PM Daily Market Commentary – 10/16/2018

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  • Thu, Oct 18, 2018 - 03:11am

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    davefairtex

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    PM Daily Market Commentary – 10/16/2018

Gold fell -2.42 [-0.20%] to 1229.36 on moderate volume, while silver dropped -0.05 [-0.37%] on moderate volume also. The buck shot up +0.57%, a large move – it was a minor miracle that the metals didn’t get sucked down along with the currency, but they managed to do all right.

The FOMC minutes from last meeting were released at 2pm; the release didn’t move the markets appreciably, but I did get a sense that we have 4 more rate increases ahead of us; one more at end of year, and three more next year.  There was some talk about raising rates above neutral into “restrictive” territory in order to slow the economy – inflation is starting to become a concern.

Gold tried to rally again today but failed, falling along with most of the other metals into the close. The high for gold was roughly aligned with the morning lows for SPX. While the short black/spinning top candle was neutral, forecaster edged down -0.03 to +0.03; still an uptrend, but not by very much. 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 fell -3,867 contracts. Short covering again today, perhaps.

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

Silver staged a relatively feeble-looking rally, but the sell-off was equally lame. The short black candle was just enough to print a swing high (47% bearish reversal), which also took the forecaster down -0.20 to -0.18, which marks a sell signal for silver in both the daily and weekly timeframes. Silver is now back in a downtrend in all 3 timeframes, although it remains above both the 9 and 50 MA lines.

COMEX SI open interest fell -1,334 contracts.

The gold/silver ratio moved up +0.12 to 83.69. That’s slightly bearish, but the gold/silver ratio at these levels still suggests we are at or near the low point for PM.

Miners rallied in the morning – as they tend to do these days – and then sold off, losing all the gains and a bit more. GDX fell -0.20% on moderate volume, while GDXJ fell -0.58% on moderate volume also. XAU dropped -0.34%. The high wave candle was an inside day, and thus unrated, but forecaster plunged -0.26 to +0.26; that’s still an uptrend, but a weakening one. Still, that’s substantially better than either gold or silver. The miners remain in an uptrend in the daily and weekly timeframes.

The GDX:$GOLD ratio moved down -0.20%, and the GDXJ:GDX ratio fell -0.58%. That’s somewhat bearish.

Platinum fell -1.08%, palladium dropped -0.77%, and copper lost -0.25%. It seems as though gold and silver did fairly well by comparison.

The buck rallied +0.54 [+0.57%] to 95.13. Most of the move took place in Europe and the US; it was due to the Euro, which fell -0.62%. Candle print was a swing low (66% bullish reversal – very strong), and forecaster jumped +0.37 to +0.03, which resulted in a tentative buy signal for the buck. The buck is now back above all 3 moving averages, and is in an uptrend in all 3 timeframes.

Europe is still bogged down with BRExit, the Italian budget – and car sales for the EU fell 23% this month, which is a huge drop. Is that a recession signal? The US looks good by comparison.

Crude plunged -1.97 [-2.74%] to 70.02 – yesterday’s buy signal on the strong API report was just a headfake. Prior to the EIA report, oil had dropped a buck, and EIA report looked quite bearish (crude: +6.5m, gasoline: -2.0m, distillates: -0.8m), which was good for the second $1 drop. It was an ugly day for crude. The long black candle was neutral, but forecaster plunged -0.55 to -0.33, which is a sell signal for crude. Today’s drop also caused the weekly forecaster to issue a sell signal as well; that means crude is now in a downtrend in both daily and weekly timeframes.

The Kashoggi situation is getting more intense by the day. Claims that “rogue elements” of the Saudi security service “botched an interrogation” are apparently contradicted by a Turkish audio recording of the event – which reportedly reveals a straightforward torture-and-execution operation. But for the recording, the “botched interrogation” story might have worked out. While it would seem that the US national interest aligns with ignoring the alleged murder, but the way things are going, that most likely won’t happen. Senator Lindsey Graham has already called for regime change in Saudi Arabia – MBS must go, according to him. Currently, oil prices appear to be heading lower, not higher as a result of the turbulence. The reason, perhaps, is that the whole Iran pressure campaign may well fail without Saudi support, which won’t be forthcoming if the US continues talking about regime change. So that would end up bringing Iran’s oil back online – among many other consequences.

It is curious that 18 hijackers of the 9/11 attacks were Saudi, but it takes the alleged murder of a well-connected Saudi, in a Saudi consulate, by Saudi security forces, to get US senators talking about regime change.  Not that I support regime change; it seldom if ever works out the way we expect.  Usually, it just makes everything much worse.  But I digress.

SPX edged down -0.71 [-0.03%] to 2809.21. The market sold off hard in the morning, but managed to recover most of its losses by end of day. While the northern doji candle was fairly bearish (53% bearish reversal), SPX forecaster rose +0.31 to +0.38, which leaves SPX in an uptrend. SPX ended the day in an uptrend on both the daily and monthly timeframes.

Financials led today (XLF:+1.01%) while consumer discretionary did worst (XLY:-0.82%). It was a somewhat bearish sector map.

VIX plunged -0.22 to 17.40.

TLT fell -0.59%, resulting in a sell signal from the forecaster. TY also dropped, losing -0.24%, also resulting in a forecaster sell signal. TY is now in a downtrend in all 3 timeframes. The 10-year yield rose +2.3 bp to 3.18%. It sure looks like bonds are headed lower. I read an article which suggested we may be headed back to a time where equities and bonds fall together, as a result of increasing inflation expectations – a la the 1970s. I think its also about a whole lot of supply too.

JNK moved down -0.11%, which didn’t affect things too much. JNK remains in a strong uptrend, at least for now anyways.

CRB fell -0.41%, with 3 of 5 sectors moving lower, led by energy (-1.98%).

Unless we get a sell-off in equities, we will probably see some sort of correction start in the PM space, with silver looking a bit weaker than gold right now.  The miners are holding on best, but a cluster of swing highs, a rally in the buck (and probable bullish reversal), and a move lower in the other metals all point to near-term weakness for PM.

Crude looks particularly bearish right now; often after a bad EIA report, crude will sell off for the remainder of the week.

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