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PM Daily Market Commentary – 12/20/2017

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  • Thu, Dec 21, 2017 - 02:45am

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    davefairtex

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    PM Daily Market Commentary – 12/20/2017

Gold rose +4.30 [+0.34%] to 1269.10 on moderate volume, while silver moved up +0.06 [+0.37%] to 16.24 on moderately light volume. The buck did drop again today, but only -0.15%. Once again, the real excitement was in the long bond: TLT was down -1.11%. Is it inflation expectations? Too much anticipated new supply? Expectations of a new boom?

Gold moved slowly higher today, making a new high to 1271.40 before retreating somewhat into the close. The short white candle is a bullish continuation. It was another relatively quiet day.  Forecaster moved up +0.03 to +0.29; gold remains in an uptrend.  However, it is running into a resistance zone defined by the prior closing low at about 1265, as well as the 200 MA.  If gold can get through this area, it will be a good sign.  This is where I expect some selling pressure to appear from trapped longs waiting to get out even.

COMEX GC open interest fell by -716 contracts today.

Rate rise chances (March 2018) fell back to 56%.

Silver followed gold, rallying somewhat more strongly but losing perhaps half of its gains before the close. It too printed a short white/bullish continuation candle.  Forecaster is fading, dropping -0.10 to +0.04.  That’s barely an uptrend.  Volume remains anemic.  Looking at this chart in isolation, and the forecaster’s response, I wouldn’t be too surprised if we re-tested the 15.75 lows before end of year.  I’m still medium (and longer-term) bullish on silver, but this chart is definitely not looking all that exciting.  You can see how badly silver is underperforming gold just by looking at silver’s distance from its 200 MA.

COMEX SI open interest fell -343 contracts today.

The gold/silver ratio fell -0.02 to 78.15. That’s neutral.

The miners are starting to move more strongly, with GDX up +1.67% on heavy volume, while GDXJ climbed +1.90% on heavy volume also. The long white candles on both ETFs had a roughly 40% chance of marking a top here. Junior miners are actually moving into somewhat overbought territory, with RSI-7 at 77. As I said yesterday, the chart I’m now using is the longer-run XAU; the XAU forecaster moved up +0.11 to +0.44, which is a fairly strong uptrend. Today, XAU broke above its previous high set back in November. Imagine that, a gold-miner breakout!  It is also comfortably above its 50 MA too.

Today, the GDXJ:GDX ratio rose, as did the GDX:$GOLD ratio fell. That’s bullish.

Platinum rallied +0.61%, palladium climbed +0.25%, and copper defied my calls for a top and jumped +1.53%. Copper seems unstoppable. Platinum’s spinning top had a 41% chance of being a reversal; platinum forecaster also fell, dropping -0.24 to +0.16. Volume remains heavy, but is starting to lighten up a bit. There are a huge number of managed money shorts in platinum; even if platinum does correct a bit, there is a lot more fuel for a rally. If platinum does well, that will help PM overall.

The buck fell -0.14 [-0.15%] to 92.89, making a new low intraday to 92.75. Money continues to leave the buck – slowly. My guess is that all those foreigners who bought US utility companies are panicking out of them now.  The long black candle was a bearish continuation, but the dollar forecaster saw something it liked, issuing a buy signal, of all things, up +0.09 to +0.00.  What did it like?  Rising junk bond yields, rising long rates, and a flattening yield curve, among other things.  It will be interesting to see how this plays out.

Crude rose +0.37 [+0.64%] to 58.03. Today’s relatively bullish EIA report seemed to help (crude -6.5m, gasoline +1.2m, distillates +0.8m). Market moving higher on good news: that’s normal. The short white candle was a bullish continuation, and the forecaster rose +0.04 to +0.20. That’s a slow uptrend. Oil has had trouble over the past month or so every time it has reached the $58 mark. At some point it will either break through, or retrace, but the longer it stays up here, the more likely it will be a breakout.

Here’s one signpost about the energy return offshore: oil major Total made a final decision to launch large scale development of an ultra deepwater field in Brazil. They claim to have secured “technical costs below $20/bbl.” I’m not sure what the word “technical” means; qualifiers always make me nervous. Maybe it means without including royalties? Investment is starting to recover, which is good news for the rest of us. After the glut is past and shale starts to decline, we’re going to need that offshore oil, which takes many years to acquire. Here’s the article: https://oilprice.com/Energy/Crude-Oil/The-Worlds-Biggest-Offshore-Boom-I

SPX fell -2.22 [-0.08%] to 2679.25. That’s the second down day in a row. Heh. Forecaster moved lower, dropping -0.21 to -0.41. What does it see? Well it doesn’t like rising long rates, or the falling utility prices. Interesting. Energy roared higher (XLE:+1.41%) while utilities were shellacked again today (XLU:-0.79%). Hope you weren’t chasing yield in the utility sector; it is down 5.4% over the past month. At a 3% yield, that’s almost 2 years worth of dividends. You could be in XLE, which has the same yield, and presumably has quite the upside if oil ever recovers.

VIX fell -0.31 to 9.72.

TLT was hammered again today, dropping -1.11% and making a new low. The spinning top candle might be a low (48% chance). The TLT forecaster (which isn’t useful for trading these days because of the violent short term moves, but it still provides a sense) dropped -0.15 to -0.87. That’s a pretty steep downtrend. TY also fell, but it lost only -0.18%. There’s a good study of “duration risk” when a big reset happens on rates. How much of this is like a taper tantrum (normalization nightmare?) to the Fed-driven real supply increase that starts in January?  Perhaps this is just nervous bond traders front-running the Fed. 

Even though the losses are smaller, TY’s chart continues to get uglier, with no support apparent on the daily chart at all.  The 10 year has been a loser since the sell signal back at the beginning of December.  Weekly and monthly charts also both point downhill.

JNK managed to stay even, up +0.11%, avoiding loss most likely because of the rally in energy equities. A lot of those junk bonds are from energy companies, and a resurgence in oil exploration would probably help a bunch of them recover and perhaps leave junk status. Forecaster still has JNK in a downtrend. [As the owner of a small amount of junky energy-company debt, its easy for me to see what’s going on. Yesterday = bad, but today = all right.]

CRB rose +0.58%, with 4 of 5 sectors rising, led by industrial metals again today (+1.08%). That’s copper again. Its hard to forecast a recession when copper keeps moving up in this way. Long term (monthly) chart for copper still looks quite strong, and it appears as though copper will break out to new highs any day now.

Gold and silver continue to drift slowly higher, led by the mining shares which are now starting to noticeably pick up steam. Volume jumped on today’s miner breakout, which is a positive sign, and RSI levels aren’t high enough yet to materially worry.

So where does that leave us?  If we look at silver’s chart, things aren’t all that exciting.  Gold is ok, as is platinum, and the miners look really good.  Uptrend remains intact, in spite of silver acting as a bit of a skeleton at the feast.

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