PM Daily Market Commentary – 3/27/2019
Gold fell -6.18 [-0.47%] to 1315.20 on extremely heavy volume, while silver dropped -0.15 [-0.97%] to 15.28 on moderate volume. The buck was virtually unchanged [-0.05%], SPX fell [-0.46%], 10-year yields fell too [-4 bp], and palladium just cratered [-6.27%].
Gold’s chopped sideways until about 9:40 am in the US, when gold spiked down $6 in 1 minute. Gold never really recovered. The long black candle was a bearish continuation, and forecaster dropped sharply, resulting in a sell signal for gold. Today’s move took gold below the 9 MA. It was also a swing high. Gold is in an uptrend in both the weekly and monthly timeframes, but the weekly is quite close to a reversal. Volume remains extremely heavy. First notice day for the April 2019 future contract is tomorrow.
COMEX GC open interest fell -3,848 contracts today.
Futures are showing a 6% chance of a rate cut in May, and a 74% chance of one rate-cut by December and a 34% chance of 2 rate cuts. Traders got more bearish today.
Silver fell along with gold, spiking lower at 9:40 am along with gold, closing relatively near the lows. The long black candle was a bearish continuation, and forecaster was largely unchanged, but remains in a downtrend. Today’s move took silver cleanly through its 9 MA. Silver remains in a downtrend in both the daily and monthly timeframes.
COMEX SI open interest rose +1,748 contracts.
The gold/silver ratio rose +0.43 to 85.85. That’s bearish.
Miners spiked up at the open, then sold off for the rest of the day. GDX fell -1.46% on moderately light volume, while GDXJ fell -1.76% on heavy volume. XAU dropped -1.46%, the closing black marubozu was mildly bearish (32% reversal), and forecaster dropped sharply – the uptrend is weakening somewhat. XAU remains above all 3 moving averages, and it is also in an uptrend in all 3 timeframes.
The GDX:gold ratio fell -0.99%, and the GDXJ:GDX ratio fell -0.31%. That’s relatively bearish.
Platinum was unchanged, palladium plunged -6.27% [losing $94.90 in one day], while copper moved down -0.05%. What’s the story with palladium? According to MarketWatch, one issue could be industrial rotation out of expensive palladium [$1418] into the much-cheaper platinum [$859]. Of course, my guess is such issues are raised by traders who have recently gone short. It may be a real thing, but – I’m always suspicious of helpful news articles like this. Today’s plunge was the largest since 2000. https://www.marketwatch.com/story/palladium-retreats-nearly-100-after-recent-record-highs-largest-one-day-drop-in-19-years-2019-03-27
The buck rose +0.5 [+0.05%] to 96.20. The buck made new highs but lost most of the gains by end of day. The doji star candle print was a bullish continuation, and forecaster plunged, but remained (just barely) in an uptrend. The buck remains in an uptrend in all 3 timeframes.
Strong currency moves included: AUD [-0.67%].
Over in the UK, May has offered – kind of – to resign if Parliament votes for Unconditional Surrender. Also today, Parliament voted on 8 different proposals, none of which passed. The closest vote was on a commitment for the government to negotiate for a customs union with the EU. Awfully clever of May to wait until the very last moment to figure out what sort of support she had in Parliament, and for which options.
The closest result was a commitment for the government to negotiate a “permanent and comprehensive UK-wide customs union with the EU” in any Brexit deal. Put forward by the pro-EU Tory veteran Ken Clarke and others, it was voted down by 272 votes to 264.
The lack of movement by GBP/USD suggests that a relatively soft BRExit is the likely outcome.
Crude fell -0.60 [-1.00%] to 59.57. Part of the problem was a slightly bearish EIA report (crude: +2.8m, gasoline: -2.9m, distillates: -2.1m), which appeared to be responsible for about 40 cents of today’s move down. The dark cloud cover was a bit bearish (36% reversal), and forecaster fell, but remains (barely) in an uptrend. Crude closed today right at the 9 MA. Crude remains in an uptrend in all 3 timeframes.
SPX fell -13.09 [-0.46%] to 2805.37. The spinning top candle was neutral, but forecaster dropped, resulting in a tentative sell signal for SPX. SPX is in an uptrend in the weekly and monthly timeframes. I can’t help but notice that when crude drops, so does SPX. Right now, the (daily chart) correlation between crude and SPX is 0.78, which is a very high rating. It has hovered around this level since late December, 2018. That’s stronger than gold/platinum, but weaker than gold/silver. Long story short: as crude goes, so goes SPX.
Sector map had sickcare (XLV:-0.83%) and communication services (XLC:-0.72%) leading lower, while industrials (XLI:+0.11) did best. This was a neutral sector map.
VIX rose +0.47 to 15.15.
TLT jumped +0.92%, a very strong move, breaking out to a new high. TY also did well, rising +0.31%, which was also a new high. The long white candle was a bullish continuation, and forecaster fell but remains in a strong uptrend. TY remains in an uptrend in all 3 timeframes. The 10-year treasury yield fell -4 bp to 2.37%. The last time we saw that yield was at the end of 2017.
JNK moved up +0.06%. The spinning top was a bullish continuation, and forecaster moved slightly lower; JNK is right on the edge of a sell signal.
CRB fell -0.69%, with 4 of 5 sectors falling, led by agriculture (-0.71%).
With the arrival of First Notice Day in the April GC contract, we also see a whole lot of volume and a move lower in price. Some say this is the commercials pounding prices lower to encourage people standing for delivery to bail out, so they don’t have to deliver actual metal. Others say these are just long specs bailing out because they don’t actually want to take delivery. Presumably a long spec who wanted to retain an overall long position would roll the contract forward, which would hit the April contract, and raise the price of the June contract. But that’s not happening. Prices of both contracts got hit.
While gold saw a sell signal, drawing any conclusions around contract expiration seems as though it could be problematic. While the miners did sell off, they remain in an uptrend, and quite close to the highs. The big palladium plunge is probably something confined to palladium. Platinum is moving higher, copper doesn’t look so great, and neither does silver.
Ultimately though, the thing is, gold isn’t rallying along with bonds. Big money is moving into bonds in order to lock in yields, and the market continues to increase its assessment of the number of rate cuts it expects by December. But gold has no yield, so it doesn’t get the same kind of attention that bonds do.
And so far, SPX has remained largely immune to selling pressure. Even though there is rising concern about a recession and a flurry of Fed rate cuts in the offing, it doesn’t seem to be leading to any significant pressure in SPX.
Wolf Richter points out that the “goods” section of the US economy is showing signs of trouble, but the “services” side continues to look fantastic. And he thinks we can’t have a recession until services gets into trouble. And so far, that’s not happening.
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