PM Daily Market Commentary – 10/2/2019

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  • Thu, Oct 03, 2019 - 03:50am

    #1

    davefairtex

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    PM Daily Market Commentary – 10/2/2019

Gold climbed +20.63 [+1.39%] to 1509.54 on very heavy volume, and silver jumped +0.33 [+1.90%] to 17.66. on moderately light volume. The buck moved lower [-0.09%], both crude [-2.86%] and SPX [-1.79%] were hit hard, while bonds rallied [10Y yield -4.8 bp].

Gold drifted lower in Asia, then rallied strongly until about 2pm in the afternoon. The swing low pattern was bullish (47%), and forecaster jumped higher, back into an uptrend. Gold is now in an uptrend in the daily and monthly timeframes..

COMEX GC open interest rose +10,758. That’s 5 days of global production in new paper.

Futures are projecting a 73% chance of a rate cut in October, a 87% chance of one rate cut in December, and a 37% chance of two rate cuts. Rate cut projections continue to increase.

Silver chopped sideways until about 7 am, and then took off higher, rallying until about 2 pm in the afternoon. The swing low pattern was bullish (50%), and forecaster moved higher into an uptrend. Today’s rally also pulled the weekly forecaster back into an uptrend also; silver is now in an uptrend in all 3 timeframes.

COMEX SI open interest rose 477 contracts.

The gold/silver ratio fell -0.81 to 85.92. That’s bullish.


Miners gapped up at the open, and then chopped sideways through to the close. GDX rose +1.82% on very heavy volume, and GDXJ rose +1.71% on moderately heavy volume. XAU rose +1.22%, the doji candle was unrated, and forecaster moved higher but remains in a downtrend. XAU remains in a downtrend in the daily and weekly timeframes. While gold and silver have reversed, XAU is lagging behind. That’s not a great sign.

The GDX:gold ratio rose +0.43%, and the GDXJ:GDX ratio fell -0.11%. That’s slightly bullish.


Platinum rallied +1.19%, palladium rallied +2.00% (and made a new all time high), and copper moved up +0.25%. The moves in palladium and platinum align fairly closely with the rallies in gold and silver.

The buck moved down -0.09 [-0.09%]to 98.59. The swing high pattern was actually not bearish, and forecaster fell, but not enough to move the buck into a downtrend. The buck remains in an uptrend in both daily and weekly timeframes.

Large currency moves included: EUR [+0.58%], JPY [+0.53%], CAD [-0.79%].

Crude plunged -1.82 [-3.36%] to 52.31. Crude moved lower going into the EIA report, and spiked sharply lower right after the somewhat bearish report (crude: +3.1m, gasoline: -0.2m, distillates: -2.m) was released. The long black candle was a bearish continuation, and forecaster inched higher but remains in a downtrend. Crude remains in a downtrend in all 3 timeframes. If crude breaks below round number 50, next stop is probably down around 45.  Right now, crude is showing no signs of stopping.

SPX plunged -52.64 [-1.79%] to 2887.61. The opening black marubozu was a bearish continuation, and forecaster dropped lower into what is now a reasonably strong downtrend. Today’s plunge was enough to drag both weekly and monthly forecasters into downtrends Ouch. Just a note: such signals are probably not so useful as entry points – they are an indication of a momentum change more than anything else.

Energy was hit hardest (XLE:-2.46%) along with financials (XLF:-2.04%), while REITs (XLRE:-0.62%) and utilities (XLU:-1.33%) did “best”. This was a bearish sector map.

VIX jumped +2.00 to 20.56.

TLT rallied +0.24%, the short white candle was a bullish continuation, and forecaster edged lower but remains in an uptrend. Its a bit curious to see such a tame move in the 30 year after such a large plunge in equities. TY rallied +0.29%, the long white candle was a bullish continuation, and forecaster moved higher into its uptrend. TY is now in an uptrend in all 3 timeframes. The 10 year yield fell -4.8 bp to 1.60%.

JNK plunged -0.56%, the strong line candle was bearish, and forecaster moved slightly higher but remains in a reasonably strong downtrend. JNK’s big move down parallels the plunge in equities. BAA.AAA differential moved up +3 bp to +90 bp. That’s a slight increase in credit quality concern.

CRB fell -0.66%, with 3 of 5 sectors falling, led by energy (-1.92%).

So equities have plunged now for two days in a row. JNK is supporting the move down, as is crude. This is probably fallout from that bad ISM report yesterday – although SPX has been heading slowly lower for the past couple of weeks.  There has also been a substantial increase in the chances of a rate cut for the October FOMC meeting.  It seems as though the market’s sense is that a recession is not far off, and that may be finally taking a toll on equities.

Both gold and silver reversed direction back up today; the miners are lagging behind, however, and that’s not confidence-inspiring.  Perhaps the selling pressure in equities is dragging down the mining shares.  That’s what happened back in 2008, maybe it is happening again here.

The rally in bonds is a lot more tepid than I would have expected.  Taken together with the moves in the mining shares, this suggests that the move to safety is still a bit tentative.  Today we have the PMI services (and the ISM non-MFG index) reports at 9:45 and 10 am respectively.  These could really move prices if they end up being worse than expected – consensus says no change.

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  • Thu, Oct 03, 2019 - 07:19am

    #2

    davefairtex

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    ISM Non-Mfg Index: 52.6

Headline 52.6 (prior 56.4, expected 55.5).  This is an unexpectedly weak number, and coming right after the unexpectedly weak ISM manufacturing number, it does not bode well for 3Q GDP.  This probably locks in another rate cut in October.

SPX -20, gold +12, crude -1.29, 10y -7.9 bp to 1.51%.  Nice move in bonds.

 

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