PM Daily Market Commentary – 3/26/2018
Gold rose +6.10 [+0.45%] on extremely heavy volume, while silver climbed +0.14 [+0.88%] on moderately heavy volume. The buck dropped -0.48%, so – can we chalk up all of gold’s rally to the currency move? Probably. However the star today was equities: SPX shot up +2.72% – a relief rally after it became clear over the weekend that tariffs were part of a larger negotiation strategy, wouldn’t be implemented immediately, and that a good-sized chunk of the fear may have been misplaced.
While the Euro moved steadily higher all day long, gold was under selling pressure in Asia, and only really started to take off after the close in Japan. Then, gold tracked the Euro fairly closely, although the +0.75% move in the Euro easily surpassed the +0.45% move in gold. Candle print was a (neutral) long white candle, while the forecaster dropped -0.46 to +0.25. Gold is nearing the recent high of 1365, but it does appear to be slowing down as it gets there. Volume was very heavy.
COMEX GC open interest fell -4,789 contracts today. It doesn’t seem as though the commercials were the ones responsible for keeping gold from breaking higher.
Rate rise chances (June 2018) dropped to 78%.
Silver more or less tracked gold, but was a bit more bullish, avoiding the sell-off in Japan. Candle print was a (bullish continuation) long white candle, and the forecaster dropped -0.14 to +0.33. That’s still an uptrend, but a slowing one. Silver finally managed to break above its downtrend line, with today’s rally capped at the 200 MA. It still has yet to break above the previous interim high at 16.90.
COMEX SI open interest rose by 701 contracts today.
The gold/silver ratio fell -0.34 to 81.02. That’s bullish.
Miners moved higher along with gold and silver today, with GDX up +1.45% on moderately heavy volume while GDXJ moved up +0.55% on moderate volume. Candle prints were both bullish continuations, although GDXJ’s short black candle was not ideal. XAU forecaster ticked down -0.10 to +0.31, which is still an uptrend. It does seem that both the miners and gold and silver are starting to slow down.
Today, the GDXJ:GDX ratio fell, while the GDX:$GOLD ratio rose. That’s neutral.
Platinum rose +0.38%, palladium edged up +0.05%, and copper climbed +0.30%. Copper might have put in a low (bullish harami, long lower tail: 34%), platinum is struggling to move higher, while palladium remains in a downtrend. While SPX might have done very well today, the industrial metals aren’t confirming this risk-on mood just yet.
The buck plunged -0.43 [-0.48%] to 88.60. On the chart, the buck made a new low, and appears to be headed down to the lower end of its trading range, possibly looking for a re-test of the 87.93 low within the next few days. Weekly and monthly timeframes both still show downtrends.
Crude fell -0.25 [-0.38%] to 65.49. While the spinning top was a bullish continuation, the forecaster fell -0.21 to +0.05, which strongly suggests that the current uptrend is slowing as crude nears the previous high of 66.66. Still, a strong reading from the API (or EIA) reports could propel crude through the previous high – with API report out tomorrow, and EIA report on Wednesday.
SPX shot up +70.29 [+2.72%] to 2658.55. It was a risk-on mood, probably driven by Mnuchin’s explanation over the weekend that the Trump Tariffs were just part of a negotiation process, which China appeared to go along with. China has been getting away with “murder” and they know it. Candle pattern was a swing low, which is a 54% bullish reversal. Forecaster ticked up +0.05 to -0.95, which is still a very steep downtrend. Forecaster isn’t convinced by the one-day rally. The sector map shows a classic bullish pattern: Tech led (XLK:+3.8%) along with financials (XLF:+3.24%) while utilities (XLU:+1.04%) brought up the rear.
VIX fell -3.84 to 21.03.
TLT fell -0.38%, which is not that bad considering how well equities performed today. TLT remains in an uptrend. TY fell too, dropping -0.22%, printing a swing high (69% reversal). TY forecaster fell just -0.05 to +0.40. Both TLT and TY remain in uptrends.
JNK shot up +0.62%, printing a swing low (56% bullish reversal) while the JNK forecaster jumped +0.69 to -0.16. JNK is confirming the risk on sentiment in equities.
CRB fell -0.25%, with 4 of 5 sectors moving lower, led by agriculture (-0.75%). Energy and PM sectors both look bullish while industrial metals and livestock are both in bearish modes. The industrial metals are not supporting risk on at the moment.
In addition to the change in sentiment on tariffs, we also have an agreement between M5S and Lega Nord on who will run the Italian parliament, with someone from M5S elected to be President of the lower house, and a Lega Nord member elected as President of the Senate. This was the first concrete signal that Berlusconi has been relegated to second-fiddle, and that Salvini (Lega Nord) could work with Di Maio (M5S) on concrete issues of governance. Next step: a government? Talks begin next month.
We also have a renewed kerfuffle in Catalonia, where the central government has arrested 5 leaders of the Catalan independence movement, has issued arrest warrants for another 6, with 25 people total being ordered to stand trial for rebellion, embezzlement, or disobedience. In addition, former President Carles Puigdemont was arrested in Germany on a Spanish/EU warrant. A German court will decide if they will extradite Puigdemont back to Spain to stand trial for sedition, which could lead to a 30-year prison sentence. Protests have erupted over both events, with some 50 people injured.
China launched its new oil futures contract denominated in CNY today; the launch went well, by all accounts. We will see how it fares over time, but it is an important milestone in Armstrong’s 14-year transition of China becoming the financial capital of the world. Given China is now the biggest oil importer in the world, it makes sense for them to have a futures market in oil.
Lastly, the US expelled 60 Russian nationals that are here on diplomatic passports in retaliation for the chemical weapon attack on the former Russian spy, Sergei Skripal. Trump himself had no comment on the action, leaving it to subordinates to brief reporters on the matter.
That is a fair amount of news for a risk-on day; perhaps that’s why gold is continuing to move higher in spite of the strong rally in equities and junk debt.
Can gold break through the previous high at 1365? We aren’t at a COT low just yet. I think it will depend on the buck, and the level of unrest.
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