PM Daily Market Commentary - 11/12/2018

davefairtex
By davefairtex on Tue, Nov 13, 2018 - 9:31am

Gold fell -9.44 [-0.78%] to 1206.06 on heavy volume, while silver fell -0.16 [-1.13%] to 13.97 on heavy volume. The buck rose +0.64%, another strong move, breaking out to new highs, causing much of the difficulty in the metals.

Currency was front and center today; EUR plunged -1.03%, while GBP dropped -0.93%. That is about both BRExit, and the Italian budget kerfuffle; the Italians want to deficit-spend 2.4% of GDP, the EC has objected, and the Italians have decided not to back down, and the date of denoument is allegedly Tuesday. Presumably, once Italy fails to modify its budget as requested, the EC will then have to decide just how hard to spank Italy for its failure to comply. Will the spanking come immediately? Will Italy pay? Nobody knows, and so the response is, “sell!!”

Does Washington tell Illinois that its budget is just too awful and, if it doesn't change, it will be slapped with a big fine? No. That doesn't happen. Illinois can go to hell all on its own, and if it can find idiot bondholders willing to lend it money, well then, the sky is the limit. As we have seen.

Gold fell for most of the day, moving lower alongside the dropping Euro.  The closing black marubozu was a bearish continuation, and forecaster fell -0.10 to -0.82, which is a very strong downtrend. Gold is in a downtrend in all 3 timeframes. Gold/Euros looks slightly better, with the monthly backing away from its sell signal – gold/Euro moved higher, because EUR/USD plunged -1.03%. The daily chart certainly looks ugly; round number 1200 looks as though it will be broken, even just intraday.

COMEX GC open interest rose +14,807 contracts. Looks like shorts are piling in.

Rate rise chances (December 2018) remains at 76%.

Silver tracked gold and the Euro down, eventually closing right at the lows.  Silver's closing black marubozu candle was possibly a reversal (34% chance), while forecaster plunged -0.23 to -0.84, which puts silver in a strong downtrend. Silver made a new low today by a penny. The chart looks ugly, and the momentum to the downside looks quite strong. Silver remains in a downtrend in all timeframes.

COMEX SI open interest rose +2,448 contracts.

The gold/silver ratio rose +0.36 to 85.78. That's bearish. I'm not going to tell you about how PM could be at a long-term low. So far that sure hasn't worked out!

Miners were hit fairly hard, with GDX off -2.26% on moderate volume, while GDXJ dropped -2.14% on heavy volume. XAU fell -2.35%; the black marubozu candle might be a reversal (32%), but forecaster dropped -0.23 to -0.84, which is a strong downtrend. XAU is in a downtrend in both the daily and weekly timeframes, but – somehow – remains clinging to an uptrend on the monthly.

The GDX:$GOLD ratio fell -1.49%, while the GDXJ:GDX ratio rose +0.12%. That's bearish.

Platinum fell -1.47%, palladium dropped -1.74%, while copper moved down -0.47%. Mostly, the other metals did worse than gold and silver, although their charts still look a lot stronger than the silver chart, which appears ready to break down hard.

As mentioned, the buck rose +0.62 [+0.64%] to 97.04, breaking out to a new high due to the plunge in the Euro and the pound. The last time the buck was here was back in mid-2017. The long white candle was a bullish continuation, and forecaster jumped +0.55 to +0.81, which is a strong uptrend. The buck remains in an uptrend in all 3 timeframes. The strong dollar continues to pressure the metals; that's especially true now that gold/Euros is correcting somewhat.

Crude fell -1.00 [-1.66%] to 59.08. That's 11 straight days down, the longest decline on record. RSI-7 has fallen to 8, which has happened just 10 times since 1983. My call for a low was...shall we say, premature. Oversold gets oversolder, etc. The long black candle was a bearish continuation, and forecaster edged down -0.02 to -0.35. Crude remains in a downtrend in all 3 timeframes. Over the weekend, the Saudis said they were going to cut production by 500 kbpd; this caused prices to gap up at the open, but then the selling started, and then crude really tanked after Trump tweeted that the Saudi plan was terrible, and how oil should be “a lot lower” due to the current supply situation. Ouch. Its hard to know if today was capitulation or not. An RSI-7 of 8 would make you think so, but – I thought that a while back, when price was $63. Probably best to wait until a swing low. The reversal will be pretty dramatic, I suspect, if and when it happens.

SPX fell -54.79 [-1.97%] to 2726.22. The opening black marubozu candle was a bearish continuation, and forecaster plunged -0.45 to -0.20, which is a sell signal for SPX. This took SPX below both the 9 and 50 MA lines. SPX is now in a downtrend in both the daily and weekly timeframes; it is still clinging to a buy on the monthly.

Sector map had tech leading the market lower (XLK:-3.52%), far and away the worst performer, while REITs (XLRE:+0.21%) and utilities (XLU:-0.05%) did best. That's a bearish sector map. AAPL, which had been doing fairly well until two weeks ago, cratered, losing 5%. Ouch. FB's chart looks horrid – down 35% from its highs in July. Amazon is down 19%, plunging -4.41%, and TSLA fell -5.49%. In addition to the bearish sector map, money appears to be fleeing the leaders, which is usually a bad sign for the market overall.

Worst equity market performer today was Europe, with the US coming in second.

VIX rose +3.09 to 20.45.

TLT climbed +0.65%, finally getting a bid. Given just how weak bonds have been, the reasonably strong rally today in TLT underscores the flight from risk right now. TY confirms, rising +0.22%, the long white candle being a bullish continuation, and forecaster jumping +0.59 to +0.36, which is a buy signal for TY. TY is now back above its 9 MA; TY is in an uptrend in the daily and weekly timeframes. Given the nervousness in the equity markets, and the rise in the dollar, bonds really are not doing well, in spite of today's rally. The 10-year yield fell -0.3 bp to 3.19%.

JNK cratered today, dropping -0.63%, making a fairly dramatic new low. Both Friday and today were large moves down; money seems to be fleeing junky debt now. This aligns with and supports the risk off mood in equities. Money may be flowing into the buck, but it is not chasing yield.

CRB fell -0.24%, with 2 of 5 sectors dropping, led by industrial metals (-0.70%). While oil is continuing to drop, natgas is up 50 cents in the past 6 days. That's a huge move for a $3 commodity.

The brief reprieve that the equity markets got from the lack of “blue wave” appears over. Is it about all the talk of investigations, and impeachment? About Italian budgets? Rate increases as far as the eye can see? The steadily-plunging oil market - down 25% in just one month? No progress in tariffs with China? [Although – Mnuchin and a “top Chinese official” are reportedly talking prior to the Trump-Xi meeting at the G-20].

My key indicators are: the tech sector, junky debt, and money flows. Money is pouring into the US, but it is not going into risk assets. In fact, money is fleeing tech – and probably heading for short term treasuries.

So far, all the fuss is causing selling in the metals, including gold – although gold is doing well enough to stay ahead of the currency move, at least for now anyways.  If your P&L is in Euros, that probably is nice to see.

Silver and the miners are a different story. No reversal, no sign of a reversal, and as long as the buck continues to move higher, the metals will probably move lower. That's just how it tends to go.

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