PM Daily Market Commentary - 12/3/2018

davefairtex
By davefairtex on Tue, Dec 4, 2018 - 5:41am

Gold rose +8.47 [+0.69%] to 1236.56 on moderately heavy volume, while silver rose +0.21 [+1.44%] to 14.46 on heavy volume. The buck fell -0.28%, SPX rallied +1.09%, but crude was the big winner: up +4.73%.

This is the first trading day after the Trump-Xi meeting at the G-20. We now have our first clues as to what “the market thinks” of the settlement prospects. Or, if you are Chris, you might view at this as: what the “”market”” “”thinks”” of the settlement. :)  I maintain we can still get clues out of price movements, especially if they are surprising, and those clues are potentially useful at sniffing out where things might be headed.

Gold rallied steadily throughout much of the day, finally running into resistance around 1240. Gold managed to break above its recent high; it really needs a close above 1240 where there seems to be a fair amount of resistance. The long white candle is a bullish continuation, but forecaster dipped -0.05 to -0.06. I'm not sure why it did that, given the new high. Gold remains in a downtrend in both the daily and monthly timeframes.  Even so, the breakout is still good news.

COMEX GC open interest rose +8,140 contracts.

Rate rise chances (December 2018) are at 85%.

Silver rallied sharply, but ran into heavy selling pressure at 14.65, eventually losing most of its gains by the close.  I'm guessing the sharp intraday decline in copper, which happened at roughly the same time, was the proximate cause for silver's reversal.  Still, silver managed to print a swing low (56% reversal), and today's rally was enough to trigger a buy signal on the weekly (assuming we close here at end of week).  Silver is still in a downtrend in both the daily and monthly timeframes.

COMEX SI open interest fell -3,482 contracts. That looks like some short-covering.

The gold/silver ratio fell -0.67 to 85.52. That's bullish. The gold/silver ratio remains at multi-decade highs – that usually happens around a low for PM.

Miners gapped up, sold off, and then rallied back by the close, with GDX up +1.83% on moderate volume, while GDXJ climbed +1.81% on light volume. XAU rose +2.14%, and the confirmed bullish NR7 was definitely bullish, and forecaster agreed, rising +0.69 to +0.27, which is a buy signal for the miners. XAU is now in an uptrend in the daily and monthly timeframes. The weekly looks as though its about to trigger a buy signal soon too.  Overall, the miners looked quite positive today.

The GDX:$GOLD ratio rose +1.14%, and the GDXJ:GDX ratio fell -0.03%. That's bullish.

Platinum rose +1.04%, palladium climbed +1.05%, and copper inched up +0.04%. There were a lot of failed rallies in the other metals. Copper looked worst of all – gapping up more than 2% at the open, and selling off hard once the US market opened, losing almost all its gains. Most likely it was copper's plunge starting at 930 am that took silver down.

The buck fell -0.27 [-0.28% to 96.50. The buck actually sold off substantially more, but managed to rebound; most of today's loss came at the gap down open. The bearish harami was actually neutral, but forecaster dropped -0.35 to -0.34, which was a sell signal for the buck. Interestingly, this also triggered sell signals in both the weekly and monthly timeframes too. End of month is a long way away, but this could be a multi-month top for the buck.

CNY was the big winner in the larger currencies, staging a strong rally (+1.07%), dropping -0.07 to 6.88. AUD also did well, up +0.63% along with the Euro (+0.65%). Most of the moves happened at the open.

Crude rose +2.43 [+4.78%] to 53.28 – it was the big winner of the day. While crude did gap up at the open, it rallied more substantially during the day. The opening white candle was a bullish continuation (and also a 3-candle swing low), while forecaster ticked up +0.02 to +0.11.  Forecaster looks uncertain about just how strong the new uptrend will be, but at least it's pointing up and not down.  Crude closed above its 9 MA for the first time in in 8 weeks. This is an early positive sign. Crude remains in a downtrend in both the weekly and monthly timeframes, but momentum looks as though it is starting to reverse.  In the geopolitical arena, Qatar (home to Al Jazeera) announced it was quitting OPEC.

SPX rose +30.21 [+1.09%] to 2790.37. All of the gains in SPX came at the gap-up open – in the futures markets. This tells you the candle print was a doji (28% bearish reversal), but forecaster moved up +0.05 to +0.85, which is still a strong uptrend. The move was enough to cause the weekly to issue a buy signal, assuming we close here by end of week. SPX is now in an uptrend in all 3 timeframes, and is now back above all 3 moving averages.

China's SSEC rose +2.57%, a strong day, with almost all of the gains coming at the open.

Sector map had energy leading (XLE:+2.22%) along with tech (XLK:+2.21%), while sickcare (XLV:-0.48%) and staples (XLP:+0.09%) did worst. That's a fairly positive sector map.

VIX plunged -1.63 to 16.44.

TLT rose +0.48%, doing surprisingly well during what theoretically should have been just a risk-on day. TLT remains in an uptrend, and it made a new high. TY rose +0.05%, not nearly as strong, but that concealed a large intraday rally: TY gapped down hard at the open in the futures markets overnight, but it managed to rally back to a little above even by the close – printing a relatively rare bullish strong line candle. TY also made a new high, and remains in an uptrend in all 3 timeframes. TY forecaster dropped -0.05 to +0.45, which is still a reasonably strong uptrend. The 10-year yield fell -2.1 bp to 2.99%. That's not what I expected.

JNK rose +0.23%, but unlike SPX, it did not make a new high. JNK forecaster actually issued a sell signal. That's not a vote-o-confidence in risk from junky debt – especially with the strong rally in crude.

CRB rose +0.97%, with 4 of 5 sectors moving higher, led by energy (+2.85%). The general commodity market rally wasn't as strong as I expected it to be, but it was still pretty reasonable.

Today's pattern seemed to be optimism in Asia, and selling pressure in the US, at least for the commodity markets. The US 10-year and crude oil were the surprises of the day; crude's rally was presaged by 5 days of sideways chop, and the 10 year made new highs. US equities did move higher, but that was all about the gap up open – there was no intraday follow-through.  The SPX doji candle says that buyers and sellers were evenly balanced.  And that strong recovery in the 10-year is not a good sign; neither is the feeble rally in JNK.

Gold and silver did relatively well; there wasn't any wall of short-selling that hit the metals, even with the failed rally in silver. In fact, according to theOI, silver looked as though there was actually short-covering going on. In early Tuesday trading in Asia, the metals have moved higher, repeating the “optimism in Asia” theme from yesterday.

As of right now, based on the 10-year, JNK, SPX, and copper, I'm not seeing new highs for SPX, but we could well see a continued move higher in PM, and also a continued rally in the 10 year treasury, but we probably need more than one day to sort out the trend. Crude is the big question mark for me. Once the overextension is washed out, where will it end up going next?

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