PM Daily Market Commentary - 1/29/2019

davefairtex
By davefairtex on Wed, Jan 30, 2019 - 9:38am

Gold rose +8.10 [+0.62%] to 1216.70 on extremely heavy volume, while silver rose +0.09 [+0.57%] on moderately heavy volume. Crude bounced back strongly [+2.27%] but SPX was not impressed [-0.15%]. Let's go through what happened to see what it all might mean.

Gold rose steadily all day long, breaking out to a new high, and closing right at the highs of the day. The white marubozu candle was a bullish continuation, while forecaster dipped somewhat but remains in a relatively strong uptrend. Gold remains in an uptrend in all 3 timeframes. The very strong recent volume pattern combined with the breakout appears almost like a buying panic – I'm guessing it has to do with the upcoming Fed meeting, and the recent hints that the Fed will adjust its balance sheet roll-off schedule.

COMEX GC open interest fell -44k contracts. That's a huge drop. It might have something to do with the contract roll (which happened today) but it might also be shorts that are fleeing for the hills. We really need the COT report to tell us.

Futures are showing a 1% chance of an increase in March, and a split in December (22% increase, 6% decrease).

Silver popped higher in Asia making a new high, but then declined slowly into the close in New York. While silver made a new high for this cycle, it has yet to surpass the high set last month. The spinning top candle was a bullish continuation, and forecaster moved a bit higher, remaining in a strong uptrend. Silver remains in an uptrend in all 3 timeframes. However, notice we don't see the same heavy volume pattern in silver as we do in gold, and silver has yet to break out above the previous high. Silver is also underperforming gold a bit as well.

COMEX SI open interest rose +2,309 contracts.

The gold/silver ratio rose +0.09 to 82.86. That's neutral.

Miners gapped up at the open, dipped, and then took off for the rest of the day, closing at the highs. GDX climbed +2.42% on very heavy volume, and GDXJ rose +2.14% on extremely heavy volume. XAU jumped +2.61%, breaking out to a new high that dates back to August 2018. XAU is now back above its 200 MA. XAU's long white candle is a bullish continuation, while forecaster jumped into a very strong uptrend. XAU is now in an uptrend in all 3 timeframes. The miners look to be in a bit of a buying panic too; the heavy volume pattern is especially visible in GDXJ.

The GDX:$GOLD ratio rose +1.79%, while the GDXJ:GDX ratio fell -0.28%. That's bullish.

Platinum rose +0.28%, palladium climbed +1.03%, while copper rose +1.57%. This didn't quite make up for yesterday's plunge, but it did repair some of the damage, especially in copper.  All of the other metals charts' do not look nearly as strong as gold - at least over the last week or so anyway.

The buck moved up +0.08 [+0.08%] to 95.23, basically going nowhere. The spinning top candle was a bearish continuation, while forecaster fell deeper into a downtrend, in spite of the rally. The buck remains in a downtrend in the daily and monthly timeframes, but both downtrends look pretty unpleasant.  So far that monthly downtrend has been setting the tone for the buck.

There were some minor currency moves today: CHF: +0.46%.

Crude jumped +1.20 [+2.29%] to 53.53. Crude moved slowly higher, taking off at about 8:45 am after news hit that the US was declaring sanctions on PVDSA – the national oil company of Venezuela – affecting 500k bbls/day exported to the US. The rally didn't quite make up for yesterday's plunge, but it did pull crude back above the 9 MA. The long white candle was neutral, while forecaster ticked slightly higher, remaining in a relatively feeble uptrend – which describes the daily chart pattern fairly well. Crude remains in an uptrend in the daily and monthly timeframes.

SPX fell -3.85 [-0.15%] to 2640.00. Basically not much at all happened today in equities – the short black candle was unrated, while forecaster ticked higher, which is a tentative buy signal for SPX. I'm not sure it means anything. SPX is in an uptrend in both the daily and weekly timeframes now.

Industrials did best (XLI:+1.38%) along with materials (XLB:+1.04%), while tech (XLK:-1.08%) and communications (XLC:-1.18%) were the worst. That's a bearish sector map. AAPL's earnings released after market close looked positive – the stock popped $10 in the after hours trading session.

VIX rose +0.26 to 19.13.

TLT rose +0.51% - the long bond is slowly meandering higher, and remains in a relatively feeble uptrend. TY rose +0.24% - it is also now inching higher, but it remains in a downtrend in the daily and weekly timeframes, however those downtrends do not look all that serious. I suspect the monthly uptrend will eventually decide direction for bonds. The 10-year yield fell -3.2 bp to 2.71%.

JNK inched down -0.03%, basically going nowhere. The trend looks roughly similar – it cannot decide which direction JNK will go next. Cousin HYB looks slightly more bullish, making a new high today, but it too looks fairly feeble.

CRB rose +0.96%, not quite making up for yesterday's plunge. 4 of 5 sectors rose, led by energy (+2.42%). Once again energy is the big mover in the commodity space.

Both price and volume are telling me that traders are eager to buy gold right now. When price breaks out to new highs on heavy volume, as is happening right now in both gold and the miners, that's a very bullish sign.

I'm guessing this has to do with the upcoming FOMC meeting. We get an announcement at 2pm, with a press conference at 2:30. We will find out about that balance sheet rolloff, and given that the (gold) market appears to be expecting a dovish outcome, the risk is that Powell decides to back away from modifying the roll-off schedule. If that happens, I suspect gold wil sell off fairly hard.

Of course if Powell sets out explicit changes in the roll-off schedule, we could see that buying panic continue, perhaps even increase.

It sure seems as though the Fed's rate-increase campaign might be at an end.  And, quite possibly, so is QT.  We'll find out more today.

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2 Comments

thc0655's picture
thc0655
Status: Diamond Member (Offline)
Joined: Apr 27 2010
Posts: 1798
So, now we wait to see what happens at $1,350

So the Fed clearly slammed on the brakes (“unless and until”). Stocks are loving it and so are gold and silver. I guess the next big inflection point will be what happens to gold at the resistance at $1,350. The “unless and until” program looks like it needs a big smack-down of gold. 10... 9... 8... 7...

Michael_Rudmin's picture
Michael_Rudmin
Status: Diamond Member (Offline)
Joined: Jun 25 2014
Posts: 1041
New life, it looks like it'll clear the two-day.

Thc, I'm not so sure this is in the baliwack of the Fed here. Put me more in Dave Fairtex's camp. If the buyers show up, the fed can't do anything and is foolish to try.

Yes, I agree the next big test is 1350. And yes, I suspect it's going to pause here, but within three weeks blow straight through it.

That said -- I am not invested in gold right now. Not entirely a fair statement, though: I'm still in PMs.

But gold is as good a topic as any.

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