PM Daily Market Commentary - 10/11/2018

davefairtex
By davefairtex on Fri, Oct 12, 2018 - 2:59am

Gold shot up +30.21 [+2.51%] to 1231.90 on extremely heavy volume, while silver rose +0.29 [+2.06%] to 14.61 on very heavy volume. The buck fell -0.49%, which contributed to the metals rally, but today's move was all about money fleeing risk assets for the safety of gold and US treasury bonds. SPX plunged -2.06%, crude dropped -2.25%, and TLT rose +1.22%. It was a mostly-classic safe haven day.

Contributing to the gold rally was the CPI report that came out at 8:30 am, which showed that government-measured inflation came in at the very low end of expectations: headline was 2.3% y/y, 0.1% m/m, and "core" 2.2% y/y.  This release helped gold, since theoretically a low inflation rating means less of a reason for the Fed to continue raising rates.

Gold chopped sideways in Asia, then at 3:05 am it took off, rallying steadily throughout the day, with the high at 2 pm. Candle print was a strong line/confirmed bullish NR7, which was a 74% bullish reversal. That's as highly rated as it gets. Forecaster shot up +0.97 to +0.82, which is a buy signal for gold. Gold is now above both the 9 and 50 MA lines. Gold weekly also issued a buy signal because of today's move, moving gold into an uptrend in both daily and weekly timeframes. Gold/Euros is in an uptrend in all 3 timeframes.

COMEX GC open interest rose 27,691 contracts, or 86 tons of paper gold. Holy crap, the shorts are really loading up. That – or this was official intervention designed to keep gold from moving even more rapidly higher. As a point of reference, the OI increase on the day of BRExit was 50,000 contracts.  And consider this: if managed money covered today, which they normally would on a move of this size, this would result in declining OI.  That suggests the size of the official intervention was even larger.

Rate rise chances (December 2018) rose to 78%.

Silver followed gold, jumping higher at 3:15 am, moving higher in fits and starts, topping out at 14.65 just after noon. Silver's candle print was a swing low (64% bullish), and forecaster jumped +0.59 to +0.53, which is a buy signal for silver. Unlike gold, silver did not manage to break out of its recent trading zone, and the rally stopped right at the 50 MA. Today's move erased the weekly sell signal; silver is now in an uptrend in both the daily and weekly timeframes.

COMEX SI open interest rose 1,100 contracts.

The gold/silver ratio climbed +0.41 to 84.03. That's bearish – it suggests today's move was a safe haven move rather than a more typical PM bull market. Still, the current level for the ratio suggests PM could be at or near a long term low.

Miners staged a huge rally today, with GDX up +6.66% on extremely heavy volume, while GDXJ climbed +6.46% on extremely heavy volume also. XAU rose +6.81%. The miners gapped up at the open, and rallied all day long, closing near the highs. XAU candle print was a swing low (49% bullish), forecaster jumped +0.74 to +0.79, which is a strong uptrend. On the chart, you can see that XAU broke out of its recent trading range, closing above the previous high set back in September. That's bullish. XAU is also back above the 50 MA for the first time since June. XAU is now in an uptrend in all 3 timeframes.

The GDX:$GOLD ratio rose +4.04%, while the GDXJ:GDX ratio dropped -0.18%. That's very bullish.

Platinum climbed +2.09%, palladium rose +1.16%, and copper moved up +0.71%. Gold outperformed all the other metals, which underscores the “safe haven” nature of today's move.

The buck fell -0.47 [-0.49%] to 94.58. The long black candle was a bearish continuation, and the move took the buck back below its 50 MA. Forecaster dropped -0.21 to -0.31, which tells us the pace of the downtrend is increasing. The buck remains in a downtrend in both the daily and weekly timeframes. Money is starting to flee US assets.

Crude fell -1.63 [-2.25%] to 70.81. Crude was already down a buck at the time of the EIA report; it was slightly less bearish than yesterday's API report (crude: +6m, gasoline: +1m, distillates: -2.7m), but the bounce lasted less than 30 minutes, after which crude continued to plunge. The opening black marubozu was a bearish continuation, forecaster dropped -0.59 to -0.68, which is a strong downtrend. That said, crude remains above its 50 MA, and in an uptrend in both the weekly and monthly timeframes. This is still only a daily correction for oil – the longer term trend remains intact.

SPX fell -57.31 [-2.06%] to 2728.37. SPX tried to rally early, failed, and then the real selling pressure occurred in the afternoon, pushing SPX down more than 70 points. SPX managed to bounce back somewhat by the close, but the long black candle was a bearish continuation. SPX ended the day well below the 200 MA. Forecaster dropped -0.17 to -1.16, which is a very strong downtrend. Today's move caused the monthly forecaster to issue a sell signal: SPX is now in a downtrend in all 3 timeframes, assuming we close here by end of month. Monthly candle patterns are extremely bearish – but again, that assumes we close here at end of month. Daily RSI-7 for SPX is 6; it is extremely oversold.

What does "extremely oversold" mean?  Since 1962, over 14,287 trading days, SPX has only been this oversold 5 other times in history: 1962, 1966, 1987, and twice in 1970.  It doesn't happen very often.  I interpret this to mean that a bounce is probably coming up in the very near future.  The few, excited shorts are going to be ringing the cash register with real enthusiasm.

Sector map has energy leading lower (XLE:-3.38%) along with financials (XLF:-2.98%), while the new communications sector (XLC:-0.85%) did best. This was a relatively bearish sector map.

VIX jumped +2.02 to 24.98. I wouldn't be buying puts right now; they're pretty expensive.

TLT rallied +1.22%, finally managing to attract money after some pretty poor performance during the recent move down by SPX. TY didn't do as well, moving up just +0.05%. The 10-year yield fell a dramatic -9.2 bp to 3.13%. Now there's a safe haven move for you.  Finally.  I suspect someone out there is selling a whole lot of longer-dated treasury bond, perhaps even a central bank or two, concerned about the breakout above 3.12% last week.

JNK rallied +0.26%, with all of its gains coming from a gap up open. Perhaps yesterday's selling was overdone. JNK's spinning top candle was unrated (it was an inside day), but forecaster jumped up +0.71 to -0.37, which is a big improvement. That suggests JNK's downtrend could be nearing an end. Is this a tell for equities? Certainly by rallying today, JNK is diverging from SPX.  If JNK is a leading indicator, this suggests we might see a bounce tomorrow in risk assets.

CRB fell -0.75%, with 3 of 5 sectors dropping, led by energy (-3.13%).

So the star of the show today was gold. In spite of 86 tons of paper-gold selling pressure from “someone”, gold shot up $30, breaking clean out of its recent trading range, on massive volume.  Silver was the poor stepchild, but it managed to do well also, along with platinum.

We also saw a very strong move by the US 10-year treasury, which plunged 9 basis points – given the drop in the buck, that's probably domestic money fleeing equities for debt.

However there are hints of good news; our coalmine canary – JNK – is showing signs of waking up. Eyelids are fluttering, there might be life in the old bird yet.  We could see a low tomorrow in SPX.

What then for gold?  If SPX bounces, that might cap gold's gains, but SPX is not out of the woods yet.  Unless the bounce turns into a meaningful rally, there has been a fair amount of technical damage done to the uptrend.   We will have to see how it plays out.  The market is quite sensitive to bad news right now; more revelations about Chinese chip-infections, bad economic news, political instability, could all push equity prices lower still.  While the RSI-7 is quite low, I believe it is a news-driven market more than anything else.

And here's a bit of good news - possibly encouraged by the market correction - Trump and Xi are going to meet during the G-20 meeting coming up next month, encouraged by Kudlow and Mnuchin.  (If you didn't like today's -2.06% drop in SPX, then you REALLY didn't like the -5.22% drop in the Chinese SSEC, which is a 4-year low, and a 28% drop from the high set in 2018).   https://www.marketwatch.com/story/trump-plans-to-meet-chinas-xi-as-trade-tensions-rise-2018-10-11

The formerly-sleepy gold market is now wide awake.  The tell for today's big move?  XAU's forecaster buy signal yesterday.  I have no idea how it sniffed out the move, but it managed to do just that.

In spite of what I believe to be very strong official intervention, the market is telling us that gold remains the safe haven.  Not bitcoin - which dropped 5% yesterday.  Gold.

Of course if calm returns, then gold will probably go right back to sleep.  That's just how things go.  Gold is not a speculation, it is an insurance policy.  If you don't have a fire, a flood, or...a hurricane, then you don't need insurance.

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7 Comments

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5686
alternative viewpoint on John McCain

Although SCMP is quickly turning into the Mouthpiece of Beijing, there was an alternative viewpoint on John McCain posted there today as an op-ed.  Was he a war hero?  Not so much, according to the editor.

https://www.scmp.com/news/hong-kong/article/2162347/john-mccain-was-chronic-warmonger-not-war-hero?gclid=EAIaIQobChMIsbDfufPM3QIVpLqzCh2DagJoEAEYASAAEgIblfD_BwE

 

phusg's picture
phusg
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Posts: 58
Armstrong on McCain

https://www.armstrongeconomics.com/armstrongeconomics101/opinion/john-mc...

No idea if this is true:

John McCain, when a Lieutenant Commander in the U.S. Navy as a Navy pilot, played a hog-dog maneuver on July 29, 1967, that killed 134 sailors. McCain while on the deck of the carrier U.S.S. Forrestal, pulled a trick by doing a “wet start” up of his jet to show off. This created a large startling flame and sudden shocking noise from the rear of a jet engine. He also seems to have apparently armed a weapon that resulted in launching a powerful Zuni rocket across the carrier’s deck hitting other parked planes. The subsequent massive explosions, fire, and destruction went several decks below and nearly sunk this U.S. aircraft carrier. This stunt resulted in the deaths of 134 sailors and seriously injured another 161 sailors blinding some. They do not see John McCain as a hero by any manipulation of the past.

Any other Navy pilot causing this type of death and destruction on his own ship would have been grounded and charged and sent to prison for decades. Not McCain. For you see, his grandfather was a famous Four Star Admiral and his father was at the time a Navy Four Star Admiral. McCain was simply transferred and everything was covered-up. What is alleged to have happened thereafter is on that mission in Vietnam, McCain was so disliked by other pilots for what he did and his privileged status, they deliberately left him out to get shot down pulling away to leave him flying alone as an easy target. That is the real alleged story of his capture.

Wendal's picture
Wendal
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Posts: 32
McCain & the U.S.S. Forrestal

Snopes has a succinct rebuke of this long standing fake news story...

https://www.snopes.com/fact-check/john-mccain-fire-uss-forrestal/

However, McCain's behaviour would seem to have been less than stellar, if one is to believe this lengthier account...

https://www.truthdig.com/articles/investigating-john-mccains-tragedy-at-...

For a broader assessment of his time in the military, this story presumes to be a "truthier" account, as told by people who served with him...

https://www.rollingstone.com/politics/politics-news/john-mccain-make-bel...

Doug's picture
Doug
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Posts: 3200
Wikipedia account

According to this account, McCain's plane and that of Lt. Cmdr. Fred White were parked side by side on the opposite side of the flight deck from the plane from which the Zuni rocket was accidentally fired.  It doesn't seem to be clear whether White's or McCain's plane was directly hit.  White died in the conflagration.  There were apparently also problems with bombs that should not have even been on board.  They were left over from Korea and defective.

https://en.wikipedia.org/wiki/1967_USS_Forrestal_fire

I was in the Navy at the time.  The Forrestal fire quickly became known as the forest fire.  Too much time on our hands.

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Time2help
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Posts: 2888
The USS Forest Fire

Since Snopes, Wikipedia AND Doug all agree this is a fake news story...probably time to do a bit of research on the topic. There's probably something to it.

John McCain's father (Admiral John S. McCain Jr.) was apparently a key player in the cover up of the Israeli attack on the U.S.S. Liberty (AGTR-5). Might want to double check that one with Snopes as well.

The Israeli Attack on the USS Liberty (Paul Craig Roberts)

Quote:

"The Israelis claim the Liberty flew no flag, but two US flags full of holes from the attack exist. When the first flag was shot down, crewmen replaced it with a flag 7 feet by 13 feet. This flag with its battle scars is on display at NSA headquarters at Ft. Mead, Maryland.

Admiral John S. McCain Jr., the father of the current US senator, ordered Admiral Isaac C. Kidd and Captain Ward Boston to hold a court of inquiry and to complete the investigation in only one week. In a signed affidavit Captain Boston said President Johnson ordered a cover-up and that he and Admiral Kidd were prevented from doing a real investigation. Liberty survivors were ordered never to speak to anyone about the event. Their silence was finally broken 12 years later when Lt. Commander James M. Ennes published his book, Assault on the Liberty.

It is now established fact that the attack on the Liberty was intentional and was covered up by President Johnson and every administration since. There has never been a congressional investigation, nor has the testimony of the majority of survivors ever been officially taken. Moreover, testimony that conflicted with the cover-up was deleted from the official record."

 

 

phusg's picture
phusg
Status: Bronze Member (Offline)
Joined: Jul 16 2014
Posts: 58
Thanks

Thanks for the alternative alternative facts! (seriously)

My take home message is that McCain was definitely no choirboy, no doubt also engaged in these wet starts and that might have been what accidentally triggered the fire. As this was something other pilots also did I don't think it's fair to blame the whole thing on him, even if his wet start was the trigger.

More broadly he does sound like he was a priveledged jerk and so the last part of Armstrongs interpretation rings somewhat true to me, "they deliberately left him out to get shot down pulling away to leave him flying alone as an easy target. That is the real alleged story of his capture."

My other take home message is that I need to be more wary of Armstrongs judgements on political issues. Considering what happened to him (whether he was imprisoned fairly or not) I guess it's to be expected for him to be emotional in some of his judgements. Looking back I should have doubted his judgement earlier when I failed to register that Armstrong considers climate change science to be some conspiracy to rob us of our freedom (not to say there aren't climate science abusers). The evidence for human induced global warming (above any natural variation) is thousands of times stronger than for any account of what happened on the USS Forrestal in 1967.

Wendal's picture
Wendal
Status: Bronze Member (Offline)
Joined: Nov 23 2013
Posts: 32
Armstrong credibilty

In my opinion, you would be well advised to be wary of Armstrong's judgements - regarding anything.

For the record, I gather his original text regarding McCain had a typo and "hog dog" should likely be "hot dog".

As for his description of McCain being shot down: "they deliberately left him out to get shot down pulling away to leave him flying alone as an easy target." - that's a new one to me and I'm afraid I find that a little hard to believe.

Granted, my expertise in such matters pretty much consists of watching reruns of "Top Gun" on late night cable TV. But it seems unlikely to me that his fellow aviators would behave in such a manner for numerous reasons - treason being not the least of them. Which is not to say that "fragging" and such didn't take place. But I would think there's a big difference between being out in some tropical jungle, unmonitored, and flying around in the sky over Hanoi where both NV and US radars are tracking your every move.

I certainly don't know for sure how many A4's would typically be involved in such a bombing run, but I suspect it's not many - so I doubt the actions of other aircraft would have had much, if anything, to do with him being targeted and hit with NV anti-aircraft fire.

With regards to Armstrong's credibility overall, I confess to always having been skeptical of him. And postings like this certainly don't enhace his standing in my eyes...

https://www.armstrongeconomics.com/uncategorized/self-aware-artificial-i...

As a retired computer programmer with over 30 years experience, I must say it seems a bit implausible to me that a single, "self-taught" individual could build his own "HAL 9000" in his basement or wherever. (BTW, I assume everyone knows by now the "inside joke" about that name, viz each of the subsequent letters).

I can only hope, as does the poster on this page where I found the reference, that this is indeed all sarcastic tongue-in-cheek...

https://boards.straightdope.com/sdmb/showthread.php?t=694414

Again, based on my computer background (and simple common sense), it strikes me as unlikely that someone could construct a unbelievably prescient computer model that predicts world and economic events based primarily on the value of "pi". Or more precisely, a cycle of pi x 1000, or 3,141 days, as described in this Wiki entry...

https://en.wikipedia.org/wiki/Martin_A._Armstrong

If only life were that simple.

But who knows - maybe he is some kind of eccentric genius? After all, Einstein's math teacher apparently told him he'd never amount to anything.

But then again, I always wonder why any such "financial genius" spends his time writing blogs, giving interviews and selling lectures and books, when presumably all he has to do is keep his mouth shut and let the big bucks roll in from his ingenious methodology?

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