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PM Daily Market Commentary – 12/2/2019

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  • Tue, Dec 03, 2019 - 02:15am

    #1

    davefairtex

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    PM Daily Market Commentary – 12/2/2019

Gold fell -1.95 [-0.13%] to 1468.76 on moderately heavy volume, while silver fell -0.11 [-0.64%] to 16.99 on moderate volume. The buck dropped hard [-0.44%] along with both SPX [-0.86%] and bonds [10y yield +6 bp], while crude moved higher [+0.99%].

ISM Manufacturing Index: 48.1 (prior 48.3), well below consensus of 49.4. This is yet another contractionary reading for the US manufacturing sector.

Gold fell in Asia, then managed to bounce back during the London session, regaining most of its losses. The high wave candle was unrated, and forecaster moved higher into its uptrend. Gold remains in a downtrend in the weekly and monthly timeframes. Gold/Euros is in the same position.

COMEX GC open interest fell -2,496 contracts. That looks like some cash-register ringing, which is a positive sign. Gold OI is now at 84% of annual global production.

Futures are projecting a 5% chance of a rate increase in December.

Silver fell along with gold in Asia, but its subsequent rebound was much weaker. The spinning top candle was somewhat bullish (39%) but forecaster fell deeper into its downtrend. Silver remains in an uptrend in both weekly and monthly timeframes, although that weekly uptrend is really more of a no-trend state.

COMEX SI open interest fell -1,087 contracts. OI in silver continues to drop as prices fall. Silver OI is now at 115% of annual global production; that’s down 2% from yesterday, and well down from the highs.

The gold/silver ratio rose +0.44 to 85.45. That’s somewhat bearish.


Miners gapped down at the open, but then rallied back to close near the highs of the day. GDX rose +0.33% on moderately heavy volume, while GDXJ rose +0.29% on moderate volume. XAU climbed +0.53%, the long white candle was a bullish continuation, and forecaster moved lower but remains in its uptrend. XAU is showing a pattern of higher highs and higher lows – an uptrend – and it appears to be preparing to break out to another higher high. The miners continue to look quite strong. XAU remains in an uptrend in all 3 timeframes.

The GDX:gold ratio rose +0.47%, and the GDXJ:GDX ratio fell -0.04%. That’s somewhat bullish.


Platinum rose +0.27%, palladium climbed +0.63%, while copper dropped -0.28%. That’s another new all time high for palladium today.

The buck fell -0.43 [-0.44%] to 97.40. The strong line/swing high pattern was quite bearish (58%), and forecaster plunged into a reasonably strong downtrend. The buck dropped through both the 9 and 50 MA lines today – it looked pretty ugly for the buck. Today’s plunge pulled the weekly back down into downtrend – meaning the buck is now in a downtrend in the daily and weekly timeframes.

The plunge in the buck started happening roughly at 7:20 am, during the London session, and didn’t stop until just before noon. I’m not sure what caused the plunge in the buck; today’s currency move were not aligned with the moves in either gold, SPX, or bonds.  It looked to be something that happened over in Europe.

Large currency moves include: EUR [+0.60%], AUD [+0.84%], JPY [+0.45%].

Crude rose +0.55 [+0.99%] to 55.92. The bullish harami pattern was somewhat bullish (39%) and forecaster inched higher but remains in a downtrend. In truth, today’s rally was a bit feeble after Friday’s big smash; crude has a long way to go before it reverses back up. Crude remains in a downtrend in both daily and weekly timeframes.

SPX plunged -27.11 [-0.86%] to 3113.87. The strong line candle was somewhat bearish (41%) and forecaster dropped hard, moving down right to the no-trend area. SPX also dropped below the 9 MA today for the first time in several months, which is a bearish sign. SPX remains in an uptrend in both weekly and monthly timeframes. Could this be a bearish reversal for SPX? It might be.

The losses in SPX happened mostly right after 9:30 am; some blamed a weak ISM report, but that didn’t come out until 10 am, and the market had been falling for 30 minutes before that report hit. Perhaps someone got it early? Certainly the selling accelerated after that report was released.

REITs led lower (XLRE:-1.84%) along with industrials (XLI:-1.65%), while staples (XLP:+0.23%) and energy (XLE:+0.0%) did best. This was a somewhat bearish sector map.

VIX shot up +2.29 to 14.91.

TLT plunged -1.50%, the spinning top candle was a bearish continuation, and forecaster plunged deeper into its current downtrend. The 30-year yield jumped +7 bp to 2.28%. TY also dropped, but it lost just -0.04%; the doji candle was a bearish continuation, and forecaster inched lower into its downtrend. TY remains in a downtrend in both daily and monthly timeframes. The 10 year yield jumped +6.0 bp to 1.84%.

JNK cratered today, dropping -0.54%. The spinning top was a bearish continuation, and forecaster plunged into a deep downtrend. Today’s large drop wiped out most of last week’s JNK rally. BAA.AAA differential moved up +2 bp to +92 bp. No worries about credit according to this indicator.

CRB rose +0.27%, with 2 of 5 sectors rising, led by energy (+0.91%).

Is today’s plunge in SPX meaningful? It sure could be.  It was the most bearish move we’ve seen in several months.  I certainly don’t know what caused it – and I suspect neither does anyone else. We’ve been seeing bad manufacturing index reports for months now. Is the market finally selling off on bad news?  That would be good news for the shorts.

Technically, the SPX daily forecaster is on the edge of a downtrend, and the candle print looks reasonably ugly. This is the first crossing of the 9 MA in months. Here’s what that looks like:

My only concern is that gold did surprisingly poorly today given the poor performance in equities, the plunge in the buck, and the plunge in junky debt. I’m not quite sure why – it wasn’t a bunch of new paper at COMEX. Perhaps the miners are the tell; they continue to do great.

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  • Tue, Dec 03, 2019 - 06:44am

    #2
    jussaumm

    jussaumm

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    Strategy

Hi Dave,

Astute commentary as always.

So, President Trump made noise about the trade deal waiting until after the election. Very easy for him to make noise like that and not mean it, but understanding that it will cause some down side on the stock market because he can just make positive noises in a few days to get some upside.

It seems clear to me that the positive noises make more positive movement in SPX than the opposite.

So is this just a strategy by our dear leader to keep SPX moving higher?

 

  • Tue, Dec 03, 2019 - 07:14am

    #3
    phusg

    phusg

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    Trade war 2?

I don’t usually follow what they say over at marketwatch, but this jumped out at me as being a grey swan contender:

https://www.marketwatch.com/story/the-woman-who-nailed-2018s-stock-market-drop-says-china-is-kind-of-a-sideshow-the-big-trump-trade-is-europe-2019-11-19?mod=mw_latestnews

especially off the back of Trump and Macron’s spat over NATO and over the ‘ digi-tax’ on American tech companies…

But then IP theft is negligible compared with what China does, but who knows, there is a big trade imbalance there.

  • Tue, Dec 03, 2019 - 09:30am   (Reply to #3)

    #4

    davefairtex

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    re: Trade war 2?

phusg-

I don’t put the EU in the same bucket as China.  Something tells me that a deal will get done without too much fuss.

As an example: BRExit.  EU was absolutely, positively, never going to modify May’s Withdrawal Agreement.  Right up until they modified it.

My guess: whatever difference the US-EU has will get split, because at the end of the day, between the US and the EU, there isn’t some egregious imbalance that one side is desperate to cling to, while the other side is getting totally hosed.

USMCA/NAFTA 2 is a case in point.  It all worked out, without too much fuss. Reasonable people do that sort of thing.

That just gives you a sense as to just how badly China is hosing the West.  They are desperate to keep their advantage.  And that’s why a US-China deal isn’t happening.  Even with 25% tariffs, they’re still better off than if they did a deal.

Just my sense anyway.

  • Tue, Dec 03, 2019 - 09:35am   (Reply to #2)

    #5

    davefairtex

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    re: Strategy

aumm-

Well, when bad news makes the market sell off a little, and good news makes the market rally to new highs, that means you’re in a bull market. 🙂

Is Trump responsible for that?  I don’t think so.  Is he taking advantage of it, and helping it along whenever he can?  Oh yeah.

I am guessing the recent bull market move is about stock buybacks + $300 billion in new money looking for a home.  But of course that’s just a guess.

We will know we’re in a bear market when Trump sends out good news, and the market rallies a little, and then it sells off really hard on bad news, making new lows.  Trump will be doing exactly the same thing, but the result won’t be the same at all.

  • Wed, Dec 04, 2019 - 12:21am

    #6
    phusg

    phusg

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    US-EU imbalance

My guess: whatever difference the US-EU has will get split, because at the end of the day, between the US and the EU, there isn’t some egregious imbalance that one side is desperate to cling to, while the other side is getting totally hosed.

Not so much in trade terms, but Trump seems to think there is one with regards to defence spending. Personally I don’t see a great imbalance there either as generally the US gets to call the geopolitical shots, has the world reserve currency status and the benefits from those things aren’t exactly peanuts either.

I don’t put the EU in the same bucket as China. Something tells me that a deal will get done without too much fuss.

As an example: BRExit. EU was absolutely, positively, never going to modify May’s Withdrawal Agreement. Right up until they modified it.

If you’re saying Brexit hasn’t been too much fuss, I’d hate to see a real fuss!

Another example was that the UK government was absolutely, positively, never going to allow the UK to be split and now the majority now seems to be in favour of a slightly modifed May’s deal that puts a border down the Irish sea and puts Scotland on the path to independence.

  • Wed, Dec 04, 2019 - 02:01am   (Reply to #6)

    #7

    davefairtex

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    re: US-EU imbalance

Your point is well taken about the critical Brexit compromise.  The following video from CGP Grey: Brexit, Revisited predicted this outcome:

https://www.youtube.com/watch?v=J1Yv24cM2os

Related: I don’t think Scotland will vote for independence once they figure out they too would need a hard border between them and the rest of England.  Just my guess anyway.  I suspect Scotland does more business with the UK than they do with the EU.

Ultimately I think the long, long, long delay on Brexit was about having a Remainer negotiate it.  If you have to keep saying “Brexit means Brexit”, that’s because nobody really believes you want to make it happen.  Not the EU, and not the people in your own party.

I stand by my statement though.  I don’t see the US-EU differences as being all that dramatic.  The EU will be happy enough to split the difference, at least enough to avoid any sort of major fuss.  I just don’t see them as hard-ass negotiators.

(Just as an aside… I do wonder why we still have NATO some 30 years after the fall of the Soviet Union.  Macron wonders too.  But then again, he’s French, so he has an excuse.  But seriously.  Why does NATO still exist?  Just an expensive habit that keeps the defense industry happy?)

Non sequitur: I liked the recent “carbon tariff” that the EU is considering levying on Chinese imports.  Which genius within the bowels of the bureaucracy came up with weaponizing climate change as a way to justify dropping Trump-style tariffs on China?

And since the EU is following the US on this one, China will be hard pressed to soft-power pressure them into backing down.  “No, we aren’t pulling a Trump, this is about CLIMATE CHANGE!”  *cough* European Jobs *cough*.

Like I said: genius!

I really am confident the US and the EU will come to some sort of arrangement.

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