PM Weekly Market Commentary - 11/2/2018

davefairtex
By davefairtex on Sun, Nov 4, 2018 - 9:56am

On Friday, gold fell -0.34 [-0.03%] to 1239.53 on heavy volume, while silver fell -0.01 [-0.03%] to 14.71 on extremely heavy volume. The buck rose +0.26%, which more than accounts for the slight decline in the metals. Copper (+3.64%) and the other metals were the big winners on Friday; equities slid (-0.63%) after another wide trading-range day, while bonds were hammered (TLT:-1.24%).

The weekly metals sector map moved from “safe haven” mode into “tariff relief” mode; platinum led, along with the "other" metals, with silver and gold largely bringing up the rear. Senior miners did a lot better than the juniors; the lagging juniors tells us that we aren't seeing the start of a new PM bull move. Still, almost all elements are back above both the 9 and 50 MA lines, which is good news.

Name Chart Chg (W) 52w ch MA9 MA50 MA200 50/200 Last Crossing last
Platinum $PLAT 4.34% -5.94% rising rising falling rising ema9 on 2018-10-26 2018-11-02
Senior Miners GDX 2.99% -13.06% falling rising falling rising ema9 on 2018-11-01 2018-11-02
Copper $COPPER 2.53% -10.20% rising rising falling rising ema9 on 2018-11-02 2018-11-02
Palladium $PALL 1.18% 10.94% falling rising rising rising ema9 on 2018-11-02 2018-11-02
Silver Miners SIL 0.84% -24.35% falling falling falling rising ema9 on 2018-11-02 2018-11-02
Silver $SILVER 0.27% -13.87% rising rising falling rising ema9 on 2018-11-01 2018-11-02
Gold $GOLD -0.06% -3.31% rising rising falling rising ema9 on 2018-11-01 2018-11-02
Gold/Euro $GOLD:$XEU -0.18% -0.72% rising rising falling rising ema9 on 2018-11-01 2018-11-02
Junior Miners GDXJ -0.53% -13.45% falling rising falling rising ma50 on 2018-11-01 2018-11-02

Gold fell -0.75 [-0.06%] this week; effectively unchanged. Over the week, gold plunged during the first half of the week, then came back strongly on Thursday, driven higher by a brisk move lower in the buck and the prospect of some movement in the US-China tariff situation (i.e. a positive tweet from Trump). The weekly doji candle was a bullish continuation, while weekly forecaster dipped -0.12 to +0.16. Gold remains in an uptrend in the daily and weekly timeframes, is above both the 9 and 50 MA lines, and the (November) monthly is quite close to issuing a buy signal. Gold/Euros issued a sell signal on the daily, and remains in an uptrend on the weekly and monthly timeframes.

The December rate-increase chances rose to 74%.

COMEX GC open interest rose 2,969 this week.

COT report shows the commercial net position rose +15k contracts, with 13k fewer shorts, and 2k new longs. It looks like the commercials rang the cash register on the dip this week. Managed money net plunged -17k contracts, with 19k longs sold, as well as 1.8k shorts covered. It feels like some managed money longs sold the top early in the week. These were relatively small changes; overall positioning remains bullish, and it is slightly more so now.

Silver rose +0.04 [+0.27%] on the week; silver had a semi-alarming sell off for the first part of the week, but Thursday's strong rally made it all back and a little bit more. Silver's weekly northern doji candle print was a bullish continuation; silver is in an uptrend in all 3 timeframes. To me it looks as though silver has just been chopping sideways for the past 5 weeks, but the forecasters appear more optimistic than that.

COMEX SI open interest rose +5,908 contracts this week.

COT report shows commercial net rose +3.5k contracts, all new longs (5.8k) with some new shorts (2.3k) also. Managed money net fell -4.2k contracts, almost all new shorts (3.9k) with 224 longs sold. These were minor changes.

Miners looked stronger than the metals; they managed to resist the selling pressure in the first half of the week, and then shot higher on Thursday along with everything else. XAU rose +3.10% on the week; the weekly bullish harami candle print might be a low (40%), but XAU forecaster fell -0.08 to -0.24, which remains a downtrend. While XAU remains in a downtrend in the daily and weekly timeframes, the new (November) monthly issued a buy signal following this week's rally.

GDX:$GOLD rose +3.05%, while the GDXJ:GDX ratio fell -3.42%. It is an odd outcome; I think some amount of that is because the miners are bouncing back from last week's sell-off. Let's call it neutral.

USD

The buck rose +0.16 [+0.17%] to 96.07. The buck was moving steadily higher, making new multi-year highs right up until Thursday, when it sold off really hard, resulting in a forecaster sell signal on the daily chart. Friday's rally was enough to pull the buck back into positive territory for the week. The weekly candle print was a doji star/northern doji, which was a bullish continuation. The buck remains in an uptrend in both the weekly and monthly timeframes, in spite of the sell-off on Thursday, however it did end the week below the 9 MA.

The buck rose against the Euro (+0.30%), fell against the Pound (-1.09%), and rose against the Yen (+1.39%). We also saw the AUD rally (+1.52%) which is often a risk-on signal. That move happened on Thursday. The buck fell against CNY (-0.75%), with CNY dropping down to 6.89 – well below the line-o-death at 7. Thank Trump's tweet for both the CNY and the AUD rallies.

US Equities/SPX

SPX rose +64.37 [+2.42%] to 2723.06. After making a new low on Monday, by Wednesday SPX was back above the 9 MA (and daily forecaster issued a buy signal), Friday's down day didn't really dent the optimism very much – at least not on the daily chart. The weekly bullish harami print (60% reversal) looks promising, but the weekly forecaster remains largely unimpressed, up +0.17 to -0.43. The new November monthly is currently showing a buy signal, although the month is still very new. That puts SPX in an uptrend on both the daily & monthly timeframes – I'm not sure how much stock I would put in that monthly buy signal, however.

The sector map shows homebuilders (+7.27%) and telecom in the lead, while utilities and REITs brought up the rear. What's the deal with the homebuilder rally? They took off on Tuesday right at the open – for no reason I could see – and rallied very strongly thereafter. The sector map was mixed; call it mildly bullish. Tech didn't do so well, and that's not so good.  Mostly you can see that the sector map is largely red - although longer term, most items remain in "golden cross"/long term uptrend mode.

Name Chart Chg (W) 52w ch MA9 MA50 MA200 50/200 Last Crossing last
Homebuilders XHB 7.27% -13.51% rising falling falling falling ema9 on 2018-10-30 2018-11-02
Telecom XTL 6.55% 8.94% rising falling rising falling ma200 on 2018-11-02 2018-11-02
Materials XLB 6.10% -8.32% rising falling falling falling ema9 on 2018-10-30 2018-11-02
Financials XLF 4.43% -1.90% rising falling falling falling ema9 on 2018-10-30 2018-11-02
Cons Discretionary XLY 4.41% 18.22% rising falling rising falling ema9 on 2018-10-31 2018-11-02
Gold Miners GDX 2.99% -13.06% falling rising falling rising ema9 on 2018-11-01 2018-11-02
Industrials XLI 2.74% -1.27% falling falling falling falling ema9 on 2018-11-01 2018-11-02
Cons Staples XLP 2.38% 3.73% rising rising falling rising ema9 on 2018-10-29 2018-11-02
Healthcare XLV 2.10% 10.28% falling falling rising falling ema9 on 2018-11-01 2018-11-02
Defense ITA 2.05% 6.90% falling falling falling falling ema9 on 2018-11-01 2018-11-02
Energy XLE 1.62% -1.34% falling falling falling falling ema9 on 2018-11-01 2018-11-02
Technology XLK 0.95% 9.13% falling falling rising falling ma200 on 2018-11-02 2018-11-02
REIT RWR 0.10% -2.78% rising falling rising falling ema9 on 2018-11-02 2018-11-02
Utilities XLU -0.41% -3.38% falling falling rising falling ma50 on 2018-11-01 2018-11-02

Globally, the US was the second-worst performer again this week, with emerging Asia on top.

VIX fell -4.65 to 19.51.

Gold in Other Currencies

Gold fell in most of the major currencies, only rising in JPY.

Rates & Commodities

TLT fell every day this week, dropping -2.60%, making a new multi-year low dating back to 2014. TY looked pretty unhappy too (-0.85%) although it avoided making a new low. Much of the losses came on Friday. While the weekly remains in an uptrend – for some reason – both the daily and monthly forecasters are pointing lower. The 10-year yield jumped +13.7 bp to 3.21%. That 10-year yield looks ready to break out once more. About half of the increase in yield happened on Friday.

JNK rose +0.14%, a small move given the large rise in equity prices. Mostly, JNK is chopping sideways near the lows. While the forecaster issued a buy signal on Wednesday and remains in an uptrend, looking at JNK's performance in the context of the reasonably strong move higher in equities, JNK's modest gain doesn't look all that positive. I guess it beats the large plunge in the US treasury market, however. Perhaps that's the reason why JNK seems so stagnant.

Crude had a terrible week, plunging -4.76 [-7.03%] to 62.97. Crude fell 4 days out of 5, making a new low on Friday, breaking through two different support levels, and really showing no signs of stopping. It has been just a straight line down for crude over the past four weeks. Crude's RSI-7 is at 17, which is fairly oversold. Crude is in a downtrend in all 3 timeframes.

Part of the problem this week was yet another inventory build (crude: +3.2m, gasoline: -3.2m, distillates: -4.1m), but in truth much of the inventory build has to do with US refineries going offline for annual maintenance. That is also why gasoline and distillate stocks are falling. Perhaps the EIA report showing an all-time high for US oil production (+416 kbpd in August alone, +2.1 mbpd since August 2017) is a larger contributor to the plunge in prices. The increase caused the US to become the world's largest oil producer, slightly above Russia. This news just came out this week – I'm guessing that the insiders knew about this situation last month, and that's why oil prices have taken a straight line down over that time period.

https://oilprice.com/Energy/Crude-Oil/US-And-OPEC-Flood-Oil-Market-Ahead-Of-Midterms.html

Physical Supply Indicators

* The GLD ETF tonnage on hand rose +9.42, with 759 tons in inventory.

* ETF Discount to NAV:

 PHYS 9.87 -1.82% to NAV [increase]
 PSLV 5.28 -4.79% to NAV [increase]
 CEF 11.91 -4.91% to NAV [increase]

* Bullion Vault gold (https://www.bul lionvault.com/gold_market.do#!/orderboard) shows a $6 discount for gold and a 10c premium for silver.

* Big bars premiums were: gold [1kg] 0.835% and silver [1000oz] … were sold out. The 100 oz silver bars had a premium of 4.48%. Interestingly, many silver products are sold out at the site I track.

Grey Swans & Geopolitics

  • Ebola: total cases 279, with 179 deaths. There were 32 new cases, mostly from the city of Beni. The teams on the ground continue to have problems with security. This week, 4 health care workers are among the newly infected. Of the total infected, 25 have been healthcare workers, 3 of whom have died. Conclusion: during an ebola breakout, being a healthcare worker is a dangerous job. https://www.who.int/csr/don/01-november-2018-ebola-drc/en/

  • Turkey: the 10-year yield fell -57 bp this week to 17.09%. Turkey's debt continues to recover from the highs made (23%) 3 months ago. USD/TRY also fell, losing -1.51% to 5.42 – a far cry from the top of 7.21 set back in August. It is amazing how the murder of one state-sponsored murder of one Saudi individual has turned around the situation in Turkey. Viewed from the standpoint of realpolitik: Erdogan was on the ropes three months ago, and the blunder by MBS has given him a reprieve. The lesson for me: you just never know how things will go.  Turkey appears to be toast in August, and then by November, it appears to be recovering.

  • German Government: the regional election in Germany turned out as badly for Merkel as feared: it was the worst showing for the CDU since 1966, and the worst showing for the SPD since 1945. Ouch. Merkel finally seemed to fall on her sword, resigning from the leadership of the CDU (effective December) and promising not to run for re-election...in 2021. Some suggested that this was a “long goodbye”, while another article called it “Angela Merkel's 29-month notice.” Clearly she is hoping to cling to power as long as humanly possible. My sense: “you'll pry the Chancellorship out of my cold, dead fingers.” https://www.theguardian.com/world/2018/oct/28/merkel-suffers-another-election-setback-key-german-state-of-hesse

  • Italy – Budget: Salvini, responding to the EU's demand to change Italy's budget, said Thursday: “we are not changing a comma of the budget.” Read the article for more amusing, pithy comments from Mr Salvini. (https://www.politico.eu/article/matteo-salvini-to-brussels-we-are-not-changing-a-comma-of-the-budget/) His flair for the dramatic appears to have captured the mood of the country. In a recent poll (https://www.corriere.it/politica/18_novembre_02/sondaggio-ipsos-lega-sale-347-16percento-nuovi-voti-viene-m5s-che-crollato-nord-b676d8da-dedd-11e8-b2ec-2281f86eb2f8.shtml?refresh_ce-cp) Lega now has 34% support inside Italy, double the 17.4% it received during the most recent election. Support for 5-Star has dropped from 32.7% to 28.7%.  Unmentioned is that much of Lega's increase in support comes from Forza Italia (Burlusconi) voters, which has become more or less irrelevant. The continued pressure by Brussels to hose the new Italian government seems to be cementing them - especially the confrontational Salvini - even more strongly in place. Elections! No wonder Europe doesn't like them. First Salvini, and now Merkel. Migration is looking to be the most astonishing own-goal (a soccer term perhaps unfamiliar to some Americans) in recent memory. https://www.politico.eu/article/matteo-salvini-luigi-di-maio-league-5star-italy-grows-in-popularity-as-5star-support-falls/

  • China – Tariffs: Trump apparently had a great call with Xi on Thursday, the announcement of which led to a commodity rally. That said, Trump is preparing to announce tariffs on all Chinese products by early December, if talks between Trump and Xi fail to produce results. Trump, in an interview with Fox News, said "I think we will make a great deal with China, and it has to be great because they’ve drained our country."  No pressure at all on that upcoming G-20 Trump-Xi meeting.  (In another 20 years, I might be calling it the Xi-Trump meeting).  https://www.bloomberg.com/news/articles/2018-10-29/u-s-said-to-plan-more-china-tariffs-if-trump-xi-meeting-fails

  • Yield Curve Inversion: the 1-10 spread rose +8.3 bp to 52.2 bp. The US long bond is not looking healthy at all.

  • US Congressional Elections, 2018. The generic ballot shows Democrats 50.5% [+8.1%] vs Republicans 42.4%. Outcome Projection: Democrat control: Senate 15.7% (-0.7 seats), House: 85% (+38 seats). https://projects.fivethirtyeight.com/congress-generic-ballot-polls/

  • North Korea: North Korea has threatened to “seriously consider” restarting its nuclear program if the US does not lift sanctions. US wants to maintain sanctions until North Korea dismantles weapons, while North Korea wants sanctions to go away prior to disarmament.  Most likely, KJU trying to set the stage for the next Trump-KJU summit scheduled for early next year.  http://www.atimes.com/article/north-korea-warns-us-of-return-to-nuclear-policy/

  • Mueller Investigation: No news.

Summary

Equities managed to bounce after falling 4 weeks out of the last 5. While I can't say definitively that the near-term low is in right now, it does look as though it might be a possibility. Since we have no bad economic news on the horizon (GDP=3.5%, Payrolls=250k), there is no overhang of macroeconomic pressure to continue moving prices downhill. The bond market is looking awful; the 10-year looks poised to break above 3.25% in spite of the 10% drop in equity prices. Where else will money go?   Shall we blame the Fed and its inexorable rate-increase program? (Savers rejoice! You can now get 2.2.% on a 28-day Treasury!) Lastly, gold, silver, and the rest of the other commodities (especially copper...got copper?) appear primed to break higher if/when the Trump-Xi talks later in November result in a positive outcome.

Big bar gold premiums on gold remain low, silver's premium has climbed, and at least at my store, big-bar silver isn't available anymore.  There is a shortage of retail silver at these prices. Surprisingly PSLV has a near-record discount to NAV of almost 5%. Maybe you should just buy PSLV, and take delivery. One wonders how silver prices can possibly remain at these levels given this situation.  My guess: it probably won't.

The COT report shows small changes in positioning. The overall position remains bullish.

The US midterm elections appear poised to give Democrats control of the House, while likely enlarging Republican control of the Senate. Any result that deviates from this expectation will likely result in a large risk-market response. A Democrat sweep will probably yield a much stronger sell-off, while an unexpected Republican victory would probably result in a large equity market rally. That's my best guess anyway.

Caravans, Kavanaugh, Nazis, racists, xenophobes, Medicare for All, fake bombs sent to Democrats, while very real bullets are fired at elderly Jewish people at a synagogue (oldest victim: 97 year old Rose Mellinger: https://pittsburgh.cbslocal.com/2018/11/02/rose-mallinger-funeral-pittsburgh-synagogue-shooting-victim/) - and, “Are you better off now than you were prior to Trump's deficit-funded tax giveaway?” - all this threatens to overwhelm. My observation: the blessing of free speech encourages us to talk about our differences.  To me, speech is what must be preserved above all else.  Free speech, protected by the First Amendment, is a huge part of what makes us American.  It comes first: our Founding Fathers thought it was just that important.  Speech comes before guns, before self-incrimination rights, before search-and-seizure protections.

Perhaps I find it so important because I enjoy writing so much.  Anyhow.

Midterm elections: Tuesday, November 6th.  Many House races in competitive (i.e. yet-to-be-gerrymandered) districts are too close to call.  While the polls say Dems are most likely win the House, I am reluctant to bet on that outcome, given what happened in 2016.

So what happens if particular local elections yield “surprising” results that don't hew to statistical analysis of what “fair” elections are supposed to look like? If local political parties try to put a thumb on the scales, and they are discovered, how will that play out? That's a wildcard.  Would Russia be blamed? Chinese hackers? How about Hillary? Nazis?  Trump?  Will anyone get locked up?  How many recounts will we see?

Does anyone else feel as though this year passed by extremely quickly?

Weekly trends (in order of strength):

Uptrend: platinum, USD, silver, copper, gold, gold/Euros, 10-year treasury.

Downtrend: crude, SPX, BAA corporates, miners, bitcoin.

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3 Comments

thatchmo's picture
thatchmo
Status: Gold Member (Offline)
Joined: Dec 14 2008
Posts: 471
1st Amendment for a reason....

Thanks Dave.  May your, our, and our progenys' free speech remain preserved for many years to come.  Aloha, Steve.

Markhemp's picture
Markhemp
Status: Member (Offline)
Joined: Nov 29 2013
Posts: 21
Free Speech

Really ? 

Take a look around, Patriot act and it's amendments! Just to begin with.

How many amendments are still standing whole, 

great commentary Dave Thank you 

thatchmo's picture
thatchmo
Status: Gold Member (Offline)
Joined: Dec 14 2008
Posts: 471
Got a point there, Markhemp. 

Got a point there, Markhemp.  I guess I've got to watch my default position which is "compared to how things will be, things are pretty good right now...".  The Constitution may be dying a death by a thousand cuts.  Thanks for reminding me....Aloha, Steve.

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