Offline)
Joined: Jun 25 2014
Posts: 913
sP, I don't think that was what Mish said.

Mish said that when the news says "Commercial shorts gold," that what is really going on is that they, as market makers, are simply taking the other side of trades that people are making.

And then the commercials hedge their trades so that their short contracts won't cost them, if the price rises.

Now, I don't get his point. I don't see how the commercials, being short and reactive, can continually drive the price down; for if Mish is correct, then the more people go long, the more the price will fall.

So his position, as I understand it or fail to understand it, doesn't make sense to me.

But it didn't look to me like Mish was saying our handlers are driving the price down. It looked to me like he was saying this is a nonissue.

Nate's picture
Nate
Status: Platinum Member (Offline)
Joined: May 5 2009
Posts: 604
Erik Townshend (Macro Voices) with Armstrong

Erik Townsend and Patrick Ceresna welcome back Martin Armstrong to MacroVoices. Erik and Martin discuss:

  • Is there room for the equity bull market to continue?
  • Outlook on the global bond markets
  • Is a monetary crisis on the horizon?
  • Outlook for the U.S. Dollar
  • How do the geopolitics playout in Europe?
  • Short bonds long equities?
  • Perspectives on China and their credit markets
  • Where is gold headed next?
  • U.S. politics and the midterm elections
  • What is next for Russia/U.S. relations

https://www.macrovoices.com/podcasts/MacroVoices-2018-07-26-Martin-Armst...

 

bronsuchecki's picture
bronsuchecki
Status: Bronze Member (Offline)
Joined: Apr 22 2012
Posts: 77
Market makers
I think you're missing the "hedge their trades" part. When speculative longs enter the futures market and bid up the futures price, a market maker will take the other side and go short, then they borrow cash and buy physical or other gold in the spot market. The market maker is long physical, short futures, thereby neutral, but only their short position is visible to people looking at the futures market because the spot market is over the counter and not done on an exchange.
 
I would note that market makers, who are usually banks, as a bank/broker can also be acting on behalf of clients and may also take proprietary speculative positions themselves. The commercial category also includes gold using businesses, eg a jewelry manufacturer, who would be naturally short (as they have phyiscal inventory in their business that they are long). So it is hard to say how much of the commercial figure is true commercials, market making, or speculative.

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