PM Daily Market Commentary – 05/19/2020
Gold climbed +13.93 [+0.80%] to 1759.76 on moderate volume, and silver shot up +0.54 [+3.11%] to 17.88 on moderately heavy volume. The buck dropped again today [-0.32%], SPX fell too [-1.05%] along with crude [-1.54%], while bonds inched higher [the 10-Year yield fell -2.0 bp]. It was another fantastic day for the red-headed stepchild, silver.
Gold fell in Asia, then started moving higher around 8:30 am, eventually closing the day at the highs. The short white candle was a bullish continuation, but forecaster fell, moving deeper into its downtrend. Gold is in an uptrend in the weekly and monthly timeframes.
Gold/euros climbed +9.62 [+0.60%] to 1608.73 on moderate volume. The short white candle was a bearish continuation, forecaster dropped, but remains in an uptrend. Gold/euros is in an uptrend in all three timeframes.
COMEX GC open interest rose +4.5K contracts. Current open interest for GC: 49% of global annual production, up +0.41% today.
The candle print wasn’t really conclusive either way; gold remains above all 3 moving averages; it still looks bullish to me.
Silver jumped higher at roughly the same time as gold, but the move was much larger; it ended the day relatively near to the highs. The opening white marubozu candle was a bullish continuation, forecaster climbed, moving higher into its uptrend. Silver is in an uptrend in all three timeframes.
COMEX SI open interest rose +4.0K contracts. That was 8 days of global annual production in new paper added to the market. Current open interest for SI: 87% of global annual production, up +2.31% today.
The gold/silver ratio dropped -2.26 to 98.42. That’s very bullish.
Today’s candle print was a new high – it invalidates yesterday’s bearish-looking high wave. Silver remains in a strong uptrend in the short and medium term. Next step for silver: a close above 19.
That said, the RSI-7 of silver is now at 88. Can it keep going? The shorts certainly are betting against it – they have been really piling in over the last few days. I can’t tell you what to do – certainly silver could just keep on going and going – but jumping in at these RSI levels is a bit risky. What’s more, we are coming up on resistance at roughly 18.75.
Miners gapped up at the open then rallied strongly for the first 90 minutes. They retreated a bit from the highs, but came back, ending the day with most of the gains intact. GDX shot up +3.56% on moderate volume, and GDXJ jumped +4.75% on moderately heavy volume. XAU rallied up 3.63%, the opening white marubozu candle was a bullish continuation, forecaster climbed, moving higher into its uptrend. XAU is in an uptrend in all three timeframes.
The GDX:gold ratio climbed +2.67%, and the GDXJ:GDX ratio climbed +1.13%.
Today was another new 8-year high, and another new 8-year closing high for the mining shares. Unlike silver, the mining shares are not particularly overbought, with RSI-7 = 73. Today’s higher high invalidated yesterday’s bearish dark cloud cover print; XAU’s uptrend remains intact.
Platinum rose +31.15 [+3.51%], and palladium rose +49.88 [+2.43%]. Platinum managed to close above the 200 MA for the first time in 3 months; platinum looks quite strong right now – although not as strong as silver. Palladium looks much weaker; it broke above the high from 3 weeks ago – no multi-month high for palladium. Still, the other metals had a good day today.
Copper fell -0.02 [-0.83%] to 2.40 on moderate volume. The black marubozu candle was a bullish continuation, forecaster dropped, but remains in an uptrend. Copper is in an uptrend in all three timeframes.
While the monthly uptrend is very weak, copper does seem to be moving slowly higher overall. The 9 MA crossed over the 50 a few weeks back; copper is slowly recovering, but it has yet to completely erase its losses from the big March plunge.
The buck dropped -0.32 [-0.32%] to 99.36 on moderately heavy volume. The long black candle was a bearish continuation, forecaster dropped, moving deeper into its downtrend. The buck is in a downtrend in both the daily and weekly timeframes.
Major currency moves included: CAD [+0.57%], GBP [+0.55%], JPY [-0.43%], AUD [+0.81%].
Buck continued lower today; member JAG noticed that Germany and France appear to have made a deal on a corona virus support program. I did some digging: proposal was for 500 billion Euros.
German Chancellor Angela Merkel and French President Emmanuel Macron unveiled their plan during a joint video news conference on Monday. The 500 billion euros would be raised through EU-backed bonds to help industries and regions hardest hit by the pandemic.
1) money would be handed out to member nations as grants, not loans
2) money would be repaid from the EU budget over 20 years (20-year bonds?)
3) the debts would be an EU liability, not a member-nation liability.
4) initial request was for 2 trillion Euros.
5) this is just a Germany-France agreement; all 27 nations would have to approve.
So instead of allowing member nations to spend whatever they want, and then have the ECB monetize it (which is a mechanism that has very few incentives for anyone to say “no”, with Germany picking up much of the tab), in this model, the EU itself would raise the cash, with all 27 member nations getting a vote. And everyone would have to work to repay the debt over time. Presumably.
Do we think this amount will stave off deflation in Southern Europe? Do we imagine that all 27 member nations will approve?
My sense is, no, and maybe.
It kind of reminds me of the MRNA vaccine trial. Headline sounds good, but – it is not all that great once you look more closely. In the meantime, it does sound a lot better than the German court’s “Nein!” from two weeks ago. Perhaps that’s by design.
Crude fell -0.50 [-1.54%] to 31.91 on moderately light volume. The short black candle was unrated, forecaster dropped, but remains in an uptrend. Crude remains in an uptrend in all three timeframes.
Crude’s uptrend remains quite strong – though we could see a pause here after the long move higher.
SPX fell -30.97 [-1.05%] to 2922.94 on moderate volume. The bearish harami candle was a possible bearish reversal (37%), but forecaster climbed, moving higher into its uptrend. SPX is in an uptrend in all three timeframes.
Energy [-2.88%] led the market lower, along with financials [-2.50%], while communication services [-0.02%] and discretionary [-0.36%] did best. This was a bullish sector map, believe it or not.
The VIX rose +1.23 to 30.53.
Most of the losses for SPX came in the last 65 minutes of trading. Rumor had it that MRNA’s vaccine studies may not be as effective as suggested by the company.
TLT climbed +0.37%. The short white candle was unrated, forecaster dropped, moving deeper into its downtrend. TLT remains in a downtrend in both the daily and weekly timeframes. The 30-Year yield fell -1.0 bp to +1.43%.
TY climbed +0.23%. The long white candle was unrated, forecaster climbed, but remains in a downtrend. TY is in an uptrend in the weekly and monthly timeframes. The 10-Year yield fell -2.0 bp to +0.71%.
The long bond appears to be weakening, while the 10-year is mostly chopping sideways.
JNK climbed +0.12%. The spinning top candle was a bullish continuation, forecaster climbed, moving higher into its uptrend. JNK is in an uptrend in the daily and weekly timeframes.
That’s a new 2-week high for JNK. That could be because of Powell’s promise to start the “Main Street” Lending Program by end of May.
The Fed actually has 4 programs, not yet operational:
- Main Street Lending Program: Fed makes loans to $600 billion for companies < $5 billion in revenue and < 15,000 employees.
- Primary Market Corporate Credit Facility: Fed buys corporate bonds from investment-grade firms and “those that fell into junk status after March 22.”
- Municipal Liquidity Facility: Fed buys state & muni bonds from investment-grade state and local governments.
- Term Asset-Backed Securities Loan Facility: Fed buys credit-backed securities including auto loans, student loans, and small-business loans.
ETF Discount to NAV:
* CEF -0.05%
* PHYS -0.02%
* PSLV -0.44%
Bullion Vault Premiums:
* gold: +0.17
* silver: -0.00
Gold dealer big bar premiums:
* gold [1kg]: 1.56%
* silver [1000 oz]: 16.11%
Physical ETFs are mixed, as are the values at BV. Physical silver remains at a high premium in spite of the recent strong rally.
A PP member related to me yesterday that – in his region, retail metals dealers have only recently been allowed to open, having been declared “non-essential” to this point. I had a thought. Perhaps some people are uncomfortable buying online, for a variety of reasons. I wonder if, as the nation re-opens its retail PM shops, physical premiums could increase, as recently re-opened shops sell out, and the stores look to replenish inventory.
Just an idle thought. We’ll have to see how it plays out.
Yield Curve Inversion: the 1-10 spread fell -0 bp to +56 bp today. 1Y: 0.15% (-2 bp), 10Y: 0.71% (-2 bp).
The vaccine-trial-inspired risk-on move ran out of gas in the late afternoon today. Possibly that was due to MRNA istelf executing a “sell the news” transaction: the company raised $1.3 billion in a secondary offering relatively soon after the press release.
It occurred to me, briefly, to “sell the news” too, but I was occupied with other things.
PM rallied strongly today – miners did best, and silver led gold. That’s what we like to see in bull market moves for PM. RSI for silver is fast moving into the stratosphere; the clever banksters have been loading up short for the first time in a while. I’m guessing we’ll see a retracement at some point – I’m just not sure when this happens.
The other metals (minus copper) continue moving higher. This appears to be a risk on signal to me.
The 30-year is tracking lower, while the 10-year chops sideways.
Now then – the “Trump taking HCQ” headline – will it matter? Besides Trump trolling the MSM as he appears to enjoy doing, it could matter a lot, in the following way. It does seem to have drawn out the “HCQ Police” in the MSM into taking some fairly extreme positions. I’m thinking specifically of the Fox news anchor virtually yelling:
“If you are in a risky population here, and you are taking this as a preventative treatment … it will kill you. I cannot stress enough. This will kill you.”
“I’ve been taking it for about a week and a half now and I’m still here”
But here’s the thing. I suspect HCQ does work as prophylaxis – it is already recommended for use in India by contacts and healthcare workers:
More importantly, there is a PREP trial in Spain for HCQ prophylaxis for contacts of an infected patient – a “randomized cluster” trial. It started March 18th, and ends June 15th. Some 3040 patients are estimated to be enrolled.
There is another PREP trial for frontline healthcare workers “HERO-HCQ”, with 15,000 participants, run by Duke University; double-blind placebo-controlled, due to finish in “July 2020” – though the doses in the trial seem a little bit high to me. Could we see results earlier than this? Presumably yes, if they are exciting enough.
If either result is positive, with the combination of Trump talking about HCQ so much, him actually taking it himself, against the MSM being so vehement against it, Trump could well ride this single issue to re-election in 2020.
I do not think this possibility is lost on Mr Trump.
But apart from election strategy, the news of the trial itself would probably result in a very strong market rally. I do not think this outcome is built into prices at all.
Given the potential market impact, I really need to do some more research into HCQ prophylaxis, specifically the potential study release dates.
I also suspect gold might experience a bit of a downdraft immediately following such an event.
As with the recent pandemic-related trade possibilities, this one comes with a date attached. That makes things even more exciting.
We also have the German court ruling taking effect – I’m guessing here – August 5th.
The approaching whipsaws could get a little bit intense.
What a great report DF! Thank you, you really put a ton of work into this one.
I did see one semi-study last week that showed adding zinc to chloroquine+z-pack gave some pretty good results.
The problem with MRNA vaccines is they have no shelf life, so distribution becomes impossible.
Unfortunately for me, Covid 19 mortality rates seem to be directly correlated to A1c levels. This is something I’ve have suspected for some time, hence the fasting. I did another 3 day fast last week. I can’t seem to go any longer than that without losing my mind.
I’m not overweight (anymore) but I still have blood sugar problems. I’m totally dead this Fall if I can’t solve them this summer.
The idea that you can reopen the economy but still protect the “vulnerable” seems ridiculous to me. Texas, my home state, seems to be proving that narrative as false right now. We opened early and the spread is taking off.
Then again, I once heard someone say that for every 1% rise in unemployment equals 40,000 additional deaths.
It’s a no win situation.
Thanks JAG. I did do a ton of work. I think there are things moving behind the scenes right now. I smell a strategy. I do not think the timing of the “Flynn” reveal is accidental. Nor is Trump doing the HCQ reveal accidental. This is all 2020 election stuff. So the trial release date becomes key as a trade, and I had to grunge through dozens of different HCQ trials – and I’m not sure I got to all of them.
There are a lot of moving parts right now.
Anyhow, regarding Texas, look at things in context, not just as your individual state.
Texas is in black. It doesn’t really look all that bad to me. Then again, I don’t live there so – easy for me to say.
And you can line the odds up in your favor. Wear the mask in the cold dry places, take the zinc, vitamin D, and other assorted substances, do the fasting like you’re doing, maximize your chances. You Get A Vote as to How This Turns Out. And that Doctor Lozano seems willing to jump in front of a train to get you HCQ/AZI if you get sick.
Being happy is useful too. Exercise is good. Lower stress = better immune system.
And really, 5 cases per day per 100,000 doesn’t seem all that horrible. That boils down to a 1% chance of “that being you” every 200 days. Assuming nothing changes. Which, I am guessing, it will. I just have a sense.
I’m a little worried that the PREP trials you mentioned (DaveF) above do not have Zinc included.
This issue of HCQ as a zinc ionophore has shown up in current mainstream medical thinking with the NYU Grossman School of Medicine paper that found the addition of zinc to the HCQ/Azith combo improved outcomes significantly. Also, that the study design process reflected the awareness of 1) the Zinc as an inhibitor of RNA-dependenatRNA-polymerase mechanism and 2) HCQ as an ionophore mechanism.
Our providers within the infectious diseases division, clinical pharmacy, and hospitalists discussed the use of zinc sulfate as an addition to hydroxychloroquine, based on the potential synergistic mechanism, and low risk of harm associated with this therapy….
The main finding of this study is that after adjusting for the timing of zinc therapy, we found that the addition of zinc sulfate to hydroxychloroquine and azithromycin was found to associate with a decrease in mortality …. This result may be reflective of the proposed mechanism of action of zinc sulfate in COVID-19. Zinc has been shown to reduce SARS-CoV RNA dependent RNA polymerase activity in vitro . As such, zinc may have a role in preventing the virus from progressing to severe disease, but once the aberrant production of systemic immune mediators is initiated, known as the cytokine storm, the addition of zinc may no longer be effective . Our findings suggest a potential therapeutic synergistic mechanism of zinc sulfate with hydroxychloroquine, if used early on in presentation with COVID-19.
References 13 and 17
13. te Velthuis AJW, van den Worm SHE, Sims AC, Baric RS, Snijder EJ, van Hemert MJ. Zn2+ Inhibits Coronavirus and Arterivirus RNA Polymerase Activity In Vitro and Zinc Ionophores Block the Replication of These Viruses in Cell Culture. PLOS Pathogens 2010; 6(11): e1001176.
17. Li X, Geng M, Peng Y, Meng L, Lu S. Molecular immune pathogenesis and diagnosis of COVID-19. Journal of Pharmaceutical Analysis 2020.
I totally agree that including zinc is the right way. The gold standard, as it were.
But even without zinc, I am projecting that we’ll get “similar to lupus patients” results with the current set of PREP studies.
And those lupus patients – mostly – didn’t get infected, and when they did, they didn’t progress to a severe state.
Presumably, people on the PREP with zinc deficiency won’t do as well, and that will be the reason for some of the failures.
But I think it will be way above “doing nothing”, which is the control group.
What do you think? Do we have a sense as to the percentage of people with zinc deficiency in Spain? And in the frontline HERO-HCQ trial?
Here. 15% of people in the US, and 40% of elderly are zinc-deficient. So maybe 15% of the HERO-HCQ people will fail out. That’s still 85% that will do all right. Theoretically.