PM Daily Market Commentary - 11/21/2018

davefairtex
By davefairtex on Fri, Nov 23, 2018 - 2:40am

Gold rose +4.65 [+0.38%] to 1232.21 on heavy volume, while silver climbed +0.20 [+1.36%] to 14.49 on very heavy volume. The buck dropped -0.13%; it wasn't much of a factor today.

Gold made a new high; the long white candle was a bullish continuation, while forecaster dropped -0.20 down to +0.06, which is just barely an uptrend. Today's move pulled both the weekly and monthly forecasters into an uptrend, which means that gold is now in an uptrend in all 3 timeframes.

COMEX GC open interest fell -4,145 contracts.

Rate rise chances (December 2018) rose to 76%.

Silver rallied much harder than gold, making a new high and erasing Tuesday's loss; the long white candle was neutral, and forecaster ticked up +0.01 to -0.02. Silver also managed to close (just barely) above its 50 MA. Silver is in an uptrend in the monthly timeframe, and is right on the edge of a buy in both the daily and weekly timeframes.

COMEX SI open interest plunged -6,906 contracts; that's a pretty big move – about 15 days of global silver production.

The gold/silver ratio plunged -0.85 to 84.40. That's strongly bullish. The gold/silver ratio remains at multi-decade highs – that usually happens around a low for PM.

Miners moved sharply higher, with GDX up +2.64% on heavy volume, while GDXJ climbed +2.74% on extremely heavy volume. XAU jumped +3.11%, making a new high; the confirmed spinning top was quite bullish, and forecaster jumped +0.85 to +0.81, which is a buy signal for XAU. Today's move was enough to pull XAU back above its 50 MA, and XAU is now in an uptrend in all 3 timeframes.

The GDX:$GOLD ratio jumped +2.26%, and the GDXJ:GDX ratio rose +0.10%. That's bullish.

Platinum rose +0.49%, palladium climbed +0.56%, while copper moved up +1.02%. While all 3 other metals rallied, none of the moves today made up for the declines from the day before.

The buck moved down -0.13 [-0.13%] to 96.21, a small pullback after yesterday's strong rally. The short black candle was unrated, while forecaster moved up +0.13 to -0.13. The buck remains in a downtrend in both the daily and monthly timeframes. Really, not much happened in currencies today.

Crude managed a decent rally today, moving up +1.31 [+2.45%] to 54.78. This doesn't make up for Tuesday's cratering, but the bullish harami pattern (39% reversal) was actually quite strong for its type; most harami patterns are useless. Forecaster rose +0.25 to -0.43, which is an improvement, but not a reversal. Crude remains in a downtrend in all 3 timeframes. The EIA report was negative (crude: , gasoline: , distillates: ) which ended up being fairly neutral. Once again, if market fails to sell off on bad news, that's a positive sign. That said, oil probably drops into the 40s if OPEC's upcoming meeting doesn't come away with some strong action. Trump appears to be walking a fine line with MBS; “let the Senate do the heavy lifting”, seems to be his position. In response, Saudi Arabia does seem to be a bit more lethargic than normal about jawboning prices higher. It just feels to me that Trump is using his leverage over MBS via restraining a US contribution to the murder investigation to keep oil prices low.

SPX rose +8.04 [+0.30%] to 2649.93. All of the gains came in the futures markets overnight, with the intraday action looking a whole lot like a failed rally. The spinning top candle was bearish, and forecaster ticked down -0.02 to -0.61. SPX remains in a downtrend in all 3 timeframes.

Energy did best (XLE:+1.57%) along with comm services (XLC:+1.19%), while utilities trailed (XLU:-1.48%). The sector map was actually bullish.

VIX fell -1.68 to 20.80.

TLT fell -0.03%, more or less unchanged. TLT sold off during the day probably due to the equity rally, but bounced back as the rally failed. The hammer candle was unrated, however, and forecaster dropped -0.21 to +0.41; TLT remains in an uptrend. TY was also little changed, up +0.01%, printing a neutral doji candle. Forecaster fell -0.09 to +0.33; TY is in an uptrend in both daily and weekly timeframes, but the monthly buy signal is now gone. The 10-year yield rose +1.3 to 3.06%.

JNK rallied +0.44%, rallying strongly for the first time in 8 days; while JNK did print a swing low (54% bullish), it also printed a shooting star candle (43% bearish), so its hard to know where things go next.

CRB moved up +0.66%, with all 5 sectors moving higher, led by energy (+1.18%). Livestock is the best looking short-term chart for the group, followed by PM. Energy looks worst.

Silver staged a surprisingly strong rally, outperforming the rest of the group. The large drop in OI might have had something to do with that; 15 days of “paper” global production vanished from the market. Miners also did quite well. Is this portending yet another end-of-year rally for PM? It might be. Certainly, the tech darlings have been hit hard; we could be at Peak Iphone, we are well past Peak Facebook (“it makes you depressed” is not good PR for any firm, no matter how well it converts dopamine-addicted users into ad views), and money is probably looking for the new sector to rotate into.

SPX is hovering about 40 points above the 2601 low. Will it collapse further, or will it recover? We are a bit too soon for the Santa Claus rally (which is, itself, just a front-running of the annual-pension-contribution-driven January Effect). It might all depend on the oil market. Along with tech, energy equities have had the crap kicked out of them recently (17% in 6 weeks for the big guys, and 40% for oil services), and if oil can be coaxed into putting in a low by the OPEC meeting, big money is probably ready to rotate back into energy. Certainly XLE is doing a lot better than $WTIC.

I'm not sure which scenario plays out – but they do feel a bit mutually exclusive.

G-20 meeting coming up next week.

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3 Comments

Cold Rain's picture
Cold Rain
Status: Gold Member (Offline)
Joined: Jul 26 2016
Posts: 380
Mining Shares

It’s amazing that virtually, after every big up day, they give it all back the next day.  Can’t get any sustained follow-through to the upside in either the metals or the shares.  My suspicion is the whole complex is going lower pretty soon.

Nate's picture
Nate
Status: Platinum Member (Offline)
Joined: May 5 2009
Posts: 605
Ray Dalio

Ray Dalio (Bridgewater) has a new book out titled "Principles For Navigating Big Debt Crisis".

Here is a snippet:

In this study we will examine big debt cycles that produce big debt crises, exploring how they work and how to deal with them well. But before we begin, I want to clarify the differences between the two main types: deflationary and inflationary depressions.

            In deflationary depressions, policy makers respond to the initial economic contraction by lowering interest rates. But when interest rates reach about 0 percent, that lever is no longer an effective way to stimulate the economy. Debt restructuring and austerity dominate, without being balanced by adequate stimulation (especially money printing and currency depreciation). In this phase, debt burdens (debt and debt service as a percent of income) rise, because incomes fall faster than restructuring, debt paydowns reduce the debt stock, and many borrowers are required to rack up still more debts to cover those higher interest costs. As noted, deflationary depressions typically occur in countries where most of the unsustainable debt was financed domestically in local currency, so that the eventual debt bust produces forced selling and defaults, but not a currency or a balance of payments problem.

            Inflationary depressions classically occur in countries that are reliant on foreign capital flows and so have built up a significant amount of debt denominated in foreign currency that can’t be monetized (i.e., bought by money printed by the central bank). When those foreign capital flows slow, credit creation turns into credit contraction. In an inflationary deleveraging, capital withdrawal dries up lending and liquidity at the same time that currency declines produce inflation. Inflationary depressions in which a lot of debt is denominated in foreign currency are especially difficult to manage because policy makers’ abilities to spread out the pain are more limited.

It can be downloaded for free here:

https://www.principles.com/big-debt-crises/

 

Adam Taggart's picture
Adam Taggart
Status: Peak Prosperity Co-founder (Offline)
Joined: May 26 2009
Posts: 3210
Trying To Land Dalio

Nate -

I've been trying to land Ray Dalio as a podcast guest since that book came out.

No luck so far. Spoke on the phone to one of his staff who said she'd get it to him for consideration. Haven't heard anything back despite sending several follow-up emails.

Will keep trying. But if anyone has any useful contacts inside Bridgewater, please direct me their way...

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