PM Daily Market Commentary - 12/10/2018

By davefairtex on Tue, Dec 11, 2018 - 8:48am

Gold fell -3.94 [-0.31%] to 1251.07 on moderate volume, while silver dropped -0.08 [-0.58%] to 14.62 on moderately light volume. The buck shot up +0.74%, a very large move; considering that, gold and silver actually did fairly well. The equity market was hit hard but then recovered, rising +0.18%.

The big news of the day is that UK PM May decided to pull the BRExit vote scheduled for tomorrow; she would have lost the vote badly, apparently. Pound cratered as a result, down -1.37% - a low that dates back to April 2017. Good news: the plunging pound will help insulate real people in the UK from some of the difficulty, at least for locally-produced things. Assuming the UK produces things these days. It doesn't bode so well for the sales of the German automakers.

I'm still not altogether sure that this isn't just a clever plan by May to get more concessions from the EU. Certainly by proposing such a terrible deal, it almost forces parliament to say no – she shrugs, goes back to the EC, points at Bad Cop Parliament, and says “well we tried it your be reasonable or else its a Hard BRExit for you!” Perhaps its just wishful thinking, hoping our leaders are that smart, willing to look like idiots in the short term in order to get a better deal for their country.

Gold made a new high to 1256 at the open in Asia, but slowly sold off for the remainder of the day. The long black candle was a bullish continuation, while forecaster fell -0.23 to +0.24, which means gold remains in an uptrend. Gold remains in an uptrend in all 3 timeframes, as does gold/Euros.  Gold did remarkably well given the strong rise in the buck today.

COMEX GC open interest fell -3,567 contracts.

Rate rise chances (December 2018) rose to 77%.

Silver had much the same pattern, but sold off a bit harder than gold; the dark cloud cover candle was mildly bearish (35% reversal), and forecaster dropped -0.14 to +0.09. That was enough to drag silver's weekly candle into a downtrend, assuming we close here by end of week. That leaves silver in a downtrend in both the weekly and monthly timeframes.  Silver has yet to break above its multi-month trading range.  Breakout = close above 15.

COMEX SI open interest fell -2,864 contracts.

The gold/silver ratio rose +0.26 to 85.57. That's somewhat bearish. The gold/silver ratio remains at multi-decade highs – that usually happens around a low for PM.

Miners moved lower, with GDX down -0.35% on heavy volume, while GDXJ dropped -1.00% on moderate volume. XAU fell -0.79%, with the bearish harami candle actually a bullish continuation. Forecaster dipped -0.13 to +0.54, which is still a strong uptrend for XAU. XAU remains in an uptrend in all 3 timeframes.

The GDX:$GOLD ratio dipped -0.03%, while the GDXJ:GDX ratio fell -0.65%. That's slightly bearish, but the juniors continue to underperform.

Platinum fell -1.15%, palladium dropped -0.78%, while copper moved down -1.11%. Platinum continues to do horribly – it just keeps making new low after new low. I checked the COT report: managed money added heavily to their short positions last week. Blame managed money for the sharp downtrend – PL is down 10 of the last 14 days. Palladium remains within a few bucks of its all time high, while copper is somewhere in the middle – a short term downtrend, but it has been chopping sideways over the past few months.

The buck rallied +0.71 [+0.74%] to 96.72. The sharp move higher brings the buck back to within spitting distance of its recent high a little above 97. The strong move wasn't enough to pull the buck out of its 3-timeframe downtrend, although it is back above the 9 MA, so that's a plus. Is money flowing back into the buck? It certainly seems so. I'm surprised the Euro didn't plunge more, with all the fuss in France, Italy, and now the incredibly pro-EU BRExit looking as though it won't happen.

Big losers today were GBP (-1.37%) and CAD (-0.97%),

CNY fell again, gaining +0.04 vs the buck to 6.91 [+0.50%]; the level to watch is 7.00.

Crude fell -1.22 [-2.33%] to 51.16. It looks as though the OPEC production cut (OPEC: -800 kbpd, non-OPEC: -400 kbpd) wasn't enough to encourage a rebound – perhaps the markets are in a wait-and-see mode. That, or the worries that are hitting equities are also infecting crude as well. The long black candle was neutral, but the forecaster dropped -0.33 to -0.28, which is a sell signal for crude. That puts crude in a downtrend in all 3 timeframes. API comes out tomorrow after market close. Nick Cunningham on the OPEC production cuts:

SPX rose +4.64 [+0.18%] to 2637.72. SPX dropped substantially in the morning, making a new multi-month low to 2583 (down 50!), and then bounced back strongly. The high wave candle looked strong (42% reversal), which is very good for this candle type. Forecaster dropped -0.11 to -0.80; that's a strong downtrend. Interestingly, the weekly chart looks much better; weekly forecaster is quite close to a buy signal after 9 weeks in negative territory. The weekly has done a good job of picking the trend for SPX. This may actually be the low.

Sector map had tech leading (XLK:+1.38%) along with communications (XLC:+0.76%) while energy did worst (XLE:-1.56%) along with financials (XLF:-1.39%). This was a mixed sector map – seeing financials at the bottom isn't great news.

VIX fell -0.59 to 22.64.

TLT rose +0.41%, another new high. The doji candle was a bullish continuation; TLT remains in an uptrend. TY fell -0.07%, the long black candle a bullish continuation, and forecaster remains in an uptrend – all 3 timeframes. The 10-year yield rose +0.6 bp to 2.86%. Looking at the 10-year yield chart, it sure feels to me as though we're close to a low; RSI-7 is at 10. That's really extended.

JNK fell -0.09%, making a new low but then bounced back strongly along with SPX; the southern doji was mildly bullish (30% reversal). JNK remains in a downtrend.

CRB fell -1.36%; all 5 sectors fell, led by energy (-2.87%). Energy is really struggling right now. I can only imagine what it will look like if we go into recession. Oil at $30? It could happen.  What would that do to the oil industry?  The mind boggles.

I'm not quite ready to a call a low yet for SPX, but I'm pretty close to doing so. I feel that the bond market rally is quite extended, and all the near-term equity-market selling is probably overdone given the current economic situation in the US, which remains largely positive.

Here's that SPX weekly chart I was talking about. This is at least part of what is driving my thoughts on equities – at least in the near term anyways.

[SPX chart]

I really wouldn't be short equities right now. Nor would I jump into the long bond either. And if equities rally, that's probably bad news for gold.

Of course, there's BRExit, FRExit, Italians-get-fined, its just never a dull moment across the pond. That would probably also drive money into the buck, and US assets along with it.

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1 Comment

davefairtex's picture
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5863
France budget blowing out

Macron throwing money at the protesters doesn't come for free, apparently.

Any bets that the EU is going to give France an Italy-style spanking over this failure to budget properly?

Since Macron is a charter member of the club, I'm just gonna guess that France will get a pass, while, with a perfectly straight face, the EU will end up fining Italy for their egregious budgetary excess.

Which will be good for another bump in the polls for Mr Salvini.


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