PM Daily Market Commentary - 11/5/2018

davefairtex
By davefairtex on Tue, Nov 6, 2018 - 8:19am

Gold fell -1.61 [-0.13%] to 1237.92 on light volume, while silver fell -0.10 [-0.71%] to 14.64 on moderate volume. The buck fell -0.29%; this should have helped the metals, but clearly didn't. Last week's excitement at the prospect of a US-China trade settlement has clearly faded over the weekend.

Gold rallied for most of the day, starting in Asia, and topping out at 1:30 pm in the US. It more or less followed the Euro (+0.80%) higher, but the strength of the rally was much more than just about currency. Gold's trading range was narrow; the short black candle was neutral, while gold forecaster dipped just -0.01 to +0.19. Gold remains in an uptrend in the daily and weekly timeframes, and it remains above both the 9 and 50 MA lines. Really not much changed today.

COMEX GC open interest rose +476 contracts.

Rate rise chances (December 2018) rose to 80% - including a 5% chance of a 0.50 bp hike.

[GC chart]

Silver started its rally around 2:10 am, eventually topping out around 1:30 pm.

Silver's drop resulted in a swing high (48% reversal), and forecaster agreed, dropping -0.53 to -0.07 which is a sell signal for silver. Silver remains trapped in its 6-week trading range, having apparently topped out on the recent attempt at 15. It looks like traders are selling the high 14.90s, and buying 14.20. Silver is now in a downtrend in both daily and monthly timeframes.

COMEX SI open interest rose +1,927 contracts.

The gold/silver ratio rose +0.46 to 84.04. That's bearish, but the current level for the ratio suggests PM could be at or near a long term low.

[SI chart]

Miners were mixed; GDX fell -0.36% on very light volume, while GDXJ climbed +0.78% on very light volume also. XAU was virtually unchanged, falling -0.07%; the doji candle was neutral, while forecaster moved up +0.18 to +0.16, which is a buy signal for the miners. This puts the miners in an uptrend on the daily and monthly timeframes. Certainly today's candle could have been bearish, but the code said it wasn't.

The GDX:$GOLD ratio fell -0.23%, while the GDXJ:GDX ratio rose +1.14%. That's bullish; the juniors are starting to look a little bit healthier.

[XAU chart]

Platinum fell -0.46%, palladium climbed +1.58%, while copper plunged -2.36%. Perhaps the sharp drop in copper is why silver had a bad day. End of last week, copper jumped higher, and today it retraced fairly strongly. Perhaps hope faded a bit over the weekend. In thinking about it, we probably shouldn't expect China to take any action prior to the mid-term elections. If the Republicans are swept from power, that will weaken Trump's negotiating position, and they can just wait him out.

The buck fell -0.28 [-0.29%] to 95.79. The buck tried to rally today but failed, sending the daily forecaster deeper into downtrend. The buck still remains in an uptrend in the weekly and monthly timeframes.

Crude -0.18 [-0.29%] to 62.79, making a new low. It rallied strongly earlier in the day, but the sellers piled on, pushing prices back down, with crude closing almost at the lows. The spinning top candle was bearish, but forecaster ticked up +0.02 to -0.32. Crude remains in a downtrend in all 3 timeframes.

There was an article at oilprice which pointed out that the COT report for crude was suggesting that managed money had bailed out of a huge number of long positions, and are now holding fewer long contracts than they did back when oil was $40/bbl in mid-2017. (I looked: it's true!) As we know from the PM COT report, this isn't a timing indicator, but it does tell us that most of the speculative longs have been rinsed out of the market (and a good chunk of the commercial shorts have rung the cash register), which is a sign that a low could be near. Theoretically anyway.

https://oilprice.com/Energy/Energy-General/Oil-Looks-Set-For-A-Rapid-Bounce.html

SPX moved up +15.25 [+0.56%] to 2738.31. Equities moved higher in fits and starts, managing to close relatively near to the highs by end of day. The long white candle was a bullish continuation; forecaster jumped +0.18 to +0.94, which is a strong uptrend. SPX remains in an uptrend in both daily and monthly timeframes.

Sector map had energy doing best (XLE:+1.67%) while communications (XLC:-0.41%) and tech (XLK:-0.10%) did worst. Oil equities have been hit fairly hard in the past month; while oil has yet to recover, energy equities are hinting that the low might not be so far away.

VIX rose +0.45 to 19.96.

TLT moved up +0.39%; trading range was narrow, and perhaps TLT was just bouncing back after Friday's big sell-off. TY climbed just +0.07%, a feeble bounce after the big losses Friday. TY remains in a downtrend in both the daily and monthly timeframes. The 10-year yield fell -1.3 bp to 3.20%.

JNK rose +0.09%, lifting just high enough to print a 4-candle swing low. While it remains in an uptrend according to the forecaster, it does not look as though it is in any hurry to move higher.

CRB rose +0.14%, with only one sector moving higher – energy: +0.65%. That's probably about natural gas, which screamed higher today, up +8.52%. Natgas is now at $3.57, up from a low of $2.70 back in July.

Things looked relatively quiet ahead of the midterm elections; if the Democrats win the house, as expected, it will be investigations from now until 2020, but perhaps little real chaos. If on the other hand, the Democrats lose, how will that play out? While I suspect markets would rally, it seems likely that the already very angry Democrat base might just double down on the anger.

Is the media causing the trouble, or simply reflecting and amplifying it in order to get eyeballs? I've read articles that suggest Trump and anger about him is the best thing to happen to MSM in years. Without Trump, nobody would be watching them at all. The MSM's Trump Show is all about ratings; to get people's attention away from their phones these days, you pretty much have to yell and scream - a realtime version of the National Enquirer - and so that's what they do. Its just a structural thing.  What will they be saying if they lose the midterms?  It might just become civil war.

I'm not sure the market will have anything to chew on tomorrow during market hours on Tuesday – I'm looking to Wednesday after market close for the denoument.

I'm thinking oil could be a surprise winner.  There's no political pressure to keep prices down once the election is over, the longs have all been rinsed out, Iran sanctions are being put in place, and oil equities are giving hints that a low might be near.  I hope so, I'm long.

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