PM Daily Market Commentary – 10/22/2018
On Friday, gold fell -4.54 [-0.37%] to 1229.21 on moderately light volume, while silver dropped -0.07 [-0.48%] to 14.58 on moderately light volume also. The buck rallied +0.30%, accounting for much of the losses in the metals today.
Gold chopped sideways in Asia, then slowly moved lower during the London session alongside the Euro as it fell. The bearish engulfing/conf bearish NR7 candle did look bearish (51% bearish reversal), and forecaster plunged -0.51 to 0.0, which was just enough for a very tentative sell signal for gold. Gold found support right at its 9 MA. Gold is now in a downtrend in the daily and monthly timeframes. Most of gold’s move today was just a currency effect.
COMEX GC open interest fell -1,503 contracts.
Rate rise chances (December 2018) fell to 79%.
Silver mostly chopped sideways until about 9 am, when it dropped about 10c in 20 minutes. Silver also printed a bearish engulfing candle, which was a 42% bearish reversal; however forecaster actually moved higher, up +0.11 to +0.16. Silver ended the day below its 9 MA, and silver is in a downtrend in both the weekly and monthly timeframes; only the daily remains pointing higher.
COMEX SI open interest rose +2,016 contracts.
The gold/silver ratio fell -0.02 to 83.91. That’s neutral; the current level for the ratio suggests PM could be at or near a long term low.
Miners gapped down and then sold off for the first hour of trading, then rebounded somewhat, regaining much of the early losses. GDX fell -0.75% on moderate volume while GDXJ dropped -1.21% on moderate volume also. XAU dropped -1.50%; the confirmed bearish NR7 was a 59% bearish reversal, and forecaster ticked up slightly but remains in a mild downtrend. XAU remains in a downtrend in the daily and monthly timeframes, but in truth, both downtrends are quite mild.
The GDX:$GOLD ratio fell -0.38%, while the GDXJ:GDX ratio dropped -0.47%. That’s somewhat bearish.
Platinum fell -1.09%, palladium shot up +3.51%, while copper inched down -0.04%. Palladium’s huge rally had two spikes; one at 8:20 am, and another at 10:45. The moves in palladium were not about China, but I’m not sure what caused them.
On Monday, the Chinese government hinted at a tax cut, and also vowed support for Chinese companies. As a result of this verbal jawboning, the Shanghai stock exchange (SSEC) also jumped +4.09%, a massive move off the lows, coming on the heels of a similarly large rally yesterday. However, this kind of move also happened during the 2008 crash – anyone remember the US government saying “we’re going to forbid short selling in bank stocks” – resulting in a massive rally that was sold after a few days.
The buck moved up +0.29 [+0.30%] to 95.55. The long white candle was a bullish continuation, and forecaster remained in a relatively strong uptrend. Today’s move erased yesterday’s drop and then some; the buck is getting close to a breakout point. It remains in an uptrend in all 3 timeframes. Euro fell -0.47%, the Pound was down -0.79% (issues with BRExit); I’m not sure what actually rallied.
In spite of the rally in the SSEC, CNY/USD weakened, moving up +0.27% to 6.95, which is a new high dating back to mid-2016. A break above 7 could trigger some serious capital flight from China. It appears that the rescue of the Chinese stock market isn’t resulting in money flowing into China itself. That suggests we might just be seeing some window dressing. If the government’s actions really were seen as long-term positive, money would be rushing into CNY and the SSEC to buy the multi-year lows. That’s not happening.
Crude edged up +0.04 [+0.06%] to 69.61. Crude sold off around 8:20 am, then bounced back, recovering all of its losses by end of day. The northern doji candle print was mildly bearish, but forecaster jumped +0.26 to -0.13, which suggests that oil might be finding a bid here around 70. Certainly oil seems to have found support at 69 over the past several days. Oil remains in a downtrend in both the daily and weekly timeframes. It is possible that the Khashoggi-driven selloff in crude is nearing a close. That said – if equities continue to move lower, that will probably drag down crude prices too.
SPX fell -11.90 [-0.43%] to 2755.88. This took SPX below the 200 MA. The long black candle was a bearish continuation, and forecaster fell -0.32 to -0.46, which is a relatively mild downtrend. SPX is in a downtrend in both daily and weekly timeframes – and the monthly is a heartbeat from tipping over as well. I think it’s likely we see a retest of the recent lows for SPX.
Sector map shows that financials led lower (XLF:-2.14%) along with REITs (XLRE:-1.41%) while tech did best (XLK:+0.83%). Let’s call that a somewhat bearish sector map.
VIX fell -0.25 to 19.64.
TLT fell -0.13%; it wasn’t a new low, but money still seems to be moving out of the long term debt. TY edged down -0.01%, which is basically no change. TY remains in a downtrend in all 3 timeframes. The 10-year yield fell -0.2 bp to 3.20%. My sense is, the only way we see a strong rally in bonds is if equities do something dramatically bad.
JNK rose +0.03%; JNK gapped up at the open, and then sold off for most of the day. JNK remains in a mild downtrend.
CRB rose +0.04%, with 3 of 5 sectors moving higher, led by livestock (+1.74%). Over the last few weeks, PM has looked strongest in the group. That coincides with the equity-market selloff.
Both gold and the miners appear to be in a kind of holding pattern; unable to move higher, but also finding support at these prices when they dip intraday. In spite of a strong dollar, PM continues to hold relatively near to the recent highs, and in fact, gold/Euros remains at the recent high. Gold has also broken out nicely when viewed in CNY. Currency effects are more or less masking a steady gold rally that is occurring in the other currencies. Here’s what that looks like:
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