PM Daily Market Commentary - 11/29/2018

davefairtex
By davefairtex on Fri, Nov 30, 2018 - 6:27am

Gold rose +2.46 [+0.20%] to 1229.95 on heavy volume, while silver fell -0.03 [-0.21%] to 14.38 on heavy volume also. The buck was virtually unchanged, up +0.01%.

Gold staged a small failed rally today, trying to move higher but largely failing. The spinning top candle (which looked a bit like a shooting star) was a bullish continuation, and forecaster rose +0.21 to +0.09, which was a buy signal for gold. This puts gold in an uptrend in both the daily and weekly timeframes. Really not much happened today.

COMEX GC open interest fell -26,849 contracts. The change in OI continues to be remarkably large; this week has seen the largest one-week drop in OI on record, more than 103k contracts, and the week isn't over yet! The COT report – the one for next Friday – should be pretty interesting. Hopefully it will paint us a picture of who bails out right before First Notice Day.

Rate rise chances (December 2018) remains at 83%.

Silver underperformed gold, perhaps dragged down by the fall in the other metals. Trading range was narrow: the short black/NR7 candle was unrated, and silver forecaster moved down just -0.01 to +0.07. Silver remains in an uptrend in all 3 timeframes.

COMEX SI open interest fell -5,413 contracts.

The gold/silver ratio rose +0.35 to 85.53. That's bearish. The gold/silver ratio remains at multi-decade highs – that usually happens around a low for PM.

Miners fell, with GDX off -0.88% on light volume, while GDXJ dropped -1.21% on moderately light volume. XAU dropped -1.11%, and its closing black marubozu was bearish (40% reversal), but forecaster rose +0.01 to -0.05. XAU on the daily chart seems uncertain about where it will go next. XAU remains in a downtrend in both daily and weekly timeframes - but the monthly forecaster is in a pretty clear uptrend.   

The GDX:$GOLD ratio fell -1.03%, and the GDXJ:GDX ratio dropped -0.34%. That's bearish.

Platinum fell -0.69%, palladium dropped -0.18%, while copper moved down -0.57%. It looks like there was some selling pressure after yesterday's relatively strong moves higher.  Platinum, perhaps pressured by bad news from the US auto industry continues to fall.

The buck edged up +0.01 [+0.01%] to 96.28. The trading range was narrow; the short black candle was a bearish continuation. A day after Powell's statement that caused yesterday's big drop, traders are probably looking to the weekend and the G-20 meeting. A failure to come to an agreement would probably lead to a sharp rally in the buck, as 25% tariffs would be bad economic news for China and that probably would lead to some strong risk-off sentiment.  A settlement would lead to a risk-on move, and in currency world, that means a falling dollar.  Perhaps foreshadowing that, the buck remains in a downtrend in both the daily and weekly timeframes.

Crude rose +0.93 [+1.84%] to 51.41. Crude made a new low to 49.56, but dip-buyers actually appeared, resulting in a reasonably strong rally. Crude didn't hang on to all of its gains, but the long white candle was bullish (42% reversal), which is as strong as it gets for this candle type. Forecaster dropped -0.04 to +0.11. Looking to the weekly print, I see a spinning top/long white which the code says is actually a bearish continuation. That suggests a “bottoming process” rather than an immediate rebound. Of course, that could change by the end of trading Friday, but that's what things look like today. Crude remains in a downtrend in both the weekly and monthly timeframes.

SPX fell -6.72 [-0.24%] to 2737.06. SPX tried one of those late-afternoon rallies, which failed. The long-legged doji was a bullish continuation, and forecaster climbed +0.17 to +0.89, which is a strong uptrend. SPX remains in an uptrend in the daily and monthly timeframes.

Sector map had materials (XLB:+0.72%) and energy (XLE:+0.65%) leading, while tech (XLK:-0.97%) and financials (-0.85%) did worst. That's a bearish sector map.

VIX rose +0.30 to 18.79.

TLT rose +0.39%, erasing most of yesterday's drop, but not enough to pull forecaster back into an uptrend. TY climbed +0.15%, breaking out to a new high, with the spinning top candle being a bullish continuation. Forecaster dropped -0.26 to +0.15, which is still an uptrend. Today's move was enough to pull the monthly into an uptrend – which brings TY into an uptrend in all 3 timeframes. The 10-year yield fell -0.9 bp to 3.03%. The last time the 10-year was here was two months ago.

JNK rose +0.06%, moving slightly higher after yesterday's big rally. JNK is in an uptrend – and is signaling risk on, at least for now anyways.

CRB rose +0.60%, with 4 of 5 sectors moving higher, led by energy (+1.40%). Energy has been chopping sideways now for the past 4 days. It could be a low.

Powell's apparently policy change was only good for one day's move in risk assets. I suspect focus is now turning almost entirely to the G-20 meeting this weekend.

The 10-year continues to be the surprising winner, and looking at the rest of the yield curve, it sure looks like money is flowing into treasury bonds, especially the middle-dated area. In fact, the 5 & 7 year bond charts look the strongest. Something Charles said to me a while back comes into play: if you have a bunch of cash and see a recession coming, one simple strategy is to buy a 5 year Treasury, which will make you 3% (now 2.85%) for the full duration of the recession. It will provide you some yield without a lot of risk to capital in either direction. It is also a bet on the currency too.

In other words, the bond market is telling us that big money is most likely sniffing out the coming recession.

I fully expect a risk-on rally if we get some sort of trade settlement after the G-20. The key test of just how much emphasis we should put on the long-lasting effects of a settlement (and there will be some, for sure) lies with the bond market. That will tell us just how enthusiastic big money is about the prospects going forward.

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1 Comment

charleshughsmith's picture
charleshughsmith
Status: Platinum Member (Offline)
Joined: Aug 15 2010
Posts: 726
thanks for the mention

Dave, thanks for the mention.  The 5-year Treasury trade might yield more than 3% if the Fed drops rates to near-zero quickly enough.  That 5-year T-bill gains in value as rates plummet, so there's a potentail capital gain there if the owner sells with a couple years left on the duration. But we're hoping you can top-tick the peak in interest rates...

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