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PM Daily Market Commentary – 1/8/2019

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  • Wed, Jan 09, 2019 - 05:06am

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    davefairtex

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    PM Daily Market Commentary – 1/8/2019

Gold fell -4.06 [-0.31%] to 1290.60 on very heavy volume, and silver fell -0.01 [-0.03%] to 15.70 on heavy volume. SPX rose +0.97%, the buck climbed +0.25%, crude rose +2.24%, while junky debt climbed +0.70% while treasury bonds declined. It was another risk-on day.

Gold fell alongside the Euro in Asia – then moved roughly sideways for the rest of the day. The spinning top candle was a bearish continuation, while the forecaster plunged, issuing a sell signal. Gold remains above all 3 moving averages, but is now in an uptrend in only the weekly and montly timeframes. Gold/Euros is also in a downtrend on the daily chart too, and it closed below the 9 MA just today.

COMEX GC open interest fell -2,903 contracts. That’s a positive sign.  While gold may be looking a bit iffy on the short term charts, at least the shorts aren’t loading up heavily.

Futures are now showing an 11% chance for a rate increase in March, and a split decision (10% rate cut, 23% rate increase) for December. This change lines up with the move higher in risk assets and junky debt.

Silver sold off early in Asia, but rallied back to close almost unchanged. Silver’s takuri line candle was a bearish continuation, and the daily forecaster moved deeper into downtrend. Silver remains in an uptrend in the weekly and monthly timeframes. Silver’s outperformance of gold today was a positive sign for PM overall – and may be related to the strong performance of the other metals. Money going “risk on” may bail out of gold, but it could end up rotating into silver.

COMEX SI open interest rose +4,884 contracts. That’s 10 days of global production in new paper silver – and silver more or less shrugged it off.

The gold/silver ratio fell -0.26 to 81.99. That’s bullish.

Miners moved higher, with GDX up +0.05% on moderately light volume, while GDXJ climbed +0.78% on light volume. Intraday, miners gapped down at the open, fell initially, but then rallied for the remainder of the day. XAU moved up +0.38%; the long white candle looked bullish, but forecaster dropped, suggesting that a reversal might not be far away. XAU ended the day just above the 9 MA. While XAU remains in an uptrend in all 3 timeframes, the upside momentum continues to drop. That said, the intraday behavior of the miners sure looked like a buy-the-dip event, which is a positive sign overall.

The GDX:$GOLD ratio rose +0.36%, and the GDXJ:GDX ratio climbed +0.73%. That’s relatively bullish.

Platinum fell -0.40%, palladium jumped +2.19% to a new all time high, and copper climbed +0.57%. Apart from platinum, the other metals had a good day. I think we probably missed the bet on the whole crazy palladium rally. At least I sure did. It was $200 at the lows in 2008, and it ended the day at 1198 – but you could have picked it up for $500 in 2016 and still more than doubled your money over a 3 year period.

The buck bounced back today, up +0.24 [+0.25%] to 95.33, recovering about half of yesterday’s losses. The bullish harami was actually bearish (the harami pattern is typically a weak one, and this one is no exception), but forecaster jumped up hard, issuing a buy signal. The buck is now in an uptrend on both the daily and weekly timeframes. The monthly looks as though the buck is about to tip over – at least that’s what it looks like to me.

Large currency moves include GBP [-0.51%], and a smaller move in EUR [-0.28%].

Crude started its rally after Asia closed, and it moved slowly higher for the rest of the day. Crude closed up +1.10 [+2.24%] to 50.42, managing to make it above round number 50. The API report was mixed (crude: -6.1m, gasoline: +5.5m, distillates +10.2m), some very large increases in the inventory of the final products swamping the drop in crude. Crude’s short white candle: bullish continuation, while forecaster remains in its strong uptrend. Crude is in an uptrend in all 3 timeframes.  I think it will be hard for equities to reverse lower if crude continues to rise.

SPX rose +24.72 [+0.97%] to 2574.41. All of the gains came overnight in the futures markets; there was a strong sell-off at the open, but prices bounced higher once the selling pressure abated, wiping out the early morning loss. The short white candle was mildly bearish (34% reversal), but forecaster moved higher; the uptrend is looking stronger now. SPX remains in an uptrend in both the daily and weekly timeframes.

Sector map had REITs (XLRE:+1.74%) and communications (XLC:+1.68%) leading, while financials (XLF:+0.08%) and energy (XLE:+0.77%) brought up the rear. This was a relatively bearish sector map in my opinion. If you are looking for a move higher, you don’t like to see the financials at the bottom of the table.

VIX fell -0.93 to 20.47.

TLT fell -0.26%, moving slowly lower all day long, following through on yesterday’s sell signal. TY did a bit worse, dropping -0.27%, also following yesterday’s sell, ending the day below the 9 MA for the first time in months. What’s more, the weekly forecaster is just about to issue a sell too. This drop in bonds supports the risk back on thesis. The 10-year yield rose +3.4 bp to 2.72%.

JNK shot up +0.70%, yet another big rally for crappy debt, gapping up at the open and moving higher all day long. Forecaster remains in a very strong uptrend. No credit problems here, at least according to JNK anyway. That pre-Christmas plunge has now been entirely unwound. Cousin HYB agrees.

CRB rose +0.76%, with 2 of 5 sectors rising, led by energy (+2.22%).

It looked like a relatively cautious move back into risk today – SPX, JNK, and crude all rallied, along with palladium and copper.  From what I read, there is a fair amount of optimism on both sides that the US and China will come to an agreement.  Certainly we got a tweet from Trump to that end: “Talks with China are going very well!”  @RealDonaldTrump is one of my data sources at this point.

Reading the rate-rise tea leaves, it seems as though traders aren’t as worried about an impending recession as they were back in mid-December.  Treasury bonds are fading a bit, along with gold, and crude is moving higher.  That last one seems critical to me; it felt as though SPX was looking nervously at crude prices, and it would plummet every time crude moved down.  Now that Saudi Arabia is seen to have actually cut production, it seems to have put some support underneath equity prices.

Ultimately I think we’re in wait-and-see mode right now.  Some good news on the trade front, and people will focus more on December’s strong payroll numbers and less on worries about the 2-10 inversion.

While PM and the miners are weakening right now, so far at least there is no sense of a sell-off.  And there has been plenty of dip-buying too.  Perhaps the slowly weakening dollar is helping.

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