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PM Daily Market Commentary – 02/04/2020

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  • Wed, Feb 05, 2020 - 03:16am

    #1

    davefairtex

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    PM Daily Market Commentary – 02/04/2020

Gold fell -24.22 [-1.53%] to 1557.35 on moderate volume, and silver dropped -0.08 [-0.45%] to 17.63 on moderately light volume. The buck climbed +0.18%, SPX rallied +1.50%, crude inched down -0.88%, and the 10-Year yield rose +6.0 bp to +1.60%.

Gold fell for most of the day, bottoming out at around 1 pm in the afternoon. The swing high candle was a likely bearish reversal (62%), forecaster dropped, moving deeper into its downtrend. Gold is in a downtrend in both the daily and weekly timeframes.

COMEX GC open interest fell -19K contracts. That was -6 days of global annual production in paper removed from the market. Current open interest for GC: 61% of global annual production, down -1.75% today.

Futures markets are projecting a 16.6% percent chance of a rate cut at the next FOMC meeting.

Silver sold off during the London session, but the move lower wasn’t particularly dramatic, and there was some bounceback during US trading hours. The long black candle was actually a possible bullish reversal (34%), but forecaster fell fairly hard, moving into a downtrend. Silver is now in a downtrend in all three timeframes, although the monthly downtrend is still quite weak.

COMEX SI open interest fell -2.6K contracts. That was -5 days of global annual production in paper removed from the market. Current open interest for SI: 130% of global annual production, down -1.50% today.

The gold/silver ratio dropped -0.97 to 88.34. That’s quite bullish.

Miners gapped down at the open, then sold off some more in the first hour, but managed to bounce back somewhat in the afternoon. GDX fell -1.79% on heavy volume, and GDXJ dropped -0.76% on moderately heavy volume. XAU moved down -1.21%, the doji candle was a possible bullish reversal (39%), but forecaster fell hard, moving into a downtrend. XAU is now in a downtrend in both the daily and monthly timeframes.

It does look as though XAU got some support at the 50, and given gold’s massive plunge, today’s drop in the mining shares was really quite mild.

The GDX:gold ratio dropped -0.26%, and the GDXJ:GDX ratio climbed +1.03%. That’s bullish.

Platinum fell -4.40 [-0.45%], palladium jumped sharply +109.88 [+4.69%], and copper climbed +0.04 [+1.57%]. Palladium’s strong rally took it back above the 9 MA, and within easy striking distance of yet another breakout, and copper did well. Copper’s candle pattern is not specifically bullish, but the forecaster is back in an uptrend. I think copper needs a close above the 9 MA before we can call it a daily reversal.

The buck climbed +0.18 [+0.18%] to 97.59 on moderate volume. The opening white marubozu candle was a bullish continuation (and a 3-candle swing low), and forecaster climbed, moving into an uptrend. The buck is now back in an uptrend in all three timeframes. DX is now back above its 9 MA also.

Major currency moves included: JPY [-0.77%], AUD [+0.71%].

Crude fell -0.44 [-0.88%] to 49.66 on heavy volume. Crude actually tried to rally, and was up almost a buck at one point, but the rally failed, and crude ended up selling off, and closed at the lows of the day. The long black candle was a bearish continuation, forecaster climbed, but remains in a downtrend. Crude remains in a downtrend in all three timeframes. This was a new low today for crude – dating back to early 2019.

SPX rallied +48.67 [+1.50%] to 3297.59 on moderate volume. The vast majority of the SPX move came in the futures markets overnight. The long white candle was a bullish continuation, and forecaster moved higher, but remains in a slight downtrend. SPX remains in a mild downtrend in both the daily and weekly timeframes.

Tech [+2.55%] led, along with industrials [+1.85%], while utilities [-1.01%] and energy [+0.36%] did worst. This was a bullish sector map.

The VIX fell -1.92 to 16.05.

 

TLT plunged -1.35%. The spinning top candle was a bearish continuation, and forecaster dropped, moving into a downtrend. TLT is in an uptrend in just the weekly timeframe, but the weekly uptrend remains strong. The 30-Year yield rose +6.0 bp to +2.07%.

TY dropped -0.65%. The swing high candle was a probable bearish reversal (59%), forecaster dropped, falling into a downtrend. TY is now in a uptrend in just the weekly and monthly timeframes. The 10-Year yield rose +6.0 bp to +1.60%.

It appears as though bonds reversed direction today, at least on the daily timeframes anyway.

JNK climbed +0.62%. The swing low candle was a likely bullish reversal (68%), forecaster climbed, but remains in a downtrend. JNK is still in a downtrend in both the daily and weekly timeframes. Today was a very high percentage reversal for crappy debt from the candle code, although forecasters continue to point gently lower for crappy debt.

Yield Curve Inversion: the 1-10 spread rose +4 bp to +12 bp today. 1Y: 1.48% (+2 bp), 10Y: 1.60% (+6 bp).

Durable Goods, new orders: headline +2.38% m/m, -3.22% m/m) capital goods new orders (excl aircraft): -0.84% m/m (prior -0.03% m/m) shipments: -0.20% m/m (prior -0.18% m/m)

Summary

Risk assets did quite well today; JNK staged an impressive reversal, and SPX also printed a 3-candle swing low.

Bonds sold off; both TLT and TY printed bearish-looking swing highs, with the daily forecasters dropping into downtrends.

PM sold off too, with gold hit really hard. Gold’s bearish reversal was extremely strong, and the plunge through the 9 MA looked quite convincing. Curiously, silver actually did fairly well by comparison. Silver found support on the 50 MA, and the candle code hinted at a low-percentage bullish reversal.

What of copper? Well, copper finally staged a strong rally – strong enough for the forecaster to reverse, but copper has yet to print a swing low, and it remains well below its 9 MA, so the jury is still out there. Crude – well crude continues to drop. It tried to rally today, but ended up making a new low instead.

There was continued short-covering in gold and silver; the open interest continues to plunge, which is a bullish sign.

So where are we? Well, even though copper staged a strong rally, it is not conclusively out of the woods. And crude continues to drop. And while bonds have executed daily bearish reversals, the weekly and monthly trends remain strongly bullish.

In watching trading overnight in Asia, I saw a large spike higher in risk assets; copper, the SPX futures, and crude. News item: “a vaccine for coronavirus!” and “chinese labs are working hard on a cure!” Bang, a quick 30 points higher for SPX futures, and a $1 pop higher in crude. So I read the story. Punch line at the end.

https://news.sky.com/story/coronavirus-significant-breakthrough-in-race-for-vaccine-made-by-uk-scientists-11926469

“And we will have it in animal models by the beginning of next week. We’ve short-tracked that part. The next phase will be to move that from early animal testing into the first human studies.

“And we think with adequate funding we could do that in a period of a few months.”

Professor Shattock is part of a global effort to develop a vaccine that could potentially save hundreds or thousands of lives if this coronavirus outbreak develops into a full blown pandemic.

The vaccine will be too late for this current outbreak but it will be crucial if there is another one.

Oh. I get all dressed up, but there’s nowhere to go.

Local transmission is picking up in neighboring countries: Thailand, Singapore, Japan, Hong Kong. All have first rate medical systems, and appear to operate with “western rational thought” processes, certainly for medical care anyway. We will know the truth about this virus situation (R0, and fatality rate) soon enough. Within three weeks, maximum.

In the meantime, expect volatility. If the trend is down – and it still seems to be down – expect rips higher as shorts are startled out of their positions by a combination of positive news, just like I saw overnight today, aided by probable government intervention.

Does Trump want his stock market to collapse? Certainly not. Neither does Xi. It just looks bad.  More importantly, your Keys to Power lose money if that happens. If you want to stay in your current slot, this is something you want to avoid.

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.

 

  • Wed, Feb 05, 2020 - 03:59am

    #2

    davefairtex

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    TSLA fun fact

Candle code rates TSLA’s “gap up doji/bearish doji star” at a 50% bearish reversal.  That’s the highest (bearish) rating it gives to a doji star candle pattern.

A close below yesterday’s low will – almost certainly – confirm the top.  But who knows?  Maybe the buyers will show up today and push price even higher!

A few days back I bought one solitary put option, way out of the money, dated 8 months in the future.  Should be fun to see what happens.

  • Wed, Feb 05, 2020 - 08:59am

    #3

    sand_puppy

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    Cruise ship will reveal true R numbers soon

DaveF wrote:

 We will know the truth about this virus situation (R0, and fatality rate) soon enough. Within three weeks, maximum.

I hope that a quarantined cruise ship will reveal the true infectivity of this virus.  The people can’t get away, the world knows about it, the test kits will be available and it is outside of China’s censoring reach in Japan.

————

As a brief aside, being trapped in a cruise ship with known infected is a sure way to transmit to almost everybody.  You don’t want to be crowded and trapped within a quarantine boundary with the sick!

  • Wed, Feb 05, 2020 - 12:13pm   (Reply to #3)

    #4

    ktruddymd

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    re: Cruise ship will reveal true R numbers soon

Sadly, my thoughts exactly:  two quarantined cruise ships (one in HK, the other off the coast of Japan with 6000 passengers) will yield R0 data and a spectrum of other epidemiological information, unprecedented.  In 2-3 weeks we will have data-driven profiles of 2019 nCoV contagion, disease progression, and outcomes that, previously, could only have been derived retrospectively.  Unfortunately for the passengers trapped on these two cruise ships, we will obtain the data prospectively.  God be with them.  Doc

  • Wed, Feb 05, 2020 - 12:54pm   (Reply to #3)

    #5

    davefairtex

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    re: Cruise ship will reveal true R numbers soon

SP-

I hope that a quarantined cruise ship will reveal the true infectivity of this virus. The people can’t get away, the world knows about it, the test kits will be available and it is outside of China’s censoring reach in Japan.

Yeah, I think that’s 100% correct.  I was actually thinking of the Wuhan evacuees on the military bases in the US, but the cruise ship is a more alarming (and likely better) test case.

Heck, we could all of us be test cases soon enough.

 

 

  • Wed, Feb 05, 2020 - 01:18pm

    #6

    sand_puppy

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    Personal dilemma: I need to know the real numbers

I am currently semi-retired, but working 50 – 60 hours a month in an emergency department on the front lines of meeting people with respiratory illness.  Soon, the second and third generation patient will present who will not have a history of travel to China or contact with those who traveled to China.  They will present like the every other regular local person with a cough and fever.

If the Ro, CFR and SCR are as high as we are suspecting, I will need to fully retire quickly.  This will cause serious reputational damage making it hard for me to get a job in the future.  My departure would stress the department where I work as they scramble to fill the work schedule and probably work overtime.

But, I’m in the cohort that does poorly with nCoV:  male, over 60, with co-morbidities.  And my hearing is poor (when I can’t lip-read with masked patients), I get claustrophobic in an N95 mask and my glasses fog.  I also don’t trust that I can flawlessly don and doff the protective gear over and over throughout the day without error.  Therefore, I won’t feel that it is safe to return home after a shift to family and grandson.  I will have to go to quarantine somewhere for some number of days (how many?) after each shift.  A hotel?  With take out food delivered?

If the R, CFR and SCR numbers are as high as we are thinking here at PP, continuing work makes no sense at all from many levels.

So I need to get clear on where this epidemic is so I can make plans.  I’ll bet there are more of you guys strategizing about your options, too.  Right?

  • Wed, Feb 05, 2020 - 02:05pm   (Reply to #6)

    #7

    ktruddymd

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    re: Personal dilemma: I need to know the real numbers

I am a breast cancer surgeon with more than 10,000 patients in my practice (over a period of 25 years.)  Your concerns are valid and understandable.  Perhaps, you can think about transferring your expertise from the ER to the local, state, or federal agencies that will be addressing the pandemic.  They are, mostly, bureaucrats that would be happy to have your clinical expertise, and you’d be able to provide it without direct clinical exposure to infected patients.  No shame:  just smart.

Doc

  • Wed, Feb 05, 2020 - 02:31pm

    #8

    AKGrannyWGrit

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    I agree Sandpuppy

My opinion, retire now.  You only have one life and no doubt a wife and children that need you.  You have given many years of service and have legitimate reasons for finding working conditions in a Pandemic a challenge with your hearing, existing health conditions and do on.  Jettison the guilt and angst and do whats best for you and your family!  Do it now, my opinion.

Someone suggested we watch the video on the 1918 Pandemic.  Sorry I would like to thank whomever posted it but am not sure. Anyway, two take- aways.  First many of the people in charge underestimated the severity which led to lots of deaths.  Second, there were three waves of the flu pandemic.  These are circumstances that may be a repeat of history. Discounting the severity and not anticipating mutations and multiple waves.

Lastly, I have a great deal of cognitive dissonance as my kids go to yoga, rock climbing, out to dinner and drinks with friends. A class I went to today was consumed with the travel plans of the  students who are all mature women.  They are getting zero accurate information on which they can make an educated and informed decision.
Soooo, just like the three E’s, the message is don’t’ worry, be happy and spend money.

Only, this time people we know and people we care about, their lives could be at stake.

 

  • Wed, Feb 05, 2020 - 03:15pm

    #9
    karenf

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    So far

Sandpuppy – I would wait a little longer to see if this avoids non Asians like Andy is saying.  People on the ground in Wuhan were noticing and talking about a bad virus coming out of the market (whether it originated there or not) in mid December but things didn’t get bad until 6 weeks later.  If you figure travelers in any number left beginning of January to mid January, you won’t see the big effects until end of February or later (early days are quietly creepy).  There is reason to suspect it may not hit westerners as hard.  I would wait for those numbers to make big decisions.  We have yet to see it really take hold in a western country.  Make preps ( I have bought many boxes of masks and have food stored) I work in a major hospital lab.  I am watching and waiting very closely.  If you are totally near retirement and just looking for a reason to leave then by all means but if you want to stay if this doesn’t affect the west then just wait a bit longer and don’t feel any guilt if you do retire, you can’t save the world and you did your time…

Karen

  • Wed, Feb 05, 2020 - 03:54pm

    #10
    dryam2000

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    Sand_puppy

I feel your dilemma.  I’m a Hospitalist and about 10 years younger.  I do not relish the thought of being up against a nasty viral outbreak.  I have enough money to retire, but still enjoy caring for patients (although I could easily tell the administrators & my corporation what they can go do with themselves with their blood-sucking tactics with the EMR, etc).  I look around the hospital and I see all sorts of staff from medical techs, nurses, doctors, etc. that I’m very convinced they will not show up to work if they feel endangered.  I struggle with the moral dilemma.  I’ve been in medicine 20+ years and have taken more than my share of all types of inappropriate abuse from patients & families on a nearly daily basis.  A dead doctor isn’t able to help too many people.  If I felt that risk stratification put me in a high risk population in regards to coronavirus, then I would leave medicine.  From my best guess I stratify out a little below 5% mortality with this virus.  For now I think I’m ok with that.  However, there are so many unknowns so the situation is quite fluid.  My plan is to continue working for now.  If I see any signs my asshole corporation is not giving us the tools & systems we need to safely do our job then I’m done.

One thing most people don’t realize is there are a lot of older doctors who are very disgusted with where medicine is these days, and are on the cusp of retiring early anyway.  They are disgusted with all the business barriers which cut down on the ability to actually care for patients.  It’s all about money in the healthcare industry.   They only need a little nudge to seal the deal.  Something like this could easily do it.  People have no idea how fragile our healthcare system is on so many levels.  We already have not only doctor shortages, but also nursing shortages.

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