PM Daily Market Commentary - 8/22/2018

davefairtex
By davefairtex on Thu, Aug 23, 2018 - 3:40am

Gold fell -0.49 [-0.04%] to 1203.40 on moderate volume, while silver dropped -0.03 [-0.17%] to 14.74 on extremely heavy volume. The buck lost just -0.12%; it was not much of a factor in today's moves, which admittedly weren't that dramatic.

Gold made a new high during the London session to 1208.40, but couldn't hang on to the gains. The northern doji was a bullish continuation, and forecaster moved up +0.10 to +0.56, which is a strong uptrend. To me the chart doesn't look all that great, but what do I know? Gold remains above its 9 MA, but not by very much, and is in a downtrend in weekly and monthly timeframes. Once again, for gold to fall along with the buck means that gold is not doing well at all.

COMEX GC open interest rose 3,376 contracts.

Rate rise chances (September 2018) rose to 96%. The FOMC minutes from last meeting were released today: it said that a trade war was the largest threat to a “strong” economy, and that it would soon be appropriate to take another step in removing policy accomodation - i.e. the September rate hike is still on. At the same time, many participants gave hints that the time was rapidly approaching when they will consider rates to be no longer accomodative. What does that mean? The futures markets currently projects 2 more hikes - September, and then December - with a chance of a third in 2019.  I'd guess just two more.

Silver made a new high along with gold, to 14.88, but it too wasn't able to retain the gains. Silver's high wave candle was a bullish continuation, but forecaster fell -0.12 to -0.06, which is a sell signal for silver. Silver has been unable to move above the 9 MA, and is now back in a downtrend in all 3 timeframes.

COMEX SI open interest rose +5,756 contracts. That's yet another large increase in open interest. Shorts appear responsible for keeping silver from moving higher.

The gold/silver ratio rose +0.11 to 81.64. That's somewhat bearish.

Miners moved up just a bit, with GDX rising +0.74% on moderately light volume, while GDXJ rose +0.18% on light volume. XAU did better, up +0.96%; the XAU forecaster climbed +0.07 to +0.33, which is a reasonably strong uptrend. To me the miners appear to be struggling to move higher; it has taken 4 days and the miners have only risen about 5% off the lows. XAU lost that much in a day during the recent downtrend. It all appears to be a dead cat bounce. XAU remains in a downtrend in weekly and monthly timeframes, and is still below the 9 MA.

The GDXJ:GDX ratio fell -0.56%, while the GDX:$GOLD ratio climbed +0.78%. That's mildly bullish.

Platinum moved down -0.20%, palladium shot up +1.63%, while copper dropped -0.71%. Apart from palladium which had a great day, the other metals look to be weakening a bit. Even though copper saw some short covering (the OI dropped -5,668 contracts) and the short black candle looked a bit bearish (33% bearish reversal). Platinum also looked as though it might be running out of gas. Forecasters of both items fell, but remain in an uptrend, at least for now.

The buck fell -0.11 [-0.12%] to 94.75. It looks as though Trump's legal issues weren't enough to keep moving the buck lower; there is so much going on in the rest of the world. The high wave candle was somewhat bullish (32% bullish reversal) and forecaster ticked up +0.04 to -0.56, which is still a strong downtrend. The buck managed to close just above its 50 MA.

Crude shot up +2.04 [+3.10%] to 67.86. Much of the day's gain came seemingly in anticipation of a decent EIA report, which didn't disappoint: (crude: -5.8m, gasoline: +1.2m, distillates: +1.8m). Crude continued to move higher following the report. Today's rally took crude above both the 9 and 50 MA lines, and crude forecaster shot up +0.32 to +0.67, which is a fairly strong uptrend. This was enough to toss crude back into an uptrend in both the weekly and monthly timeframes – with a buy signal on the weekly assuming prices close here. Crude's correction may be over.

In other news, Saudi Arabia has officially decided to call off the Aramco IPO. Apparently, the decision to bail on the IPO was made long ago, but for some reason they decided to only release the news today.

SPX fell -1.14 [-0.04%] to 2861.82. SPX had plunged overnight in the futures markets, but managed to rally back most of the way prior to the open, only to chop sideways for most of the day. The doji candle was neutral, while SPX forecaster fell -0.12 to +0.48, which is still an uptrend. SPX remains above its 9 MA, and in an uptrend in all 3 timeframes. Sector map has energy doing best (XLE:+1.20%) while industrials did worst (XLI:-0.97%). Sector map today was neutral. I have heard people say “we are running out of August”, meaning that September – a typically bad month for equities – approaches rapidly. With the equity market at an all time high...is this the time to close out all your equity long positions? I have no opinion. My stuff is still all pointing skyward.  For now.

VIX fell -0.61 to 12.25.

TLT rose +0.40%, making a new high; US treasury bonds continue to attract capital right now, even though the buck is moving lower. TY rose +0.05%, also making a new high today. TY remains in an uptrend in all 3 timeframes. The 10-year yield dropped -2.1 bp to 2.82%.  We continue to move farther from the 3.0% level.  A friend of mine pointed out that the number of US Treasury bond shorts is the highest in history.  This suggests bonds could rally very sharply during any sort of flight to safety as the shorts scramble to cover.  I would not be short US treasury bonds right now.

JNK rose +0.03%, also making a new high; it looks a bit feeble given the very strong move in energy today, but the JNK rally has not yet run out of steam.

CRB rose +0.58%, with 3 of 5 sectors rising, led by energy (+2.66%). That was all about oil. Still, the commodity complex remains mired in a longer term downtrend; a death cross (50 dropping below 200) happened about a week ago, and CRB itself remains well below both the 50 and 200 moving averages.

The "other metals" rally appears to be running out of steam.  Its hard to know exactly why, but the move does seem as though the momentum is beginning to peter out.  That stands in stark contrast to what is happening with crude, which came back strongly today as it became clear that last week's inventory build wasn't a new trend.

As I write this, copper is leading the metals group lower in Asia trading, with platinum close behind.  We may well re-test the lows.  The lack of a positive move from the metals during the dollar's recent, brisk plunge was probably the tell.

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