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PM Daily Market Commentary – 5/8/2019

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  • Thu, May 09, 2019 - 02:24am

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    davefairtex

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    PM Daily Market Commentary – 5/8/2019

Gold fell -4.17 [-0.32%] to 1285.49 on very heavy volume, while silver dropped -0.08 [-0.54%] to 14.85 on moderate volume. The buck was virtually unchanged [-0.01%], along with SPX [-0.16%], crude rallied [+0.94%] and bonds fell [10Y +3.4 bp].

Gold rallied in Asia and London trading, peaking out at 8:40 am, then falling for the remainder of the day. In spite of the failed rally, the spinning top was a bullish continuation, but forecaster dropped hard, falling back into a downtrend. Gold is now in a downtrend in all 3 timeframes.

COMEX GC open interest rose 15,518 contracts. That’s 7 days of global production in new paper. Someone is jumping in short here; suppression or managed money, its hard to know.

Futures are showing a 10% chance of a rate cut in June, a 41% chance of one rate-cut by December and an 18% chance of 2 rate cuts. The picture is growing slowly darker.

Silver roughly followed gold’s track, but the rally wasn’t quite as strong. Candle print was a closing black marubozu (bullish continuation), while forecaster dropped hard, flipping silver back into a downtrend. Silver continues to cling to an uptrend in both weekly and monthly timeframes, but it would not take much selling to change that situation for the worse.  It sure looks as though silver ran into resistance at the 200 MA, and the likely next move is lower.

COMEX SI open interest fell -450 contracts.

The gold/silver ratio rose +0.18 to 86.51. That’s mildly bearish.

The miners gapped up at the open, and then sold off hard until about noon. GDX fell -1.11% on moderately light volume, while GDXJ dropped -1.62% on moderately heavy volume. XAU lost -1.94%, much more than either ETF. The bearish engulfing was mildly unpleasant (33% bearish), and forecaster moved lower, keeping XAU in a downtrend. XAU remains in a downtrend in the daily and weekly timeframes, and the monthly is right on the edge too.

The GDX:gold ratio fell -0.79%, while the GDXJ:GDX ratio dropped -0.51%. That’s bearish.

Platinum fell -1.06%, palladium dropped -0.81%, while copper moved down -0.61%. Intraday, the other metals moved roughly along with both gold and silver – rallying early, and then selling off later in the day. All 3 other metals are in short-term downtrends.

The buck inched down -0.01 [-0.01%] to 97.06. Not much happened today with the buck; the short white/spinning top was unrated, and forecaster barely moved, keeping the buck in a mild uptrend. The buck remains in an uptrend in all 3 timeframes.

There were no large currency moves today.

Crude rose +0.58 [+0.94%] to 62.11. Most of that move came after a surprisingly positive EIA report (crude -4.0m, gasoline: -0.6m, distillates: -0.2m); the report was good for more than 40 cents of today’s move. The long white candle was unrated, but forecaster moved higher, pushing crude back up into an uptrend. Crude is now in a uptrend in both the daily and monthly timeframes. Over the last 5 days, crude appears to have found strong support at the 200 MA.  I’m not sure the new trend holds if the US-China trade deal really falls apart, but for now, crude may be ready to start moving higher again.

SPX fell -4.63 [-0.16%] to 2879.42. SPX sold off in the futures markets overnight, but started coming back before market open, eventually topping out at about 3:30 pm – after which it dropped 16 points into the close. The doji star candle was a bearish continuation, and forecaster inched higher but remains in a downtrend. The currently-forming weekly candle print looks quite bearish; the weekly swing high right now is 62% bearish reversal, which is fairly highly rated. Still, SPX remains in an uptrend in the weekly and monthly timeframes. At least for now anyways.

Sector map showed utilities leading lower (XLU:-1.37%) along with financials (XLF:-0.22%) while sickcare (XLV:+0.21%) and discretionary (XLY:+0.03%) did best. This was a bearish sector map; financials and tech both did poorly.

VIX inched up +0.08 to 19.40.

TLT fell -0.43%, printing a bearish engulfing (43% bearish), but forecaster remains in an uptrend. TY fell -0.15%, the spinning top was mildly bearish (39% reversal), but forecaster was unchanged, remaining in an uptrend. TY remains in an uptrend in all 3 timeframes. The 10-year treasury yield rose +3.4 bp to 2.48%.

JNK was virtually unchanged, rising +0.02%. JNK remains in a mild downtrend.

CRB moved up +0.14%; only 1 sector rose – it was energy (+1.01%).

No clarity yet in where things will go next in US-China trade talks.  Some headlines from SCMP:

Given the huge import-export imbalance, China will find it difficult to inflict equal pain on the US.  Meanwhile, factories are migrating to Vietnam.  Lastly, the US is now demanding that China write down its commitments – rather than simply promising to change, and – most likely – not delivering, as they have done for the past 10 years.  And, no matter what they say, Chinese manufacturing is going to be really hammered hard.  10% tariffs can be absorbed.  25% – put in place virtually overnight – simply cannot.

It is a positive sign that Liu He went to Washington – it suggests that China would like to stop the pain.  However, will they ever agree to real reform?  They’ve been getting away with unequal treatment of foreign business now for decades.

One example, from Matthew Murphy, an IP attorney practicing in China:

“We feel that the main sticking point on intellectual property must be the enforcement of China’s laws regarding intellectual property and mechanisms for monitoring enforcement and raising concerns,” Murphy said.  “We are seeing decisions that reject a foreign applicant’s well-known trademark application, and the following month allow a Chinese company to register that very same trademark in bad faith.  These kinds of events continue to dampen confidence in China’s intellectual property protection system, despite the laws looking good on paper.”

In a nutshell, this is China.  Laws look good on paper, but actual rule of law doesn’t exist.  We think rule of law is problematic in the US (and it is, in many areas), but the basic things still work.  They don’t work in China.  How do you come up with a trade agreement under those circumstances?  Enforcement is the key.

And given that Xi personally authorized the walkback of commitments previously made by Chinese negotiators – I’m not optimistic as to the outcome.

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