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PM Daily Market Commentary – 5/16/2019

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  • Fri, May 17, 2019 - 03:43am

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    davefairtex

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    PM Daily Market Commentary – 5/16/2019

Gold plunged -10.03 [-0.77%] to 1291.67 on very heavy volume, while silver dropped -0.25 [-1.72%] to 14.55 on heavy volume. The buck rallied [+0.30%], along with SPX [+0.89%] and crude [+1.52%], the other metals mostly fell, as did bonds [10Y yield +2.6 bp]. Today was definitely a risk-on day.

Gold chopped sideways in Asia, started downhill at about 4:35 am, and then really slid starting at 8:30 am, and never really recovered. The long black candle might actually mark a low (38% bullish), but forecaster plunged, dropping gold into a downtrend. Gold is now in a downtrend in both daily and weekly timeframes. Gold/Euros remains in an uptrend in all 3 timeframes.

COMEX GC open interest fell -1,388 contracts. Some short-covering on the decline, but not very much.

Futures are showing a 13% chance of a rate cut in June, a 41% chance of one rate-cut by December and a 34% chance of 2 rate cuts. Rate cut chances continue to increase.

Silver chopped sideways until 8:30 am, when it dropped off a cliff, falling 27 cents in about 3 hours. Silver never recovered from the plunge. The confirmed bear NR7 was extremely bearish (71%) and forecaster plunged, dropping silver into a downtrend. Silver is in a downtrend in all 3 timeframes.

COMEX SI open interest rose +5,284 contracts. That’s 11 days of global production in new paper – shorts are piling in as prices drop, which is probably managed money.

The gold/silver ratio jumped +0.82 to 88.65, which is quite bearish. That’s another new 25-year high for the ratio.

The miners sold off hard in the first few hours, but managed to bounce back somewhat by the close. GDX dropped -1.11% moderate volume, while GDXJ moved down -1.42% on moderately heavy volume. XAU fell -1.27%, making a new multi-month low. The opening black marubozu was a bearish continuation, and forecaster inched lower, moving XAU back into a very slight downtrend. XAU is now in a downtrend in both daily and weekly timeframes.

The GDX:gold ratio fell -0.34% and the GDXJ:GDX ratio dropped -0.31%. That’s slightly bearish.

Platinum dropped -1.59%, palladium fell -0.54%, while copper moved up +0.04%. Platinum continues to look horrid – a new low, a strong downtrend – while both palladium and copper may be recovering; both have moved back into daily uptrends.

The buck moved up +0.29 [+0.30%]. The rally in the buck started at about 8:30 am, and continued through to the close. The long white candle was a bullish continuation, and forecaster jumped higher, moving the buck into a moderate uptrend.  Today’s move was enough to unwind the monthly sell signal, which puts the buck back in an uptrend in all 3 timeframes. The dollar rally today seemed to cause problems for PM.

Large currency moves include: GBP [-0.40%], AUD [-0.40%], EUR [-0.25%], JPY [+0.30%].

Crude rallied +0.95 [+1.52%] to 63.36. Crude rallied for much of the day. The opening white marubozu was a bullish continuation, and forecaster jumped higher, moving crude into a strong uptrend. Crude’s move today took it above its recent trading range, a minor breakout of sorts. Crude remains in an uptrend in both daily and monthly timeframes.

Venezuela made oil news today by seeing its output plunge to 169k bpd, a new record low. This was because storage tanks have filled up – there are not enough tankers to take the VZ crude away. What’s more, VZ crude as currently constituted can’t be processed by India and Chinese refineries, so the products that were sent to US refineries no longer have as much of a market. Related: Putin may now be our friend. Reportedly, Putin told Trump on the phone that he was prepared to withdraw support for Maduro if the US withdraws military assistance to Ukraine. That seems like a perfect realpolitik swap. Pompeo is set to meet with Putin soon.

https://oilprice.com/Energy/Crude-Oil/Putin-Could-Cut-His-Loss-As-Venezuelan-Oil-Output-Nosedives.html

SPX ralled +25.36 [+0.89%] to 2876.32. While price moved up a bit in the futures markets overnight, the real move started right at market open, rallying strongly until noon, and then fading into the close. The long white candle was a bullish continuation, and forecaster jumped higher, moving into a strong uptrend. Today’s move took SPX back above both the 9 and 50 MA. The rally also unwound the weekly sell signal. This puts SPX back into an uptrend in all 3 timeframes.

Sector map shows materials (XLB:+1.40%) leading, along with financials (XLF:+1.01%), while energy (XLE:+0.55%) and REITs (XLRE:+.58%) did worst. This was a bullish sector map.

VIX fell -1.15 to 15.29.

TLT fell -0.33%, printing a swing high (41% bearish), and causing forecaster to drop into a downtrend. TY fell too, losing -0.15%, the bearish harami was actually a bullish continuation, and forecaster dipped but remains in an uptrend. TY remains in an uptrend in all 3 timeframes.

JNK moved up +0.07%, the spinning top candle was neutral, and forecaster moved higher, moving into an uptrend. JNK is not supporting the move higher in equities – at least not very strongly anyway.

CRB rose +0.92%; 4 of 5 sectors rallied, led by agriculture (+1.96%).

So you might have noticed a consistent thread throughout today’s report: the time 8:30 am. That was the time of the Housing Starts release, which was close to the top end of the expected range. It was better than expected, but still lower than last year – housing remains in a y/y correction.

This seemed to be the proximate cause of the dollar rally, which happened at the same time as the gold/silver sell-off. While the PM moves were exaggerated (given the medium-sized dollar rally), it does suggest that if the dollar continues moving higher, PM will probably suffer.

Silver appears to be continuing its pattern of small rallies, and sharp drops. Intraday today, once the breakdown happened, there were no buyers in sight. That gold/silver ratio above 88 is yet another new 25 year high. It will matter someday. Just not today, apparently. More blood in the streets – more straw hats in the wintertime.  Will silver find buyers short of $14?  That’s the question.

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