PM Daily Market Commentary - 10/16/2018

davefairtex
By davefairtex on Wed, Oct 17, 2018 - 4:27am

Gold fell -2.42 [-0.20%] to 1231.78 on moderate volume, while silver dropped -0.03 [-0.20%] on moderate volume also. The buck edged down -0.01 today. Both gold and silver made new highs today, but fell back as a strong risk on mood sucked money into equities (SPX:+2.15%) and away from safe haven assets.

Gold made new highs today, but the rally faded as the US equity market rallied. The bearish harami candle was actually neutral, while gold forecaster was unchanged; it remains in a weak uptrend. I think gold actually did fairly well under the circumstances. Gold remains in an uptrend in both the daily and weekly timeframes. Gold/Euros is in an uptrend in all 3 timeframes.

COMEX GC open interest fell -4,723 contracts.

Rate rise chances (December 2018) fell to 77%.

Silver tried to rally also, making a new high to 14.88 at around 8:30 am, before falling back along with gold into the close. Silver's bearish high wave was just mildly bearish (35% reversal), but silver's forecaster didn't like the day's move, falling -0.48 to +0.01, which is right on the edge of a sell signal for silver. The forecaster believes silver's upside momentum has entirely stopped. Silver remains in an uptrend in both the daily and weekly, but is right on the edge of a reversal in both timeframes.

COMEX SI open interest rose 299 contracts.

The gold/silver ratio moved up +0.01 to 83.57. That's neutral. The current level for the ratio suggests PM could be at or near a long term low.

Miners rallied briefly at the open, sold off during the day, but rallied into the close. GDX fell -0.35% on moderately heavy volume, while GDXJ moved down -0.17% on moderately light volume. XAU dropped -0.50%, printing a mildly disagreeable dark cloud cover candle (37% bearish reversal), while forecaster plunged -0.28 to +0.52. Momentum is slowing, but the miners remain in an uptrend in the daily and weekly timeframes. The monthly lost its buy signal today.

The GDX:$GOLD ratio moved down -0.15%, while the GDXJ:GDX ratio moved up +0.18%. That's neutral.

Platinum fell -0.14%, palladium dropped -0.47%, and copper moved up +0.14%. There wasn't much movement today in the other metals today.

The buck was almost unchanged, moving down -0.01 [-0.01%] to 94.59. The trading range was fairly large, with the buck making a new low to 94.31 before bouncing back. The doji candle was a bearish continuation, and forecaster fell -0.22 to -0.35, moving the buck deeper into downtrend – but only on the daily. The buck remains in an uptrend in both the weekly and monthly timeframes.

Crude rose +0.48 [+0.67%] to 71.99. Most of the gain came after market close, driven up 40 cents by a surprisingly bullish API report (crude: -2.1m, gasoline: -3.4m, distillates: -0.2m). Today's spinning top candle was unrated, while the forecaster jumped +0.28 to 0.21, which is a buy signal for crude. Crude is back in an uptrend in all 3 timeframes.

Nick Cunningham at oilprice.com wrote a piece telling us that US "shale's glory days are numbered.” We already know this here, but he cites articles from Wood Mackenzie and Goldman Sachs which attempt to quantify some important issues in shale. Surprisingly high decline rates in the Permian, as well as “5 signals to watch” for when shale “starts to become a less meaningful driver of global oil supply.” They didn't want to use the words “peak shale”, I guess, but that's exactly what they are talking about: 5 signposts for Peak Shale.  https://oilprice.com/Energy/Crude-Oil/US-Shales-Glory-Days-Are-Numbered.html

Dave's reductive summary for busy executives: shale peaks in 2020.  At least if I read between the lines. You probably want to be out of shale producers before that becomes apparent to the market in general.

SPX rallied +59.13 [+2.15%] to 2809.92. The market rallied 20 points in the futures markets overnight, and then just kept on going once the market opened, closing right near the highs. The opening white marubozu was a bullish continuation, forecaster jumped a massive +1.24 to +0.25, which is a buy signal for SPX. SPX is now back above its 200 MA. SPX is now in an uptrend in both the daily and monthly timeframes – it remains in a downtrend on the weekly.

Tech led today (XLK:+3.01%) along with sickcare (XLV:+2.74%), while energy did worst (XLE:+0.83%). That's a relatively bullish sector map.  Supposedly NFLX had good earnings.  Blockbuster earnings.  How good?  Well, they were really good.  $0.89 per share, x 4 = $3.60 EPS annualized.  Ok, so the share price is $346, which makes the P/E ratio 96.  And that's not including the $50 that NFLX added after market close on the fantastic earnings report.  Then the P/E would be 112.  The real punchline?  NFLX market cap is $150 billion.  It totally reminds me of CSCO during dotcom.

VIX plunged -3.68 to 17.62.

TLT moved up +0.23%, managing to rise in spite of a very strong equity market. TY didn't look as good, falling -0.07%. TY is slowly edging lower; the daily remains in an uptrend, but not by much. TY remains in a downtrend in bot the weekly and monthly timeframes. The 10-year yield fell -0.7 bp to 3.16%.

JNK shot up +0.42%, with half of the move coming as a gap up at the open. Forecaster jumped +0.69 to +0.60, which is a buy signal for JNK. JNK's fall yesterday tricked me into thinking we would probably see more selling in equities; that didn't turn out so well.  Currently JNK is signaling risk on.

CRB moved up +0.01%, basically unchanged on the day. Only 2 of 5 sectors rose, led by energy (+0.45%).

The strong rally in the equity market sucked money out of the metals – traders appeared to be chasing the latest buy-the-dip move. Goldman and Morgan Stanley reported earnings which were supposedly positive, and that helped sentiment at the open. It was a bit surprising that long bonds managed to move higher in the face of the strong equity market rally.

Gold's rally seems as though it might have run out of steam.  It hasn't tipped over yet, but it may well do so if the rally continues for equities.

Part of the "problem" for the bear case in equities: there is not even a hint of recession on the horizon.  While the Fed continues to raise rates (and the FOMC minutes come out tomorrow - which can often move the markets if they contain something surprising), so far it has not impacted the economy.

Housing is definitely starting to tip over, but so far at least, no impact on the broader economy.

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1 Comment

Eannao's picture
Eannao
Status: Silver Member (Offline)
Joined: Feb 28 2015
Posts: 164
TLDR

Dave's reductive summaries much appreciated!

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