PM Daily Market Commentary – 09/16/2020
It was another failed rally day for gold. The shooting star candle was a possible bearish reversal (38%), forecaster dropped, but remains in an uptrend. Gold is in an uptrend in the daily and monthly timeframes.
Gold/euros climbed +7.63 [+0.46%] to 1666.41 on moderate volume. The long white candle was a reasonably strong bearish reversal (47%), forecaster dropped, but remains in an uptrend. Gold/euros is in an uptrend in all three timeframes.
COMEX GC open interest rose +3.5K contracts. Current open interest for GC: 54% of global annual production, up +0.32% today. 111 GC contracts stood for delivery at COMEX today.
There was a small amount of shorting that happened today, as well as some modest volatility that occurred around the time of the FOMC press conference. Today’s candle print was fairly negative. Although gold remains above the 9 MA, there seems to be a fair amount of selling pressure at roughly 1970.
Silver also tried to rally and failed; the selling pressure for silver appeared during the FOMC press conference at about 2:40 pm. The doji candle was a bearish continuation, but forecaster climbed, moving higher into its uptrend. Silver is in an uptrend in all three timeframes.
COMEX SI open interest fell -17 contracts. Current open interest for SI: 94% of global annual production, down -0.01% today. 305 SI contracts stood for delivery at COMEX today.
The gold/silver ratio climbed +0.22 to 72.00. That’s slightly bearish.
There was no shorting in silver today; all the selling happened around the time of Powell’s press conference. Trends for silver look somewhat stronger than the trends for gold.
Miners gapped up at the open, sold off almost immediately, then chopped sideways for the rest of the day. GDX rose +0.14% on moderate volume, and GDXJ climbed +0.68% on moderate volume. XAU fell -0.08%, the short black/NR7 candle was unrated, forecaster dropped, but remains in an uptrend. XAU is in an uptrend in all three timeframes.
The GDX:gold ratio dropped -0.13%, and the GDXJ:GDX ratio climbed +0.54%. That’s mildly bullish.
Miners remain in an uptrend, but a fairly weak one. Still, miners look a bit stronger than gold; call it a mildly positive sign.
Platinum fell -2.31 [-0.24%], and palladium dropped -9.49 [-0.39%]. The minor moves in the other metals were unrelated to the FOMC today; platinum turned down just after noon. Both other metals remain in uptrends.
Copper climbed +0.02 [+0.66%] to 3.06 on moderately light volume. The short white/NR7 candle was unrated, forecaster dropped, dropping into a downtrend. Copper is in an uptrend in the weekly timeframe.
Copper rallied on the FOMC announcement, then fell during the press conference. It was a mildly positive day for copper, which remains right at its multi-year closing highs. Copper appears to be setting up for a breakout to higher levels, yet forecaster is neutral-to-bearish. Perhaps the long standing relationships that the model has been trained on aren’t working so well post-pandemic.
The buck climbed +0.14 [+0.15%] to 93.22 on moderately heavy volume. The confirmed bullish doji candle was a probable bullish reversal (53%), yet forecaster dropped, moving deeper into its downtrend. The buck is in an uptrend in the weekly and monthly timeframes.
Major currency moves included: GBP [+0.63%], JPY [+0.51%].
The buck was fairly choppy today – the FOMC press conference was mildly dollar positive. Trends for the buck remain quite weak.
Crude screamed higher, up +1.80 [+4.66%] to 40.41 on heavy volume. The opening white marubozu candle was a bullish continuation, forecaster climbed, rising into an uptrend. Crude is in an uptrend in the daily and weekly timeframes.
EIA report: crude -4.4m, gasoline -0.4m, distillates +3.5m. The mildly bullish report didn’t seem to move prices at all.
I’m not entirely sure the hurricane is the reason for crude’s price advance. Today’s move was strong enough to pull the weekly forecaster back into an uptrend. Might this be it for the crude oil correction? We will only know once the hurricane is past.
SPX fell -15.71 [-0.46%] to 3385.49 on moderately heavy volume. The long black candle was neutral, forecaster dropped, but remains in an uptrend. SPX is in an uptrend in the daily and monthly timeframes.
Tech [-1.57%] led the market lower, along with communication services [-1.09%], while energy [+3.86%] and financials [+1.12%] did best. This was a mildly bearish sector map.
The VIX rallied +0.45 to 26.04.
NYSE advance ratio was 62%, which suggested that most prices actually rose today. That’s surprisingly bullish. All of the selling took place after 2:40 pm, during Powell’s press conference.
TLT dropped -0.30%. The opening black marubozu candle was a low-percentage bullish reversal (27%), forecaster dropped, dropping into a downtrend. TLT is in an uptrend in the weekly timeframe. The 30-Year yield rose +3.0 bp to +1.46%.
TY inched down -0.09%. The confirmed bearish nr7 candle was neutral, forecaster fell, dropping into a downtrend. TY is in a downtrend in all three timeframes. The 10-Year yield rose +2.0 bp to +0.70%.
Bonds continue to chop sideways, with the trend pointing slightly downhill.
JNK inched down -0.03%. The shooting star candle was a possible bearish reversal (39%), forecaster dropped, but remains in an uptrend. JNK is in an uptrend in the daily and weekly timeframes.
Today was a strongly bearish failed rally for crappy debt; all of the selling happened after 2:40 pm, during the press conference. That would seem to be a bad sign.
The GLD ETF tonnage on hand was unchanged at +0.00 tons, with 1248 tons remaining in inventory.
ETF Discount to NAV:
* CEF -1.92%
* PHYS -0.33%
* PSLV -2.03%
Gold dealer big bar premiums:
* gold [1kg]: +1.18%
* silver [100 oz]: +6.73%
Physical ETF premiums are slowly declining, but big-bar premiums are at relatively low levels also.
Yield Curve Inversion: the 1-10 spread rose +3 bp to +58 bp today. 1Y: 0.12% (-1 bp), 10Y: 0.70% (+2 bp).
Retail Sales: headline +0.11% m/m retail sales (ex-autos): +0.65% m/m. Retail sales are higher (+4%) post-pandemic than they were pre-pandemic. That’s a stimulus artifact. Here’s what that looks like:
So what did Powell say during that press conference? As they say, “I watched it, so you don’t have to.”
There was a whole lot of stuff, much of it I found not so interesting. The primary message seemed to be about causing government-measured inflation, dragging it above 2%.
How? Messaging. Powell felt it was very important that everyone realize just how “powerful” the recent Fed statement was, about how inflation would be allowed to rise above 2%, but the Fed wouldn’t take action to raise rates until maximum employment was achieved.
They are also going to continue to buy $80 billion in Treasury bills per month, and $40 billion in MBS; $1.4 trillion per year.
A key question was asked later on – I will paraphrase – “hey so I get the whole approach, but your team doesn’t see inflation rising above 2% for the next 3 years”, suggesting that not even the Fed itself really believed in the strategy Powell was talking about. To which Powell responded that the Fed was most certainly “not out of ammo” – why they had Forward Guidance, and the Balance Sheet. It totally rang hollow, at least to me.
This was an Official Denial. The Fed is out of ammo. Their own team doesn’t think the approach will work for at least 3 years. The only arrows in the quiver are “powerful statements” about not raising rates when inflation does actually start to happen.
The only way we will get inflation – consumer inflation, not asset-price inflation – will be through government spending. It won’t come from the Fed.
Gold, silver, and the miners went nowhere today; they had rallied somewhat going into the FOMC meeting announcement, but then largely fell during Powell’s press conference. This more or less mirrored what the currency markets did during that time also; Powell’s words seem to be cautiously dollar-positive.
SPX didn’t like what Powell had to say, and neither did crappy debt.
Crude oil seemed to be doing its own thing – the very strong rally was said to be driven by the hurricane, but I am not so sure. At some point, US oil & gas assets are going to be worth real money again. This assumes, of course, that we won’t drop into a great depression.
Do I see a depression in the cards? The math says yes, but I don’t think anyone in power (on either side) has the stomach for anyone taking any losses at all anymore. The country is so unlike where we were in the 30s – we can’t expect the same economic outcomes, even if that’s where the logic of events should be taking us. Trump’s recent tweet:
Democrats are “heartless”. They don’t want to give STIMULUS PAYMENTS to people who desperately need the money, and whose fault it was NOT that the plague came in from China. Go for the much higher numbers, Republicans, it all comes back to the USA anyway (one way or another!).
Of course if Harris (biden?) gets in power, they’ll be passing MMT-funded UBIs for everyone, in perpetuity. Free money, monetized by the Fed, paid for by the savers and everyone on a fixed income. $12k/year x 350m people = $4.2 trillion/year.
So its stimulus to the right of us, stimulus to the left of us, stimulus in front of us.
I think we will get inflation. Inflation with Trump, even more inflation with Harris. I actually already think we have it, at least in the things we are buying. Not in airline tickets or hotel reservations, but in food for sure. Future inflation won’t come from the Fed, it will come from the government, and the Fed will happily monetize all of the new debt, for as long as it takes, until we get full employment. Assuming that ever happens.
Savers and pensioners will pay. As always.
When? We might see a stimulus bill passed within a month (say 50% chance), but we will get another one for sure after the election.
Best report yet DF. No wonder it got flagged as SPAM.
I’m so sick of politics and it’s only mid-September. I’ve filled out and sent in 19 mail-in ballots for Biden and Co. I’m exhausted.
Just joking Bad Orange Man fans, Tejas doesn’t do mail-in voting unless you are a geezer. I would never vote anyways, unless it was for Texas Secession.
The oft-repeated mantra is “don’t fight the Fed.”
Yet, the Fed is unwilling to raise interest rates out of fear of a stock market crash, as suggested in late 2018. Powell threw in the towel and began lowering rates.
I wonder to what extent the Fed actually has power to directly control interest rates. They seem unwilling to fight the trend toward lower rates coming from the market for 10 year rates.
Perhaps the flood of liquidity from money printing is pushing the market to lower rates, and the Fed can’t or won’t fight it. In which case, the Fed is not as powerful as they’d like us to believe. Which suggests a lot of the smoke and mirrors in Powell’s speeches is about giving the illusion that they have control of interest rates.
I think the Fed has full control of rates, but really only in one direction: raising them.
Controlling rates to the downside is useful in some circumstances – but if people don’t want to borrow, it won’t matter how low the rates are. You can’t push on a string. Japan found that one out.
So the Fed’s levers get more and more useless as consumer expectations of inflation drifts lower and lower. And they don’t like that. So they want inflation higher – so they can get more control back again.
Maybe they should just let rates find their appropriate, natural level?
Nah. That would never work.
Well I signed up for an absentee ballot. It was a mildly annoying process, but not horrible. Supposedly I’ll get my ballot tomorrow.
Curiosity question. If Texas seceded from the union, which it is always threatening to do – which I find kind of charming actually – would you be in favor of Open Borders and Healthcare as a Human Right, or would you Build The Wall? Or some combination?
OMG are we talking Texit here?!? I shouldn’t laugh as I know how painful and devisive Brexit continues to be. It’s already been hugely disruptive and time consuming.
To solve the next big worldwide problem after covid passes, climate change, we need to cooperate and I don’t see that happening if we waste years splintering into ever more smaller independent states.
Maybe proper free market capitalism could also solve climate change bottom-up, certainly pension funds and insurers seem to be waking up to the economic disaster that will be, but I’m not sure what that solution would look like. People who over-consume get higher insurance premiums? Sky high interest rates to dampen economic activity? I don’t believe there are any easy outs on this one. Technological advancement is nice, but as much of a cause as a solution.