PM Daily Market Commentary – 01/30/2020

Login or register to post comments Last Post 0 reads   14 posts
Viewing 10 posts - 1 through 10 (of 14 total)
  • Thu, Jan 30, 2020 - 11:58pm

    #1

    davefairtex

    Status Member (Offline)

    Joined: Sep 03 2008

    Posts: 2089

    count placeholder1+

    PM Daily Market Commentary – 01/30/2020

Gold fell -2.80 [-0.18%] to 1578.90 on moderately heavy volume, while silver rallied +0.27 [+1.53%] to 17.87 on moderately heavy volume also. The buck moved lower [-0.12%] as did crude [-0.23%], while SPX climbed +0.31%, and bonds rallied also [10-Year yield fell -3.0 bp].

Today’s market-moving news: the WHO declared the Wuhan Coronavirus to be a PHEIC (Public Health Emergency of International Concern). This caused a widespread relief rally in most risk assets following the announcement.

https://www.who.int/news-room/detail/30-01-2020-statement-on-the-second-meeting-of-the-international-health-regulations-(2005)-emergency-committee-regarding-the-outbreak-of-novel-coronavirus-(2019-ncov)

Gold spent most of the day moving higher, hitting 1590 just after lunch in the US, but then dropped hard in the afternoon in New York after the WHO emergency declaration. The long black/shooting star candle was a possible bearish reversal (36%), forecaster dropped, but remains in a slight uptrend. Gold remains in an uptrend in all three timeframes.

COMEX GC open interest fell -11K contracts. That was -3 days of global annual production in paper removed from the market. Current open interest for GC: 63% of global annual production, down -1.03% today.

Futures project a 13% chance of a rate cut at the 18 March FOMC meeting.

Like gold, silver rallied for much of the day, hitting 18.04 at around 11 am, then selling off after the WHO declaration, but managing to hold on to most of its gains. The swing low candle was a likely bullish reversal (68%), forecaster climbed, but remains in a downtrend. Silver is in an uptrend in the monthly timeframe, and in a downtrend on the daily. While the candle print was positive (in fact, this was a very high rating for a swing low), silver wasn’t quite able to close above that 9 MA.

One interesting note: that big one-minute spike down yesterday may have been the “tell” for today’s large silver rally. Sometimes the banksters like to run the stops of the longs prior to bidding the price higher – so that the poor guys bailing out at the lows are forced to re-buy at much higher prices after the rally. Trading futures is a tough business. It is easier for me (emotionally) just to put my pennies in unleveraged PSLV and watch the shenanigans from a safe distance.

COMEX SI open interest rose +1.8K contracts. That was 3 days of global annual production in new paper added to the market. Current open interest for SI: 132% of global annual production, up +1.05% today.

The gold/silver ratio dropped -1.51 to 88.35. That’s bullish.


The miners sold off at the open, rallied along with gold to a mild new high in the afternoon, and then dropped after the WHO announcement. GDX moved down -0.45% on moderate volume, and GDXJ fell -0.41% on moderate volume. XAU actually rose +0.40%, the northern doji candle was a reasonably strong bearish reversal (43%), and forecaster dropped, moving deeper into its downtrend. XAU is in an uptrend in the weekly and monthly timeframes.

The GDX:gold ratio dropped -0.27%, and the GDXJ:GDX ratio climbed +0.04%. That’s neutral.

Platinum rose +2.00 [+0.20%], palladium rose +30.54 [+1.37%], while copper fell -0.02 [-0.79%]. Copper made a new low once again, although it did rally strongly following the WHO announcement. Copper’s hammer candle was a reasonably strong (44%) bullish reversal, but forecaster remains in a strong downtrend.

The buck dropped -0.12 [-0.12%] to 97.50 on moderately heavy volume. The confirmed shooting star candle was a reasonably strong bearish reversal (48%), and forecaster fell, moving into a downtrend. The buck is still in an uptrend in the weekly and monthly timeframes. Today could mark the near-term top for the buck.

Major currency moves included: GBP [+0.64%], AUD [-0.52%]. USD/AUD is looking really awful right now – the currency pair another indicator of China’s near-term economic future.

Crude fell -0.12 [-0.23%] to 53.03 on moderately heavy volume. Crude moved lower for most of the day, then rallied sharply following the WHO announcement. The takuri line candle was a reasonably strong bullish reversal (48%), and forecaster climbed, but remains in a downtrend. Crude is still in a downtrend in all three timeframes.

Could this mark the low for crude? It might be a near-term low, certainly. Today’s takuri line bullish reversal rating was extremely strong for a single-candle print. Certainly there could be a lot of shorts ringing the cash register in the next day or two, and price did bounce off (roughly) 52 support. It is hard to know how the next few days will play out.

SPX climbed +10.26 [+0.31%] to 3283.66 on moderately heavy volume. As with many other items, SPX sold off in the futures markets overnight, then rallied sharply following the WHO announcement in the afternoon in the US. The closing white marubozu candle was a bullish continuation, and forecaster climbed, but remains in a downtrend. SPX is in an uptrend in the weekly and monthly timeframes.

Financials [+1.24%] led, along with staples [+1.17%], while communication services [-1.02%] and sickcare [-0.73%] did worst. This was a mildly bearish sector map.

The VIX fell -0.90 to 15.49.

TLT rose +0.01%. As with the other safe havens, TLT rallied for much of the day, then sold off following the WHO announcement. The shooting star candle was a possible bearish reversal (34%), but forecaster was unchanged, and remains in a strong uptrend. TLT is in an uptrend in the daily and weekly timeframes. The 30-Year yield fell -2.0 bp to +2.03%.

TY fell -0.03%. Like TLT, TY had a failed rally today. The doji candle was a bullish continuation, and forecaster dropped, but remains in an uptrend. TY is in an uptrend in all three timeframes. The 10-Year yield fell -3.0 bp to +1.57%.

No reversal at this point for bonds. It will require a confirmation tomorrow.

JNK climbed +0.14%. JNK spent most of the day in negative territory, rallying sharply after the WHO announcement. The closing white marubozu candle was a bullish continuation, and forecaster climbed, rising into an uptrend. JNK is now in an uptrend in the daily timeframe, and a downtrend on the weekly.

Recession Watch

Fed Balance Sheet: headline $4,151.6B, +5.7B (+0.14% w/w) (prior -0.72% w/w). No serious money printing this week.

Yield Curve Inversion: the 1-10 spread was unchanged at +9 bp today. 1Y: 1.48% (-3 bp), 10Y: 1.57% (-3 bp).

Summary

The WHO announcement caused a large risk-on move today. Regardless of what we might think about whether or not the WHO is advocating the correct policy prescriptions, the perception by the market seems to be that the Gang In Charge has (finally) noticed there is a problem, and that they are taking what appear to be reasonable steps to control the situation.

If you remember back to 2008 – for those of you who were watching markets back then – things didn’t go to hell in a straight line. All along the way, the government and the Fed took various actions which, for days and sometimes weeks, would cause the market to bounce back.

The resulting “reaction rally” moves were often violent, but the underlying trend remained in place: it was down.

I think that’s where we are now. And we should expect this sort of thing to happen on a daily if not weekly basis as time passes.

Again, I continue to watch copper. It is my “tell” about what the well-connected insiders are thinking about China’s near-term future – and who knows, maybe even the CCP oligarch-billionaires are playing in that market. Why wouldn’t they – they know far more about the real story than we do.

During 2008, each “reaction rally” was an opportunity to jump in short. Do we imagine that the WHO’s announcement will change anything on the ground in China?

Just saying.

Here’s your daily copper chart. Note the candle code’s assessment of a (44%) bullish reversal. Candle code has been trained on thousands of different instruments over a 30 year time period – it doesn’t know copper from a hole in the head, but a hammer candle print like this after a long decline has a decent chance of marking a low, at least for a time.

Same thing is true for crude.

It will be interesting to see if traders want to hold their positions over the weekend. These days, a weekend is a very long time.

Note: If you’re reading this and are not yet a member of Peak Prosperity’s Gold & Silver Group, please consider joining it now. It’s where our active community of precious metals enthusiasts have focused conversations on the developments most likely to impact gold & silver. Simply go here and enjoy the daily reports & discussion.

 

  • Fri, Jan 31, 2020 - 06:57am

    #2

    JAG

    Status Gold Member (Offline)

    Joined: Oct 26 2008

    Posts: 443

    count placeholder

    Copper/Gold Ratio and 10 Year Bonds

Hey Dave,

Have you ever heard about using the Copper to Gold Ratio as a directional indicator for 10-year bond yields?

I heard Jeffrey Gundlach bragging about its usefulness on one of the financial talking heads shows last month, but I don’t understand it. With copper making such a big move, I wonder what it portends for the bond market?

Thanks for the update….Jeff

  • Fri, Jan 31, 2020 - 09:54am   (Reply to #2)

    #3

    davefairtex

    Status Member (Offline)

    Joined: Sep 03 2008

    Posts: 2089

    count placeholder

    re: Copper/Gold Ratio and 10 Year Bonds

Chart says: sometimes the linkage is quite close, but sometimes, not so much.

  • Fri, Jan 31, 2020 - 09:58am

    #4

    davefairtex

    Status Member (Offline)

    Joined: Sep 03 2008

    Posts: 2089

    count placeholder1+

    new low: SPX

It might be a teensy bit premature, but as of now, it looks as though traders aren’t interested in holding equities over the weekend.  Looks like the WHO-PHEIC bounce lasted for all of a day.

New lows in copper, SPX, oil; new highs in the 10-year.

 

  • Fri, Jan 31, 2020 - 12:56pm   (Reply to #4)

    #5

    JAG

    Status Gold Member (Offline)

    Joined: Oct 26 2008

    Posts: 443

    count placeholder

    re: new low: SPX

I ditched my TLT, EDV, PSQ and TWM bear market plays just now with a pretty good profit…..thank you Mr. Dave.

Still holding my miners…..

I’m going to invest my profits from this week into a couple solar-powered mini-split heat pump air conditioners.

With my south Texas climate, I calculate a 12% annual return on this air conditioner investment. And you don’t have to pay taxes on savings lol, in fact, I’ll get a 25% federal tax rebate!

Thanks again Mr. Dave

JAG-

I’m going to invest my profits from this week into a couple solar-powered mini-split heat pump air conditioners.

Sounds like a good long term play.

I added some XLF puts.  June again.

My guess is, the pace will pick up from here.  I’m not sure I need that much time, but who can say for sure?  It is my first pandemic.  🙂

I added some XLF puts.  June again.

Sounds like a good play.

I am sitting on SPX June puts half already below the strike (put them on after sending my coronoavirus Alert), half “crash” puts at 2700 (which I’ve painfully held since last fall).

Not a ton…just enough to keep me focused.

Went with June as I didn’t want to pay a ton for time.  Thought this should all be tipped one way or the other by then.

The big question, of course, is not only what will the Fed do, but what can they do?  How much does fraudulently goosing stocks higher really do when every Wall Street bank and HFT outfit has decided it’s time to suck cash out of the market?

This is where we find out if the Fed’s magic printing press actually has what it takes to dominate the market.  If not, the only and most important narrative supporting this “”market”” shreds like tissue paper caught in a downpour.

When the story goes ‘pop’ goes the bubble.

A pandemic has the capability to do that.  Something about the vast gulf between the reality of a lethal microbe stalking the land and the Fed’s insistence that maintaining the illusion of normality via elevated stock prices…it’s a tension that cannot be maintained indefinitely and which possesses a metric megaton of potential energy.

That’s my theory.

  • Sat, Feb 01, 2020 - 06:05am   (Reply to #4)

    #8

    JAG

    Status Gold Member (Offline)

    Joined: Oct 26 2008

    Posts: 443

    count placeholder

    re: new low: SPX

Hey Dave,

Why the XLF? Just trying to pick your brain here.

With “Not-QE” being extended into 2020 Q2, wouldn’t that be very bullish for the banking stocks in particular? Unless the Fed is still doing QT, which appeared to be the cause of the repo blow-up in Sept?

I’m just spit-balling here because I really don’t know anything about the macro factors in play here. I just see a very tight correlation between repo market liquidity and stock prices.

And sentiment in the XLF looks like it’s moving towards a buy signal:

Not that one should give sentiment too much emphasis in this market environment. What do you see that I don’t?

Also, what is your two-cents on a short-play over the next week on the utilities sector? Too soon?

Thanks buddy.

  • Sat, Feb 01, 2020 - 02:48pm   (Reply to #4)

    #9
    MKI

    MKI

    Status Member (Offline)

    Joined: Jan 12 2009

    Posts: 202

    count placeholder1+

    re: re: re: re: new low: SPX

CM: Thought this should all be tipped one way or the other by then. The big question, of course, is not only what will the Fed do, but what can they do? This is where we find out if the Fed’s magic printing press actually has what it takes to dominate the market.

My model is different:  1. Real wealth is being created.  2. Fed now controls how wealth is distributed and is forcing all wealth-holders into “markets” to keep the real economy to stay afloat.  3. The next decade will be a politiccal decade of “bailouts for the worker” from Fed.  4. Just like Japan, the US has decades before debt wrecks our confidence game.

We will probably see dozens of articles crying how the US economy is simply a bug in search of a windshield (just like we did for Japan). These things oft go a LOT longer than seems possible (again like Japan).

CM: When the story goes ‘pop’ goes the bubble. A pandemic has the capability to do that.

A pandemic has no power controlling the redistribution of wealth, only to lessen wealth production for a time, and create fear. Both these make the public even more docile and easier to manipulate. Just like 2008, fear is a useful tool for political cover for the elites. I’m not sure about war or an oil crisis; those are wildcards.

Anyway, that’s my theory. Hope I’m wrong (but regardless keep 10% NW in physical PM w/my own well & food production to stay healthy/safe).

JAG-

Banks and tech tend to lead market direction, both up, and down.  I’m assuming that if we’re going to have a brisk correction, XLF will do poorly.

FOMC is now projected to cut at the next meeting (27% chance).  That’s a new development.  It won’t help the banks.

My play is longer term than just the next week or so.  I’m assuming the pandemic thing is real, that there are a bunch of cases not detected, and it will largely take out China for the next six months, that there’s a decent chance the virus will jump into Hong Kong, and the HKG-USD peg will snap, and that will cause a banking crisis.

Again, timeframe of next 6 months.

If the pandemic doesn’t happen, my trades will fail.

Just curious: what did your XLF “buy signal” indicator say during 2008-2009?

Viewing 10 posts - 1 through 10 (of 14 total)

Login or Register to post comments