PM Daily Market Commentary – 09/17/2020

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  • Fri, Sep 18, 2020 - 05:36am

    #1

    davefairtex

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    PM Daily Market Commentary – 09/17/2020

Gold fell -15.54 [-0.79%] to 1955.11 on moderate volume, and silver edged down -0.07 [-0.26%] to 27.30 on moderately light volume. The buck fell [-0.28%], SPX dropped too [-0.84%], crude rallied [+1.98%], while bonds were unchanged.

Gold fell in Asia, and dipped once more just before the open in New York, but then moved back higher through end of day. The swing high candle was a reasonably strong bearish reversal (46%), forecaster dropped, but remains in an uptrend. Gold is in an uptrend in the daily and monthly timeframes.

Gold/euros dropped -14.04 [-0.84%] to 1652.36 on moderate volume. The swing high candle was a likely bearish reversal (62%), forecaster dropped, dropping into a downtrend. Gold/euros is in a downtrend in both the daily and monthly timeframes.

COMEX GC open interest fell -5.6K contracts. Current open interest for GC: 54% of global annual production, down -0.52% today. 3 GC contracts stood for delivery at COMEX today.

There was a moderate amount of short-covering today on gold’s decline; that’s a positive sign. While the gold/USD candle print was bearish, the gold/EUR candle print was really bearish. Gold is teetering on the edge of a bearish reversal on the daily; it remains in a downtrend on the weekly timeframe.

Right now there seem to be dip-buyers that appear on just about every decline below (roughly) 1950.

Silver also dipped in Asia, sold off hard at 9 am, but bounced back even harder at 10, erasing the 9am losses, and eventually almost returning to even. The takuri line candle was a bearish continuation, and forecaster fell, dropping into a downtrend. Silver is now in an uptrend in just the monthly timeframe.

COMEX SI open interest rose +1.2K contracts. Current open interest for SI: 94% of global annual production, up +0.68% today. 397 SI contracts stood for delivery at COMEX today.

The gold/silver ratio dropped -0.38 to 71.62. That’s bullish.

Silver’s plunge just before market open, and the subsequent strong rally an hour later, looked to be a bit of a mystery. Why the plunge? And why the even-stronger rally? This sort of thing has been happening a lot. A trader friend speculated that “someone” might be yanking metals prices around in order to make money off the Robinhood traders. Makes as much sense as anything else I’ve heard.

“Trade less, do better” is my motto.

No short-covering, but silver definitely outperformed gold today. While silver forecaster dropped into a downtrend, silver remains above the 9 MA, and today’s rebound looked quite strong to me.

The miners gapped down hard at the open – probably due to the 9 am selloff in PM – rallied during the first 90 minutes, sold off again, but then eventually recovered much of the losses by end of day. GDX fell -1.75% on moderate volume, and GDXJ dropped -1.34% on moderate volume. XAU fell -1.28%, the confirmed bearish nr7 candle was a low-percentage bearish reversal (26%), forecaster fell, dropping into a downtrend. XAU is in an uptrend in the weekly and monthly timeframes.

The GDX:gold ratio dropped -0.98%, and the GDXJ:GDX ratio climbed +0.41%. That’s mildly bearish.

The miners were driven by the 9 am sell-off in the metals; all of today’s losses came on that gap-down open. The (bearish) candle pattern was actually pretty weak, and the miners ended the day above the 9 MA. This probably isn’t a bearish reversal for the mining shares.

Platinum plunged -36.78 [-3.89%], while palladium dropped -57.03 [-2.42%]. Both of the “other” metals had terrible days, with platinum looking the most bearish. Platinum’s swing high candle pattern was very bearish (62%), and its forecaster plunged into a strong downtrend. Palladium’s print wasn’t bearish, and it remains in an uptrend, in spite of the big down day.

Copper inched up +0.01 [+0.33%] to 3.07 on moderate volume. The belt hold candle was a reasonably strong bullish reversal (45%), forecaster dropped, but remains in an uptrend. Copper is in an uptrend in the daily and weekly timeframes.

I’ve been working on the daily copper model. I can’t get it to resolve very well. Over the past six months, there have been relatively frequent, intense down days which trip the model into a bearish reversal, only to encounter a huge move back up the very next day – which ends up in a whipsaw.  Rinse, repeat.

My guess: some large entity is intervening in the market. It almost feels as though a lid is being kept on prices. Who would want to accumulate large amounts of copper for a lower price? Hmmm. Let’s see now. Who might that be?

Note the weekly and monthly all resolve really well. The daily shenanigans aren’t seen at the longer timeframes.

The buck fell -0.26 [-0.28%] to 92.96 on moderately heavy volume. The long black candle was a bullish continuation, forecaster fell, dropping into a downtrend. The buck is in a downtrend in both the daily and weekly timeframes.

There were no major currency moves today.

The buck tried to rally early in Asia, but failed; it spent the rest of the day selling off, eventually closing at the lows. Bigger picture – the buck appeared to run into resistance at the 50 MA, and finally ended the day below the 9. I can see why the forecaster turned bearish.

The early rally in the buck did seem to affect the metals initially – driving prices a bit lower – but once the buck started to fall, the metals went their own way for the remainder of the day.

Crude moved up +0.80 [+1.98%] to 41.21 on moderately heavy volume. The long white candle was a bullish continuation, forecaster climbed, moving higher into its uptrend. Crude is in an uptrend in the daily and weekly timeframes.

Today’s rally seemed to stop at the 50 MA. Today marks 3 straight days up for crude. Prices are acting funny right now. Headlines are negative, but prices are doing quite well. Something might be up.

SPX fell -28.48 [-0.84%] to 3357.01 on moderately heavy volume. The swing high candle was a reasonably strong bearish reversal (45%), forecaster dropped, moving deeper into its downtrend. SPX is in a downtrend in both the daily and weekly timeframes.

REITs [-2.26%] led the market lower, along with communication services [-1.87%], while materials [+0.73%] and industrials [+0.20%] did best. This was a neutral sector map.

The VIX rallied +0.42 to 26.46.

All of today’s losses happened in the futures markets overnight. NYSE advance ratio was 39%, which was somewhat bearish – but not horribly so. Sector map was neutral; SPX is now back below the 9 but remains above the 50. Weekly is just in a slight downtrend. Call it – cautiously bearish. A close below the 50 MA could lead to a lot of selling. This is September, typically not a great month for equities.

TLT climbed +0.31%. The belt hold candle was a bullish continuation, forecaster climbed, rising into an uptrend. TLT is in an uptrend in the daily and weekly timeframes. The 30-Year yield fell -1.0 bp to +1.44%.

TY inched up +0.04%. The gravestone doji candle was a reasonably strong bearish reversal (41%), forecaster dropped, moving deeper into its downtrend. TY is in a downtrend in all three timeframes. The 10-Year yield was unchanged at +0.0 bp to +0.69%.

The 10-year continues to more or less move sideways. Powell told us yesterday that the Fed is buying $120 billion in Treasury and MBS issues per month in order “to sustain smooth market functioning.” Presumably, if the Fed buying were to stop, prices in bonds would crater due to supply outstripping demand at current prices, and the price moves would be anything but smooth. So they do not dare to let price discovery happen. Bond market: destroyed. We will pay for this someday. Just not today.

JNK inched up +0.04%. The long white candle was a bearish continuation, forecaster dropped, but remains in an uptrend. JNK is in an uptrend in the daily and weekly timeframes.

It was a fairly positive move for crappy debt, especially given the drop in equities. Perhaps – it had to do with rising oil prices; some amount of crappy debt is US shale driller debt.

Physical Supply

The GLD ETF tonnage on hand dropped -0.59 tons, with 1247 tons remaining in inventory.

ETF Discount to NAV:
* CEF -1.77%
* PHYS +0.05%
* PSLV -1.78%
Gold dealer big bar premiums:
* gold [1kg]: +1.15%
* silver [100 oz]: +6.75%

Physical ETF discounts continue to slowly shrink; big bar premiums remain relatively low also.

Economic Reports

Fed Balance Sheet: 7064.5B, +53.9B, Liquidity Swaps: 52.3B, -19.8B, Reverse Repos: 200.2B, -7.7B, Treasury Securities: 4407.0B, +13.4B, MBS: 2005.0B, +55.4B. Balance sheet is growing again.

Yield Curve Inversion: the 1-10 spread rose +1 bp to +58 bp today. 1Y: 0.11% (-1 bp), 10Y: 0.69% (+0 bp).

Summary

The impact from yesterday’s FOMC meeting (and Powell’s “powerful message”) ran out of impact about 3 hours into the Asia trading session. The Fed is out of ammo, and consigned to the sidelines. They don’t like it much, but that’s where we are today.

Gold ended the day down, silver fell but bounced back hard, and the miners were somewhere in between. It looks as though “someone” is pounding metal prices at COMEX prior to the US open, which affects the mining share prices, and then covering their shorts an hour later, erasing the losses. Mostly, prices are just chopping sideways. At least for now.

Equities are drifting lower; a break below the 50 MA (and a new lower close) could be a signal which ignites more selling. Commodities aren’t supporting this, however; crude is rallying, copper is edging higher, and even crappy debt is hanging in there.

Could Bad Orange Man be bringing peace to the middle east? Well, the two Arab nations normalizing relations with Israel certainly suggests positive movement. Allowing one group (“the Palestinians”) to be the gatekeepers of the process certainly hasn’t worked to date. Why keep pushing a failed approach?

As we know, the enemy of my enemy is my friend, and that’s never more the case than with the Sunni/Shia split. Nuclear-armed (and militarily proficient) Israel could be a very useful ally for many of the Sunni gulf states in a conflict with Shia Iran – which is proving to be a far more existential threat to them than Israel ever was. That destroyed refinery in Saudi Arabia was probably very helpful to this end.

In some sense, Orange President is simply making official the informal relations that these weaker gulf states have had with Israel over the years, and rebranding it a “peace deal.” But it isn’t a nothing-burger; it is also a clear signal to the Palestinians that The Peace Train is Leaving the Station – they are no longer the gatekeepers – and they might want to get on board before it leaves them completely behind.

https://www.reuters.com/article/us-israel-gulf-usa/white-house-says-five-more-countries-seriously-considering-israel-deals-idUSKBN26906G

Domestically, the election strategy of Team Biden is becoming more clear. It is less about the vote on November 3rd, and much more about the post-election period.

Kunstler explains the strategy in his recent piece:
https://kunstler.com/clusterfuck-nation/convergence-of-quandaries/

…Here’s how it works: the complicit newspapers and cable news channels publish polls showing Joe Biden leading in several swing states, even if it’s not true. Facebook and Twitter amplify expectations of a Biden victory. This sets the stage for a furor when it turns out that he loses on election night. On cue, Antifa and BLM commence to riot all around the country. Meanwhile, a mighty harvest of mail-in votes pours into election districts utterly unequipped to validate them.

Lawfare cadres agitate in the contested states’ legislatures to send rogue elector slates to the electoral college. The dispute ends up in congress, which awaits a seating of newly-elected representatives on January 4, hopefully for Lawfare, mostly Democrats. Whoops…! Turns out the Dems lost their majority there too. Fighting in the streets ramps up and overwhelms hamstrung police forces in Democratic-run cities. January 20 — Inauguration Day — rolls around and the Dems ask the military to drag Trump out of the White House “with great dispatch!” as Mr. Biden himself put it so nicely back in the summer. The US military breaks into two factions. Voilà: Civil War Two.

Jim lays out the plan, but he doesn’t explain why – at least his explanation doesn’t satisfy me . Why is the prospect of 4 more years of a Bad Orange Man in power so horrible an outcome that they are willing to risk blowing up the Republic and causing a civil war when Bad Orange Man will – worst case – leave office in 2024 and most likely they’ll get to replace him with Sandy Cortez.

We survived 8 years of Bush II, for heaven’s sake.

So that’s the mystery. Why the urgency? I still don’t know.

Why do we care? Apart from being citizens, this will be a massive driver of volatility going into November and December. The dates are all useful – they can provide options expiration dates, at the very least.

Severe volatility = opportunity. I will be pondering the subject as things move closer to the date. I think this is the most important market-moving issue for the next 3 months.

  • Fri, Sep 18, 2020 - 06:59am

    #2

    JAG

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    PM Daily Market Commentary – 09/17/2020

Kunstler

I know Kunstler has a lot of fans here, and I have enjoyed his fictional works, but he has been flat-out wrong with so many of his predictions that I can’t take him seriously. Reality makes fools of us all, however, and he is a really good writer.

 

Gold

Sentimentrader is pretty bearish on gold and silver over the next year. I bought call options on Barrick and Pan American Silver and so far they haven’t done much. They are long dated contacts to Jan22, but I think I bought them way too early. I should have waited for a better opportunity.

 

Election

My step-mother told me that she’s so worried about the election that she can’t sleep at night. I think that is hilarious. Like one politician is any better or worse than another.

I think most of the political drama comes down to one thing: Trump is just annoying. He has the social skills of a fifth grader and really is not capable of thinking about anything other than himself. That just drives some people crazy, and I think that is more of a criticism of them than it is of him.

Maybe we should buy stock in anxiety meds, lol.

  • Fri, Sep 18, 2020 - 07:57am

    #3

    davefairtex

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    non-peaceful power transitions

JAG-

So I wasn’t making the case of one politician being better than the other – simply that this time around, one team appears determined not to lose, and is signaling it will use extra-legal methods to ensure they move into power.

If correct, that by itself should suggest to any neutral observer that this group are probably not the group you want to be in power, since once a group starts acting extra-legally and getting away with it, it will become a habit.  They will not voluntarily give up power short of death or revolution.

The concept of peaceful transition of power isn’t about picking the best politician, or about one group being better than another.  It’s about ensuring you can replace either group if they get too far out of line.  It is a systems-architectural check on whoever is in power from acting too obnoxiously.

Once you can’t replace the politician – and I assume they are all equally lame here – the current lame group will become exponentially more lame because they will not be operating under any fear of replacement.  There will be no restraint at all.  People really are all the same: absolute power will corrupt absolutely.

If you couldn’t replace Trump, he’d become about 10x worse than he is now.  There would be no check on what he would do.  Same is true for his opponent.

I’ve lived under such regimes.  From observation, they are vastly worse than what we have in the US.  Once the weasels don’t live in fear of replacement, the shit they will pull will be really beyond the pale.  They’ll throw huge chunks of the population right under the bus, they won’t think twice about it, because there’s no downside at all for them.

Just look at China under the CCP.  That’s what we’ll become.

Just say no to non-peaceful transfers of power.

  • Fri, Sep 18, 2020 - 08:02am

    #4
    debu

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    PM Daily Market Commentary – 09/17/2020

The Palestinians are not the gatekeepers in the so-called peace process but, rather, the wronged party.  It isn’t at all clear how they are supposed to board the glibly termed Peace Train when they are blocked from doing so by Jacobtinsky’s Iron Wall.

But this isn’t really the forum to discuss the eternal I/P conflict so this will be last I have to say on this matter here.

  • Fri, Sep 18, 2020 - 08:25am

    #5

    davefairtex

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    peace train

debu-

I suspect that the wronged party will see an advantage to making a deal, even if it wasn’t the deal they were hoping for, that will improve the overall situation for the people in Palestine.

I also suspect that once peace is achieved, Hamas will lose power.

Curiously, I think that will be true for Likud as well.

I believe the world will be better off as a result.

Perhaps this dynamic is why there has been no peace to date.  Leadership on both sides wants to remain in place.  Hamas is Likud’s best friend, and vice versa.

  • Fri, Sep 18, 2020 - 08:52am

    #6

    Quercus bicolor

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    re: non-peaceful power transitions

one team appears determined not to lose, and is signaling it will use extra-legal methods to ensure they move into power.

How did you reach the conclusion that this only applies to one team and not to both?

  • Fri, Sep 18, 2020 - 11:23am

    #7

    JAG

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    PM Daily Market Commentary – 09/17/2020

White Oak asked: How did you reach the conclusion that this only applies to one team and not to both?

You know DF, when it comes to your politically-adjacent views, I often wonder the same thing. Whatever the issue is, your perspective is the exact opposite of the one that naturally comes to my mind. Why do you think that is?

It’s not a big deal to me and the last thing I want is an echo chamber for a think tank. But one could replace the term Team Blue with Team Red in your commentary and it would make just as much sense to me, if not more.

  • Fri, Sep 18, 2020 - 01:25pm

    #8

    davefairtex

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    good questions

QB,JAG-

How did you reach the conclusion that this only applies to one team and not to both?

So what specific rules is Trump trying to change to affect the 2020 election?

Did he recruit a bunch of Antifa-BLM brownshirts and deploy them nationwide?

Did he demand a last-minute change to the centuries-old voting mechanism?

My sense is, Trump is happy to follow the usual rules.

If you disagree, please provide your evidence.

  • Fri, Sep 18, 2020 - 01:58pm

    #9
    Sport7777777

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    PM Daily Market Commentary – 09/17/2020

Just looking at the upcoming election in general is very troubling because we already know there are issues with mail in ballots. The primary issue would not be that people are voting by mail but there is no tracking for each individual ballot. That is what we have absentee ballots for however even this is not foolproof. Rules are being changed on the fly making it difficult to know what really will happen come November.

The information that I have been seeing has said we may not know the results of the election until well after November. That could be December or even later than that according to some speculations.

Whatever is to come in our future we will have to deal with it. Whether that be Trump being re-elected, Biden is elected or maybe in a surprise a third party candidate is elected.

Resiliency will be key during the rest of the year into 2021. Be prepared for whatever is to happen. As they say prepare for the worst but hope for the best.

V/r

Sport7777777

  • Fri, Sep 18, 2020 - 08:12pm

    #10
    Nate

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    off topic

Perfect storm.  Covid 19 Scamdemic.  Floyd dies from cop knee and/or Fentanyl.  Riots and violence follow. Left condones. Fires – natural and manmade – burn the Left coast.  Mail in ballots.  Cheating on steroids.  And now RBG checks out.  Let the shit storm continue.

 

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