PM Daily Market Commentary - 9/13/2018

By davefairtex on Fri, Sep 14, 2018 - 10:19am

Gold fell -5.34 [-0.44%] to 1208.39 on heavy volume, while silver fell -0.09 [-0.60%] to 14.20 on heavy volume also. The buck moved down -0.24%, but it did not seem to help the metals at all today.

While the ECB had a meeting – at which nothing happened - it was the CPI release that seemed to spike the metals higher today, at least for a time anyway. Government-reported inflation was 0.2% m/m, and 2.7% y/y, which is less than everyone expected.

On that note, I hope everyone reading this is really enjoying all the hedonic adjustments to all their products. Let's see, the latest iphone costs $1100. What's the impact of hedonic adjustments since the first iPhone release in 2008?

Below, find the link to the BLS CPI-U consumer “Telephone hardware, calculators, and other consumer information items” category, which includes smartphones. Note that the index has dropped from 37 in 2008 down to 19 today – a 49% drop due “hedonic adjustments” over 10 years. How much is the iPhone 10 again? Right, it's $1100, while the iPhone 3 in late 2007 was $400...that's a 300% increase in “actual price.”

This section is 0.08% of the total CPI. Does that make sense? With per capita GDP at $57.4k, that allocates $46 to this category per person per year. Let's say that on average people get a new phone every 2 years, so this should be $550 per person per year, rather than $46. That's off by a factor of 10.

So for many people, this category should be almost 1% of the CPI, not 0.08%. And if we base this on prices rather than hedonics, it rose at 300%, vs a reported drop of 49%, over the last 10 years.

Gold tried rallying today, but ran into resistance at or near the 50 MA; candle print was a long black candle,which was a bullish continuation. Forecaster dropped -0.12 to +0.36; gold remains in an uptrend on the daily, but it is in a downtrend in both the weekly and monthly timeframes. The next step for gold is a close above the previous high at 1222.

COMEX GC open interest rose +7,279 contracts, or 23 tons of paper gold.  I'm guessing the shorts stuffed the rally in gold today.

Rate rise chances (September 2018) fell to 95%.

Silver chopped sideways until 11:10, when it spiked higher on the trade negotiations news. Silver's candle print was also a bunch of bullish patterns (71% bullish reversal), which confirmed yesterday's bullish high wave.

Silver printed a dark cloud cover candle – but the code felt it was a bullish continuation, rather than a bearish pattern. Forecaster moved up +0.12 to +0.18. Silver remains in a downtrend in both the weekly and monthly timeframes. Next step for silver is a break above the downtrend line – perhaps 14.50. Likely that depends on what copper does.

COMEX SI open interest fell -254 contracts.  I can blame OI for gold - but not for silver.

The gold/silver ratio rose +0.16 to 85.04. That's a little bearish for today, and the current level for the ratio suggests PM could be at or near a long term low.

Miners opened up, rallied, and then sold off for the remainder of the day, with GDX off -0.11%, and GDXJ dropping -0.77%. XAU itself fell -0.50%; its long black candle was a bullish continuation, however, and XAU forecaster rose +0.21 to +0.22. Like silver, the next step for XAU is a close above the downtrend line. c XAU remains in a downtrend in the weekly and monthly timeframes.

The GDX:$GOLD ratio rose +0.33%, while the GDXJ:GDX ratio fell -0.66%. That's slightly bearish.

Platinum rose +0.34%, palladium moved up +0.78%, and copper fell -0.28%. It looks like copper was taking a rest after its large move higher yesterday.

The buck fell -0.25 [-0.26%] - but my view of the DX futures looked different, I'm not quite sure why.  Perhaps there's an error in my code somewhere, so my code's conclusions today won't be right.  Anyhow - the Euro rose sharply immediately after the US CPI numbers came out; the Euro was up +0.52% on the day.  For gold and silver to drop on a day with this large of a move in the Euro suggests some weakness in PM.

Crude plunged -1.43 [-2.04%] to 68.59, dropping hard for reasons I couldn't really identify. The candle print was 48% bearish – confirmed bear spinning top. Forecaster plunged -0.54 to +0.07, which is almost a sell signal for crude. Surprisingly, crude remains in an uptrend in all 3 timeframes.

SPX rose +15.26 [+0.53%] to 2904.18. This brings SPX to within 10 points of a breakout above the all time high set back in late August. Most of the gains happened in the futures markets overnight. The short white candle was a bullish continuation, and the forecaster moved up +0.14 to +0.10, which is a buy signal for SPX. SPX is back to an uptrend in all timeframes. Sector map shows sickcare leading (XLV:+1.24%) along with tech (XLK:+1.17%), while staples (XLP:-0.15%) and financials (XLF:-0.14%) brought up the rear. Call it a neutral sector map.

VIX fell -0.77 to 12.37.

TLT rose +0.17% today; there was lots of volatility and it looked a lot like a failed rally. TY actually fell, losing -0.08%. Candle print was a bearish continuation, and forecaster dipped -0.06 to -0.44. TY remains in a downtrend in both daily and weekly timeframes. The 10-year yield was unchanged at 2.96%.

JNK shot up +0.22%, another strong move, moving JNK closer to a breakout above its previous high. Uptrend for JNK is quite strong now. This aligns with the reasonably strong move higher in SPX.

CRB fell -1.01%, dropping back below both the 9 and 50 MA. 3 of 5 sectors fell, led by energy (-2.15%).

SPX looks as though it is about to break out to new highs - egged on by rising junk bond prices.  The metals may just be taking a rest; we will have to see how they fare in the next few days.  They might be waiting for some news from China on the tariff situation.

Oh, one more thing.  The Turkish central bank raised rates to 24% - that's an increase of 625 basis points, a truly massive move, and it exceeded market's expectations of what they would do.  It also surprised me.  Might this work?  It might.  It will also bring recession to Turkey, sure as the sun rises.  That's the reason it works.

And - related: also on Thursday, Erdogan appointed himself chairman of Turkey's Sovereign Wealth Fund.  You just can't make this stuff up!  I guess he figured that he did so well with Turkey's economy, he was also the right guy to be in charge of the sovereign wealth fund too.

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