PM Daily Market Commentary – 09/28/2020

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  • Tue, Sep 29, 2020 - 02:18am

    #1

    davefairtex

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    PM Daily Market Commentary – 09/28/2020

Gold rallied +22.76 [+1.22%] to 1890.21 on moderate volume, and silver screamed higher +0.83 [+3.60%] to 23.86 on moderately light volume. The buck dropped hard [-0.40%], SPX rallied hard [+1.61%], as did crude [+1.40%], while bonds were unchanged.

Gold moved lower in Asia, with the day low happening around 5 am; then gold rallied strongly for the rest of the day, closing at the highs. The closing white marubozu candle was a possible bullish reversal (36%), forecaster climbed, rising into an uptrend. Gold is in an uptrend in the daily and monthly timeframes.

Gold/euros climbed +12.92 [+0.80%] to 1620.30 on moderate volume. The closing white marubozu candle was a low-percentage bullish reversal (26%), forecaster climbed, rising into an uptrend. Gold/euros is in an uptrend in the daily and weekly timeframes.

COMEX GC open interest rose +3.3K contracts. Current open interest for GC: 52% of global annual production, up +0.31% today. 16 GC contracts stood for delivery at COMEX today.

Today saw a 3-candle swing low, and a bullish reversal on the forecaster. Was this just a currency effect? To some degree, I think the answer is yes. While I think today’s move – probably – marks the low for gold for a time, this is conditional on what happens to the buck.

Silver also fell in Asia, bottomed out a bit earlier, then spent the rest of the day moving strongly higher, and also ending at the highs. The long white candle was a bullish continuation, forecaster climbed, rising into an uptrend. Silver is in a downtrend in both the weekly and monthly timeframes.

COMEX SI open interest rose +1.3K contracts. Current open interest for SI: 89% of global annual production, up +0.78% today. 47 SI contracts stood for delivery at COMEX today.

The gold/silver ratio dropped -1.87 to 79.22. That’s bullish.

Silver’s 3-candle swing low looked stronger than gold’s, at least to my eye. Certainly daily forecaster was impressed, although on a weekly basis, silver has a long, long way to go to recover the massive losses from last week. This probably marks the low for silver as well.

Miners gapped up at the open, chopped lower for a time, then moved higher for the remainder of the day. GDX rallied +1.17% on moderately light volume, and GDXJ shot up +1.90% on moderately light volume. XAU rallied +1.14%, the doji candle was a possible bearish reversal (35%), forecaster climbed, rising into an uptrend. XAU is in an uptrend in the daily and monthly timeframes.

The GDX:gold ratio dropped -0.05%, and the GDXJ:GDX ratio climbed +0.71%.

All of the gains for the miners came on that gap up open. While the forecaster liked today’s move, the candle code wasn’t so sure – this was a very bearish rating for a normally boring doji candle. And to be sure, there really wasn’t much buying pressure in the miners, at least compared to the moves in the metals today.

Platinum rose +40.73 [+4.58%], while palladium rose +52.32 [+2.29%]. Palladium is back in an uptrend, as is platinum. Today’s strong move in platinum is definitely supporting a move higher in the metals – it managed to close back above the 200 MA, and its performance was the best of the entire metals group. Sometimes I think platinum leads; if that is true, then today’s big platinum rally is a very positive sign.

Copper climbed +0.02 [+0.67%] to 2.99 on moderately light volume. The spinning top candle was a bullish continuation, forecaster dropped, moving deeper into its downtrend. Copper is in a downtrend in both the daily and weekly timeframes.

Copper is slowly creeping higher, slowly trying to recover from the big down day last week. No bullish reversal for copper today.

The buck fell -0.38 [-0.40%] to 94.29 on moderately light volume. The opening black marubozu candle was a bearish continuation, forecaster fell, dropping into a downtrend. The buck is still in an uptrend in the weekly and monthly timeframes.

Major currency moves included: EUR [+0.41%], GBP [+1.13%], AUD [+0.82%].

Today might mark a top for the buck. While the candle print wasn’t specifically bearish, forecaster didn’t like today’s price action at all.

Crude rallied +0.56 [+1.40%] to 40.67 on moderately light 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.

I’m becoming more convinced about this crude rally. Crude closed above the 200 MA, which was a positive sign. We also saw a swing low for energy equities (XLE), although it was a pretty iffy swing low.

SPX rallied +53.14 [+1.61%] to 3351.60 on moderate volume. The opening white marubozu candle was a bullish continuation, forecaster climbed, rising into an uptrend. SPX is in an uptrend in all three timeframes.

Financials [+2.33%] led, along with energy [+2.30%], while utilities [+0.25%] and sickcare [+0.89%] did worst. This was a very bullish sector map.

The VIX fell -0.19 to 26.19.

Most of the gains came in the futures markets overnight. The NYSE Advance Ratio was 85, which indicates a broad-based rally. As of right now, the SPX correction appears to be largely over.

TLT dropped -0.28%. The spinning top candle was a low-percentage bullish reversal (23%), forecaster climbed, moving higher into its uptrend. TLT is in an uptrend in the daily and weekly timeframes. The 30-Year yield rose +2.0 bp to +1.42%.

TY inched up +0.05%. The short white candle was unrated, forecaster dropped, but remains in an uptrend. TY is in a downtrend in both the weekly and monthly timeframes. The 10-Year yield was unchanged at +0.0 bp to +0.66%.

Bonds mostly aren’t going anywhere.

JNK climbed +0.71%. The long white candle was a bullish continuation, forecaster climbed, but remains in a downtrend. JNK is in a downtrend in both the daily and weekly timeframes.

Three-candle swing low for crappy debt, a close back above the 200 MA – it was a bullish-looking day, confirming the move in equities.

Physical Supply

The GLD ETF tonnage on hand climbed +2.05 tons, with 1269 tons remaining in inventory.

ETF Discount to NAV:
* CEF -3.66%
* PHYS -0.70%
* PSLV -2.67%
Gold dealer big bar premiums:
* gold [1kg]: +1.04%
* silver [100 oz]: +6.35%

Physical ETF discounts increased today, and big bar physical premiums declined. That’s a bearish sign for PM.

Economic Reports

Yield Curve Inversion: the 1-10 spread was unchanged at +0 bp to +54 bp today. 1Y: 0.12% (+0 bp), 10Y: 0.66% (+0 bp).

Summary

Gold and silver both printed reasonably strong-looking swing low candle patterns today, along with a bullish reversal in the forecaster too. The miners appear to be lagging to some degree, while platinum is looking very strong. This looks reasonably bullish. Will it continue? I think this depends mostly on what happens to the buck.

Speaking of which, the buck may have topped out. What was the cause? Over the weekend, France seemed to decide against a second lockdown. And Germany is now talking about just limiting gatherings to 50 people – and it will be a recommendation from Merkel, not a mandate. I’m guessing about this being the cause of the dollar plunge, of course.

Perhaps they all looked north, and saw that Sweden has avoided all this “second wave” fuss without imposing a bunch of public policy nonsense, and – just maybe – they figured out that they too can do the same thing.

[Here’s an idea: try a nationwide campaign to distribute Vitamin-D to everyone who is vulnerable. I mean, science, right? You EU politicians control national healthcare systems – you might consider using them to help people using prevention, rather than as a vehicle to funnel money to your pals in Pharma. Just a thought anyway.]

Risk assets shot higher – much of the SPX move happened overnight in the futures markets, but copper, crude, and crappy debt all moved higher too. It looks like risk-back-on again. Interestingly, the banksters (XLF) seemed to have staged a strong recovery too.

We here in the US have a Presidential Debate tomorrow. I would give a lot to be a fly on the wall overseeing preparations on both sides tonight. Do I like politics? Maybe a little. 🙂 Is this a possible market-moving event? Oh my gosh yes. Who knows what Trump could say. And Biden could have a Biden Moment. Or two.

This is 90 minutes of mostly-unfiltered-by-mainstream-media access to our Presidential candidates.

When? 9:00 pm to 10:30 Eastern. No commercials.

https://edition.cnn.com/2020/09/22/politics/presidential-debates-schedule/index.html

Chris Wallace, the moderator for this first debate, selected the following topics:
* The Trump and Biden Records
* The Supreme Court
* Covid-19
* The Economy
* Race and Violence in our Cities
* The Integrity of the Election

Each segment will last 15 minutes.

Supposedly, there will be three of these debates. In the current climate, this is a Fed meeting times 10.

  • Tue, Sep 29, 2020 - 06:37am

    #2

    JAG

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    XLE

DF: I’m becoming more convinced about this crude rally. Crude closed above the 200 MA, which was a positive sign. We also saw a swing low for energy equities (XLE), although it was a pretty iffy swing low.

Me too. Sept. and Oct. are typically bad months for oil but seasonality is all screwed up this year. Fall is Spring and Spring is Fall.

XLE is going to be one hell of a buy soon. I know the oil companies are really hated right now by the ‘enlightened’ investors but get real people. This sector is going to come roaring back next year methinks.

  • Tue, Sep 29, 2020 - 08:58am

    #3
    Nate

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    JAG nailed it

I do think value stocks are about to make a come back and XLE will be part of that story.  The podcast with Art Berman provides a timeline for lower US production:

Why US oil production will be dramatically lower by next June
Why the US may never produce as much oil as it did between 2016-2019
Why oil, not interest rates, will be the limiter of economic growth going forward
For many years on this website we’ve warned of the coming crisis of “Peak Cheap Oil”. We may now be entering a new, accelerating stage of that story.

JAG – let us know when the bottom is in.

 

 

  • Tue, Sep 29, 2020 - 11:14am

    #4

    davefairtex

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    the bottom in XLE

Well, just when I start to imagine the bottom might be in for oil, then it sells off hard and makes a new low.  So – not just yet, it would appear.

XLE (and the poorer cousin OIH) were not looking all that healthy – not exactly confirming – so fortunately I’m still watching.

I think there will be a time to swap out some of my miners for oilers again.  But production hasn’t fallen quite as much as we might have hoped.  Still watching from the sidelines.

There is some slight insider buying in services – but not very much.  That should be my trigger to get back in.

  • Tue, Sep 29, 2020 - 01:57pm

    #5

    JAG

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    Capital Flows

Hey DF,

I came across this capital flow model that ‘predicts’ a huge move out of the USD and US assets about a year from now:

Though models are often wrong, it does make sense to me:

  • No matter who wins the election, the economy is stagnated and loaded with debt. There will have to unbelievable fiscal spending to get it going again.
  • Equities will soar and bond yields will rise, only if they rise too much the FAANG bubble pops and we get deflation. The FED will print like crazy to keep bond yields suppressed.
  • Loose Monetary + Loose Fiscal = Major Currency Crash
  • The world pulls their 20-22 Trillion out of US assets like we see in the chart above.

I would really hate to be the next POTUS.

DF, you have said that Armstrong has some capital flow models that you like. What does his model predict?

  • Tue, Sep 29, 2020 - 02:11pm

    #6

    JAG

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    PM Daily Market Commentary – 09/28/2020

Nate: JAG – let us know when the bottom is in.

LOL, good luck with me calling the bottom. We better leave that up to DF.

Unless we see major market drama in the next two months, I will probably just take a small position in XLE early next year and add to it as it moves against me. I really like this approach because it reverses my psychology on trading (meaning I’m happy to see it go down).

This approach has worked well with my VIX calls and I’m starting to use it with the miners. Obviously you have to progressively sell on the way up too. I hope I get lucky enough to learn that lesson.

  • Wed, Sep 30, 2020 - 12:33am

    #7
    phusg

    phusg

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    PM Daily Market Commentary – 09/28/2020

Speaking of which, the buck may have topped out. What was the cause? Over the weekend, France seemed to decide against a second lockdown. And Germany is now talking about just limiting gatherings to 50 people – and it will be a recommendation from Merkel, not a mandate. I’m guessing about this being the cause of the dollar plunge, of course.

You don’t see it as that the buck has spent the last month forming a bottom and has now broken out of its downtrend? I don’t see it topping out so soon, especially as you say, with no new US stimulus package likely until after the election. So i’m sticking with your weekly analysis, lower prices for PM ahead. FD: I’m currently short PM as I’m expecting the dollar strength to keep returning and the PM correction to become a bit deeper.

As for the cause being looser corona measures in euroland, I suspect these are only because Europeans are also more torn about how necessary it is to give up freedoms, hurt sections of the economy and spend more public money to plug the gap. With rising Covid reproduction rates all over the place, when push comes to shove, I think the measures will quickly get a lot more restrictive. We have an older population generally which makes us more vulnerable.

Medium term we also have the slow motion crash that is Brexit which increasinly looks to end up as bad for both the GBP and EUR, so DXY should profit.

Perhaps they all looked north, and saw that Sweden has avoided all this “second wave” fuss without imposing a bunch of public policy nonsense, and – just maybe – they figured out that they too can do the same thing.

Some Europeans also want to look North to Sweden, but I think the majority recognizes that Swedes are social distancers by culture (cold would be unkind, but they are far from hugely sociable and touchy feely people by nature) and are also trusting of their government in this case and so voluntarily self-applied many measures. Sweden also hardly has any of the densely populated mega-cities other European countries have. Those things help a lot. If herd immunity really works then why is Spain, one of the hardest hit countries during the first wave, now experiencing one of the worst second waves?

  • Wed, Sep 30, 2020 - 02:00am

    #8

    davefairtex

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    spain & lockdowns

phusg-

Lockdowns don’t prevent infections.  They just push infections off into the future.  So Spain, which had a very hard lockdown, pushed infections off into – right now, as it turns out.  True for most of Europe, actually.  The hard lockdowns just pushed infections off until later.

There is some math that shows this.  If you effectively jail the super spreaders instead of infecting them, they are lying in wait until the time of released restrictions – they emerge from hiding after being “protected” by the lockdown, they get infected and turn around and infect a bunch of people, and presto – you get your second wave.

The math says that lockdowns will result in MORE people being infected over the long haul, until most of the super-spreaders are taken out.

This was in a paper written by a Spanish epidemiologist.  I’m paraphrasing, of course.

There are so many charts from around the world that all look just like Sweden.  In non-lockdown countries, there are no “second waves” – not of deaths anyway.

Of course if you take advantage of the information gained during the lockdown period (vitamin-D, ivermectin, HCQ) by using the better treatments you discover during this time, then you may end up saving lives.  If you don’t do this, well, then you end up killing even more people with repeated lockdowns.

Right sorry about that.

I have to defer to you on where you think Europe will go in terms of a second lockdown.  I’m not plugged into the news cycle there quite so much.

If you guys do lock down a second time, then the buck probably does rally strongly.  The EU economy will be absolutely crushed.  Which I do not want to see.  I really hope it doesn’t happen.

As for BRExit – I’m just going on what the history is.  Gun to the head, EU will do a deal.  If that’s wrong, well then things do get a bit unpleasant – I agree.

Here’s another factor: I’m positive that the NSA listens to the comms of the EU negotiating team, and it is likely that “the special relationship” has conferred upon the UK a “special” advantage – they know the hole cards of their erstwhile adversaries.  In fact, I’d say that’s probably a certainty.  It is tough to play cards with someone who knows your hand from the start.

  • Wed, Sep 30, 2020 - 03:12am

    #9
    phusg

    phusg

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    PM Daily Market Commentary – 09/28/2020

I’m with you on lockdowns pushing infections into the future, but for me the calculus includes a good chance of a viable vaccine early 2021, so not far to push now…

Spain had a very hard lockdown, but that was because the virus was spreading widely, which should have brought some of the same herd immunity. If Sweden remains immune as the weather gets colder and more people congregate indoors then that could swing the policy to herd immunity, but on balance I expect that even if Sweden had it, their herd immunity will wear off the coming months.

I’m not sure the European economy potentially being ‘crushed’ again bothers people as much as it maybe should. As long as the government keeps plugging the shortfall with more deficit spending a lot of voters are happy enough.

I also expect the EU to offer a last minute extra concession to try to secure the deal, but then Britain will have to play ball and reciprocate. And surely that must be more than just withdrawing that latest legislation that undermines the withdrawal agreement which protects the Good Friday agreement.

And I can’t really see how the UK has an advantage by knowing the EU’s cards. I think it’s a very strong hand vs the smaller British hand and the game only lasts one round. They could walk and hope the next round is better but wouldn’t that be about 10 years down the road when they want to rejoin Scotland in the (succesor to) the EU?

  • Wed, Sep 30, 2020 - 04:17am

    #10

    davefairtex

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    viable vaccines

phusg-

The very people that are at risk from COVID-19 are the same people for whom a vaccine won’t work very well: obese, and the elderly.

I know you guys in Europe aren’t as fat as we are here in America, but you are older, and as we age, our immune system responds less well to vaccination.  I don’t think its possible to get “vaccinated herd immunity” (60-70%) in the US for this very reason.  Europe, I don’t know about.  The high-dose vaccines (required to get those elderly immune systems to react) caused some pretty serious side effects in this one trial I read about; and this was in young healthy volunteers.

Natural herd immunity is about T-cells, cross-immunity, as well as taking out super-spreaders.  I’m willing to put money on Sweden’s herd immunity holding through the winter.  I also think this winter’s flu season will be a lot lighter than normal.  People will be hypersensitive about fever, symptoms, etc.  You get temp-checked everywhere now.  I don’t think this will go away anytime soon.

We have lots of great treatment options for COVID-19.  Locking down the young and relatively immune is just stupid.  (If you are older and vulnerable – by all means, protect yourself.)  But it really seems to me like there might be another thing going on under the covers – “a transition into a lower carbon future”, or something like that, via a mass transition to a lower standard of living for everyone via economic destruction.

Otherwise all this incompetence just makes no sense.

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