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PM Daily Market Commentary – 7/19/2018

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  • Fri, Jul 20, 2018 - 01:12am



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    PM Daily Market Commentary – 7/19/2018

Gold fell -4.80 [-0.39%] on heavy volume, while silver dropped -0.24 [-1.54%] to 15.33 on moderately heavy volume. The buck moved up +0.13%, but that’s just where it ended up – intraday, the buck was up more than +0.60% until an interview was aired, featuring a comment from Trump saying that he was “not crazy” about the Fed’s interest rate increases (although of course he wasn’t going to interfere). Bang, the Euro takes off, the buck reverses, and the metals jump higher off the lows. Never a dull moment with Trump in office.

Gold followed the Euro lower, making a new low to 1210.70 at around 8:30 am, and then bounced back a bit…until Trump’s comment hit the wires, after which the Euro shot higher, and so did gold – up $13 over 40 minutes.  However gold then faded into the close.   Still, gold’s (Trump-inspired) hammer candle was strong, with a 41% chance of being a bullish reversal. However gold’s forecaster moved down -0.04 to -0.53. As far as forecaster is concerned, gold remains in a strong downtrend.

COMEX GC open interest fell -6,408 contracts. Finally, some signs of short covering.

Rate rise chances (September 2018) fell to 86%.

Silver more or less tracked gold, with a new low to 15.18 around 8:30 am; the Trump bounce pulled silver back up to 15.48, but then silver lost most of that by the close. Silver ended the day with a long black candle print, which was a bearish continuation. Silver forecaster edged down -0.01 to -0.35. No reversal for silver.

COMEX SI open interest rose by 1,105 contracts today. No short-covering in silver.

The gold/silver ratio rose +0.92 to 79.75, which is very bearish.

Miners fell today, with GDX off -1.28% on x volume, while GDXJ fell -1.30% on y volume. While the miners rallied strongly after Trump’s comment, the miners gave almost all of that back by the close.  The miner candle prints were bearish continuations. XAU made a new low today, and while it remains in an uptrend, XAU forecaster fell -0.12 to +0.03. XAU broke down below the previous low set back in June.  That’s a bearish sign.

The GDXJ:GDX ratio fell -0.02%, while the GDX:$GOLD ratio dropped -0.89%. That’s bearish.

Platinum fell -1.44%, palladium cratered, dropping -4.10%, while copper plunged -1.74%. All the candle prints were bearish continuations, and all 3 metals made new lows. Platinum even dropped below the 800 level before bouncing back somewhat. The other metals all looked pretty terrible today, with only platinum benefitting somewhat by Trump’s comment.

The buck rose +0.12 [+0.13%] to 94.83. In spite of the long upper shadow (the buck made a new high to 95.33), the high wave candle print was a bullish continuation. Forecaster moved up +0.05 to +0.11. Buck remains in an uptrend in all 3 timeframes.

Crude traded in a wide range, but ended up +0.06 [+0.09%] to 68.09. The long legged doji print was neutral; crude forecaster edged up +0.05 to -0.03; oil appears uncertain as to where it will go next. Will Saudi Arabia turn on the taps to compensate for sanctions on Iran? If so, by how much? Nobody really knows.

SPX fell -11.13 [-0.40%] to 2804.49. Print today was a feeble-looking swing high (38% bearish reversal), but forecaster agreed, dropping -0.34 to -0.10, which is a sell signal for SPX. Financials led lower (XLF:-1.50%) while utilities did best (XLU:+0.92%). This was a bearish sector map; tech also did poorly (XLK:-0.36%).

VIX rose +0.77 to 12.87.

TLT rose +0.63%, supporting the risk-off signal from equities. TY also rallied, up +0.22%. TY is trying to figure out which direction it will take; currently its in an uptrend. 10-year treasury yield fell -2.8 bp to 2.84%.

JNK fell -0.06%, moving down slightly from yesterday’s new high. Forecaster remains in a slight downtrend. JNK is also trying to sort out what comes next.

CRB moved down -0.03%, but only 2 of 5 sectors moved lower, led by industrial metals (-1.56%). Industrial metals have fallen 20% in the past 6 weeks. That’s a sharp move in a short time, and it does not appear to be over yet.

Yesterday’s hints of a low were erased by copper’s breakdown today. Even a dollar-negative Trump comment wasn’t enough to pull the metals very far off the floor – and even then, only gold, silver, and platinum improved.  This decline is not just about gold – gold is down 11% over the past 6 weeks, while copper is off 22%, while the buck is up almost 7%. Over the past 7 months, platinum is off 27%, palladium is down 29%, while silver is down 13.6%. Perhaps its no comfort to know “things are worse in other places”, but if you own gold, just realize at least you aren’t being singled out.

And perhaps 60% of gold’s drop can be attributed to currency moves.

The metals are becoming more and more oversold. That’s a “buying opportunity” (although if you’re long, such opportunities are a bit less fun), and we can see just how oversold in the following chart. The green box (daily, weekly, monthly RSI values < 30) represents “oversold” in the given timeframe. Oversold in all 3 timeframes means a relatively rare long term buying opportunity. One very simple trading system is to wait for all 3 boxes to turn green, and then buy when the “daily” box moves back up above 30 – i.e. once a large enough bounce occurs.

If you forego stops, over the lifetime of GC, you’d have a 60% success rate on 70 trades, avg ROI 5.6%; 15.9% on success, -9.8% on failure, with a hold time of 160 days.  Key to avoiding the falling-knife-catch is to wait for the bounce.  Even so, you still only have a 60/40 success rate – but rewards for success outweigh losses on failure.

name symbol last RSI-D RSI-W RSI-M
Junior Miners GDXJ.N 31.86 30.2 34.9 42.9
Senior Miners GDX.N 21.58 26.8 31.6 41.0
Palladium PA.V 866.00 14.7 21.9 37.0
Gold/Euro GC.EUR 1049.27 26.4 18.9 34.4
Copper HG.V 2.72 22.8 23.4 33.7
Gold GC.V 1222.50 19.6 15.7 32.5
Silver SI.V 15.33 18.8 20.7 28.9
Silver Miners SIL.N 27.72 24.7 22.3 27.9
Platinum PL.V 808.20 25.9 13.5 25.9

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