PM Daily Market Commentary - 1/7/2019

davefairtex
By davefairtex on Tue, Jan 8, 2019 - 9:32am

Gold rose +4.54 [+0.35%] to 1294.66 on heavy volume, while silver dropped -0.05 [-0.32%] on moderately light volume. The buck plunged -0.55%, while SPX moved up +0.70%. Apart from the reasonably strong move down in the buck, today wasn't all that eventful – at least by comparison to the past month or so anyway.

Gold rallied in Asia and London, topping out before the US market opened at about 8:30 am, but then sold off losing most of its gains even though the buck continued to drop. Gold's forecaster jumped enough to issue a buy signal for gold. Gold is now back into an uptrend in all 3 timeframes. In spite of today's buy signal and the fact that gold remains above the 9 MA and today's candle pattern is fairly benign, my sense is the safe haven effect is weakening a bit – intraday, gold's fall coincided with the drop in treasury bill futures. 

COMEX GC open interest rose +9,461 contracts. It looks like the shorts are starting to load up here.

We are back to hints of a rate cut (5.6%) for March, and a split decision (11% rate cut, 13% rate increase) for December.

Silver rallied along with gold, eventually failing, and then declining some more during the US session. Silver's long black candle was unrated, but silver forecaster fell further, moving silver daily deeper into downtrend. Silver remains in an uptrend in the weekly and monthly timeframes, and although there is no specific bearish candle pattern, the daily forecaster is hinting of a correction coming soon.

COMEX SI open interest rose +2,715 contracts. As with gold, this looks like increased shorting activity.

The gold/silver ratio rose +0.55 to 82.25. That's bearish. When silver underperforms gold, that's a bad sign – it is a hint of a correction ahead for PM.

Miners fell today, gapping up at the open, and then selling off all day long. GDX fell -1.22% on moderate volume, while GDXJ dropped -1.47% on light volume. XAU moved down -0.93%; the bearish belt hold was mildly unpleasant (36% reversal), but forecaster dipped just slightly – it remains in a reasonably strong uptrend. XAU remains above all 3 moving averages, and in an uptrend in all 3 timeframes, but the upside momentum in the longer-term timeframes is definitely beginning to drop.

The GDX:$GOLD ratio fell -1.57%, and the GDXJ:GDX ratio dropped -0.25%. That's bearish.

Platinum rose +0.02%, palladium moved up +0.04%, while copper dropped -0.53%. Copper staged a huge rally last Friday; today's drop didn't retrace much of Friday's gain. Not much happened with the other metals today.

The buck was hit fairly hard, dropping -0.53 [-0.55%] to 95.09, making a new low. (A new low today is fairly well-correlated with a drop in price tomorrow). The black marubozu candle was a bearish continuation, and forecaster plunged issuing a sell signal on the daily. The buck is now in a downtrend on both the daily and monthly timeframes.

Large currency moves include CHF [+0.69%], EUR [+0.93%] and AUD [+0.49%]. The AUD move felt a bit like risk on to me. 

Crude tried to rally, making a new high to 49.79, but ultimately lost most of its gains, ending the day up just +0.48 [+0.99%] to 49.14. The short white/spinning top was mildly bearish (35% reversal), but forecaster disagreed, moving higher into an uptrend. This marks 5 days up in a row for crude, which remains in an uptrend in all 3 timeframes.  The bounce in crude looks reasonably strong; API report is out tomorrow, and EIA on Wednesday.

SPX rose +17.75 [+0.70%] to 2549.69. Today was a relatively uneventful day in the equity market; price made a new high, and the spinning top candle was a bullish continuation. Forecaster moved higher into uptrend – which currently is relatively mild. Weekly forecaster issued a buy signal today, assuming we close at these prices at end of week. This puts SPX in an uptrend in both the daily and weekly timeframes.

Sector map showed discretionary (XLY:+2.26%) leading along with energy (XLE:+1.49%), while utilities (XLU:-0.68%) and staples (XLP:-0.14%) did worst. That's a somewhat bullish sector map.

VIX rose +0.02 to 21.40.

TLT fell -0.29%, gapping up at the open and then selling off (along with gold) during the trading day. TLT forecaster issued a sell signal, and TLT printed a 3 candle swing high. TY also fell, losing -0.16%, and TY daily issued a sell signal as well. TY remains in an uptrend on the weekly and monthly timeframes, however. The 10-year yield rose +2.3 bp to 2.68%.

JNK shot up +1.11%, a huge rally for crappy debt, gapping up at the open and rallying all day long. Forecaster moved into a very strong uptrend. JNK's move today underscores the risk on mood in equities. No problems in the credit markets at all – at least not at retail anyway.

CRB rose +0.74%, with all 5 sectors rising, led by livestock (+0.70%).

It looks as though there is a certain amount of worry receding from the risk markets – we see currency and junky debt moves that support this, alongside some selling pressure in gold, silver, and treasury bonds. There were some positive noises about the China trade negotiations, and although the government shutdown continues, it currently does not seem to be much of a drag on the markets.

Ultimately, if crude continues to rally, that should help lift equity prices, as there are some pretty deep discounts in energy equities after the pounding they took over the last few months of 2018. And my code is currently showing a reversal in all timeframes for crude.

Is this just a bear market rally for equities? Yes probably. But there will be enthusiasm if that trade deal gets done, and if the government shutdown ends, and suddenly there are smiles all around Washington.

Just for what its worth, I have a new – highly experimental – reversal model that tries to predict where prices will go in the next 4-10 days, and emits a blue ball if it thinks price will rise, and a red one if it thinks price will fall, and no ball at all if it can't decide. From what I'm told by “sources with knowledge on the matter”, that approach is more likely to be accurate than trying to predict the trend. Here's what it looks like for SPX: that collection of red balls says "dead cat bounce" to me.  This is a similar approach to what I used for bitcoin.

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