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PM Daily Market Commentary – 10/1/2018

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  • Mon, Oct 01, 2018 - 11:09pm



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    PM Daily Market Commentary – 10/1/2018

Gold fell -3.62 [-0.30%] to 1195.49 on moderate volume, while silver dropped -0.17 [-1.16%] to 14.52 on very heavy volume. The buck rose +0.18%; it seemed to influence the price of the metals, but they were mostly doing their own thing.

Big news item of the weekend was that Canada and the US agreed to a trade deal – but please don’t call it NAFTA – just in time for the Sunday evening deadline. And the midterms too, no doubt. This sent the CAD shooting higher, up +1.06%. Some of the provisions in the agreement (the “rules of origin”) seemed to be aimed directly at keeping out Chinese components.

Gold moved lower in Asia, and then chopped sideways for the rest of the day. The spinning top candle was unrated, while gold forecaster moved up +0.09 to -0.09. That’s a modest improvement, but gold remains in a downtrend in all 3 timeframes.

COMEX GC open interest fell -212 contracts.

Rate rise chances (December 2018) rose to 80%.

Silver sold off a lot harder, down almost 30 cents at one point, but managed to bounce back at least to some degree anyway.  Silver appears to have found support on its 9 MA.  The opening black marubozu candle was unrated, but forecaster climbed +0.10 to +0.35, which suggests that today’s dip may have been a buying opportunity.

COMEX SI open interest fell -2,740 contracts. That’s some short covering in silver, which is a positive sign.  I suspect the shorts were ringing the cash register down at the 9 – as opposed to piling in to bet on silver prices dropping further.

The gold/silver ratio rose +0.70 to 82.16. That’s bearish, but the current level for the ratio suggests PM could be at or near a long term low.

Miners mostly just chopped sideways; GDX rose +0.16% on moderately light volume, while GDXJ climbed +0.11% on light volume. XAU moved down -0.06%; the doji candle was neutral, and forecaster fell -0.09 to -0.01, which is a tentative sell signal for XAU. XAU seems to be finding resistance just under the 9 MA.  Miners are now in a downtrend on the daily and weekly, but the monthly is signaling buy assuming we close here at end of month.

The GDX:$GOLD ratio rose +0.47%, and the GDXJ:GDX ratio fell -0.05%. That’s mildly bullish.

Platinum rose +0.83%, palladium fell -1.57%, and copper dropped -0.50%. Palladium may have topped out (swing high today), platinum looks somewhat positive, while copper appears undecided.

The buck continued rallying today, up +0.17 [+0.18] to 94.86. The buck is still unsure of trend; uptrend in the daily and monthly, while a downtrend on the weekly.

Crude screamed higher today, up +1.92 [+2.62%] to 75.25, breaking out to a new four-year high. This was because OPEC only added a small amount of additional supply to the market in September, suggesting that either Saudi Arabia wasn’t really trying, or – perhaps – they didn’t have any spare production capacity left. Issues with Venezuela and Iran continue to dominate. This, after the North American rig counts actually dropped last Friday – which suggests that shale may not be the endless supply of oil we imagined it would be. China’s Sinopec cut its oil imports from Iran by half last month. Oil remains in an uptrend in all 3 timeframes.

SPX rose +10.61 [+0.36%] to 2924.59. All of the gains came in the futures markets overnight – likely a result of the US-Canada-Mexico trade deal. While the doji candle was neutral, forecaster jumped +0.17 to +0.09, which is a tentative buy signal for SPX. SPX is now back above its 9 MA, and is now in an uptrend in all 3 timeframes. Energy led (XLE:+1.39%) while REITs did worst (XLRE:-0.77%). This was a relatively bullish sector map.

VIX fell -0.12 to 12.00.

TLT was hit hard, dropping -0.96%, making a new low dating back to mid-May. So much for the rebound in bonds. TY didn’t look nearly as bad, losing just -0.10%, but that was enough to pull the daily forecaster into a downtrend. TY did not make a new low, but is now in a downtrend in all 3 timeframes once more. The 10-year yield rose +2.4 bp to 3.08%.  The new line-o-death for rates is 3.12%.  A convincing break above that level could lead to a rapid move higher in rates.

JNK fell -0.17%, with all the losses coming at the gap down open. JNK rallied during the day, but not enough to avoid printing a swing high (41% bearish reversal). The fall in JNK prices was a bit surprising, given the strong rally in crude.

CRB shot higher, up +1.35%, vaulting over its 200 MA breaking out to levels last seen in July. 4 of 5 sectors rallied, led by energy (+2.59%). PM was the only sector to fall.

It appears as though Trump’s campaign for a better trade deal for America is making progress.  After much sturm und drang, there seems to be a growing sentiment that yes, China really has been hosing the US for quite some time on trade – and in fact, they’re hosing everyone else too.  The campaign by US globalized businesses to take China’s side (because it greatly helps their profit margins) and ridicule this concept and/or scare the US public does not seem to have worked – though not through lack of effort on their part.  The “Never Trump” group is actually a melange of true believers (Trump is a dog-whistle racist nazi statue-lover) / disappointed HRC voters working right alongside US companies whose outsized profits (for management & shareholders) depend on taking jobs from Americans and giving them to Chinese workers.  I’m not sure the true believers realize who they are in bed with.  Then again, you could probably say the same thing about Kavanaugh supporters.  Do we really need more surveillence state?

But I digress.  Settling the various trade disputes should lead to risk-on trades, as we saw today in SPX, as well as USD/CAD.

Oil is slowly going nuts.  Its about Iran sanctions, but also turmoil in Libya (we came, we saw…) which has chopped oil production in half, as well as cratering oil production in Venezuela, limits on pipeline capacity in the US shale regions, and a limited spare production capacity within OPEC – lack of investment over the last 4 years might have contributed to this.  It all adds up to ever-higher oil prices.

What then for gold and silver?  There does seem to be support for silver right now – I’m heartened by the short-covering on today’s decline.  Gold isn’t looking nearly as good.  Contrast with platinum, which is showing a somewhat bullish-looking inverse head & shoulders pattern.  Perhaps rallying platinum prices will help pull gold up off the floor.  We’ll have to see.  Jury is still out on the miners in the daily timeframe, but they look a bit more bearish than bullish.

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