PM Daily Market Commentary – 12/16/2019

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  • Tue, Dec 17, 2019 - 03:37am

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    davefairtex

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    PM Daily Market Commentary – 12/16/2019

Gold moved down +0.32 [+0.02%] to 1482.30 on light volume, while silver climbed +0.10 [+0.59%] to 17.11 on moderately light volume. The buck fell [-0.19%], SPX rallied [+0.71%] along with crude [+0.71%], and bonds fell [10y yield +7.3 bp].

Gold traded sideways in a narrow range today. The doji candle was a bullish continuation, and forecaster fell into a modest downtrend. Gold is now in a downtrend in both daily and monthly timeframes; gold/Euros is in a downtrend in both weekly and monthly timeframes.

COMEX GC open interest fell -335 contracts. Current open interest for GC: 88% of global annual production, down -0.04% today.

Futures are still predicting no chance of a rate cut at the Fed’s next meeting in January 2020.

Silver rallied in Asia, then chopped sideways for the remainder of the day.  Silver’s short white candle was a bullish continuation, and forecaster inched lower but remains in an uptrend. Silver remains in an uptrend in both daily and weekly timeframes, with the monthly in a state of no-trend.

COMEX SI open interest rose +2.0K contracts. That was 4 days of global annual production in new paper added to the market. Current open interest for SI: 116% of global annual production, up +1.13% today.

The gold/silver ratio dropped -0.49 to 86.63. That’s bullish. Silver continues to outperform gold.

Miners sold off for most of the day, ending near the lows.  GDX fell -1.19% on moderately light volume, and GDXJ plunged -1.40% on moderately heavy volume. XAU dropped [-1.04%], the long black candle was mildly bearish (31%), and forecaster dropped hard but remains in an uptrend. XAU remains in an uptrend in all 3 timeframes.

The GDX:gold ratio dropped -1.23%, and the GDXJ:GDXJ ratio dropped -0.21%.

Platinum rose +0.30 [+0.03%], palladium jumped +46.70 [+2.39%], and copper rose +0.03 [+1.05%]. Is that yet another new all time high for palladium? Well – it is another all time closing high.

The buck fell -0.18 [-0.19%] to 96.56 on moderately light volume. The short black candle was unrated, and forecaster moved higher but remains in a strong downtrend. The buck remains in a downtrend in all 3 timeframes.

There were no major currency moves today.

Crude climbed +0.42 [+0.71%] to 59.98 on moderate volume. The short white candle was unrated, and forecaster moved higher into its uptrend. Today saw the highest close for crude since early September; crude is on a roll right now. Crude remains in a strong uptrend in all 3 timeframes.

SPX climbed +22.65 [+0.71%] to 3191.45 on moderately heavy volume. Today marked yet another new all time high for SPX. The opening white marubozu was a bullish continuation, and forecaster moved higher into what is now a strong uptrend. SPX is now in a strong uptrend in all 3 timeframes.

Energy [+1.33%] led, along with utilities [+1.23%] while industrials [-0.05%] and staples [+0.35%] did worst. This was a mildly bearish sector map.  The rally in crude is finally starting to really help the energy group.

VIX fell -0.49 to 12.14. VIX is once again back in the low 12s.

TLT plunged [-1.65%], the long black candle was both bullish and bearish, while forecaster plunged into what is now a strong downtrend. The 30-year yield rose +9 bp to 2.32%.

TLT fell [-0.90%], the long black candle was unrated, and forecaster moved lower into what is now a strong downtrend. The 30-year yield rose +4 bp to 2.30%.

TY dropped [-0.27%], the opening black marubozu was unrated, and forecaster fell hard, dropping into a strong downtrend. TY is now in a downtrend in all 3 timeframes. The 10-year yield rose +7.3 bp to 1.89%. Bonds continue to look ill.

JNK climbed [+0.23%], the long white candle was a bullish continuation, and forecaster inched higher into its very strong uptrend. This was a new multi-month high for JNK. My guess: the Fed’s “repo madness” is really helping crappy debt. “The Fed has your back – might as well collect the 5.5% coupon.” BAA.AAA differential moved up +1 bp to +87 bp. No worries about credit according to this indicator.

CRB rose +0.76%, with all 5 sectors rising, led by agriculture (+1.91%). CRB broke out to a new 8-month high today. Are we starting to see a commodity-led move of cost-push inflation? Maybe. Or maybe our farmers need to buy bigger tractors. Or something.

So as SPX makes new highs and bonds fall, gold is holding steady, while silver moves higher. My sense is that the plunge in bonds is partially because the Fed is now buying short term Treasury bills, and letting the longer term stuff roll off, and partially because of the positive impulse from the trade deal, which although few details have been provided, the indication are that it will end up – at least on paper – addressing some long-standing issues on doing business in China.

There is no “sell the news” effect from this trade agreement as of yet.

Perhaps the ongoing SPX rally is more about the effects of the massive injection of cash by the Fed. After all, the former holders of those hundreds of billions in treasury bills now have to do something with all that money. They aren’t going to lend it to other banks (why, that would be dangerous), but buying equities – perhaps that’s just fine.

And our recent commodity rally is partially driven by the trade agreement (especially the ag products rally), and partially by the Saudis statement that they’ll over-comply.

Silver outperforming gold appears to align with the commodity rally. If it continues, silver should end up dragging gold higher eventually.

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