PM Daily Market Commentary – 7/17/2018

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    PM Daily Market Commentary – 7/17/2018

Gold fell -13.60 [-1.10%] to 1227.40 on moderately light volume, while silver plunged -0.22 [-1.39%] to 15.59 on heavy volume. The buck rallied fairly strongly, up +0.45%, so it wasn’t any help today at all, and neither was the metals group, which moved lower.

Gold more or less followed the Euro today – first rallying in Asia, topping out at 5am, and then selling off for most of the rest of the day, making a new low to 1226.70.  Gold’s long black candle was a bearish continuation. Forecaster plunged -0.25 to -0.65. Gold is in a downtrend in all 3 timeframes.  Next level to watch: 1204, set back in July of last year. Daily RSI-7 for gold is 22, weekly 17, monthly 33. Much further, and we’ll be into a “triple RSI accumulate” area (all 3 time period RSI < 30), which is a relatively rare phenomenon for gold – only 9 times in the last 10 years.  You can see the breakdown below the previous low in the chart.

COMEX GC open interest rose 3,422 contracts. No short-covering yet.

Rate rise chances (September 2018) rose to 88%.

Silver tracked gold, but fell a bit more rapidly, bottoming out about 3 hours earlier, making a new low to 15.56. It tried to bounce but largely failed.  Silver’s candle print was a long black candle, which was a bearish continuation. Silver forecaster plunged -0.25 to -0.51. Silver also broke conclusively below the previous low; next level to watch is 15.14…and after that, 14.34. Silver is in a downtrend in all 3 timeframes.

COMEX SI open interest rose by 1,469 contracts today. No short-covering yet.

The gold/silver ratio rose +0.07 to 78.49, which is slightly bearish.

Miners gapped down at the open; dip-buyers appeared, pulling prices back to mostly even.  GDX inched up +0.05% on very heavy volume, while GDXJ fell -0.53% on moderately light volume. Unfortunately the candle prints were both bearish continuations, as was the spinning top candle printed by XAU. Forecaster did rise +0.28 to -0.25; that’s a downtrend, but a slowing downtrend. While XAU did make a new low today, it hasn’t broken below the previous low just yet. There was a good amount of buying in the miners; the heavy volume tells us that traders were definitely buying the dip.

The GDXJ:GDX ratio fell -0.57%, while the GDX:$GOLD ratio climbed +1.15%. That’s somewhat bullish.

Platinum fell -0.87%, palladium plunged -0.67%, and copper moved down -0.83%. I had hopes that copper would manage to put in a low today, but it was not to be; even before the Euro started its plunge, copper’s rally started to fade.  Still, the move lower wasn’t as bad in copper as it was for (say) silver.  I still think that a low for copper is not far away.  That said, today the OI for copper increased 3,182 contracts – about 1%. Copper forecaster also reversed itself and is now back in a downtrend – as is platinum and palladium. Palladium made a new low, platinum is moving down to re-test the lows at 800. The other metals remain in downtrends.

The buck rose +0.42 [+0.45%] to 94.60. DX forecaster flipped back to an uptrend today – up +0.11 to -0.10. Buck is back above its 9 MA, and is in an uptrend in all 3 timeframes. Those longer term timeframes – which have been bullish for a while now – continue to dominate. They say “the trend is your friend” and this certainly seems to be true for the buck.

Crude fell -0.47 [-0.70%] to 66.81. It was a day with a fair amount of back and forth – crude sold off fairly hard, bounced strongly back into the green, and then faded…right until a bearish-looking API report came out at 4:30 (crude: +0.6m, gasoline: +0.4m, distillates: +1.7m). That took prices down 50 cents. EIA’s weekly report on US crude production shows that production has remained flat for the past 5 weeks. Crude made a new low, the spinning top candle was a bearish continuation, forecaster fell -0.04. to -0.38. Crude is now in a downtrend in both daily and weekly timeframes.

SPX rose +11.12 [+0.405] to 2809.55, managing to close conclusively above round number 2800 resistance. Opening white marubozu was a bullish continuation. SPX forecaster rose +0.16 to +0.29; SPX is in an uptrend in all 3 timeframes. Materials led (XLB:+1.31%) while energy trailed (XLE:-0.40%). This was a reasonably bullish map – tech did fairly well also, in spite of issues with NFLX which plunged 5% on unexpectedly bad growth numbers.

VIX fell -0.77 to 12.06. The “12” level is usually a decent buy point for the VIX.

TLT fell -0.19%, moving down off its highs; TY moved down also, off -0.03%. TY appears uncertain as to direction – it has flipped back and forth between up and down trends for the past week or so. The monthly still looks good, but the weekly is weakening. Hard to know if this is the top for bonds. The 10-year treasury rose +0.6 bp to 2.86.

JNK rose +0.08%; the forecaster plunged -0.33 to -0.17, issuing a sell signal for JNK. It looks as though it took an extra day for the swing high to be noticed. JNK remains a bit of a sour note in the whole risk-on theme.

CRB edged down -0.04%, with 3 of 5 sectors falling, led by PM (-1.02%) and livestock (also -1.02%).

The metals downtrend continues. Gold and silver broke decisively below their previous lows, which suggests we have more price declines ahead of us. Certainly if the buck continues to rally, and the other metals continue falling, that’s what will happen.  Shorts continue to pile in – there are no signs of short-covering in the OI numbers.

The miners injected a hopeful note today; GDX certainly should not have rallied, and definitely not on such heavy volume, on a day when the metals plunged this much. This tells us that big money is piling into the mining shares, which is a bullish sign longer term. Why are they doing this? Presumably, they believe the miners to be undervalued here. And/or they are looking through the current downtrend in the metals prices, seeing it as a temporary thing. Sounds like King World News, right?  I’m making that all up. Who knows what they think?  What I do know is that money is piling into the mining shares, and it is visible if you know where to look.  It doesn’t mean gold will reverse tomorrow, but it does suggest we will see a strong move higher once the trend reverses.

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