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PM Daily Market Commentary – 12/26/2017

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  • Wed, Dec 27, 2017 - 06:57am

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    davefairtex

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    PM Daily Market Commentary – 12/26/2017

 

Gold rose +8.50 [+0.66%] to 1287.60 on light volume, while silver moved up +0.16 [+0.97%] to 16.61 on light volume also. The buck fell, but only -0.13%; the rally in the metals was all about them today.  In fact, it seemed to be a general commodity group rally.  Literally every commodity group moved higher today.  We haven’t seen many of those sorts of days over the past 5 years.  This could be something new.

Gold moved higher in fits and starts – it looks as though traders have decided to buy gold after the holiday break. Long white was a bullish continuation; forecaster rose +0.01 to +0.47. Gold remains in its uptrend, with 1300 resistance not all that far away. Volume is still quite light. Gold’s RSI7 is still only 77, which is only mildly overbought.

COMEX GC open interest rose by +1,687 contracts today.

Rate rise chances (March 2018) is at 62%.

 

Silver just steadily moved higher today, closing relatively near the day highs.  The long white candle was potentially a top, with 52% chance of marking the high. Not sure what the candle code saw, since silver’s RSI7 is only 70. Silver’s forecaster disagrees with the candle code, rising +0.13 to +0.27. Silver is now entering its resistance zone at around 16.70, where we might expect some selling to appear.

COMEX SI open interest fell -16,755 contracts today. What is up with that?  That’s a huge change.  Maybe its just some data artifact.  It will be something I’ll have to look at for the COT report, which right now is quite bullish.  Would I be jinxing things if I said “we won’t see silver with a 15 handle ever again?”  Probably.  So pretend I didn’t say it.  I do really like that COT report though.

The gold/silver ratio fell -0.24 to 77.52. That’s bullish. Silver managed to outperform gold, which is a positive sign.

The miners moved a bit faster than the metals, with GDX up +1.35% on moderately heavy volume, while GDXJ climbed +2.30% on heavy volume. Both miner ETFs are overbought; GDX RSI7=80, GDXJ RSI7=88. This is moving into somewhat dangerous territory – at least for the miners anyway. For SPX, its normal. Candle code says the closing white marubozu of both ETFs has about a 38% chance of marking the top. However, the XAU forecaster jumped +0.32 to +0.38. Whatever it was unhappy about last week seems to be gone.   Miners appear to be going vertical.  This could be a lot of short covering going on here.  Either that, or some goldbugs feeling a bit of FOMO.  Its always dangerous to buy RSI in the high 80s.

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

Platinum rose +0.54%, palladium climbed +1.26%, and copper rose +0.94%. Copper broke out to a new multi-year high today, rising for 13 of the last 14 days. Copper is on fire; RSI7=88. Platinum however is looking a bit feeble; it did worst of the metals today; perhaps it is running into resistance. It is the only metal with a bearish forecaster.

The buck fell -0.12 [-0.13%] to 92.80; it was a narrow trading range, which resulted in a short black candle print – a bearish continuation. Forecaster plunged -0.52 to -0.58. It sure saw something it didn’t like.  Buck is in a downtrend.

Crude jumped to new highs today, up +1.44 [+2.47%] to 59.80. Crude made a new high today of 60.01 – the first time above 60 since mid-2015. The news driving crude today could have been about a Libyan pipeline explosion, but it also felt to me as though crude was just in rally mode, along with the rest of the commodity complex. Crude’s RSI7 is 79, which says crude is overbought. Candle print was an opening white marubozu, which had a 40% chance of marking the top. Forecaster jumped +0.43 to +0.51; that’s a strong uptrend. Can crude break through 60? My guess is that round number 60 will provide resistance. Still, weekly crude remains in an uptrend, and it looked as though a fair number of shorts were stopped out on the breakout above the previous high.

SPX fell -2.84 [-0.11%] to 2680.50. SPX forecaster remains mired in a downtrend, rising +0.06 to -0.41. Energy (XLE:+0.88%) was the strongest sector, with tech (XLK:-0.66%) and utilities (XLU:-0.59%) bringing up the rear. More rotation out of utilities, it would appear.

VIX rose +0.35 to 10.25.

TLT rose +0.30%; it was a bit of a failed rally, but it does appear as though bonds may have put in a low last week. While the TLT forecaster rose +0.79 to +0.55 – which is a buy signal – I don’t trust buy signals in TLT anymore, it has just been too volatile. TY’s forecaster jumped too, up +0.38 to -0.35; TY remains in a downtrend, and that feels a bit more right to me.

JNK rose +0.14%, managing to print a three candle swing low, following on from last week’s buy signal. Forecaster rose +0.26 to +0.32. I’m not sure I trust JNK’s buy signal either, it has been fairly jumpy, although not as bad as TLT.

CRB shot up +1.38% today; all 5 sectors rallied. The move caused CRB to leap over its 50 MA – commodities now appear to be moving into a reasonably strong uptrend, led by industrial metals and energy. That’s not a recessionary pattern to me.

The sector rotation out of utilities and into energy continues, as does the PM rally. As I mentioned before, all the commodities seem to be doing well. Are they sniffing out inflation up ahead?

If you give people a tax cut, and you pay for it with borrowed money, that’s inflationary. As in, “real” inflation vs money-printing-driven asset-price inflation. I think that’s what the market is trying to tell us right now. It thinks inflation is on the way. Well, if you are renter, or you have healthcare costs, or you have to pay for higher education, inflation has been hammering you for a while, but I’m talking about basic consumer inflation, the kind the Fed really wants to see.  That kind of inflation.

It seems to be on the way.

Boy, I haven’t said something that like that in forever.  Now we need to watch to see if it turns into anything real.

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