PM Daily Market Commentary – 06/24/2020

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  • Thu, Jun 25, 2020 - 02:46am

    #1

    davefairtex

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    PM Daily Market Commentary – 06/24/2020

Gold dropped -9.95 [-0.56%] to 1781.11 on moderately heavy volume, and silver plunged -0.54 [-2.96%] to 17.71 on moderately heavy volume. The buck rallied sharply [+0.54%], while SPX [-2.59%] and crude [-4.82%] plunged, while bonds moved higher [the 10-Year yield fell -3.0 bp].

Gold tried to rally during the London session but the rally failed, and gold eventually ended the day at the lows. The long black candle was a bullish continuation, forecaster climbed, moving higher into its uptrend. Gold remains in an uptrend in all three timeframes.

Gold/euros moved down -0.89 [-0.06%] to 1581.40 on moderately heavy volume. The closing black marubozu candle was a reasonably strong bearish reversal (43%), forecaster climbed, moving higher into its uptrend. Gold/euros is in an uptrend in all three timeframes.

COMEX GC open interest rose +5.5K contracts. Current open interest for GC: 50% of global annual production, up +0.51% today.

Although gold staged a failed rally, gold’s uptrend did not seem to be affected by today’s price drop. Perhaps that was due to the strong dollar rally – today’s minor gold drop was just a currency effect.

Silver rallied briefly in Asia, retreated, and then dropped off a cliff starting at 8 am, with the day low coming just 30 minutes later. Silver then tried to rally, but sold off again starting around 11 am. The long black candle was neutral, and forecaster climbed, moving higher into its uptrend. Silver is still in an uptrend in all three timeframes.

COMEX SI open interest fell -3.0K contracts. That was -6 days of global annual production in paper removed from the market. Current open interest for SI: 104% of global annual production, down -1.70% today.

The gold/silver ratio climbed +2.43 to 100.57. That’s very bearish.

So far at least, silver’s uptrend was not derailed by today’s big silver smash, although silver ended the day below the 9 MA, which doesn’t look great. There was some short-covering on today’s big plunge.

Miners chopped sideways in the morning, then fell off a minor cliff starting around 11 am during silver’s “second leg” down; the miners did bounce back, ending the day back up off the lows. GDX fell -1.78% on moderately heavy volume, while GDXJ dropped -2.98% on moderate volume. XAU moved down -2.15%, the spinning top candle was a possible bearish reversal (42%), forecaster dropped, but remains (just barely) in an uptrend. XAU is in an uptrend in all three timeframes.

The GDX:gold ratio dropped -1.25%, and the GDXJ:GDX ratio dropped -1.24%. That’s bearish.

The swing high print was just moderate rather than severe, however the forecaster has weakened substantially and will probably reverse if the miners decline tomorrow. The miners really didn’t like silver’s 11 am sell-off.

Platinum fell -41.09 [-5.07%], and palladium dropped -58.16 [-3.10%]. Platinum was just crushed today; it felt to me that platinum was used as a club to pound both silver and (to some extent) gold lower. Platinum is back below both the 9 and 50 MA lines, and has returned to a downtrend. The gold/platinum ratio jumped +0.09 to 2.20 today.

Copper was unchanged at 2.65 on moderately heavy volume. The long black candle was a bullish continuation, forecaster dropped, but remains in an uptrend. Copper is in an uptrend in all three timeframes.

Copper did not support the risk off sentiment today; it rallied just before the US market opened, and then sold off mid-morning, erasing the gains from the rally but ending the day virtually unchanged. Copper remains in a reasonably strong uptrend, and today’s candle print was not bearish.

The buck climbed +0.52 [+0.54%] to 97.12 on moderate volume. The bullish engulfing candle was a reasonably strong bullish reversal (43%), but forecaster dropped, moving deeper into its downtrend. The buck is in a downtrend in all three timeframes.

Major currency moves included: CAD [-0.57%], EUR [-0.50%], GBP [-0.82%], JPY [-0.41%], AUD [-0.96%].

The buck managed to squeak back above its 9 MA. This isn’t a reversal just yet, in spite of the moderately positive candle print.

Crude plunged -1.93 [-4.82%] to 38.11 on moderate volume. The confirmed bearish spinning top candle was a reasonably strong bearish reversal (47%), forecaster dropped, but remains in an uptrend. Crude remains in an uptrend in all three timeframes.

EIA report: crude +1.4m, gasoline -1.7m, distillates +0.2m

Crude had a bad day today. It was moving lower prior to the EIA report, and the selling accelerated not long after the report was released. The day’s candle print was bearish, and crude ended the day below the 9 MA. Curiously though, forecaster hasn’t reversed just yet.

SPX plunged -80.96 [-2.59%] to 3050.33 on moderate volume. The confirmed bearish spinning top candle was a probable bearish reversal (57%), forecaster climbed, moving higher into its uptrend. SPX is in an uptrend in all three timeframes.

Energy [-5.87%] led the market lower, along with financials [-3.66%], while utilities [-0.92%] and staples [-1.71%] did best. This was a bearish sector map.

The VIX rose +2.47 to 33.84.

This was a very bearish candle pattern, although for some reason, forecaster wasn’t yanked lower. Not yet anyway. Next waypoint: the 200 MA.

TLT rallied +1.07%. The confirmed bullish spinning top candle was a possible bullish reversal (48%), forecaster climbed, moving higher into its uptrend. TLT is in an uptrend in the daily and weekly timeframes. The 30-Year yield fell -4.0 bp to +1.45%.

TY climbed +0.16%. The long white candle was a bullish continuation, forecaster dropped, but remains in an uptrend. TY is in a downtrend in both the weekly and monthly timeframes. The 10-Year yield fell -3.0 bp to +0.69%.

Bonds have moved back above the 50 MA – back in the now-usual trading range. The Fed appears to be in complete control over the bond markets right now. All it takes is $25 billion per week in money printing to accomplish this. One might ask, is there a difference between this, and MMT?

JNK fell -1.08%. The confirmed bearish nr7 candle was a reasonably strong bearish reversal (48%), and forecaster fell, moving deeper into its downtrend. JNK remains in a slight uptrend in the weekly timeframe.

That’s a risk off signal from crappy debt.

Physical Supply

ETF Discount to NAV:
* CEF -0.24%
* PHYS -0.10%
* PSLV -0.78%
Bullion Vault Premiums:
* gold: -2.18
* silver: +0.05
Gold dealer big bar premiums:
* gold [1kg]: +0.93%
* silver [100 oz]: +12.07%

BV premiums were mixed, the physical ETF discounts are shrinking, and silver remains in shortage in big bar form.

Economic Reports

Yield Curve Inversion: the 1-10 spread fell -3 bp to +51 bp today. 1Y: 0.18% (+0 bp), 10Y: 0.69% (-3 bp).

Summary

So what caused the big sell-off in equities today? Rising corona virus cases? Navarro’s comment that the trade deal was over? It is hard to know. Equities took a first leg down just after Asia closed, and the second leg down began just after market open in New York.

Equity markets around the world all sold off, with emerging Asia doing best, and Latin America worst. So that tells us this wasn’t a US-only phenomenon.

Copper didn’t tank, but crude certainly did, and so did crappy debt. Crude started its plunge mid-morning.

PM also sold off too; platinum was absolutely crushed, silver was hammered hard, and gold – it just moved lower, and there seemed to be a fair number of dip-buyers. The miners were stuck somewhere in the middle; they seemed to catch cold only when silver’s mid-morning bounce failed.

Ultimately, this looks like a lower high for equities, and the momentum is now pointing lower. Sector map suggests this may well be led by energy.

Travel bans may be playing a part in market sentiment; Europe is talking about imposing one on the US, after squawking when we did the same thing to them, just two short months ago. Now it is the turn of the US to squawk. Shoe on the other foot test: failed, for both parties.

Likewise, Cuomo in NY is now (gleefully?) imposing quarantines from people coming from other states that he deems as “bad”, namely, states with 10 new infections per 100,000 people. He tells us that New York has “worked hard” to bring infections down.

The infection charts all look suspiciously similar in nations around the world. A huge peak, a large drop, followed by a “cautious reopening”, and back-patting about how well we did – staying at home to slow the spread. [This, when most people get it at home.]

Truth bomb: New York appears to have herd immunity at this point. Staying at home didn’t slow the spread. When enough people catch the virus and get over it – that’s what slows the spread. Masks can do this too, if you have them. If you use them.

It seems as though “the process of obtaining herd immunity through natural means” is now happening in the other regions of the country. We can call this, “the Sweden model.”

So let’s assume the latest SPX decline is because of the fear of spiking infections. And, at some point, these new regions will get herd immunity, and regardless of the public policy response, infections will peak, and start to fall. At that point, presumably, the decline in equity prices might well stop.

So for purposes of projecting what the market will do, how long does this process take?

Just eyeballing the charts, it appears as though that process takes about 6 weeks. And – let’s say – we’re about 2 weeks into that process. Note that AZ will almost certainly have more detected cases than New York, due to vastly increased testing capacity. We should just look at the shape of the curve rather than the absolute level of cases reported.

On a personal note: if you are in one of those regions, user JAG pointed out that air conditioning seems to be a big contributing factor to speeding the spread. Recycled air, cool temperatures, no filtration. Subways, buses, apartments, homes, offices. If you want to personally dodge this bullet, mask-wearing, and avoiding air conditioning would seem to be the thing to do. Hot & humid works to slow the spread too, but only if you are actually experiencing it.

  • Thu, Jun 25, 2020 - 03:12am

    #2

    davefairtex

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    US data

Here’s the national US data.  You can see – no spike in deaths yet, although the downslope has started moving sideways instead of falling.

  • Thu, Jun 25, 2020 - 03:51am

    #3
    phusg

    phusg

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    PM Daily Market Commentary – 06/24/2020

Travel bans may be playing a part in market sentiment; Europe is talking about imposing one on the US, after squawking when we did the same thing to them, just two short months ago. Now it is the turn of the US to squawk. Shoe on the other foot test: failed, for both parties.

Haha, I know you’re not talking about me personally here, but the only thing I personally remember sqwuaking about was that the EU got an understandable ban but the UK didn’t. That seemed extremely political and looked to me like Trump wanted to give the UK a pat on the back for leaving the EU. Nothing to do with the science as the UK was in at least as bad a place in terms of Covid19 as the average EU country at that time.

Anyway thankfully this forum is a sqwuak free zone (since user Naorobi packed his bags).

  • Thu, Jun 25, 2020 - 03:53am

    #4
    phusg

    phusg

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    PM Daily Market Commentary – 06/24/2020

Grey swan re herd immunity is that last I read it may not last that long, have you looked into that recently Dave?

  • Thu, Jun 25, 2020 - 06:12am

    #5

    davefairtex

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    squawk-free zones

phusg-

Actually  I wasn’t thinking about you squawking at all, it was more the noises coming from Official Europe.  And now similar sounds are coming from Pompeo.  One good squawk deserves another, I suspect.  🙂

As for herd immunity – my guess is that, as time passes, the virus will weaken, and our immunity will become “partial”, just as it is with other corona viruses.  So we still get the influenza-like illnesses, but they aren’t fatal, mostly, and we have partial immunity, mostly.

Because this is some weird lab variant, it might do something different, but – again, I’m just going with what I consider to be the odds here. Immune systems will learn, viruses will mutate (and weaken), and we will adapt.

Right now I strongly distrust the dystopian projections, since they invariably help the vaccine makers sell more product.  Both CDC and WHO have proven to be corrupt, along with the major medical publications, and the major medical research organizations.

As we know, HCQ seems to work pretty well as prophylaxis, but there’s no money in it, so – study after study after study has been concocted to paint it as something that kills people.

So yeah.  Herd immunity, weakening virus, partial eventual immunity – all the usual stuff remains operational.  Less fear = better all around.  Wear a mask, avoid aircon, dodge the current bullet if you can, but – don’t freak out either.

My opinion.

  • Thu, Jun 25, 2020 - 06:23am

    #6

    JAG

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    HCQ for prophylaxis

DF – As we know, HCQ seems to work pretty well as prophylaxis…

Hey DF (or anyone), is there any evidence for that, specifically for prophylaxis? I’ve never seen any (completed) studies for prophylaxis but I haven’t looked in awhile.

Thanks

  • Thu, Jun 25, 2020 - 06:30am

    #7
    MountainBlues

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    JAG

This guy has the data on his site somewhere

 

  • Thu, Jun 25, 2020 - 06:56am

    #8
    phusg

    phusg

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    PM Daily Market Commentary – 06/24/2020

Thanks Dave.

Because this is some weird lab variant

This is the only bit I have real trouble believing, not that China wouldn’t be experimenting with biological weapons as unfortunately many countries do, but that there isn’t a single Western virologist who wouldn’t cry foul if they saw that it wasn’t a natural variant. There are copies of this virus all over the planet, so that’s obviously not the problem in this case haha. If you have the evidence that switched you over to this belief to hand, I’d love to have a look at it, thanks.

ps. some pretty Hi-Lo, Silver! moves already today, although I’m trying to follow your discipline and keep my eyes off it and not get emotioned into changing positions and handing over money to the day trading algos.

pps. Would young American’s get the Lone Ranger reference? Doubt any Europeans would for such an old series.

  • Thu, Jun 25, 2020 - 07:44am

    #9

    davefairtex

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    HCQ as PREP

India did some reasonably good work – they gave it to a bunch of health care workers, and the ones that actually took it, avoided getting sick.  “Dose-dependent result” (i.e. don’t skip your medicine or it won’t work).  Looked like an 80% success rate.

https://www.indiatoday.in/india/story/4-hydroxychloroquine-hcq-doses-coronavirus-healthcare-workers-icmr-1684112-2020-06-01

I’ve given up on the mainstream medical community doing proper studies on such things.  Seriously.  After Oxford gave everyone 2400 mg in just the first day, and (not surprisingly, people died) I’m now just assuming they’re going to hork the study in some way that I’m not clear about to tank the drug.

And that Boulware study for PEP – it appeared to cut rates of infection by 50% if you took it within the first 2 days.  By day 4, it was useless in preventing infection.  Of course that Gilead weasel that ran the stats managed to hide this result, so the conclusion was “no benefit.”

 

  • Thu, Jun 25, 2020 - 07:54am

    #10

    davefairtex

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    lab variant

So there was this US youtuber who spent 10 years in China who did a deep dive on this a few months back.  (Reading chinese – very useful skill.  So are connections on the ground in country.)

Anyhow, there was this researcher at the Wuhan lab, name still on the site, picture gone (at least, from the present lab site – but not from the old site stuck in archive). Basically the lab removed her picture.  When called, the lab said “who?  we don’t know who that person is.”  When confronted with evidence that she a) existed, and b) actually had worked at the lab, the lab responded, “oh.  HER.  Oh yeah, she’s fine.  Just in another province.”

Its never the crime, its the coverup.  Why cover up this “bat lady assistant”‘s vanishing, which happened roughly around the time of the outbreak, if it had an innocent explanation?  No other researcher had their picture removed.  No other researcher was lied about.  Just this one.

The theory was, she got infected in a lab accident (the same lab which had a history of accidents, and was reported as unsafe by … I forget which organization), she ended up spreading it outside the lab, and she ended up dying – patient Zero.

Wuhan Institute of Virology.  There’s a whole writeup on it if you really care.

Not a weapon.  Gain of function research.  “Just playing with bat viruses to see what they can come up with.”  Turns out…SC2 is (probably) some interim project.  That’s why China shut down access to nearby military bases back in December. They knew what it was, and where it came from, and what it could do.

There’s a truckload of circumstantial evidence on this one.

One more bit: the gain of function research, conducted by Chinese Bat lady at the WIV, was actually paid for by a US research project, and indirectly, the US NIAID.  This explains why US virologists say its natural.  To say otherwise, implicates them in the whole mess.  Chris did a whole video on it.

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