PM Daily Market Commentary – 11/13/2018
Gold rose +1.87 [+0.16%] to 1207.93 on very heavy volume, while silver moved down -0.01 [-0.04%] to 13.96 on very heavy volume also. The buck fell -0.26%, which helped the metals from collapsing further, but the real action was in crude: after dropping 11 days in a row, today oil plunged -3.57 [-6.04%] on double normal volume. It was a ridiculously large move after a long, long decline.
So what’s going on with oil? Nobody really knows – or if they know, they are not saying. That is, there is the usual talk about over-supply, there is the US production increase from shale, but that’s all within the range of “normal” events. What we are seeing in crude is way beyond normal: the RSI-7 for crude is at 4.6. That’s the lowest value ever. As in, since 1983, oil has never had this happen to it. So whatever is going on, it is not explained by the headlines we are reading. My guess, as I posted elsewhere, is that the Saudis have been removed from the board as swing producer by Trump. I think the US has evidence of just exactly what happened in the Khashoggi murder, which most likely implicates MBS. Given the global reaction to the murder, that means Trump owns MBS. Trump wants lower oil prices? Trump gets lower oil prices.
This is all just a guess. But it feels right to me. How low will prices go? How low does Trump want them to go? Of course shale production will stop if prices drop much further. So it is a self-correcting system, long term. And this exacerbates the long-term supply situation. And it will destroy a bunch of companies who can’t make money with oil at $55, if price stays there for too long. In the meantime, I believe we could be dealing with an oil market with the swing producer removed from the board.
Today’s strong line candle for crude was bearish, while forecaster plunged -0.67 to -1.03. That’s a very strong downtrend. Crude remains in a downtrend in all 3 timeframes.
Gold traded in a narrow range today; the bullish harami was neutral, while forecaster jumped +0.45 to -0.37; that looks relatively positive. It isn’t a reversal, but at least the plunge has stopped for now. Gold remains in a downtrend in all 3 timeframes. Gold/Euros looks slightly better; it is still in an uptrend, just barely, on the monthly timeframe.
COMEX GC open interest rose +20,660 contracts. That’s a large increase in short interest – with no change in price. That suggests the bid for gold here at 1200 is actually quite strong, which is a pleasant surprise.
Rate rise chances (December 2018) remains at 76%.
Silver’s doji candle was a bearish continuation, but forecaster rose +0.52 to -0.32; as with gold, the forecaster thinks today’s price action was bullish. Silver did make a new low, but only by a few cents. Silver remains in a downtrend in all timeframes.
COMEX SI open interest rose +4,798 contracts. As with gold, this is a fairly large change in OI, without a big move lower in price. It seems there is a bid for silver down here just below 14.
The gold/silver ratio rose +0.13 to 85.91. That’s slightly bearish. The gold/silver ratio is at multi-decade highs – nearer to a low for PM than a high.
Miners didn’t do nearly as well; GDX fell -1.02% on moderate volume, while GDXJ dropped -1.43% on heavy volume. XAU fell -1.29%. The long black candle was a bearish continuation, and forecaster ticked up +0.02 to -0.82, a strong downtrend. XAU appears headed for a re-test of the low set back in August. XAU remains in a downtrend in the daily and weekly timeframes.
The GDX:$GOLD ratio fell -1.17%, while the GDXJ:GDX ratio dropped -0.41%. That’s bearish.
Platinum fell -0.18%, palladium rose +1.37%, while copper rallied +0.51%. Copper had a large failed rally, palladium remains near its highs, while platinum continues to move lower.
The buck fell -0.25 [-0.26%] to 96.79; the dark cloud cover candle was only mildly bearish (33% reversal), while forecaster dropped -0.25 to +0.56; the buck remains in an uptrend in all 3 timeframes. The fall in the buck should have helped the metals a bit more; this suggests gold and silver remain under pressure.
SPX fell -4.04 [-0.15%] to 2722.18. As with copper, SPX had a fairly large failed rally today. The high wave candle was a bearish continuation and forecaster dropped -0.33 to -0.53. SPX remains in a downtrend in both the daily and weekly timeframes.
Sector map was led lower by energy (XLE:-2.30%) – that was all about the cratering crude prices – while financials did best (XLF:+0.56%).
VIX fell -0.43 to 20.02.
TLT fell -0.06%; it remains in an uptrend. TY moved higher, up +0.10%; the long white candle was a bullish continuation, and forecaster rose +0.25 to +0.62. The forecaster seems positive about TY; it remains in an uptrend in both daily and weekly timeframes. The 10-year yield dropped -4.1 bp to 3.15%. That’s a decent-sized move down.
JNK fell -0.14%, making a new low, following through off yesterday’s breakdown. Some of that debt is shale-driller debt which becomes more problematic when oil prices fall.
CRB fell -1.84%, a large move which takes CRB to levels last seen in late 2017. 4 of 5 sectors fell, led by energy (-5.29%). That’s even with natgas up +8%!
The plunge in crude, especially with today’s massive loss, seems to have the markets a bit nervous. When prices plunge, for weeks at a time, for a reason that nobody can really articulate all that well, it hits confidence – at the very least, in traders confidence of how well they can predict what will happen next.
At least gold and silver managed to avoid collapse. Given the large increase in open interest today, avoiding collapse could be interpreted as success. Woohoo!
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