PM Daily Market Commentary - 1/2/2019

davefairtex
By davefairtex on Thu, Jan 3, 2019 - 3:49am

On the first trading day of 2019, gold rose +1.89 [+0.15%] to 1290.04 on heavy volume, and silver moved up +0.02 [+0.13%] to 15.58 on very heavy volume. The buck shot up +0.70%, SPX barely eeked out a gain [+0.13%], while the 10-year dropped -2.5 bp to 2.66% - a low dating back almost a year.

Gold made another new a new high to 1294.54; to me it was a minor miracle that gold managed to avoid selling off as the Euro plunged hard for much of the day. The long white candle was neutral, while forecaster inched higher and remains in a modest uptrend. Gold/Euros jumped to a new high, up +1.17%; GC.EUR broke above a previous high to levels not seen since May 2017, and that weekly GC.EUR forecaster is showing a very strong uptrend. Gold remains in an uptrend in all 3 timeframes, in both USD and EUR.

COMEX GC open interest rose +1,320 contracts.

Rate rise chances – I now have to be talking about rate-cut chances, which are at 1.6% for the March 2019 meeting, and 16% by the December 2019 meeting. Click on the link below to look for yourself. Once on the page, you need to click on the date to see the balance of bets on the rate outcomes for that particular meeting. https://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html

Silver traded in a fairly wide (30c) range range, making a new high to 15.68 after first dropping to 15.38 early in Asia. The high wave candle was neutral, and forecaster fell somewhat but remains in an uptrend. Silver is overbought, with the RSI-7 at 83. Silver remains in an uptrend in all 3 timeframes.

COMEX SI open interest rose +5,362 contracts. That's a large increase: about 11 days of global production in new paper. Perhaps the shorts are thinking that silver's current run is nearing the end.

The gold/silver ratio fell -0.04 to 82.64. That's neutral.

Miners were mixed, with GDX down -0.19% on moderate volume, while GDXJ rose +0.36% on light volume. XAU climbed +0.40%, making a new high. XAU's spinning top candle was a bullish continuation, and forecaster moved a bit higher, but remains in a relatively weak uptrend. XAU remains in an uptrend in all 3 timeframes. Ever since the December Fed meeting, the mining shares have had a lot of trouble moving higher. That's a fairly sharp contrast with what gold and silver have done in recent weeks. I'm not sure what it means; maybe its just an artifact of the safe haven dynamic.  Its hard to say.

The GDX:$GOLD ratio plunged -0.34%, while the GDXJ:GDX ratio rose +0.55%. That's mildly bullish.

Platinum fell -0.12%, palladium dropped -0.23%, while copper moved down -0.80%. It looks like both platinum and palladium mostly just chopped sideways, while copper followed the Euro downhill. It is a bit surprising that silver managed to pull out a gain today given copper's drop.

The buck shot up +0.67 [+0.70%] to 96.30. The trading range for the buck today was very wide – selling off early in Asia, and forecaster looks as though it might be ready to reverse back up. The buck is back above its 9 and 50 MA lines. Every time I think the buck has picked a direction, it does something like this to reverse it. The buck remains in a downtrend on the daily and monthly timeframes, but the daily is very close to a reversal.

Currency moves included: EUR [-1.13%], GBP [-1.17%], and JPY [+0.75%]. JPY is particularly interesting because it is up about 4.4% over the last 2 weeks, and it just continues to scream higher. Perhaps: Mrs Watanabe (https://www.investopedia.com/terms/m/mrs-watanabe.asp) is pulling her family's money back to Japan as concerns over a global slowdown increases. If true, it would be yet another risk off signal.

Crude rallied today, up +0.50 [+1.08%] to 46.66. Just before 10 am, crude shot higher – almost $3 over the course of just one hour – but the rally didn't hold. The spinning top candle was neutral, but the daily forecaster fell, moving closer to a bearish reversal. Still the news isn't all bad – the monthly forecaster will issue a buy signal if crude closes here by end of month. Hmm. That's a long way away. Still, if crude can just side-track, it might signal the end of the downturn. Crude is now in an uptrend in the daily and monthly timeframes.

SPX rose +3.18 [+0.13%] to 2510.03. SPX had sold off hard in the futures markets overnight (down 60 points!), but then was pulled back up again at least in part due to the crude oil rally. However after the close, AAPL issued an earnings warning, which took the futures down 35 points in less than an hour. Apparently, at some point, increasing iPhone prices stops working as a corporate sales strategy. What Would Steve Do?  Something creative, no doubt, but he is no longer with us. SPX remains in a downtrend in both the weekly and monthly timeframes.

Sector map had energy leading (XLE:+1.97%) along with communication services (XLC:+1.33%), while REITs (XLRE:-2.29%) and utilities (XLU:-1.72%) did worst. That's a fairly bullish sector map – rotation out of yield and into risk. Before reading too much into that, let's see how that looks after tomorrow's market close, what with AAPL's earnings warning and all.

VIX fell -2.20 to 23.22. That's down from a high of 36.

TLT rose +0.53%, breaking out to a new high. TY climbed a similar amount, up +0.52% - that's a very strong move for TY, which remains in an uptrend in all 3 timeframes. The 10-year yield fell -2.5 bp to 2.66%. It feels as though traders came back from the holidays and dropped all their spare change into the bond market. That doesn't really support a “bullish equities” thesis.

JNK fell -0.12%; that was good for a swing high (46% reversal). While forecaster plunged also, it remains in an uptrend, but not by much. JNK also isn't supporting “bullish equities”.

CRB rose +0.35%, with 4 of 5 sectors rising, led by energy (+2.00%). Industrial metals were hit hard, falling -2.00%. That's a new low dating back to mid-2017. Most likely that's about bad news from China.

In spite of the rally that SPX managed to eek out, the overall picture sure looks like trouble ahead. What do we have?

  • terrible industrial metals performance, down 26% from the 2018 peak, with no bottom in sight, with a 2% plunge just today.

  • JNK looks about to reverse lower – looks like a dead cat bounce.

  • Gold continues to perform well – extremely well across the pond.

  • A continuing stream of bad data from China – with AAPL's declining sales in China providing the latest bit of bad news.

  • Oil having trouble rallying

  • JPY is screaming higher

  • Long bonds are attracting a whole lot of money; +58 bp on the 10-year in less than 2 months.

  • Market is now projecting a Fed rate cut, rather than a rate increase, for the first time in years.

This is a fairly uniform message. When money steadily moves into bonds, gold, and safe haven currencies, it signals possible trouble ahead.

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