PM Daily Market Commentary – 12/26/2019

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  • Fri, Dec 27, 2019 - 01:31am

    #1

    davefairtex

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    PM Daily Market Commentary – 12/26/2019

Gold climbed +12.26 [+0.81%] to 1519.10 on moderately light volume, and silver rose +0.13 [+0.73%] to 18.00 on moderate volume. The buck fell [-0.14%], while SPX rose [+0.51%] along with crude [+0.90%], and the 10-Year Yield was unchanged at +1.9%.

Gold moved higher for most of the day closing right near the highs. The long white candle was a bullish continuation, and forecaster moved higher into its uptrend. Gold remains in an uptrend in both daily and weekly timeframes, and the monthly is on the verge of a bullish reversal. Gold/Euros is now in an uptrend in all 3 timeframes.  You can see that gold is quite close to the previous high set back in November; a break above this previous high would be a bullish sign – a clear indication that gold’s 5-month downtrend is probably at an end.

COMEX GC open interest rose +7.0K contracts. That was 3 days of global annual production in new paper added to the market. Current open interest for GC: 94% of global annual production, up +0.87% today. That’s yet another new all time high in gold OI.

Futures are predicting a 4% chance of a rate increase at the Fed’s next meeting in January 2020.

Silver rallied sharply in Asia, but then sold off around 11 am in New York. Still, the spinning top candle was a bullish continuation, and forecaster dropped, but remains in an uptrend. Silver is now in an uptrend in all 3 timeframes.

COMEX SI open interest rose +2.8K contracts. That was 5 days of global annual production in new paper added to the market. Current open interest for SI: 128% of global annual production, up +1.57% today. OI for silver continues to build, but it remains a long way below the all time high set back in August.

The gold/silver ratio climbed +0.07 to 84.39. That’s neutral.

Miners gapped up at the open, then chopped sideways for the remainder of the day. GDX rose +1.47% on moderately heavy volume, and GDXJ rallied +2.29% on moderately heavy volume. XAU climbed [+1.36%], the high wave candle was a possible bearish reversal (33%), and forecaster rose, moving higher into its uptrend. XAU remains in a strong uptrend in all 3 timeframes. This was another 3-year high for the mining shares.

The GDX:gold ratio climbed +0.64%, and the GDXJ:GDXJ ratio climbed +0.81%. That’s bullish.

Platinum rose +6.90 [+0.72%], palladium rose +18.90 [+1.01%], and copper rose +0.02 [+0.79%]. That’s a new 8-month high for copper, and a 2-month high for platinum – although platinum’s northern doji candle is a reasonably strong bearish reversal (49%).

The buck dropped -0.14 [-0.14%] to 97.06 on very light volume. The confirmed bearish NR7 candle was a reasonably strong bearish reversal (43%), and forecaster fell, moving into a downtrend. The buck is now back in a downtrend in all 3 timeframes.

Major currency moves included: CAD [+0.41%], GBP [+0.31%], AUD [+0.30%].

Crude climbed +0.55 [+0.90%] to 61.55 on moderately light volume. The short white candle was a bullish continuation, and forecaster climbed, moving higher into its uptrend. Crude broke out to a new 8-month closing high today. Crude remains in an uptrend in all 3 timeframes.

SPX climbed +16.53 [+0.51%] to 3239.91 on moderately light volume. This is another all time high for SPX. The confirmed bullish spinning top candle was neutral, and forecaster dropped, but remains in an uptrend. SPX remains in an uptrend in all 3 timeframes.

Discretionary [+1.21%] led, along with communication services [+0.76%] while sickcare [-0.07%] and energy [-0.03%] did worst. This was a bullish sector map.

The VIX fell -0.02 to 12.65. Puts remain cheap. Who needs insurance with all that money printing going on?

TLT moved higher [+0.24%], the spinning top candle was a bullish continuation, and forecaster dropped, but remains in an uptrend. TLT remains in an uptrend in the daily, but a downtrend on the weekly. 30-Year Yield was unchanged at +2.30%.

TY inched up [+0.06%], the spinning top candle was a bullish continuation, and forecaster climbed, moving higher into its uptrend. TY did manage to close above the 9 MA for the first time in 3 weeks, which is a mildly positive sign. TY remains in a downtrend on the weekly and monthly timeframes. 10-Year Yield was unchanged at +1.90%.

Compared with gold, bonds are looking quite weak. This suggests that gold’s recent breakout has little to do with a safe haven move.

JNK moved up [+0.16%], the short white candle was a possible bearish reversal (37%), but forecaster climbed, moving into an uptrend. JNK is now in an uptrend in both daily and weekly timeframes. BAA.AAA differential rose +1 bp to +88 bp. No worries about credit according to this indicator.

CRB rose +0.62%, breaking out to a new 8-month high. 4 of 5 sectors rose, led by energy (+1.12%).  Are we seeing the start of commodity-push inflation? Again – 8 month high for commodity prices overall, and that’s led by the master resource, energy, which is also at an 8-month high. Maybe that is what is driving gold?

There were no economic reports today.

Today was Fed Balance Sheet Day: headline 4165.6B, +28.5B (+0.69% w/w) (prior +1.00% w/w). The Fed continues to print money by the truckload to paper over something.

This marks the third strong rally day for gold after the break above the 50 MA. Gold has rallied right up to the previous high set back in early November. Open interest continues to build – there are new all time highs in OI every single day. The perplexing thing for me is – why the strong rally over the holidays? I don’t think there has been any material change. Maybe we are seeing some big guys positioning themselves ahead of the new year – 2020 is likely to bring all sorts of interesting activity.

So lots of new OI for gold, and a very strong rally in spite of all that new paper. Here’s what the OI level looks like:

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  • Fri, Dec 27, 2019 - 04:51am

    #2

    davefairtex

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    Posts: 1883

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    more experimental trading model

Here’s the latest from the 5-day gold trading model.  Model knows about resistance from previous highs.  We are now approaching a previous high.

Not trading advice.  Paint still drying.  Etc.

  • Sat, Dec 28, 2019 - 10:27am

    #3

    JAG

    Status Silver Member (Offline)

    Joined: Oct 26 2008

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    Trading Model

Hey Mr. Dave,

What software do you use for your trading models? Have you ever explained it in a previous post? If so can you provide a link or two?

I think traders are expecting the annual January surge in the miner stocks, but without any significant tax-loss selling this year (because there wasn’t any losses) I’m half-expecting a Q1 2020 blood-bath in the miners. I’ve been a momentum trader in the miners for the last half of this year and it’s worked well, but I am seriously considering closing out my positions for the new year.

I hate being a momentum trader BTW. It goes against my contrarian nature, lol.

Any thoughts would greatly be appreciated. Thanks again for all your hard work.

Jeff

JAG-

I wrote the model myself – using tensorflow and a framework I put together.

The trading model has a few dozen inputs; moving averages, stochastics, candle fragments, some key ratios (including SI/GC, HG/GC), changes in open interest, support & resistance levels, and a few other things.

Many of the inputs I include on my report because they seem to influence the price of GC.  I know this because when I add these elements to my various models, the models get better answers on historical patterns.

I should write this up in more detail in a page somewhere.  It’s actually pretty interesting – well for people like me anyway.

This model is still experimental since I keep changing its inputs, and the parameters I use to train it up.  I also need to do a study to see how well it performs on past data – not just the present time.

That’s why I don’t dare trade on it just yet.  But preliminary results are interesting.

Here is some (partial) output from a correlation I ran vs GC:

-0.70: $SPX.N/GC.CW (Inst-$SPX.N/GC.CW(11004))
-0.43: LB.V/GC.CW (Inst-LB.V/GC.CW(10951))
-0.34: HG.V/GC.CW (Inst-HG.V/GC.CW(10945))
-0.07: PL.V/GC.CW (Inst-PL.V/GC.CW(1097))

0.08: OI.SI.V (Inst-OI.SI.V(10964))
0.17: OI.GC.CW (Inst-OI.GC.CW(10962))
0.18: OI.PL.V (Inst-OI.PL.V(10973))

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