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PM Daily Market Commentary – 7/29/2019

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  • Tue, Jul 30, 2019 - 03:00am

    #1

    davefairtex

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    PM Daily Market Commentary – 7/29/2019

Gold rose +8.15 [+0.57%] to 1439.30 on very heavy volume, while silver climbed +0.07 [+0.46%] to 16.48 on moderately light volume. The buck was almost unchanged [+0.03%], SPX edged down [-0.16%], while crude shot higher [+1.53%] and bonds rallied [10Y yield -2.6 bp].

Gold chopped sideways for much of the day, finally rallying in the afternoon in New York. The short black candle was mildly bearish (32%), and forecaster moved higher but remains in a mild downtrend. Gold/Euros rallied also, but its forecaster remains in a mild uptrend – gold/Euros looks more bullish than gold/USD. Gold remain in an uptrend in both weekly and monthly timeframes.

COMEX GC open interest fell -22,490 contracts. Contract roll happened at the open today; the front month changed from GCQ19 (August) to GCZ19 (December). This was roughly a $13 jump – this move isn’t reflected in the prices I quote, but some services might show a large gold rally (maybe $20 or so) as a result of the roll. The large drop in OI might also be related to this contract roll as well.

Futures are projecting a 100% chance of one rate cut in July and a 26% chance of two rate cuts, a 100% chance of at least one rate-cut by December, an 89% chance of at least 2 rate cuts, and a 55% chance of at least 3 rate cuts. Next FOMC meeting: 2 days from now.

Silver rose +0.07 [+0.46%] to 16.48. -0.20 [-1.17%] to 16.43. Silver also chopped sideways today, starting its rally around noon. The short white/NR7 candle was unrated, and forecaster moved higher, moving back into an uptrend. Silver is back in an uptrend in all 3 timeframes.

COMEX SI open interest rose +2,171 contracts.

The gold/silver ratio rose +0.07 to 86.97.

The miners opened up, sold off for the first 15 minutes, bounced higher, then rallied sharply in the afternoon along with gold. GDX rallied +1.80% on heavy volume, while GDXJ climbed +1.92% on moderate volume. XAU moved up +1.30%, the closing white marubozu was mildly bearish (34%), and forecaster moved sideways, remaining in a modest downtrend. XAU managed to close back above its 9 MA, and remains in an uptrend in both weekly and monthly timeframes.

The GDX:gold ratio rose +1.22%, and the GDXJ:GDX ratio climbed +0.12%. That’s bullish.

Platinum rallied +1.88%, palladium jumped +1.52%, and copper moved up +1.06%. Platinum and copper both started rallying roughly at 7 am, and moved higher for most of the day. Platinum made a new closing high today – it remains in an uptrend. The strong moves in platinum underscore the bid underneath PM also.

The buck moved up +0.03 [+0.03%] to 97.55. This was a new high for the buck, but not yet a new multi-year high, although that is not far away. The short white/spinning top candle was somewhat bearish (40%), but forecaster inched higher, remaining in an uptrend. DX remains in an uptrend in both daily and weekly timeframes.

Large currency moves include: GBP [-1.30%].

Over the weekend, Boris Johnson declared that the UK gvernment was “turbocharging” preparations for a no-deal exit, and stated that there would be no “Irish Backstop” – as a precondition with any talks with the EU. Brussels, for their part, rejected this precondition. This caused GBP to drop to new lows (122.17), levels not seen since early 2017. For May, she had to remind everyone that “Brexit meant Brexit.” Johnson doesn’t seem to feel the need to remind anyone. Lies need constant reinforcement, while the truth needs no defense.

Germany has already moved into a manufacturing recession. A no-deal BRExit “to punish the UK for leaving” will end up hosing Germany the most. In the next 3 months, will the bureaucrats in Brussels – who desperately want to punish the UK in order to secure their pensions and position – triumph, or will German common sense?

The EU will go down because it must. A monetary union without transfers between the states won’t work. In the US, strong states support the weak ones, and the debt was federalized. This ensures monetary stability. In the EU, instead of transfers and support, the strong states prey on the weak. Greece is the prime example: German and French banks were bailed out on the backs of the Greek taxpayer.

Consider where we are in Europe. Currently, the ECB is at zero percent, and that’s before any recession starts. The debt markets have been utterly destroyed; Italian debt is trading at lower rates than US debt but only because the ECB stands ready to monetize debt issuance. There are negative yields for junk bonds, and negative yields across most of the German debt curve – because of ECB money printing as well as capital flight.

And this is before any real recession starts.

BRExit in 90 days, regardless of the challenges it will provide, gives the UK a chance to get its house in order while the global economy is still reasonably stable. If the UK waits for things to blow up over on the continent before it cuts the cord, the dislocation will presumably be much greater.

Crude jumped +0.86 [+1.53%] to 57.13. The confirmed NR7 was bullish (50%), and forecaster moved higher into an uptrend. Crude ended the day back above both the 9 and 50 MA lines. Crude is now in an uptrend in both daily and monthly timeframes – and the weekly is quite close to a trend change too. Crude really could go either way at this point, but after today, things are looking a bit more positive.

SPX fell -4.89 [-0.16%] to 3020.97. SPX started selling off right after market open; it bounced back after the first 90 minutes, but not enough to erase that first hour sell-off. The bearish harami was a bullish continuation, and forecaster dropped, but remains in a modest uptrend. SPX remains in an uptrend in all 3 timeframes.

Sector map was led lower by financials (XLF:-0.77%) and communication services (XLC:-0.56%), while utilities (XLU:+0.52%) and sickcare (XLV:+0.41%) did best. This is a bearish sector map.

VIX rose +0.67 to 12.83.

TLT rose +0.03%, with forecaster moving higher into a slight uptrend. TY moved higher also, up +0.08%. TY forecaster moved higher but remains in a downtrend. -0.48%, with forecaster dropping into a mild downtrend. TY remains in an uptrend in both weekly and monthly timeframes, although the trends are definitely weakening. The 10-year yield fell -2.6 bp to 2.06%.

JNK fell -0.13%, the swing high candle was actually just a bullish continuation, but forecaster fell, pulling JNK into a downtrend. The BAA.AAA differential remains at -90 bp, and in a strong downtrend. The markets are showing no credit concern at the moment.

CRB rose +0.36%, with 4 of 5 sectors rising, led by industrial metals (+0.77%). PM, industrial metals, and livestock have done reasonably well in the past six weeks.

Gold’s rally heading into FOMC looks reasonably positive. The fuss in the UK probably helps too; you should see a chart of gold/GBP, it is very bullish.

And as Chris noted over the weekend, on Friday the ECB announced the end of a “gold sales agreement” among its member central banks, which had been in place since 1999.  Apparently, no member central banks have any plans to sell gold anytime soon.

https://www.reuters.com/article/europe-cenbank-gold/europes-central-banks-ditch-20-year-old-gold-sales-agreement-idUSL8N24R4QU

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  • Tue, Jul 30, 2019 - 09:00am

    #2
    booms1

    booms1

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    Gratitude

Thank you so much for the information you have provided.I do admire the effort and consider this as a great help.

  • Tue, Jul 30, 2019 - 10:02am

    #3

    davefairtex

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    Peaking US Oil Production? Perhaps 2020?

From Robert Rapier, via Ilargi at https://www.theautomaticearth.com/2019/07/debt-rattle-july-29-2019/

If US oil production peaks, it would be a huge deal.  [Especially for some very beat up oil services companies that I happen to have in my account.  Just saying.]

https://www.forbes.com/sites/rrapier/2019/07/28/a-new-u-s-oil-production-peak-looks-imminent

From this graphic, production growth has been slowing since January, and the slowdown has accelerated in recent months. Production growth is falling so fast that at the current pace, it would fall below zero before the end of the year. Even if we assume the slower rate of decline from earlier in the year, it looks like growth will fall below zero within a year. Once growth falls below zero, that represents a year-over-year decline in U.S. production.

  • Tue, Jul 30, 2019 - 12:39pm

    #4

    debu

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    Louise Yamada

Louise Yamada (4 min. video from Bloomberg on July 26) has a very bullish outlook for gold based on TA.

I find this encouraging because she has always been a “just the charts, ma’am” type analyst never hesitating to wax bearish if that is what her charts have been telling her.

  • Tue, Jul 30, 2019 - 10:32pm   (Reply to #4)

    #5

    davefairtex

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    re: Louise Yamada

I haven’t heard from Louise Yamada in a long time, but my memory is that she really is as you say – “just the charts.”

Reasonable video.  All very long term charts.  I agree with her, FWIW.  The breakout above 1400 was a BFD.

 

  • Wed, Jul 31, 2019 - 02:36pm

    #6
    phusg

    phusg

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    EU & eurozone

I’m with you on the design flaws of the euro but I really don’t understand why you’re so negative on the EU and May. The EU is the only large trading block/world power that takes peak resources reasonably seriously, which doesn’t exempt them from scrutiny of bad practices, but I would think makes them at least somewhat of an ally of this site.

For May, she had to remind everyone that “Brexit meant Brexit.” Johnson doesn’t seem to feel the need to remind anyone. Lies need constant reinforcement, while the truth needs no defense.

I think that’s very unfair on May as she hammered that phrase to fight those remainers who sought to overturn the democratic referendum result. I agree with you that her deal was a very soft brexit, not much more than in name only, but then the results of the referendum gave more than enough scope for that to be considered democratic.

Germany has already moved into a manufacturing recession. A no-deal BRExit “to punish the UK for leaving” will end up hosing Germany the most.

How so? Germany gets tariffs on part of their exports (to the UK) but the UK gets tariffs on a raft of its exports and imports to and from all countries.

In the next 3 months, will the bureaucrats in Brussels – who desperately want to punish the UK in order to secure their pensions and position – triumph, or will German common sense?

Sure politicians also have their personal interests at heart, but I really don’t understand why you think that Trump also operates in the interests of the whole of the US (which I agree with) but then write so cynically about EU politicians. German common sense is aligned with ‘bureaucrats in Brussels’ in that the UK shouldn’t be offered a good deal, in the hope that they eventually stay, or failing that at least doesn’t give any incentive to other countries to leave the union. I don’t think there is anything unusual or sinister about a union making membership attractive and withholding good deals for voluntary leavers.

The EU will go down because it must. A monetary union without transfers between the states won’t work. In the US, strong states support the weak ones, and the debt was federalized. This ensures monetary stability. In the EU, instead of transfers and support, the strong states prey on the weak. Greece is the prime example: German and French banks were bailed out on the backs of the Greek taxpayer.

We’ve had a big nuanced discussion on the Greece/French-German bank rescue before, but let me just add that there are and always have been large transfers of money from north to south through the medium of the EU budget. Have a look at this for example: https://www.bbc.co.uk/news/uk-politics-48256318. Italy is the only southern European country in the top ten contributors and Greece is the second largest net recipient!

I’m pretty sure that Draghi’s ECB policy of whatever it takes also eventually results in a net transfer from north to south. Doesn’t it lower southern governments debt repayments more than it does for northern European governments?

At least on the following I can wholeheartedly agree:

Consider where we are in Europe. Currently, the ECB is at zero percent, and that’s before any recession starts. The debt markets have been utterly destroyed; Italian debt is trading at lower rates than US debt but only because the ECB stands ready to monetize debt issuance. There are negative yields for junk bonds, and negative yields across most of the German debt curve – because of ECB money printing as well as capital flight.

And this is before any real recession starts.

BRExit in 90 days, regardless of the challenges it will provide, gives the UK a chance to get its house in order while the global economy is still reasonably stable. If the UK waits for things to blow up over on the continent before it cuts the cord, the dislocation will presumably be much greater.

Personally I think Brexit is a mistake as the EU was already moving (albeit slowly) to a less federal less refugee friendly stance. It’s also proven to continue to be a massive distraction for politicians/bureaucrats on both sides. But given the UKs sentiment and their majority vote to leave that that should be respected which I expect will get that sentiment out of their system. It would be very messy but I suspect that if it does become a hard brexit that it would lead to the break-up of the UK and leave England and Wales increasingly wondering whether it was all worth it.

  • This reply was modified 3 weeks, 4 days ago by  phusg.
  • This reply was modified 3 weeks, 4 days ago by  phusg.
  • Thu, Aug 01, 2019 - 04:58am   (Reply to #6)

    #7

    davefairtex

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    re: EU & eurozone

phusg-

At the core, I dislike the EU because it is intensely anti-democratic in architecture and intent.  (Mind you, I really like Europe – all my trips there have been awesome.  And Europeans themselves, I like them too.  Even the French, who have a reputation for being a bit cranky, especially if your French is confined to mispronouncing the various wine producers and/or regions.  “Chateneuf du Pape.”  “Mersault.”  etc)

But who elects the EU “President”?  A smoke-filled room.  What powers does Parliament have?  Only veto power.  They cannot initiate legislation, only vote up or down.  All effective power resides in the bureaucracy.  The design was modeled – as far as I can tell – after the governmental structure of the Former Soviet Union.  Which, as we know, was horribly unresponsive to the people, and eventually ended up failing for that very reason.

One would think that a collection of democratic states could come up with a less authoritarian governance architecture.  Certainly there are a lot to choose from.  Governance architectures, I mean.  Apparently, that Politburo architecture was seen as the most compelling.

Call this the “original sin” of the EU, and from there, things (predictably) didn’t get better.  The soft coups (Burlesconi, for one, and the attempted coups against Salvini/De Maio), what they did to Greece – its just ugly stuff.  But all too predictable given the structure they put in place.

Hosing other nations – that’s just realpolitik, and expected.  Hosing your own member nations as a direct consequence of poor system design?  That’s just lame.  And self-destructive.  Long term, anyways.

So that’s the reason for my negativity.  I really didn’t like the Former Soviet Union.  Nor do I like the successor state, the EU.  I design systems for a living, and I think bad design just offends me.

The Eurozone itself is also fatally flawed.  As I said, having a single currency, and no shared debt, and a single interest rate policy – “one size fits Germany”- just makes no sense.  Italy hasn’t grown since 2000, all because of the Euro straitjacket.

And the “freedom of movement” thing is great for the migrant labor from the poorer nations, but it really sucks for the working class in the richer ones.  I mean, it really sucks.  My friends from the UK talk about how the Poles come to the UK, they work really hard, and for less than what the local workers get paid.  My friends are well-educated, so they don’t suffer, but – what about the lower wage workers?  It totally reminds me of Mexican migrants who come to the US.  That’s great for the migrants; they work really hard, but what about US citizen low wage workers?  They get to compete with all those hard-working Mexicans.  How does that work for them?  Not well.  US low-wage salaries have been flat for 30 years.

Just ask yourself – who are the winners and losers in the EU?  Certainly not the working class.

The EU is structural wage debasement and globalism across a continent, with an unelected bureaucracy running everything, with only a simulacrum of democracy where the elected “representatives” have no real power.  The way I see it, the EU is structurally designed to fail, and fail spectacularly – just like its forefather, the Soviet Union.

As for the EU being an ally of this site – I’m just the gold guy.  Chris and Adam are “the site”; they let me rattle on and ride my favorite hobby horses, but certainly I don’t speak for them.  I’m not even sure how they feel about it.

As for May – she appears to be a bought-and-paid for politician (like most Democrats and Republicans here in the US) willing to hand her country over to the Soviet EU for – most likely – a Fistful of Euros post “public service.”  The film of Barnier gloating about just how badly they were hosing the UK was just the cherry on top for me.

So.  Like Europe, dislike the Soviet-style government structure.  Sorry if I missed any of your points.

My two cents.  I do rattle on, I know.  🙂

  • Thu, Aug 01, 2019 - 06:44am

    #8

    Chris Martenson

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    Another Perceptive, Intelligent Post from Dave…

Chris and Adam are “the site”; they let me rattle on and ride my favorite hobby horses, but certainly I don’t speak for them.  I’m not even sure how they feel about it.

As for May – she appears to be a bought-and-paid for politician (like most Democrats and Republicans here in the US) willing to hand her country over to the Soviet EU for – most likely – a Fistful of Euros post “public service.”  The film of Barnier gloating about just how badly they were hosing the UK was just the cherry on top for me.

So.  Like Europe, dislike the Soviet-style government structure.  Sorry if I missed any of your points.

Well, in this case Dave you not only spoke for me, but educated me, which I always appreciate.

The moments of crystallization were in comparing the design flaws of the EU to the former Soviet Politburo, and in the North-South dynamics.

I too have a bad taste in my mouth about the way that May went about attempting to make Brexit as painful as possible for the UK, presumably to teach the voters a good hard lesson about daring to vote the wrong way, whilst also securing a nice fat private payday from the merged corporate-state apparatus she serves so well.

That’s how it seemed to me.  I see many EU politicians with the same mentality of seeming to relish the punishment of the serfs and vassal states if they dare to stray from the EU parliaburo.

I recall after the Italy elections that swept Salvini into power an EU official remarking that “the markets will punish Italy” with some measure of stern satisfaction.

I think this excerpt from a letter written by 30 leading European intellectuals captures the essence of the divide nicely:

Like Garibaldi’s followers in the 19th century, who repeated, like a mantra, “Italia se farà da sè” (Italy will make herself by herself), we believed that the continent would come together on its own, without our needing to fight for it, or to work for it.

This, we told ourselves, was “the direction of history”. We must make a clean break with that old conviction. We don’t have a choice. We must now fight for the idea of Europe or see it perish beneath the waves of populism.

The EU’s core values are under attack as never before. It must defend them.

In response to the nationalist and identitarian onslaught, we must rediscover the spirit of activism or accept that resentment and hatred will surround and submerge us.

Urgently, we need to sound the alarm against these arsonists of soul and spirit who, from Paris to Rome, with stops along the way in Barcelona, Budapest, Dresden, Vienna and Warsaw, want to make a bonfire of our freedoms.

In this strange defeat of “Europe” that looms on the horizon; this new crisis of the European conscience that promises to tear down everything that made our societies great, honourable, and prosperous, there is a challenge greater than any since the 1930s: a challenge to liberal democracy and its values.

(Source – Rabobank.  Alert this is a link to a PDF download.  You click,, you download)

How intellectually superior and flowery!  🙂

“Arsonists of  soul and spirit” – nice flourish.

“A bonfire of our freedoms” – /golf claps/

That’s all very profound, and certainly rings well in the halls of academia and stirs the hearts of the main beneficiaries of the current EU arrangement, but what does any of that mean to the person who cannot make ends meet or find a decent paying job because their locality is now flooded with cheap immigrant labor?

How does any of that stir the heart of a person who cannot afford the the high cost of  housing and rents horsewhipped higher by financialization?

Most importantly, how can they write an entire lengthy defense of “EU core values,” ideals and “everything that made our societies great, honorable, and prosperous” without ever directly mentioning what any of those things specifically are?

It all reads like a gigantic rationalization penned by hormone spiked teenager trying to justify a position without ever looking at the details too closely.

If I could translate this I would simply write, “The EU as configured has benefited me and my identity group a lot and we rather like that.  The people who have been taken from in this story are increasingly unhappy with the deal.  That concerns us, so we’re going to attack and marginalize them as being morally inferior.  That should do the trick.”

  • Thu, Aug 01, 2019 - 07:11am

    #9
    Edwardelinski

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    Some other ways they use to marginalize the masses

Gender,race,sexual identity and wealth…

  • Thu, Aug 01, 2019 - 07:39am   (Reply to #9)

    #10

    davefairtex

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    re: Some other ways they use to marginalize the masses

The paycheck is how the masses get marginalized.  If I take away your paycheck, all the rest just doesn’t matter.

The UK Labor party took away their voters’ paychecks, and in exchange tries to make them feel better by saying, “well at least you aren’t racist, sexist, xenophobes, which you would be if you protested importing foreign low-wage workers coming to take your jobs.”

Oh ok.  I certainly don’t want to be a racist.  Here, cut my paycheck in half.  Now I feel better.

The fact that Labor in the UK isn’t rabidly pro-Leave underscores just exactly how horribly bought off Labor-the-party is.  The buyers of Labor in the UK, I suspect, are the same buyers who captured the US Democratic party back in 1992.

I’m really not pro-union at all, but – for heaven’s sake, we really don’t have any force operating in opposition to The Cartel Party, which comprises almost everyone else.

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