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PM Daily Market Commentary – 12/24/2018

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  • Tue, Dec 25, 2018 - 05:44am

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    davefairtex

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    PM Daily Market Commentary – 12/24/2018

On Friday, gold jumped +13.81 [+1.09%] to 1275.15 on light volume, while silver rose +0.14 [+0.95%] to 14.84 on very light volume. The buck fell -0.48%, SPX plunged -2.71%, crude was hammered losing -5.88%, while the 10-year treasury dropped -4.3 bp. Crude and SPX continue plunging together, while money flows to gold and treasury bills.

What caused the continued move downhill on the normally-quiet night-before-Christmas? Two things. First, after apparently having an all-hands meeting over the weekend, Mnuchin announced that “there was ample liquidity available” from the major banking institutions. This answered a question that nobody had been asking – but the answer sure reminded everyone of 2008. In addition, rumor is that Trump is considering firing Fed Chairman Powell. Apparently he is able to do this “for cause”. Does raising rates count as “cause”? Neither of these two things were positive for confidence.

https://oilprice.com/Energy/Energy-General/Mnuchins-Bizarre-Statement-Rattles-Markets.html

Gold was a clear beneficiary of the continued plunge in risk items. Gold’s opening white marubozu was a bullish continuation, but forecaster fell -0.07 to +0.05, which suggests that the current move higher might be slowing down. Gold remains in an uptrend in all 3 timeframes.  If prices hold more or less where they are now, gold will execute a (bullish) golden cross within a couple of weeks.

COMEX GC open interest increased +9,945 contracts.

Rate rise chances plunged to 12% in the near term (March 2019), and dropped to ust 27% by end of next year (Dec 2019). Wow, those are some big moves. Market is saying, clearly: “there will be no more rate increases.”

Silver continues to underperform gold; that underscores the “safe haven” nature of gold’s current rally. Silver’s long white candle was neutral, and forecaster moved up +0.02 to -0.06; that’s still not quite a buy signal for silver. Silver remains an uptrend in the weekly and monthly timeframes. Silver has not yet broken out above its recent trading range.

COMEX SI open interest fell -204 contracts.

The gold/silver ratio rose +0.06 to 85.81. That’s neutral. The gold/silver ratio remains near multi-decade highs – that usually happens around a low for PM.

Miners shot up today, with GDX up +3.18% on heavy volume, while GDXJ climbed +3.25% on heavy volume also. XAU moved up +2.74%, the white marubozu candle was a bullish continuation, while forecaster jumped +0.35 to +0.10, which is a buy signal for the miners. Miners are in an uptrend in all 3 timeframes. Mining shares have yet to confirm the double bottom pattern, and have just now managed to recover the losses suffered on the day of the FOMC meeting from last week.  However, they are close to the top of their recent trading range.

The GDX:$GOLD ratio rose +2.06%, and the GDXJ:GDX ratio rose +0.07%. That’s bullish.

Platinum fell -0.13%, palladium rose +1.06%, while copper dropped -0.28%. Copper remains in a downtrend, palladium is near its highs but may be tipping over, while platinum is chopping sideways but is also in a downtrend.

The buck fell -0.46 [-0.48%] to 95.94, losing much of the gains from last Friday’s rally. While the daily chart is on the fence about where things go next, the buck is in a downtrend in both the weekly and monthly timeframes. Today’s plunge took the buck below the 50 MA.

I’m guessing that threatening to fire the Fed chairman isn’t dollar-positive.  I think Trump still needs to learn about unintended consequences.

Major moves today were: GBP [+0.58] CHF [+0.50] and JPY [+0.85%].

Crude plunged -2.68 [-5.88%] to 42.92, dropping down to within spitting distance of the previous low of 42.18 set back in July 2017. Crude’s long black candle was a bearish continuation, and forecaster dropped -0.32 to -0.64. Crude remains in a downtrend in all 3 timeframes. There is – still – no good news right now for crude.

SPX plunged -65.48 [-2.71%] to 2351.10. SPX managed to pack an entire day’s decline into just a 4 hour period. The closing black marubozu was mildly bullish (35% reversal), but all 3 forecasters remain in horrid-looking downtrends. SPX closed at the dead lows of the day. SPX RSI-7 is 8. That’s dreadfully oversold. “It could bounce any moment now.”  Haven’t I been saying that for a while?

Sector map showed utilities doing worst (XLU:-4.18%) along with energy (XLE:-4.05%), while consumer discretionary (XLY:-1.90%) did “best”. The plunge in the utility sector is the largest I’ve seen for quite some time – you have to go back to 2008 to see days like this for the normally tame utility sector.

VIX jumped +5.95 to 36. a high for VIX that dates back to January 2018. This was a large move in the VIX from an already-high level to an even-higher-level.  The market is seriously worried at this point.

TLT climbed +0.50%, reversing the two-day move lower. TY jumped +0.40%, a large move for the 10-year. TY remains in an uptrend in all 3 timeframes. The 10-year yield fell -4.3 bp to 2.75%. Just when I think bonds are running out of gas, the equity market plunges to yet another new low.

JNK plunged -0.75%, dropping right alongside equities. So far the selling in JNK has not become disorderly, but I’m not sure how long that relatively moderate movement continues if equities continue to sell off. JNK’s continued plunge signals risk off.

CRB plunged -2.19%, with 3 of 5 sectors falling, led by energy (-5.85%). Energy looks really terrible right now – the overall sector is down 34% from just two months ago.

If its not one thing, its another. Trump threatening to fire Powell (in order to restore market confidence??) and Mnuchin saying “everything is ok” when nobody was actively worried prior to his reassurance. Was this the worst night-before-christmas plunge in equities, ever? I don’t know, but it was pretty bad.

The usual suspects continue to rally on the risk-off sentiment: gold, and treasury bonds. Silver is being dragged along for the ride behind gold, and the miners are looking fairly strong also – although gold’s chart definitely looks best – it made new highs, while silver & the miners did not.

The rate-increase projection has plunged significantly from where it was prior to the FOMC meeting just last week. Right now, we’re looking at a 27% chance of just one single rate increase over the next 12 month period.  That’s quite the come-down.

My commodity-price recession predictor is getting more and more nervous as oil drops. It isn’t predicting recession yet, but the chances are climbing.

The reversal in equities, when it happens, should be fairly strong (the shorts will be scrambling to cover), but so far there are no hints of such a thing on the horizon.

No hints at all.

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