PM Daily Market Commentary – 3/8/2018

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  • Fri, Mar 09, 2018 - 01:56am

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    davefairtex

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    PM Daily Market Commentary – 3/8/2018

Gold dropped -3.80 [-0.29%] to 1322.50 on moderate volume, while silver was unchanged at 16.50 on moderate volume also.  The buck ended up higher on the day, up +0.62%, which tells us that gold and silver actually did fairly well just to stay relatively even.

What caused the big currency move? Well first, there was an ECB meeting today, and the usual line-by-line parsing of the statement revealed that the ECB had removed language saying it would increase QE if things got worse. So the conclusion was, QE either stays the same, or goes away, and this probably caused the Euro to rally. Draghi found this reaction to be disagreeable, so he minimized the change during his press conference, and (probabbly much to his delight) the Euro sold off. In speaking about risks going forward, Draghi also suggested that “protectionism” could also threaten growth. Presumably he meant the New and Disagreeable US Protectionism announced by Trump, rather than the Reasonable EU Protectionism regime already in place.

Later in the day, Trump walked back parts of the Trump Tariff plan, giving “our allies” the option of getting exemptions for national security reasons. Canada and Mexico were exempted, for now, in an apparent bid to influence the NAFTA renegotiation currently in progress.  This helped the dollar move higher as well.

Gold sold off early in Asia, and more or less chopped sideways for the remainder of the day.  Somewhat surprisingly, gold entirely ignored the gyrations of the currencies.  Gold’s candle print was a neutral-looking short black candle, which caused the forecaster to drop -0.10 to -0.15. Volume wasn’t particularly high; it looks as though yesterday’s selling pressure had mostly abated, at least for gold anyway.

COMEX GC open interest fell -7,980 contracts today. Finally, some cash-register ringing by the commercials.

Rate rise chances (March 2018) rose to 89%.

Silver largely chopped sideways too, also ignoring all the fuss in the currency markets.  Silver was unchanged, resulting in a doji candle, which was a bearish continuation.  Silver’s forecaster agreed, dropping -0.13 to -0.17. From my viewpoint, silver held up pretty well, especially given the big drop in its cousin, copper, as well as that large dollar rally.  Looking at the chart, it seems clear silver is now just as the lower end of its 6-week/50-cent trading range.

COMEX SI open interest rose 1,330 contracts today.

The gold/silver ratio fell -0.21 to 80.15. That’s bullish.

Miners managed to rally with GDX up +0.37% on extremely light volume, while GDXJ moved up +0.32% on moderately light volume. Forecaster wasn’t impressed, dropping -0.16 to -0.12, which is a sell signal for XAU. I interpret this to mean that today’s move was just some relatively weak dip-buying after yesterday’s larger sell-off. Probably lower prices tomorrow.

In the chart below, you can see a fairly steep descending triangle pattern.  It doesn’t look very promising.  XAU needs to break above that downtrend line before it can even start to look bullish again.

Today, the GDXJ:GDX ratio fell, while the GDX:$GOLD ratio rose. That’s slightly bullish.

Platinum fell -0.01%, palladium climbed +0.84%, and copper plunged -1.77%. Copper’s big drop resulted in a sell signal and a new low. If the copper downtrend continues – and copper is in a downtrend now in both the weekly and monthly timeframes too – that is a signal of weakness for the global economy.

The buck rose +0.55 [+0.62%] to 89.79. Candle print for the buck was a swing low, which had a 47% chance of being a reversal. Forecaster fell -0.03 to -0.10; it moves slowly, and will need some more convincing.  The buck is now back above its 9 MA.

Looking at the Euro chart, I see a pattern of lower highs and lower lows over the last 6 weeks. This suggests that in spite of the recent set of rallies, the Euro has entered a longer term downtrend. The buck hasn’t done as well as that might imply; it still needs a close above 90.29 to confirm that double bottom.

Crude fell, dropping -1.01 [-1.65%] to 60.29, following through off yesterday’s sell signal. Forecaster continued falling, down -0.34 to -0.41, which is a more emphatic downtrend. Volume was heavy. Although there was some buying at 60, I’m not sure it will hold given the selling pressure we saw today.

SPX moved up +12.17 [+0.45%] to 2738.97. Trading range was fairly narrow today, resulting in a short white candle/bullish continuation. Forecaster moved up +0.10 to +0.05, which is a mild buy signal for SPX. Sector map showed that consumer staples led (XLP:+0.91%) along with utilities (XLU:+0.74%) while energy trailed (XLE:-0.03%). That’s not a very bullish configuration.

VIX fell -1.22 to 16.54.

TLT rose +0.58%; money flowing into the buck appeared to go into bonds. TY also moved higher, up +0.17%, although it remains in a downtrend.

JNK climbed +0.08%; forecaster moved higher, up +0.09 to -0.08. JNK still looks ill to me, especially given the continuing move higher in equities.

CRB fell -0.40%, with 4 of 5 sectors falling today. Energy led (-1.39%) the sector down again today. CRB seems to be struggling a fair amount right now.

It looks like the Trouble with Tariffs will be limited – certainly equities appear to have shrugged it off, at least for now.  Dragi avoided another Euro rally, and while gold wasn’t happy about the currency moves, it didn’t drop all that much.  Gold in Euros remains in a downtrend, but it did fairly well today.

Dropping copper prices are starting to become a bit of a concern – along with palladium, these are industrial metals that are tied to economic activity, and when they fall in price, it is usually a sign of economic weakness.  Along with a rise in credit card charge-offs, weakness in JNK prices, rising BAA rates, they are hinting that perhaps not all is well.  Oil is echoing this mood too.

For now, risk assets are still moving higher – with equities being preferred, possibly because of all those buybacks.  So far the 10 year has remained below the 3% line-o-death.  Will it continue?

And there’s that Italian political situation which could get interesting any day.

Nonfarm Payrolls report is out tomorrow at 8:30 am. It usually drives prices around quite a bit.  I have a new model I’ve come up with that tries to predict full time employment, and it is predicting bad news.  I’m really curious to see if it turns out to be correct.  If it is wrong – a certain model will get tossed right into the fire!  🙂

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