PM Daily Market Commentary – 10/21/2020

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  • Thu, Oct 22, 2020 - 01:51am

    #1

    davefairtex

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    PM Daily Market Commentary – 10/21/2020

Gold rallied +18.43 [+0.96%] to 1933.09 on moderate volume, and silver shot up +0.41 [+1.65%] to 25.25 on moderate volume. The buck fell hard again [-0.48%], SPX moved lower too [-0.22%], crude plunged [-2.98%], while bonds were unchanged.

Gold moved higher for much of the day, topping out during the US session around 10:30 am, and then falling a bit into the close. The opening white marubozu candle was a bullish continuation, forecaster climbed, rising into an uptrend. Gold is in an uptrend in the daily and monthly timeframes.

Gold/euros climbed +10.47 [+0.65%] to 1628.71 on moderate volume. The opening white marubozu candle was neutral, forecaster climbed, rising into an uptrend. Gold/euros is in an uptrend in the daily and weekly timeframes.

COMEX GC open interest rose +9.5K contracts. That was 3 days of global annual production in new paper added to the market. Current open interest for GC: 53% of global annual production, up +0.89% today. 1019 GC contracts stood for delivery at COMEX today.

Perhaps half of today’s gains were a currency effect – the plunging US dollar has definitely helped gold to move higher. While there was a fair amount of shorting going on today, there were also a surprising number of contracts standing for delivery. It looked like today’s rally ran into resistance at the 50 MA.

Silver shot up +0.41 [+1.65%] to 25.25 on moderate volume. The opening white marubozu candle was a bullish continuation, forecaster climbed, moving higher into its uptrend. Silver is in an uptrend in the daily and monthly timeframes.

COMEX SI open interest rose +631 contracts. Current open interest for SI: 91% of global annual production, up +0.36% today. 46 SI contracts stood for delivery at COMEX today.

The gold/silver ratio dropped -0.52 to 76.56. That’s bullish.

Silver contiues to slowly recover from the big smash that happened four weeks ago. While it remains in an uptrend, the recovery is slow – silver has recovered perhaps 40% of the losses from that smash.

Miners gapped up at the open, rallied for the first hour, then spent the rest of the day selling off. GDX rallied +1.17% on moderate volume, and GDXJ shot up +1.46% on moderately light volume. XAU rallied +1.43%, the short white/shooting star candle was a bearish continuation, forecaster dropped, moving deeper into its downtrend. XAU is in an uptrend in the weekly and monthly timeframes.

The GDX:gold ratio climbed +0.20%, and the GDXJ:GDX ratio climbed +0.29%. That’s mildly bullish.

Almost all of today’s gains came on that gap-up open – today was a mostly-failed rally. It wasn’t a great look for the miners today.

Platinum rose +12.85 [+1.44%], while palladium fell -1.76 [-0.07%]. Platinum has looked strong for two days now; perhaps this is a good sign for the PM group overall.

Copper rallied +0.05 [+1.59%] to 3.19 on moderate volume. The short white candle was a low-percentage bearish reversal (27%), forecaster climbed, moving higher into its uptrend. Copper is in an uptrend in all three timeframes.

Copper’s breakout continued today; this was another 2-year high. Copper is not far from a break above the 2018 high of 3.31. The all time high was 4.65 set back in 2011.

The buck plunged -0.45 [-0.48%] to 92.58 on moderate volume. The long black candle was a bearish continuation, forecaster dropped, moving deeper into its downtrend. The buck is in an uptrend in the weekly timeframe.

Major currency moves included: EUR [+0.31%], GBP [+1.72%], JPY [+0.95%], AUD [+0.89%].

Today the buck broke to a new 2-month low; it is starting to look ugly. The pace of the plunge is accelerating. So far only the daily looks bearish.

Crude plunged -1.23 [-2.98%] to 40.04 on moderate volume. The swing high candle was a likely bearish reversal (63%), forecaster fell, dropping into a downtrend. Crude is in a downtrend in both the daily and monthly timeframes.

EIA Report: crude -1.0m, gasoline +1.9m, distillates -3.8m.

While crude was dropping for much of the day, the decline seemed to accelerate following the EIA report. Today’s candle print looked very bearish, and the decline pulled crude below both the 9 and 50 MA lines. Forecaster wasn’t happy either. The tea leaves suggest this is a real reversal, but we’ve seen a few of these that have reversed after just a few days.

There does seem to be a wall-o-resistance of sorts at roughly $41. At the same time, there is support around 36.

SPX dropped -7.56 [-0.22%] to 3435.56 on moderate volume. The spinning top candle was a bearish continuation, forecaster dropped, moving deeper into its downtrend. SPX is in an uptrend in the weekly and monthly timeframes.

Energy [-1.94%] led the market lower, along with industrials [-1.02%], while communication services [+1.65%] and staples [+0.09%] did best. This was a bearish sector map.

The VIX fell -0.70 to 28.65.

Today marked a second day of failed rally. NYSE Advance ratio was 34%, which is fairly bearish. Sector map was moderately bearish. SPX remains in a mild short-term downtrend. Longer term trends remain bullish.

TLT dropped -0.35%. The short black candle was a possible bullish reversal (34%), forecaster dropped, moving deeper into its downtrend. TLT is in a downtrend in both the daily and weekly timeframes. The 30-Year yield rose +2.0 bp to +1.62%.

TY dropped -0.19%. The short black candle was a low-percentage bullish reversal (27%), forecaster climbed, but remains in a downtrend. TY is in a downtrend in all three timeframes. The 10-Year yield was unchanged at +0.0 bp to +0.81%.

Bond rates didn’t do all that much; the bond futures broke down to a new 5-month low, as did the TLT ETF. Bonds continue to look very weak.

JNK inched down -0.03%. The short black candle was a bullish continuation, forecaster climbed, moving higher into its uptrend. JNK is in an uptrend in the daily timeframe.

Crappy debt trends remain weak; JNK is below the 9, but above the 50. It looks unsure where it will go next.

Physical Supply

The GLD ETF tonnage on hand dropped -0.58 tons, with 1269 tons remaining in inventory.

ETF Discount to NAV:
* CEF -2.87%
* PHYS -0.53%
* PSLV -3.31%
Gold dealer big bar premiums:
* gold [1kg]: +1.07%
* silver [100 oz]: +5.52%

Physical ETF discounts remain wide, and the big bar premiums have fallen. This suggests retail demand is relatively weak, which is bearish for PM overall. At least in the US.

Summary

Gold, silver, and the miners all moved higher today, but both gold and the miners looked a bit anemic, while silver and platinum did fairly well. I keep wondering if platinum is providing hints as to direction – both up, and down.

Risk assets were mixed again; equities and crappy debt both edged lower, crude fell off a minor cliff, while copper rallied to a new 2-year high. What to make of all that? Perhaps making stuff is doing well (copper) while air travel is still in the dumpster (crude)?

The plunge in the dollar is really starting to pick up steam. Today marks the 4th straight day of decline for the buck, with each day’s move larger than the last.

This might be about the ongoing stimulus negotiations; the sticking point has been on Nancy insisting that her states get a money drop. Mark Meadows (Trump’s Chief of Staff) said the revenue loss to states from the pandemic was around $250 billion, while Nancy is demanding $500 billion. She also wants $75 billion for “a national plan to combat the pandemic – testing and contact tracing” (not sure how contact tracers help once we have millions of people infected), as well as a one-year suspension on the $10k cap on deducting state & local taxes.

These are big numbers. The US defense budget for 2019 was about $700 billion. Nancy’s demands are a sizeable fraction of the defense budget – roughly $1700 for every man, woman, and child in America. But not for us, of course. Rules for Rulers say – if you want to stay in power, the money has to be given to the Key Supporters, not the people.

So far, Trump has said yes, while Senate Republicans have said no.

Will it happen? It still seems like a maybe.

Tomorrow we have the last Presidential debate; Biden has been largely hiding in his basement since Monday presumably preparing for said debate, while the post-COVID Trump has been flying into strategic battleground state regions and holding rallies, sometimes 3 and 4 per day. The debate will include a mute button; while victory laps were taken by the Biden team for this accomplishment (anything they can do to control the Bad Orange Man is a thing to be celebrated), it may not play out the way they hope.

My guess: Team Biden got the debate questions ahead of time, and Biden has been practicing his mike-muted two-minute answers in his basement for the past 3 days. If you remember, HRC got debate questions in advance during her 2016 run, and things are vastly more polarized during this campaign season than they were 4 years ago.

Will Trump be able to squeeze in any questions about the Hunter Biden emails? Those emails, which appear to describe money coming from the CCP, funneled through Hunter, with a percentage reserved “for the Big Guy”, are the elephant in the room.

Debate starts at 9 pm Eastern; it will last 90 minutes, with no commercials.

This might make you laugh: rapper 50-cent has declared he’s for Trump (by way of an instragram post), saying he doesn’t want to become 20-cent. We get to see real time as he realizes that Biden, while being the “politically correct” candidate to vote for, promoted by Hollywood etc, means he’s going to be personally hosed. And then he starts thinking that maybe moving out of New York City might be a reasonable option too – all the while never forgetting to promote his brands to his followers. Its a real journey of discovery.  In five tweets.

https://twitter.com/50cent/

WHAT THE F*CK! (VOTE ForTRUMP) IM OUT,  F*CK NEW YORK The KNICKS never win anyway.  I don’t care Trump doesn’t like black people 62% are you out of ya fucking mind.

Yeah, i don’t want to be 20cent. 62% is a very, very,bad idea.  i don’t like it ! #abcforlife nov 18 #starzgettheapp

That was the first time I heard those Tax numbers,  STARZ GET THE APP before I faint. LOL

i was just thinking i like Texas the weather nice, the people are great.  what is there not to like about TEXAS.#starzgettheapp

  • Thu, Oct 22, 2020 - 02:19am

    #2

    davefairtex

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    policy vs division

Rapper 50-cent tweet journey really brought home to me how little this election is about policy.  And how that’s a deliberate construction of the media.  They don’t want to talk about policy.  They want it to be about racism, about the usual politics of division.  They want it to be about anything but policy.

This approach has largely worked – to the point where someone worth $20 million, someone who clawed his way up the greasy pole of the music business from nothing over a 20 year timeframe, and who is a survivor, a very savvy guy – doesn’t figure out until just 2 weeks before the election that he’s been had.

 

  • Thu, Oct 22, 2020 - 02:44am

    #3
    phusg

    phusg

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    PM Daily Market Commentary – 10/21/2020

> And how that’s a deliberate construction of the media. They don’t want to talk about policy.

To be fair to the media, specific policy is the last thing the candidates usually want to talk about when campaigning.

> #abcforlife

Hey, is 50 cents also on to your bitcoin beating cryptocurrency!

I just hope the election result is over with quickly so we get back Dave the internationalist with his insightful geopolitical analyses.

  • Thu, Oct 22, 2020 - 05:46am

    #4

    davefairtex

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    wrong abc

I think Mr 50 Cent was referring to his TV show on the US TV network ABC, rather than the obscure quantum-proof coin.  🙂

Man.  There is not enough time in the day these days.

In my defense, the US elections will almost certainly drive geopolitics for the next four years.  I do think it is a defining moment; what appears to be a domestic squabble will have much larger implications, at least in the Pacific.

Specifically, how will the US deal with the CCP: either it will go along with the bribery as it did during the Bush/Obama years, or continue decoupling.  That drives Quad Alliance enthusiasm in the Pacific.  That goes away if Trump leaves office.  Pre-Bribed Biden will go back to the old ways.  An unchecked-CCP … I shudder to think.  No more jobs.  All gone.

Europe – I don’t see too much change one way or the other.  Trump’s impact on Europe is relatively minor – probably because the US and Europe are culturally aligned, and generally share the same worldview, and so there isn’t much need for adjustment.  The moves in NATO are tempest-in-a-teapot importance.  “Spend more on NATO” – whose existence is more than a little questionable, given how Russia has shrunk.  Do you know where Russia is on the world GDP chart?  They are #12.  Above Spain, below South Korea.  China is of course #2.

The UK appears to be about to Hard Brexit – I still think the US has supplied BoJo with intel that walking away will lead to him getting what he wants.  We don’t have too long to find out if this is true or not.  The EU might actually have to experience walking off the cliff before they cave, but I do not think Mrs Merkel will toss German auto sales out the window for fishing rights.

Europe’s fate is largely in its own hands.  The pandemic response has just crushed the economy there.  And the follow-on response to the “second wave” will make sure there is no recovery for a while.  Its just deadly.   Sweden will be the lone survivor.  For the most part.  Longer term, I don’t see how the Euro survives.  Will all rent be cancelled forever?  All mortgage payments?  All loans forgiven?  When does the extend and pretend stop?  Does it ever stop?  [Same question for the US – except the US dislocation has been a lot less dramatic.  Thank Trump and Fed money printing for that].

Once the pandemic “is over”, and “things go back to normal”, who owes what?  And who owns what?  Europe never recapitalized its banks from 2008.

Maybe this is why the gang in charge isn’t eager for things to go back to normal just yet.

There.  Hope that satisfies for a while.  🙂

  • Thu, Oct 22, 2020 - 06:17am

    #5

    JAG

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    Bitcoin’s $1000 Days

Bitcoin has been going ‘ballistic’ the last few weeks. This has to be a head-fake move to get dumb money FOMO and then another crush. No real bull market meal begins without an appetizer of despair. It is impressive though….the narrative is PayPal’s pending adoption of Bitcoin.

Some Sentimentrader.com news:

  • The VIX Put/Call ratio has reached a level not seen since 2008-2009. Trust me, I’m the only guy holding VIX calls. They are getting dumped big time. I treat them like an insurance policy so I’m expecting to give away my money most of the time. The current VIX Put/Call ratio and VIX term structure have historically proceeded a spike higher in the VIX (and drop in the S&P 500).
  • The smart money (the commercial hedgers) is short stocks, particularly the Nasdaq 100. Though their position is not extreme, yet, it doesn’t bode well for the markets.
  • The smart money is also short the dollar. This is typically bad for the dollar and good for gold over the next 3-6 months.
  • The Gold/Copper ratio has hit a 6-month low. This is historically negative for both gold and copper over the next 2 months. Even though this is typically a risk-on signal, the return on the S&P 500 wasn’t anything great going forward in the next 6 months, but T-notes declined over the next 2-3 months.

Tejas

All the rich a**holes are moving to Texas because there is no state income tax here. They are going to love the winters but freaking hate the summers, If you are from New York, forget-about-it. You will die during the summer here. And the 100% humidity will ruin your hair-do if you are from California.

With this bicoastal influx, Texas will soon be for Team Blue. That should go over well with the locals. Right now, those immigrants are focused on Austin as it is the new Silicon Valley. Property taxes will be going way up.

Can we Texans build a wall on our north, east, and west borders? Got to keep the south border open, the food is too good.

  • Thu, Oct 22, 2020 - 06:33am

    #6

    davefairtex

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    the food

I grew up on Mexican food.  I second “the food is too good” notion.

My friends ask me what my favorite American food is.  I pause and think to myself, “does 3 rolled tacos with guacamole count?”  I ate mostly Mexican food all through university.  Kidding aside – I like pot roast.  I’m not sure that’s food you can get in a restaurant though.

I do think that if truckloads of Mexican chiropractors were swarming across the border, you might feel differently about border security.  The issue really isn’t your issue; mostly, its for the lower wage US workers who have their salaries savaged by competition by our hard working neighbors to the south who see our wages as a goldmine.

I see this with the H1B visas and the armies of mostly Indian tech workers.  They started appearing after dotcom, and it mostly never stopped.  It definitely affected wages for my group.  I didn’t realize it at the time, but the impact was real.

If you talk to anyone from another country that wants to come here, it usually isn’t for our freedoms.  It is because they can do the same job they do in their own country, but get paid a lot better to do it.

  • Thu, Oct 22, 2020 - 06:45am

    #7
    phusg

    phusg

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    PM Daily Market Commentary – 10/21/2020

> In my defense, the US elections will almost certainly drive geopolitics for the next four years.

I think you’re right on that one, I’m just election fatigued already and I haven’t even followed it much. The shit show of a first debate pretty much killed my interest. To be honest I think you have 2 terrible candidates this time round. Trump too self centered and Biden too dulled by age. European leaders these days are all in their 50’s, some in their 40’s, why isn’t America following our trend for a change?

> given how Russia has shrunk. Do you know where Russia is on the world GDP chart? They are #12. Above Spain, below South Korea. China is of course #2.

Well that’s easy to say when you’re the other side of 2 large ponds! They haven’t shrunk in land mass and in the coming decades of climate change I expect them to be able to leverage that land mass to become a dominant agricultural player and shoot up that GDP ranking. Worryingly, their culture hasn’t really modernised much either.

> but I do not think Mrs Merkel will toss German auto sales out the window for fishing rights.

Not for fishing rights, but I don’t think she sees any gain by keeping British auto sales at the cost of another 5+ EU countries lining up for the same trade deal (i.e. without commitments or responsibilities) as she gave Britain.

> [Same question for the US – except the US dislocation has been a lot less dramatic. Thank Trump and Fed money printing for that].

If money printing reduces the drama; don’t forget we have a printing press too, apparently we’re just a little more afraid to use it 😉

More seriously, really the elderly who we’re sacrificing our economy for should be the ones paying up. Tax the elderly I say! Maybe that would get the young on board with following the rules, and shorten the lock-downs, knowing that they’re not also going to be financially on the hook the rest of their lives. Not that they think that far ahead. Probably something like relatively direct payments from elderly/covid susceptible to young people sacrificing their freedoms may work?

  • Thu, Oct 22, 2020 - 06:55am

    #8
    phusg

    phusg

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    PM Daily Market Commentary – 10/21/2020

> Right now, those immigrants are focused on Austin as it is the new Silicon Valley.

I have some colleagues who loved their trip to the SXSW ‘conference’ in Austin, is that what kick started the new Silicon Valley there or is it the other way around?

> If you talk to anyone from another country that wants to come here, it usually isn’t for our freedoms. It is because they can do the same job they do in their own country, but get paid a lot better to do it.

Isn’t that what we would do in their position? And isn’t it fair for people doing the same work to be paid the same wage?

  • Thu, Oct 22, 2020 - 07:14am

    #9

    davefairtex

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    fair

Isn’t that what we would do in their position? And isn’t it fair for people doing the same work to be paid the same wage?

Of course I’d be doing the same thing if I were in their position.  Kids will also eat all the ice cream in the tub, if you let them.  Answer: don’t let them.

Do you imagine the entire population of Africa would like to come to Europe and make a better living for the same amount of work?  I bet most of them would.  Wouldn’t it be “fair” to let each and every one of them in?  All billion of them.  I’m sure a few minor things would change for the people who built the civilization that made it all possible. But it would be “fair.”  So why not do it?

The whole “fair” argument leads inexorably to communism.  Of which I’m not a fan.

Trump is President of the United States.  I expect him to look after the citizens of the United States.  Not the citizens of the rest of the world.  It is as simple as that.

Likewise, I expect the President of Mexico to look after the citizens of Mexico.  Not the citizens of the rest of the continent.

Heh sorry you made a lot of other interesting points.  You think the UK needs to get spanked “to encourage all of the others” to remain in line.  I guess it depends on just how much influence the automakers have over Merkel.  Do you really think there are that many nations ready to leave?  My sense is, the UK has always been the cranky odd-man-out of the group, unlikely to be duplicated.  Been that way for centuries.  Not even part of the eurozone.

You do realize that lockdowns don’t make the virus go away right?  Sweden has shown us that.  They just inflict economic damage in exchange for pushing infections off into the future.  So the sacrifice our youth are making is really all in vain.  Unless you lockdown until that vaccine arrives, which could take another year.  And it might not even work.  Or it might cause even more damage than it allegedly solves.

By then the EU economy will be utterly toast.  I’m suggesting you don’t tax the elderly for this very dubious benefit.  Sweden will end up running the place.  Them, or China, which will buy up the EU on the cheap.  More likely, China.

Which may have been the plan all along.

“I know, lets unleash a virus on the world, lock down a city to show them how it is done, have the WHO tell everyone to follow suit, and once they destroy their economies by mindlessly following this example for 18 months, we can drop in and buy up their key bits of infrastructure in the bankruptcy sale.”

  • Thu, Oct 22, 2020 - 10:02am

    #10

    JAG

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    re: the food

DF: I ate mostly Mexican food all through university.  Kidding aside – I like pot roast.  I’m not sure that’s food you can get in a restaurant though.

My latest obsession is Birria, which is like a Mexican pot roast that you make tacos from (Birria actually refers to goat meat but modern day versions use beef).

Birria Queso tacos dipped in consume (broth) is pure heaven. It sounds like you would love it DF. I made a batch two weeks ago ate it for 3 days straight.

Here is a simpler version:

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