PM Daily Market Commentary – 12/18/2018
Gold rose +3.73 [+0.30%] to 1255.43 on moderate volume, while silver fell -0.04 [-.27%] to 14.70 on moderately light volume. The buck was largely unchanged [+0.02%], as was SPX [+0.01%], but crude was smashed [-6.49%] along with copper [-3.47%] while TLT made new highs [+0.36%]. It was a bad day for commodities; it is interesting how gold and silver largely avoided the fuss.
Trading range was narrow today; gold’s short white candle was a bullish continuation, and forecaster rose +0.38 to +0.28, which is a buy signal for gold. Gold is quite close to another minor breakout above the previous high of 1257.90. Gold is now in an uptrend in all 3 timeframes, as is gold/Euros. While there can be a lot of chop on the daily chart, the weekly looks much clearer – gold is in a moderately strong uptrend.
COMEX GC open interest increased +4,718 contracts. If I had to guess, I suspect the commercials are probably responsible.
Rate rise chances (December 2018) rose to 72%.
Silver tried to rally but failed, probably dragged down by the massive plunge in copper. The spinning top candle was neutral, while silver’s forecaster rose +0.21 to +0.04 which is a buy signal for silver. Perhaps it liked how well silver did on a day where copper took quite the beating. Silver is now in an uptrend in both the daily and weekly timeframes. Yet when I look at the chart, it still feels relatively weak to me. Unlike gold, silver has yet to break out of its multi-month trading range.
COMEX SI open interest fell -202 contracts.
The gold/silver ratio rose +0.43 to 85.29. That’s bearish. The gold/silver ratio remains near multi-decade highs – that usually happens around a low for PM.
Miners charged higher, with GDX up +2.33% on very heavy volume, while GDXJ jumped +2.47% on heavy volume. XAU rose +2.05%, which is yet another new high for this cycle. XAU is approaching a confirmation of the the 4-month double-bottom pattern – a breakout above the previous high would confirm the pattern, which would be a strong bullish indicator longer term. The miner ETFS have already broken above this previous high – money is clearly pouring into the mining shares. XAU remains in an uptrend in all 3 timeframes.
The GDX:$GOLD ratio rose +2.02%, and the GDXJ:GDX ratio climbed +0.14%. That’s bullish.
Platinum fell -0.39%, palladium dropped -1.03%, while copper plunged -3.47%. While platinum and palladium are doing all right, the huge move in copper is probably driven by bad news out of China. Leader Xi gave a speech in which he offered no new stimulus measures to boost the economy. Overall the picture out of China is one of economic deterioration. Did it all just hit today? Its hard to know. Regardless, its quite surprising that silver managed to avoid being dragged down along with copper.
The buck rose +0.02 [+0.02%] to 96.54. The buck had actually sold off fairly briskly [-0.50%] earlier in the day, but bounced back recovering all of its losses. The dragonfly doji was mildly bullish (32% reversal), and forecaster jumped +0.18 to +0.16, which is a buy signal for the buck. In spite of this, the buck is in a downtrend in the weekly and monthly timeframes.
There were no significant moves in the major currencies today.
Crude plunged -3.22 [-6.49%] to 46.43, a very large move that smashed crude down through its previous low. At this rate, crude will be testing the previous low of 42.18 within a couple of days. Seriously, I don’t know if it will get there that quickly, but crude just has no friends right now. The API report was mildly bearish (crude: +3.5m, gasoline: +1.8m, distillates: -3.4m), and the market moved down just a few cents on the news. The API report was not a factor in today’s plunge. Crude is in a downtrend in all 3 timeframes.
Nick Cunningham tries to sort out the reasons for the smash: he’s just guessing, but then again, so is everyone else.
US production predicted to rise +134 kbpd next month, with +73 kbpd from the Permian alone.
Fed is expected to hike rates tomorrow, which will further slow the economy.
German GDP went negative this quarter.
US housing market is tipping over.
Its all bad news all the time out of China – auto sales, industrial production, retail sales, etc.
SPX rose +0.22 [+0.01%] to 2546.16. SPX actually made a new low today by a couple of points, but managed to rally back to even by the close – it was actually up but dropped hard in the last 10 minutes. The spinning top candle was mildly bullish (34% reversal), and forecaster rose +0.31 to -0.46, which is still a relatively strong downtrend. Watching the movements intraday, the selling pressure remains quite strong. Will this low hold? Most likely not – although the Fed could surprise. SPX remains in a downtrend in all 3 timeframes.
Sector map has REITs (XLRE:+0.99%) and tech (XLK:+0.79%) doing best, while energy (XLE:-2.36%) did worst. Neutral sector map today.
VIX rose +1.06 to 25.58.
TLT rose +0.36% breaking out to a new high, following through off yesterday’s buy signal. TY confirms, rising +0.22%, also breaking out to a new high. TY remains in an uptrend in all 3 timeframes. The 10-year yield fell -3.2 bp to 2.83%. The last time we were at this level was back in August 2018. The 10-year is down 42 bp from the highs set just 5 weeks ago.
JNK fell -0.29%, breaking down to a new low, seemingly trailing SPX by a day. Most likely the drop in JNK was due to the plunge in oil – lots of shale driller debt is junky, and they can’t pay it back with oil at $46.
CRB plunged -1.97%, making another new low today. 3 of 5 sectors fell, led by energy (-4.97%).
Today is all about the FOMC meeting. This is a really important one – there is a chance that the Fed won’t actually raise rates at this meeting, given how the markets have been performing. Especially crude. And even if they do raise, I suspect this one will be the last rate increase in a while. My 1-year treasury (monthly) forecaster is just about to issue its first sell signal in 30 months. The word “global slowdown” is on everyone’s lips, and you know things in China are really bad when manufacturing center Guangdong is ordered by the central government to stop publishing its manufacturing data. (Yes, really!) The Chinese have a very efficient way to deal with bad news: they simply don’t report it.
If you are eager to hear what Powell has to say, you can listen to him speak today in near real time by clicking on this link: https://www.federalreserve.gov/live-broadcast.htm
As always, the meeting announcement will be at 2pm, with the press conference at 2:30.
Note: If you’re reading this and are not yet a member of Peak Prosperity’s Gold & Silver Group, please consider joining it now. It’s where our active community of precious metals enthusiasts have focused discussions on the developments most likely to impact gold & silver. Simply go here and click the “Join Today” button.