PM Daily Market Commentary – 11/19/2018

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    PM Daily Market Commentary – 11/19/2018

Gold rose +2.67 [+0.22%] to 1230.31 on moderately heavy volume, while silver moved up +0.01 [+0.10%] to 14.40 on moderately heavy volume also. The buck fell -0.28%, while the rest of the metals were mixed. Risk ran into trouble again today, with SPX off -1.66%, and tech off -3.81%.

Gold’s spinning top candle was a bullish continuation, while forecaster rose +0.20 to +0.49. Forecaster thinks the uptrend is strengthening, but I’m not so sure. The buck fell more than gold rose, which to me isn’t a great sign; for instance, gold/Euros dropped below the 50 MA today, and GC/EUR forecaster issued a sell signal. Still, if you compare gold to SPX, gold is the big winner, relatively speaking. Gold remains in a downtrend in both weekly and monthly timeframes.  The GC.EUR chart shows that gold across the pond is slowly weakening.  If the buck starts to bounce…it could lead to trouble.

COMEX GC open interest fell -3,680 contracts. Perhaps that is short covering?

Rate rise chances (December 2018) remained at 72%.

Silver’s northern doji candle was a bullish continuation, while forecaster dipped -0.22 to +0.13; silver’s daily-chart uptrend is slowing. Silver ended the day slightly below the 50 MA. Weekly silver will issue a buy signal if prices close here at end of month; that puts silver in an uptrend in all 3 timeframes.

COMEX SI open interest fell -1,293 contracts.

The gold/silver ratio rose +0.13 to 84.79. That’s slightly bearish. The gold/silver ratio remains at multi-decade highs – that usually happens around a low for PM.

Miners mostly had failed rallies today, with both ETFs printing shooting star candles. GDX rose +0.05% on moderate volume, while GDXJ climbed +0.33% on very light volume. XAU actually fell, dropping -0.58%; XAU’s shooting star candle was actually a bullish continuation while forecaster moved down just -0.01 to +0.33. Compared to SPX, the miners did quite well. XAU ended the day below its 50 MA. XAU remains in an uptrend in the daily and monthly timeframes.

The GDX:$GOLD ratio fell -0.17%, while the GDXJ:GDX ratio rose +0.28%. That’s neutral.

Platinum climbed +0.96%, palladium fell -1.19%, while copper rose +0.32%. Copper is moving to re-test the top end of its recent trading range – the move today in the face of the strong sell-off in equities is a positive sign, as was the rally in platinum. Palladium remains within a few bucks of its all time high. While SPX had a tough day and equities overall look quite weak, prices of the other metals aren’t supporting any sort of recession thesis, possibly because of hopes that the US & China will settle their differences at the upcoming G-20 meeting.

The buck fell -0.27 [-0.28%] to 95.70. Today’s long black candle was a bearish continuation, while DX forecaster moved down -0.04 to -0.79, which is a very strong downtrend. Today’s move was enough to pull the monthly DX forecaster into a sell signal for the first time in 8 months – assuming prices close here at end of month. DX is now in a downtrend in both the daily and monthly timeframes.

The recent currency moves are mostly about the Euro – the EU currently appears to have won the BRExit lottery, thanks to a “business friendly” BRExit agreement “negotiated” by UK PM May, much to the delight of the EU bureaucrats, while the Italian budget situation remains unresolved, and is fading a bit from the headlines.

Crude moved up +0.33 [+0.58%] to 57.47. Crude sold off hard earlier in the day, but buyers showed up to pull prices above the open price. The takuri line candle print was bullish, but forecaster dipped -0.25 to +0.07, which is just barely an uptrend. Crude remains below all 3 moving averages, and in an downtrend in the weekly and monthly timeframes. Still, I think today’s bounce looks promising, especially given the strong sell-off in equities.

SPX plunged -45.54 [-1.66%] to 2690.73. The opening black marubozu candle was neutral, while forecaster plunged -0.69 to -0.66, which is a sell signal for SPX. Today’s move was enough to pull SPX into a downtrend in the monthly timeframe too; this drops SPX into a downtrend in all 3 timeframes.

Sector map shows tech leading lower (XLK:-3.81%) along with communication services (XLC:-3.03%), while utilities did best (XLU:+0.44%). AAPL was off -3.96%, and is down 20% from the peak in early October; apparently, its new iPhone isn’t selling so well. Might we be at Peak Iphone? FB fell -5.72%, making a new low and printing an ugly black marubozu, and is off 40% from the peak set in July. Even the Democrats hate Facebook now. I think the market is pricing in some sort of regulatory risk. Plus, articles like this don’t help either:

“Exposure to the carefully curated images from others’ lives leads to negative self-comparison, and the sheer quantity of social media interaction may detract from more meaningful real-life experiences,” the report says. How many of you know facebook users who go to places and events just in order to take pictures to then post to facebook or instagram, all in order to generate “likes.” That’s the opposite of authenticity, which is what happiness ultimately depends on. If you feel like your life is a big facebook fraud…how happy will you be? Apparently, not very happy.  Also apparently, this revelation isn’t great for the stock price of the company.

Today’s sector map is bearish.

VIX rose +1.96 to 20.10.

TLT rose +0.28%, making a new high – the white marubozu candle was a bullish continuation, and TLT is moving towards a breakout above its previous high set back in October. TY didn’t look as good, rising just +0.01%; the northern doji was a bullish continuation, while forecaster dipped -0.09 to +0.38. TY has broken above the October high, and is in an uptrend in all 3 timeframes. The 10-year yield fell -1.7 bp to 3.06%. Looking at the chart, it is possible that the 10-year yield has double-topped at (roughly) 3.25%, although the lack of enthusiasm in bonds today with equities down relatively hard suggests we may be seeing some bond-buying fatigue.

JNK fell -0.12%, making yet another new low. The move was fairly mild, but the trend is clear: money continues to flee junky debt, although not at a high rate of speed just yet. My observation: money is moving to quality – look at the JNK:IEF ratio, which has been heading straight down for the past 7 days. Someone, perhaps multiple someones, have decided that junky debt is now a bad idea. So far the move is more than a trickle, but less than a flood.

CRB rose +0.78%, with 4 of 5 sectors moving higher, led by livestock (+1.18%), which has been on a tear in the past few weeks. Both industrial metals and PM have moved higher over the past week – they continue to have some hope about a US-China tariff settlement, I think. Natgas continues to be the source of unhappiness for the shorts – it rose 10% today, moving back up near its recent highs. Perhaps the shorts haven’t been hosed badly enough yet; maybe there are hedge funds that are short natgas that have yet to be destroyed by their bankster buddies.

Gold and silver continue to lag the rest of the metals group, but they are doing much better than the risk assets. Gold/Euros continues to fade, which won’t help matters if the Euro stops rallying. Will the current gift-to-the-corporations not-a-BRExit deal pass Parliament? So far, opponents have not managed to deliver a no-confidence vote, so perhaps the deal will go through, in spite of the mass resignations over the past few days. So far, at least, the issues around BRExit are not affecting the metals markets much at all.

The UK used to make things, the Germans still do. Why is that? I think both UK parties signed onto the globalization bandwagon. You’d expect that from many of the Tories, but Labor is no longer about labor, much like the Democrats in the US. As a result, manufacturing “Brexited” a while back, with the blessings of both parties “competing” for government. Now we are seeing the Tories fracturing – the nationalist Tories want to Leave, while the co-opted corporate/globalized Tories want to Remain. I suspect Labor is split similarly, but since they aren’t in government, the split is less visible. Could we see some sort of party realignment along nationalist lines? Heck, we are seeing that in the US. And around the world, really. Italy’s “populists” are really nationalists.  Given this fracture-in-progress, it is really hard to say how BRExit will actually play out.

I digress again.

Crude might be putting in a low here; the bounce today looked relatively strong. API report comes out after market close at 430 pm. SPX looks unhealthy – there was no reversal of any sort, and junk debt continues to sell off, money is flowing from equities into the bond market (finally!), while the metals continue to get a bid – most likely from the hopes of a settlement between the US and China.  When the market leaders are plunging, its probably well past time to be watching from the sidelines.

While there is still no recession from my indicators, the housing market is giving us a clue that there might be one in the offing. Supply jumped to 7 months nationwide (up from 5.5 months during the summer), which appears to be moving up towards a possibly recession-predictive 8 months. As you can see in the chart below, “months of home supply” is often (but not always) a leading indicator of recessions.  Note the data lags by a month or two, but fortunately it seems as though it also leads the actual recession by more than that, so it remains a good leading indicator.

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