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PM Daily Market Commentary – 5/16/2018

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  • Wed, May 16, 2018 - 11:30pm



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    PM Daily Market Commentary – 5/16/2018

Gold was unchanged today, at 1290.10 on heavy volume, while silver moved up +0.12 [+0.71%] to 16.390 on moderately light volume. The buck moved higher, up +0.19%, which says that PM did better than what we saw in USD terms. Does this mean the low is in? Perhaps after looking at the rest of the markets, we will get the answer.

Gold pretty much chopped sideways all day today, closing right where it opened. That resulted in a long-legged doji candle print, which the candle code says is neutral. Forecaster thought it was bullish, rising +0.26 to -0.76; sometimes doji prints on high volume after a significant decline can be a sign that the downtrend might be ready to reverse.

COMEX GC open interest rose 5,775 contracts. That’s another reasonably large rise in open interest; normally the commercials would be ringing the cash register – covering like crazy after a big decline, which would be visible as a big drop in open interest. But – that’s not what we’re seeing. Is the COT wash-and-rinse cycle a thing of the past?

Rate rise chances (June 2018) remains at 95%.

Silver made a new low around 8:30 am, and then rallied briskly during the New York session, closing relatively near to the highs. Today’s candle print was a bullish harami, which unfortunately wasn’t very bullish – it was not a reversal pattern. Forecaster agreed, moving up just +0.13 to -0.60, which leaves silver in a strong downtrend. Still, silver did a lot better than gold, which is unusual, and bullish.

COMEX SI open interest rose by 3,183 contracts today. As with gold, there’s no short covering going on here – or at least, commercial short covering is overwhelmed by new shorts from managed money.

The gold/silver ratio fell by -0.56 to 78.74. That’s definitely bullish.

Miners were mostly unchanged, with GDX up +0.13% on moderate volume, while GDXJ fell -0.06% on very light volume. XAU forecaster saw this as bullish, moving up +0.20 to -0.38. That’s an improvement, but not a reversal.  XAU does seem to have support at the 50 MA.

The GDXJ:GDX ratio edged lower, while the GDX:$GOLD ratio inched higher. That’s neutral.

Platinum fell -0.55%, palladium rose +0.47%, while copper moved up +0.57%. Two of the three other metals did relatively well, with copper forecaster issuing a strong buy signal. Platinum made a new low (to 888.10), and remains in a strong downtrend. Weakness in platinum is not so encouraging if we are looking for a low in gold.

The dollar rose +0.18 [+0.19%] to 93.01, making a new high on the day to 93.24. Print was a high wave, which was a bullish continuation. Forecaster moved up +0.22 to +0.23, which is a stronger uptrend.

Crude rose +0.56 [+0.79%] to 71.59. It wasn’t a new high, but it was a new closing high. The EIA report was bullish: crude: -1.4m, gasoline: -3.8m, distillates: -0.1m, and crude jumped immediately following the report. No bad news for the oil market yet. I was kind of expecting the momentum in crude to slow down after the Iran news, but so far that hasn’t happened. Crude just continues to power higher.

SPX rose +11.01 [+0.41%] to 2722.46. Forecaster was unchanged, at +0.42, which is still a relatively strong uptrend. Sector map shows basic materials led (XLP:+1.19%) while utilities did worst (XLU:-0.78%). Utilities have done poorly over the past few weeks, possibly affected by the downdraft in bonds.

The industrial production report was released today at 9:15 am, and it was quite strong, coming in at +0.72% m/m growth. This might have been the catalyst for the SPX rally today.  Certainly from a macro perspective, the INDPRO report is a key indicator for predicting recessions, and there is no hint of a recession right now.

VIX fell -1.21 to 13.42.

TLT fell again today, dropping -0.38%. TY agreed, making a new low of its own, falling -0.14%. The 10-year treasury yield is now 3.10%.

JNK rallied, moving up +0.17%, printing a bullish harami which has a 34% chance of marking a low. JNK forecaster moved higher, but remains in a downtrend. My sense: the JNK rally was tied to rising crude oil prices.

CRB moved up +0.15%, with 3 of 5 sectors moving higher, led by energy (+0.59%). Not much happened in the commodity space today.

After yesterday’s big sell-off, the bounce in PM was not all that impressive. While the forecasters for gold and silver did move higher, they aren’t suggesting momentum is about to reverse. Likewise, the changes in open interest are telling us that the selling pressure in PM remains. What’s more, the drop in platinum isn’t a good sign either. Platinum prices have a strong influence on both gold and silver. I don’t know if its correlation or causation but it is typically not great for gold when platinum drops.  So far, the technicals don’t suggest a low in PM just yet.

The 10-year yield continues to move higher. This is a big deal, but so far, nobody seems to care very much. 

Lastly, the buck continues to move higher. This, as we know, usually has a bad effect on the metals. It is probably better to watch right now than to jump in. That’s just my sense.

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