PM Daily Market Commentary - 11/13/2018

By davefairtex on Wed, Nov 14, 2018 - 8:09am

Gold rose +1.87 [+0.16%] to 1207.93 on very heavy volume, while silver moved down -0.01 [-0.04%] to 13.96 on very heavy volume also. The buck fell -0.26%, which helped the metals from collapsing further, but the real action was in crude: after dropping 11 days in a row, today oil plunged -3.57 [-6.04%] on double normal volume. It was a ridiculously large move after a long, long decline.

So what's going on with oil? Nobody really knows – or if they know, they are not saying. That is, there is the usual talk about over-supply, there is the US production increase from shale, but that's all within the range of “normal” events. What we are seeing in crude is way beyond normal: the RSI-7 for crude is at 4.6. That's the lowest value ever. As in, since 1983, oil has never had this happen to it. So whatever is going on, it is not explained by the headlines we are reading. My guess, as I posted elsewhere, is that the Saudis have been removed from the board as swing producer by Trump. I think the US has evidence of just exactly what happened in the Khashoggi murder, which most likely implicates MBS. Given the global reaction to the murder, that means Trump owns MBS. Trump wants lower oil prices? Trump gets lower oil prices.

This is all just a guess. But it feels right to me. How low will prices go? How low does Trump want them to go? Of course shale production will stop if prices drop much further. So it is a self-correcting system, long term. And this exacerbates the long-term supply situation. And it will destroy a bunch of companies who can't make money with oil at $55, if price stays there for too long. In the meantime, I believe we could be dealing with an oil market with the swing producer removed from the board.

Today's strong line candle for crude was bearish, while forecaster plunged -0.67 to -1.03.  That's a very strong downtrend.  Crude remains in a downtrend in all 3 timeframes.

Gold traded in a narrow range today; the bullish harami was neutral, while forecaster jumped +0.45 to -0.37; that looks relatively positive. It isn't a reversal, but at least the plunge has stopped for now. Gold remains in a downtrend in all 3 timeframes. Gold/Euros looks slightly better; it is still in an uptrend, just barely, on the monthly timeframe.

COMEX GC open interest rose +20,660 contracts. That's a large increase in short interest – with no change in price. That suggests the bid for gold here at 1200 is actually quite strong, which is a pleasant surprise.

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

Silver's doji candle was a bearish continuation, but forecaster rose +0.52 to -0.32; as with gold, the forecaster thinks today's price action was bullish. Silver did make a new low, but only by a few cents. Silver remains in a downtrend in all timeframes.

COMEX SI open interest rose +4,798 contracts. As with gold, this is a fairly large change in OI, without a big move lower in price. It seems there is a bid for silver down here just below 14.

The gold/silver ratio rose +0.13 to 85.91. That's slightly bearish. The gold/silver ratio is at multi-decade highs – nearer to a low for PM than a high.

Miners didn't do nearly as well; GDX fell -1.02% on moderate volume, while GDXJ dropped -1.43% on heavy volume. XAU fell -1.29%. The long black candle was a bearish continuation, and forecaster ticked up +0.02 to -0.82, a strong downtrend. XAU appears headed for a re-test of the low set back in August. XAU remains in a downtrend in the daily and weekly timeframes.

The GDX:$GOLD ratio fell -1.17%, while the GDXJ:GDX ratio dropped -0.41%. That's bearish.

Platinum fell -0.18%, palladium rose +1.37%, while copper rallied +0.51%. Copper had a large failed rally, palladium remains near its highs, while platinum continues to move lower.

The buck fell -0.25 [-0.26%] to 96.79; the dark cloud cover candle was only mildly bearish (33% reversal), while forecaster dropped -0.25 to +0.56; the buck remains in an uptrend in all 3 timeframes. The fall in the buck should have helped the metals a bit more; this suggests gold and silver remain under pressure.

SPX fell -4.04 [-0.15%] to 2722.18. As with copper, SPX had a fairly large failed rally today. The high wave candle was a bearish continuation and forecaster dropped -0.33 to -0.53. SPX remains in a downtrend in both the daily and weekly timeframes.

Sector map was led lower by energy (XLE:-2.30%) - that was all about the cratering crude prices – while financials did best (XLF:+0.56%).

VIX fell -0.43 to 20.02.

TLT fell -0.06%; it remains in an uptrend. TY moved higher, up +0.10%; the long white candle was a bullish continuation, and forecaster rose +0.25 to +0.62. The forecaster seems positive about TY; it remains in an uptrend in both daily and weekly timeframes. The 10-year yield dropped -4.1 bp to 3.15%. That's a decent-sized move down.

JNK fell -0.14%, making a new low, following through off yesterday's breakdown. Some of that debt is shale-driller debt which becomes more problematic when oil prices fall.

CRB fell -1.84%, a large move which takes CRB to levels last seen in late 2017. 4 of 5 sectors fell, led by energy (-5.29%). That's even with natgas up +8%!

The plunge in crude, especially with today's massive loss, seems to have the markets a bit nervous. When prices plunge, for weeks at a time, for a reason that nobody can really articulate all that well, it hits confidence – at the very least, in traders confidence of how well they can predict what will happen next.

At least gold and silver managed to avoid collapse. Given the large increase in open interest today, avoiding collapse could be interpreted as success. Woohoo!

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davefairtex's picture
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btc breakdown

Bitcoin broke down - new low - 5530.  It has bounced back to 5700.

Anyone remember bitcoin?  12 months ago, it was all the rage.  It may be again some day in the future.  But it sure isn't now.



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davefairtex wrote: Bitcoin
davefairtex wrote:

Bitcoin broke down - new low - 5530.  It has bounced back to 5700.

Anyone remember bitcoin?  12 months ago, it was all the rage.  It may be again some day in the future.  But it sure isn't now.

so similar price action to the silver bubble of 2011-2013

I created a new <$6k thread under the Bitcoin Interest Group, the BitCoin Cash Hardfork could have tied up lots of $$$ for HODLers. Tether also looking shaky again...

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Rubino poscast

Elite Terrified of 1930’s Depression or Weimar Hyperinflation – John Rubino


Financial writer John Rubino says everywhere you look, debt is exponentially mounting. Nothing demonstrates the “imminent bankruptcy” problem better than the financial obligations of New York City. Rubino says, “They just announced that they have unfunded liabilities for retiree healthcare, just retiree healthcare and not the rest of their pensions, of $100 billion. That’s for a city, not a state or a country, and if you add their unfunded liabilities for their pensions, which is another $50 billion or so, and their official debt, which is $50 billion or so, you get $200 billion that New York City is on the hook for that they have not put money away for. If a private sector company had finances like that, they would be insolvent, and their accountants would force them to say that.”You can tell the same story for cities, states and countries around the world swimming in unrepayable debt. So, what will be done when bond defaults and financial failures begin? Will Trump let it go like the failed debt of Puerto Rico or have massive bailouts? Rubino says, “It’s possible that Trump will teach that lesson to the system, but I think the numbers are so big now the risk of a 1930’s style depression, or a Weimar Germany hyperinflation, is so great these guys are going to be terrified of anything that seems to be destabilizing. The pressure on whoever is in charge of the central bank or federal government is going to be to try to nip crises in the bud before they can really get going when you don’t know what is going to happen. For instance, New York City goes bankrupt, and that pulls down Chicago, and then that pulls down California. What does that mean? Nobody knows, and nobody wants to find out.”

Rubino contends massive bailouts will explode in the next economic downturn, and they will have grave consequences for interest rates and the U.S. dollar. Rubino says, “They would say, hey, here’s $5 trillion to bail out states and localities across the country. People will see that and will worry about what that means for the value of the dollar. So, they sell dollars, and not just here, but all around the world. The dollar starts to fall, and interest rates start to go up. If the dollar is tanking, who wants to lend money to the federal government that is going to be paid back in a depreciating currency? So, our interest rates go up. That causes our interest costs to go through the roof and forces the government to borrow even more. . . . At some point, the whole thing blows up. There is a number out there when all this will happen. . . . So, the question is what is that number, and when do we hit it? . . . . The concept of fiat currencies will be called into question when all this happens. The dollar might lead this down or some other fiat currency might lead it down. . . .At some point, they will realize all the fiat currencies are basically in the same boat. . . . We can’t know the timing of this, but we can know what will do well when this happens, and that is gold and silver.”



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John Rubio

I think we need to realize that the debt is a global problem. The US cannot resolve any debt issue of the current magnitude on it's own. It will have to be some form of collective scheme involving every country. It could go the other way, where nationalism takes hold and war is the means for resolving gargantuan debt issues.

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John Rubio

I think we need to realize that the debt is a global problem. The US cannot resolve any debt issue of the current magnitude on it's own. It will have to be some form of collective scheme involving every country. It could go the other way, where nationalism takes hold and war is the means for resolving gargantuan debt issues.

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Steve Hanke Podcast on Macrovoices


Have any of you listened to this podcast?  I'm listening to it for my 3rd time and still don't understand him.  However, he seems awfully well-connected and knowledgeable with quite the pedigree.  I wish he had a current book to go deeper in his analysis but he doesn't.  He's a big dog.  Hanke might indeed be the world authority on Hyperinflation.(wrote "the" book on it?)

As the title says, he emphasizes M4 money supply is what matters, and that QE is relatively insignificant.  He seems to defend the banks and blame Dodd-Frank, but at the same time doesn't (to me) have the arrogance of guys who usually defend the banks.  He sort of rambles and jumps around but my impression is that he's completely unsurprised by what's happened since 2008, unlike most of us here who were expecting things to blow up long before now.

On the deflationist side, I hold up Lacy Hunt/Hoisington as the rational, humble representative.

On the Inflationist side, the gold bugs are legion.  Exponential debts and obligations, governments with lots of guns and printer ink.  Seems so simple.  

Here on PP we seem to want to believe the ka-boom theory which sorta incorporates both.  I'm inclined to agree with that theory, but I am terrified of my own confirmation bias, so I seek others opinions.

This guy Hanke seems to be neither, kind of like Martin Armstrong to me.

I have been paying stuff off and deleveraging personnally, while at the same time I see other guys buying all kinds of equipment leveraging up and wonder if they're actually right in the event we get some sort of helicopter money.

I've got a bobcat loader and a dump trailer so I'm more than ready for a Weimar/Zimabwe situation.

I eagerly hope to hear any of you that can summarize Hanke.  Kind of like how much I appreciate how Dave deciphers Martin Armstrong.

FWIW, my whole interpretation of MA is that he overlays so many cycles basically studying capital flows, and when the superimposition of the cycles can override the individual cycles of which many of us tunnel vision and say here we go again (but then we don't-yet).

Chris/Adam - maybe you guys could get Hanke on a podcast and try to clarify and define his world view?


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Re: Steve Hanke Podcast on Macrovoices

I listened to the podcast and I can understand the confusion. IMO, he contradicted himself a few times, sometimes almost in the next sentence.

1) He indicated QE doesn't matter because it is small relative to M4. True on the surface because QE in the US was 17% (his number) of M4. This conflicts with my view because QE bought overpriced junky assets, propping up the markets. The prices are determined at the margin. A second point about QE. All the people I follow (they have a contrarian and value bias) said QE wouldn't matter at the time it was implemented. All of them now say that QE mattered. Most are now saying QT is affecting the markets now. I agree.

2) He suggests that banking regulation led to less lending. Again true, IMO. My view is rather than being able to lend willy nilly and be rescued by the central banks and governments, the banks could be held to account for lending to risky borrowers so they became more conservative. Though he never states it, his position would seem to be let the banks lend to anyone without regard to credit worthiness. He doesn't discuss bailouts.

3) The Macrovoices host suggest Prof Steve Hanke has the opposite view of Prof Steve Keen. Here is a link to a somewhat old podcast for Steve Keen. For me, Steve Keen makes more sense although not I'm fond of bailouts, period. At least Keen proposed something other than "more of the same" which is the position presented by Prof Hanke.

4) I do agree with Prof Hanke's position that using monetary sanctions are an act of war.

My overly simplistic summary for Prof Hanke views in this podcast are he is a mainstream, free market economist that proposes more of the same. He references a Cato Institute link (libertarian) but nowhere did I hear him mention that bailouts are a bad idea which would be a libertarian position.

I'm going with the rate of change of credit growth/contraction a la Grant Williams and recently, Steen Jakobson.


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