PM Daily Market Commentary – 04/16/2020

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  • Fri, Apr 17, 2020 - 04:34am

    #1
    davefairtex

    davefairtex

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    PM Daily Market Commentary – 04/16/2020

Gold dropped -8.84 [-0.51%] to 1734.75 on moderately light volume, while silver rallied +0.10 [+0.63%] to 15.86 on moderately light volume also. The buck shot higher [+0.61%], SPX climbed also [+0.58%], crude moved lower [-2.04%] and bonds were mostly unchanged [the 10-Year yield fell -1.0 bp].

Gold chopped sideways in Asia, rallied strongly during London, and then sold off for much of the rest of the day. The long black candle was a bearish continuation, and forecaster dropped, falling into a downtrend. Gold is in an uptrend in the weekly and monthly timeframes. Gold’s plunge today was entirely a currency effect.

Gold/euros rose +2.63 [+0.16%] to 1600.06 on moderately light volume. The long black candle was a possible bearish reversal (35%), forecaster climbed, moving higher into its uptrend. Gold/euros is in an uptrend in the daily and weekly timeframes.

COMEX GC open interest fell -364 contracts. Current open interest for GC: 45% of global annual production, down -0.03% today.

Silver drifted lower in Asia, shot 30 cents higher at 2:15 am, topped out at 8 am, and then gave much of it back by end of day in the US. The bullish harami candle was a bearish continuation, forecaster fell, dropping into a downtrend. Silver is now in a downtrend in both the daily and monthly timeframes.

COMEX SI open interest rose +797 contracts. Current open interest for SI: 81% of global annual production, up +0.46% today.

The gold/silver ratio dropped -1.25 to 109.38. That’s bullish.

Miners rallied for the first hour, sold off for most of the rest of the day, but then rallied into the close. GDX moved up +2.55% on light volume, and GDXJ rallied +2.08% on light volume. XAU climbed +1.76%, the short white candle was a possible bearish reversal (30%), forecaster dropped, but remains in an uptrend. XAU is still in an uptrend in all three timeframes.

The GDX:gold ratio climbed +2.98%, and the GDXJ:GDX ratio dropped -0.46%. That’s bullish.

Platinum rose +3.65 [+0.45%], while palladium fell -23.07 [-1.09%]. That 50 MA still appears to be trouble for both platinum and palladium.

Copper climbed +0.01 [+0.43%] to 2.31 on moderately light volume. The short white candle was unrated, forecaster climbed, moving higher into its uptrend. Copper is in an uptrend in the daily and weekly timeframes. No change in the outlook for copper; the slow rally continues.

The buck climbed +0.61 [+0.61%] to 100.08 on moderately light volume. The opening white marubozu candle was a bullish continuation, forecaster climbed, rising into an uptrend. The buck is in an uptrend in the daily and monthly timeframes. Today’s move took the buck through the 9 MA – buck is now above all 3 moving averages.

Major currency moves included: EUR [-0.63%], GBP [-0.55%].

I’ll get back to you on crude. I think my calendar weighting algorithm isn’t working properly.

SPX climbed +16.19 [+0.58%] to 2799.55 on moderately light volume. The northern doji candle was a possible bearish reversal (37%), forecaster dropped, but remains in an uptrend. SPX is in an uptrend in the daily and weekly timeframes.

Sickcare [+2.14%] led, along with tech [+1.20%], while energy [-4.46%] and financials [-1.79%] did worst. This was a neutral sector map.

The VIX fell -0.73 to 40.11.

TLT climbed +1.14%. The short white candle was a possible bearish reversal (30%), forecaster climbed, moving higher into its uptrend. TLT is in an uptrend in the daily and weekly timeframes. The 30-Year yield fell -6.0 bp to +1.21%.

TY felll -0.08%. The short black candle was a bullish continuation, forecaster dropped, but remains in an uptrend. TY is in an uptrend in all three timeframes. The 10-Year yield fell -1.0 bp to +0.62%.

Probably – no bearish reversal for bonds.

JNK inched down -0.07%. The spinning top candle was a bearish continuation, forecaster dropped, falling into a downtrend. JNK is in an uptrend in just the weekly timeframe.

Wolf Richter tells us that the Fed isn’t actually buying crappy debt ETFs. Yet. They were just playing with us. Or something.

https://wolfstreet.com/2020/04/17/fed-massively-tapered-qe-4-hasnt-bought-any-junk-bonds-yet-was-just-jawboning/

Physical Supply

ETF Discount to NAV:
* CEF -0.26%
* PHYS -0.15%
* PSLV -0.17%
Bullion Vault Premiums:
* gold: +4.79
* silver: +0.17

Premiums: Gold 100 gram bars: 5.94%. 100 oz silver bars: 18.53%. There continue to be clear shortages in physical PM right now. BV is back in premium, while the ETFs have all moved into a slight discount.

Economic Reports

Fed balance sheet did not update today on FRED – for some reason. Hopefully I can pick it up on Saturday.

Yield Curve Inversion: the 1-10 spread rose +1 bp to +45 bp today. 1Y: 0.17% (-2 bp), 10Y: 0.62% (-1 bp).

Summary

There wasn’t much change today during market hours; the miners are hovering just below their recent highs, while gold suffered a bit due to the strong dollar rally.

No real change in direction for anything else.

After market close, Trump announced his “reopening the economy” plan. What did the market think?

Equities liked it [+3%], so did copper [+2%], crude was unchanged, while gold [-1.57%] and silver [-2.16%] were not so happy. Treasury bonds initially sold off, but have since bounced back [-0.34%].

That sounds like cautious optimism to me. I think the market will wait to see how the various governors respond.

  • Fri, Apr 17, 2020 - 07:53am

    #2

    JAG

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    PM Daily Market Commentary – 04/16/2020

Thanks for the Wolf Street article, it was excellent. I’m going to have to start reading him.

  • Fri, Apr 17, 2020 - 08:31am

    #3
    davefairtex

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    crude update

Yes, I had problems with the calendar weighting, which wasn’t apparent before – since contango was so small.  But today the bug showed up big time.  All fixed now.

Crude update:

Crude fell -0.19 [-0.75%] to 25.03 on moderately light volume. The short black candle was unrated, forecaster climbed, but remains in a downtrend. Crude is in a downtrend in all three timeframes.

Below, find a chart of the standard “volume-roll” crude price. The idea is to display the current price of crude.  In reality, there are 12 months of contracts you could pick – but they choose the one with the most trading volume on it.

We had a contract roll yesterday.  This showed up in the chart (below) as a $5.66 rally.  If you held a crude oil future, could you have made $5.66 yesterday?  Absolutely not.  This was just a contract roll artifact.  Yesterday, front month was CLK20, today, front month was CLM20.  These are totally different instruments.  So if you buy CLK20, you don’t collect the “$5 jump” because it didn’t happen.  CLK20 actually declined slightly.  It will expire soon.  Nobody collects that $5.66.

This confusing event is why I do calendar-weighting.  So you all don’t see a “$5.66 rally in crude” and wonder WTF just happened, when, in fact, nothing happened except a contract roll with a large contango.

Hope that makes sense.

  • Fri, Apr 17, 2020 - 10:25am

    #4

    JAG

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    Negative Interest Rates

Hey DF, got yet another question for you….

What’s the best way to play the possibility of interest rates going negative in the future (besides gold)?

TLT? Or would a zero coupon fund like ZROZ be better? Options?

Thanks for your feedback…J

  • Fri, Apr 17, 2020 - 11:28am

    #5
    davefairtex

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    negative rates

JAG-

I don’t think we’ll be seeing negative rates.  The Fed is “heavily influenced” by the banksters, and negative rates in the EZ has really hosed the net interest margin of said banksters across the pond.  Ergo – no negative rates.

I do not think negative rates would be good for the buck, FWIW.

How would I play it?

Yeah.  Something outside the banking system.  Gold in hand.  Maybe cash.  Why on earth would you ever have bank deposits if they charge you for them?

  • Sat, Apr 18, 2020 - 01:48am

    #6
    lorro14

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    Late for savings investments

Hello Jag/DF

First post.. I was hoping to get some advice and hope this I’m not posting in the wrong place for this..

I’m based in the UK and am worried I’m probably too late to invest my savings in silver. I only recently managed to get things in order.

It seems that silver is hard to come by at the moment. Do you think it’s still worth trying to get a hold of? Or are there any alternatives that maybe safer than keeping the savings in rather than just currency (savings account)? Would Bitcoin be worthwhile?

Thanks for any advice/suggestions and apologies if I seem very ignorant, I’ve only recently gotten my head around a lot of the concepts of economics.

  • Sat, Apr 18, 2020 - 08:50am

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    JAG

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    negative rates

Why on earth would you ever have bank deposits if they charge you for them?

I know. It seems like a stupid question but if your choice is to lose a little money versus a lot of money, you never know. Maybe you can’t use physical cash because businesses don’t want to take the virus risk associated with it. I see that already happening, locally.

The FED has said repeatedly that negative interest rates will never happen here. That alone should be a good enough reason to give it some consideration.

I guess gold really is the only play. It seems like gold is the only play for a lot of possible outcomes of this mess. That makes me not trust it.

Thanks for the feedback.

  • Sat, Apr 18, 2020 - 09:40am

    #8

    JAG

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    lorro14

lorro14: It seems that silver is hard to come by at the moment. Do you think it’s still worth trying to get a hold of? Or are there any alternatives that maybe safer than keeping the savings in rather than just currency (savings account)? Would Bitcoin be worthwhile?

I’m definitely not anybody that should be giving advice on these matters, but I didn’t want to leave you hanging. DF’s input would be more valuable, for sure.

My personal point-of-view is bitcoin is by far the best play, if you are talking a multi-year investment. It’s super volatile, so one really needs to acclimatize oneself to the market with a very small position initially.

In fact, if you want to hold on to your cash, which seems very prudent right now, there was a study last year that showed that a 1% bitcoin and 99% cash position outperformed all other investments over the last 10 years.

I couldn’t find the original write up, but here is a link that summarizes it:

https://bitcoinist.com/sp-500-bitcoin-portfolio-gold/

I currently hold 2% of my portfolio in bitcoin, 50% cash, 30% physical gold and the rest in various speculations (I bought 90% of my physical gold in 2009).

If we see bitcoin in the $4000-5000 USD range at some time later this year, I will jump all in, selling my physical gold too. If that doesn’t happen then so be it. I’ve learned (the hard way) that a FOMO investment just destroys your trading psychology. It’s so much better to be patient and hope that the market comes to you, rather than chase it.

All the best….Jeff

 

  • Sun, Apr 19, 2020 - 02:10am

    #9
    lorro14

    lorro14

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    PM Daily Market Commentary – 04/16/2020

Thank you very much for coming back to me Jeff.

So you think it’s safe to hold onto cash at the moment? The impression I had was that having cash right now is a bad risk due to possible inflation. I’ve been getting my information mostly from Mike Maloney and Chris Martenson. It may be that I’ve been misunderstanding but my impression was that inflation is likely around the corner, with money creation for the virus and also the crash predicted by Chris. So wouldn’t that make cash a very unsafe option at this point? Or do you think that’s a bit further down the road?

As I’m sure most have, I’ve been having a lot of anxiety lately having heard the warnings on how “brutal” things are going to get. I’m not entirely sure what this will mean but unfortunately I don’t have a garden to grow anything. The only obvious way of preparing right now that I can think of is to protect the relatively small amount of savings I do have. So I’ve suddenly had a bit of a panic lately and just want to figure out what the best option is, assuming it’s not too late.

But maybe you’re correct and I’m jumping the gun a bit. If you think that’s the case then maybe I should hang on a bit longer. I’ll try and educate myself a bit more on Bitcoin as the whole concept of cryptocurrency is quite new to me.

Thanks again, I don’t have any experience with investing, or know anybody who does so I really appreciate the advice.

Lawrence

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