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PM Daily Market Commentary – 3/19/2018

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  • Tue, Mar 20, 2018 - 04:34am

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    davefairtex

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    PM Daily Market Commentary – 3/19/2018

Gold rose +2.80 [+0.21%] to 1316.70 on moderately heavy volume, while silver dropped -0.03 [-0.18%] to 16.31 on moderate volume. The buck plunged -0.53%; money fled US assets, while gold and silver were relatively unaffected.

So what caused the plunge in the buck and the flight out of US assets? Was this about Trump firing his National Security Advisor? The upcoming FOMC meeting? The sharp decline of Facebook’s stock price (FB:-6.77%) due to the news breaking on just how much data mining Facebook allowed? How about Uber’s self-driving car killing a pedestrian, with a “safety driver” there behind the wheel. Today was a double-whammy for tech enthusiasts. For some, or all of those reasons, the buck plunged/the Euro rallied strongly, and a lot of things sold off.

Gold sold off in Asia, making a new low to 1307.40 at about 2 am – roughly aligned with moves in the Euro.  It then rebounded and rallied for the rest of the day, spiking up about $6 a little after 11:30.  That was probably some news event I didn’t see – I really need a more general news feed to tie in cause and effect.  Gold’s spinning top candle was a bearish continuation, but gold forecaster rose +0.08 to -0.11, which is a mildly positive response.

COMEX GC open interest rose 12,375 contracts today. That’s 38 tons of paper gold (vs 6 tons of real gold mined each day). This continues the curious pattern of large increases in paper gold over the past week. Certainly gold would have done better if the new paper hadn’t been “mined” and sold.

Rate rise chances (March 2018) fell to 93%. FOMC meeting in 2 days.

Silver roughly tracked gold, but it made its low at 4:30 am, and managed to climb back to almost even by end of day.  Trading range felt narrower.  Candle print was a southern doji, which was a bearish continuation. Forecaster rose +0.09 to -0.31, which was a relatively positive outcome given the decline, but still leaves silver in a downtrend.

COMEX SI open interest rose 1,393 contracts today.

The gold/silver ratio rose +0.32 to 80.72. That’s bearish.

Miners moved higher along with gold; GDX rose +0.37% on moderately light volume, and GDXJ rose +1.02% on moderate volume. GDXJ actually printed a swing low (58% bullish reversal) and GDX printed a bullish engulfing (39% bullish reversal). XAU did not perform as well as either ETF, dropping -0.05%; as a result, its forecaster moved up just +0.07 to -0.32. Still, the sideways movement of the miners and the is suggesting that – perhaps – a near term low may be possible. And just in time for FOMC too.

Today I’ll show you GDXJ – it is the most positive of my 3 miner charts.  GDXJ is even back above its 9 MA.

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

Platinum climbed +0.40%, palladium dropped -0.74%, copper fell -1.14%. That confirm the following pattern today: the more-industrial metals were hit, while PM managed to do relatively well. Was this a safe haven flow example? It could be.

The buck plunged -0.48 [-0.53%] to 89.33. Candle print was a confirmed bear spinning top, which was only a 36% chance of being a high. Forecaster fell -0.15 to +0.05, suggesting the buck’s uptrend is fading. In reality, the buck continues to chop sideways, as it has for the past 6 weeks.

From looking at the evidence, I have to conclude that Trump – and the way he runs his White House – is not dollar-positive. I can’t claim that all of today’s sell-off was about McMaster’s firing, but certainly the market is not happy these days when it senses political turbulence. That was a theme last week as well, after Tillerson was unceremoniously tossed out. I may have to add Donald Trump to my list of grey swan market events – although he’s more of a Black Swan generator at this point. Guaranteed this activity will piss off both parties in Congress, because most of them own all own large stock portfolios, and this hits them all right in the pocketbook.

Crude fell -0.10 [-0.16%] to 62.21. While crude was hit intraday, it managed to rally back – this on a day when the other industrial commodities suffered selling pressure. I take that as a mark of strength. Candle print was a bearish harami, which was actually just a bullish continuation. Forecaster moved up +0.02 to +0.45, which leaves crude still in a solid uptrend. Energy equities were not so fortunate.

SPX was sold hard, dropping -39.09 [-1.42%] to 2712.92. At one point it was down 55 points, but managed to rally back towards end of day. Candle print was a confirmed bear NR7, which was bearish. Forecaster plunged -0.38 to -0.72, which is a strong downtrend. Sector map shows tech was hit hardest (XLK:-1.98%) while utilities fell least (XLU:-0.62%). The drop in tech tends to lend credence to the “Facebook caused the plunge” thesis, although plenty of other sectors did poorly also. Still, tech seems to be one of the things the US does well these days, and so when a tech darling gets hammered, the market starts to get worried.

VIX rose +3.22 to 19.02.

TLT plunged -0.32%, a really unfortunate move given how hard equities sold off today. TY moved lower also, dropping -0.10% – trying to rally and failing. Even at the market’s lowest point today, bonds were unable to move meaningfully higher. Bonds continue to look very weak. Based on what equities did, TLT “should have” rallied maybe 1% today. It fell instead.

JNK fell -0.33%, making a new low and generally signaling risk off – although today’s drop wasn’t as bad as it could have been given what happened to equities. JNK remains in a downtrend.

CRB fell -0.80%, with 4 of 5 sectors falling, led by agriculture which plunged -2.19%.

In spite of the constant creation of paper gold (i.e. all that new open interest) most of last week and today, gold is mostly managing to stay afloat. That’s a positive sign. Gold in Euros continues to move lower, however, and that says gold will be held hostage to currency moves; the buck must plunge for gold to see continued support.

Are we seeing hints of a safe haven move? I don’t know. If gold in Euros was rallying, I’d be more confident in saying yes. I think there’s a decent chance gold and the miners could take off after FOMC.

In two days we have the FOMC announcement as well as Powell’s first press conference.

By then maybe we’ll have an idea who will be Trump’s National Security Advisor. Heaven help us if it is John Bolton. Hopefully the hints about Bolton are just Trump’s way of making us all feel relief when he actually selects someone else.

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