Investing in precious metals 101

PM Daily Market Commentary – 10/15/2018

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  • Mon, Oct 15, 2018 - 11:31pm



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    PM Daily Market Commentary – 10/15/2018

On Friday, gold jumped +9.49 [+0.77%] to 1234.20 on heavy volume, while silver rallied +0.11 [+0.72%] to 14.71 on moderately heavy volume. The buck fell -0.19%; metals appeared to move in sync with the currency moves, but the minor drop in the buck was certainly not responsible for the relatively strong rally in the metals.

Gold started moving higher at the open in Asia, finally topping out at 1236.90 at about 5:30 am, after which it declined into the close. The long white candle was a bullish continuation, while the forecaster plunged -0.62 to +0.07. Forecaster really did not like today’s semi-failed rally; it suggests that a reversal could be imminent.  Gold remains in an uptrend in both the daily and weekly timeframes. Gold/Euros is in an uptrend in all 3 timeframes.

COMEX GC open interest rose 6,623 contracts.

Rate rise chances (December 2018) remained at 78%.

Silver followed gold, although it looked bit less enthusiastic, making a new high around 5:40 am, then retreating somewhat into the close. The long white candle was a bullish continuation, and forecaster fell -0.05 to -0.34, but remained in a reasonably strong uptrend. Silver was able to close conclusively above its 50 MA, which is a positive sign. Silver remains in an uptrend in both the daily and weekly timeframes.

COMEX SI open interest fell -280 contracts.

The gold/silver ratio climbed +0.02 to 83.56. That’s neutral. The current level for the ratio suggests PM could be at or near a long term low.

Miners gapped up and rallied for the first 30 minutes, but then sold off for the remainder of the day. GDX climbed +1.57% on heavy volume, while GDXJ rose +1.67% on heavy volume also. XAU rose +1.69%. The shooting star candle looked a bit alarming, but was actually just a bullish continuation. Forecaster fell -0.13 to +0.81, which is a strong uptrend. XAU is now in an uptrend in all 3 timeframes.

The GDX:$GOLD ratio rose +0.79%, while the GDXJ:GDX ratio moved up +0.10%. That’s bullish.

Platinum climbed +0.45%, palladium rose +1.70%, and copper fell -0.98%. Both platinum and palladium are back in uptrends. Platinum specifically looks to be breaking above the neckline of a reverse head-and-shoulders pattern – which is a bullish pattern.

The buck fell -0.18 [-0.19%] to 94.60. This seemed to assist the metals in their rally, but probably was not the proximate cause, because the currency move itself was relatively small. Forecaster edged down -0.01 to -0.13, which is a modest downtrend. Weekly forecaster – for some strange reason – issued a buy signal after today’s move. The buck is in an uptrend in both the weekly and monthly timeframes.

Crude rose +0.22 [+0.31%] to 71.51. Trading range was fairly wide; crude jumped higher immediately after the open, then sold off, and then bounced back. The long-legged doji was neutral, while forecaster rose +0.22 to -0.19, which is still a downtrend. Today’s move caused the weekly to issue a sell signal, but not a very strong one. Crude is now in a downtrend on both the daily and weekly timeframes.

The alleged murder of the WAPO journalist (but Saudi citizen) in the Saudi consulate in Turkey is starting to cause some serious repercussions in the oil market. After Trump said he would impose “severe punishment” on Saudi Arabia if it was proven that they were behind the murder of the journalist, a news organization with close ties to Saudi Arabia published an op-ed that said, in part: “If the price of oil reaching $80 angered President Trump, no one should rule out the price jumping to $100, to $200, or even double that figure.”

So far the oil market isn’t pricing this in. Trump seems quite reluctant to give up the billions in arms sales, and I’m guessing that both parties are really hoping this issue can be swept under the carpet in some way.

SPX fell -16.34 [-0.59%] to 2750.79. Equities zig-zagged higher during the day, but in the last hour, prices dropped 30 points, closing at the lows. The closing black marubozu was a bearish continuation, while SPX forecaster rose +0.12 to -0.99, which is still a severe downtrend. SPX remains in a downtrend in both the daily and weekly timeframes, and is right on the edge of a sell signal on the monthly.

Sector map has tech leading the market lower (XLK:-1.64%) while REITs did best (+0.62%) along with staples (XLP:+0.61%) and utilities (XLU:+0.47%). That’s a bearish sector map.

VIX edged down -0.01 to 21.30.

TLT moved down -0.04%; it managed to avoid attracting a bid even though equities sold off. That’s not a great sign. TY rose +0.02%, and its forecaster dropped -0.23 to +0.10; it is just barely clinging to an uptrend. TY remains in a downtrend in both the weekly and monthly timeframes – and the daily appears to be preparing to join it shortly. The 10-year yield moved up +2.2 bp to 3.16%.

JNK plunged -0.23% today, a fairly large move, and one that suggests that, whatever momentary bounce we saw in equities on Monday may now be in the rear-view mirror. JNK remains in a downtrend.

CRB jumped +0.91%, with 4 of 5 sectors rising, led by agriculture (+1.65%).

So even though gold managed to move up perhaps $10, it seemed to run into some selling pressure today, along with all of the “other metals” and the miners. We can’t really blame this on open interest; although it increased, it wasn’t all that dramatic.  My guess is, the future for gold relies on where equities go next.

The sell-off in equities in the last hour of the trading day was a negative sign for equities, at least in my opinion. Dip buyers appeared, and tried to push prices higher, but the end-of-day move is the key, and it looked bearish. They say you only need to watch the first hour, and the last hour, to know what the sentiment is. That, in combination with the sell-off in JNK tells me we’re probably headed lower.

What happens with Saudi Arabia? Neither party – not Trump, nor MBS – want the current train derailed. That is, billions in arms sales, oil prices below $80, sanctions on Iran, and the support of the US behind MBS and his domestic “reform” efforts. Still, murder in your own consulate is a pretty egregious act, and it will not play well politically for Trump to wave it off as no big deal. Civilized countries don’t do this. (Civilized countries use drone strikes, of course).

Germany had an election this Sunday in Bavaria. It was a disaster for Merkel, whose coalition partners were absolutely hammered at the polls – both on the left (SPD), and the right (CSU). Seehofer’s attempt to move right failed; the Greens won a record number of votes (sucked right out of the more mainstream SPD), as did the AfD. There is another regional election coming up in 2 weeks. Most likely, the same thing will happen.  All of these effects can be traced back to Merkel’s decision to allow unlimited migration into Germany.  She said, of the election, ” lot of trust has been lost”, linguistically ducking responsibility for the disaster.

And this, when times are good.  What happens when things turn down?

Never a dull moment.

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