PM Daily Market Commentary - 11/20/2018

davefairtex
By davefairtex on Wed, Nov 21, 2018 - 3:40am

Gold fell -2.75 [-0.22%] to 1227.56 on heavy volume, while dropped -0.11 [-0.76%] to 14.29 on extremely heavy volume. The buck screamed higher, up +0.67%, which caused the bulk of the trouble for the metals today – in fact, the rest of the metals group did substantially worse than gold and silver. The equity market also sold off, with SPX down -1.82%.

Gold made a new high today, but the rising dollar put an end to the minor rally. The spinning top was a bullish continuation, but forecaster dropped -0.11 to +0.28. That's still an uptrend for gold. In fact, gold/Euros actually broke out above its downtrend line today, because the small drop in gold was far outweighed by the plunge in the Euro [-0.72%]. While gold remains in downtrend in the weekly and monthly timeframes, it is right on the edge of a buy signal in both. Reading the tea leaves, it seems that gold is actually holding up fairly well right now, and it would not take much to send price moving higher.

COMEX GC open interest rose +3,777 contracts.

Rate rise chances (December 2018) remained at 72%.

Silver was hit substantially harder than gold today, pulled lower by plunges in the rest of the metals group. The confirmed bear NR7 was bearish (41% reversal), and forecaster dipped -0.16 to -0.03, which is a tentative sell signal for silver. Volume was extremely heavy. Given the moves down in copper and platinum, it is pleasantly surprising (and bullish) that silver didn't get hit harder. In spite of today's drop, silver remains in an uptrend in both the weekly and monthly timeframes.

COMEX SI open interest rose +221 contracts.

The gold/silver ratio rose +0.46 to 85.25. That's bearish. The gold/silver ratio remains at multi-decade highs – that usually happens around a low for PM.

Miners moved lower, with GDX down -0.46% on moderately light volume, while GDXJ dropped -0.91% on moderate volume. The miners were sold fairly hard, but managed to recover most of the losses by end of day. XAU fell -0.81%, printing a swing high (49% reversal), while forecaster dropped -0.34 to -0.02, which is a tentative sell signal for the mining shares. XAU is now in a downtrend in both the daily and weekly timeframes, but it is a very mild one, at least for now. Given how hard equities were hit today, I think the miners did quite well. Often they are dragged down by any serious selling in equities, but that didn't happen today.

The GDX:$GOLD ratio fell -0.24%, while the GDXJ:GDX ratio dropped -0.44%. That's slightly bearish.

Platinum fell -1.33%, palladium dropped -1.77%, while copper plunged -1.48%. The other metals all did quite poorly, with platinum printing an evil-looking swing high, palladium entering a downtrend, and copper's spinning top could well be a reversal (40% bearish). [I'll have to sort out the timing of the metals moves with currency.]

The buck rallied sharply, up +0.64 [+0.67%] to 96.34. The long white candle might be a reversal (35% bullish), while forecaster jumped +0.54 to -0.25. That's not a reversal just yet. DX remains in a downtrend in both the daily and monthly timeframes.

The currency moves today were fairly violent: EUR down -0.72%, CAD off -1.01%, AUD down -1.12%. CAD is usually about oil, AUD about emerging markets & risk, while EUR is about issues within the EU itself. After today, the Euro has retraced much of last Friday's big rally. I'm not sure what happened across the pond, but it wasn't good for the Euro.

Crude suffered another major shellacking today, losing -4.00 [-6.96%] to 53.47. While the opening black marubozu/strong line might mark a low (38% chance), forecaster plunged -0.75 to -0.68, which is a sell signal for crude. Crude remains in a downtrend in all 3 timeframes. A positive API report (crude: +1.5m, gasoline: +0.7m, distillates: -1.8m) after market close helped, but only bumped price maybe 20 cents. This summary is as good as any I saw: “Oil prices are under pressure in the face of ample supply, falling stock markets and an increasingly gloomy economic outlook,” Commerzbank said on Tuesday. OPEC will probably cut production in their upcoming meeting, but that's not for another week.

SPX plunged -48.84 [-1.82%] to 2641.89. Most of the drop happened in the futures markets overnight; attempts to rally were sold. The opening black marubozu candle was neutral, while forecaster moved up +0.07 to -0.59. Today showed no signs of a reversal.  SPX remains in a downtrend in all 3 timeframes.

Sector map shows energy leading lower (-3.28%) along with consumer discretionary (XLY:-2.26%), while utilities did best (XLU:-0.42%). This was a bearish sector map.

VIX rose +2.38 to 22.48.

TLT rose +0.03%, a really pathetic move given the plunge in equities. While TLT remains in an uptrend, there is no flight to the "safety" of long term US treasury debt. TY confirms, actually dropping -0.04%. While TY remains in an uptrend in all 3 timeframes, we might be near the end of the bond market rally – at least based on the move in bonds today. The 10-year yield fell -0.9 bp to 3.05%.

JNK plunged -0.46%, making yet another new low. JNK continues to reinforce the risk off mood in equities; certainly the plunge in oil prices don't help all that shale-driller junk debt either. Things have not become disorderly yet, but the trend in junky debt is quite clear: it is down.

CRB plunged -2.64%, with all 5 sectors dropping, led by energy (-5.81%). Energy is down 23% from the highs set just six weeks ago. That's all about crude oil.

Crude is now down 30% from its peak in early October. That's a huge drop in the price of the master resource. Here's the analysis I saw that made the most sense: worries about supply from the Iran sanctions were overblown – the US gave a surprisingly large number of exemptions - which resulted in the Saudis dumping a bunch of extra supply on the market that wasn't actually required. Was this Trump's plan all along - just in time for the midterm elections?  Who knows, but it resulted in a very strong oil price drop once the market sorted it all out. Can OPEC cut production quickly enough to put a floor under prices? If there is a global economic slowdown hitting at the same time, they might not react quickly enough. Could we see oil prices back in the 40s? Well, that's just $3 away, or one day's move given the current pace of the decline.

PM did a lot better than the other metals today; the mood was strongly risk off, shown by AUD (-1.12%), copper (-1.48%), and equities (-1.82%). While SPX has yet to break below the previous low of 2601, that level is not far away, and I'm not seeing any signs of reversal just yet. Tech, the usual market leader, is now leading the way down. AAPL, the former market darling, fell -4.78% just today. While SPX is down just 10% from the peak, the Nasdaq Composite is off 22%, and anyone who bought FB at the July high is now down 39%.

While gold doesn't appear to be going anywhere quickly, neither is it moving strongly lower.  Gold has outperformed both TLT (30y) and IEF (10y), and seems to have reasonbly strong support from 1190-1200.

Thanks to the PP community for checking their favorite resources on the availability of silver.  The rough consensus is that there isn't any major lack of supply just yet, except for a few select items that are out of stock.

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