PM Daily Market Commentary – 8/15/2019
Gold rallied +6.79 [+0.44%] to 1534.77 on very heavy volume, while silver rose +0.05 [+0.29%] to 17.35 on moderately heavy volume. The buck moved up [+0.18%] as did SPX [+0.25%] and bonds [10Y -5.2 bp], while crude fell [-0.66%].
Industrial Production was recessionary (headline: -0.2% m/m, manufacturing: -0.4% m/m), while Retail Sales was not (headline: +0.7% m/m, less-autos-and-gas: +0.9% m/m). Neither report seemed to affect prices much at all.
Gold traded in a relatively narrow range today, ending near the highs. The long white/spinning top candle was a bullish continuation, and forecaster moved lower but remains in an uptrend. Today was yet another 6-year closing high for gold, and gold/Euros is just 10 points away from a new all time high. The RSI-7 for gold is just 77, which is on the edge of “overbought”, but not horribly so. Gold remains in an uptrend in all 3 timeframes.
COMEX GC open interest rose +8,384 contracts. That’s 4 days of global production in new paper; shorting into the rally continues.
Futures are projecting a 100% chance of one rate cut in September, and a 33% chance of two rate cuts. The December projection is 100% chance of one rate cut, an 91% chance of two cuts, a 55% chance of 3 cuts. No meaningful change from yesterday.
Silver chopped sideways today; the spinning top candle was a bit bearish (43%), but forecaster moved higher, and remains in an uptrend. Silver remains in an uptrend in all 3 timeframes.
COMEX SI open interest fell -3,736 contracts. That’s 8 days of global production; there was a spike higher in the Asia session; perhaps that was a stop-gunning attack by the commercials. I didn’t think there were many shorts left.
The gold/silver ratio rose +0.14 to 88.46. That’s slightly bearish.
The miners rallied slowly for most of the day, ending at the highs. GDX rose +1.13% on moderately heavy volume, while GDXJ climbed +1.74% on moderately heavy volume also. XAU moved up +0.98%, the long white candle was a bearish continuation, and forecaster moved higher but remains in a downtrend. Forecasters for both ETFs flipped back into uptrends today – the forecaster for XAU did not. XAU remains in an uptrend in both weekly and monthly timeframes.
The GDX:gold ratio rose +0.68%, and the GDXJ:GDX ratio climbed +0.60%. That’s bullish.
Platinum fell -0.55%, palladium climbed +1.42%, and copper moved down -0.02%. Platinum continues to make new lows, palladium is chopping sideways, as is copper.
The buck rose +0.18 [+0.18%] to 97.72. The long white candle was a bullish continuation, and forecaster moved higher into its uptrend. The buck remains in an uptrend in both daily and weekly timeframes. The buck just continues to climb.
Large currency moves include: GBP [+0.49%], AUD [+0.41%].
New phrase from the UK: “Tory Meatloaf Remainers”, per the old, famous song from Meatloaf: “I’ll do anything to stop BRExit…but I won’t do that.”
Crude fell -0.36 [-0.66%] to 54.44. The spinning top candle was bullish (43%), and forecaster moved lower, but remains in an uptrend. Crude remains in an uptrend in just daily and monthly timeframes, and the monthly remains fairly weak.
SPX moved up +7.00 [+0.25%] to 2847.60. There was a fair amount of movement intraday, with SPX making a new low, but it managed to bounce back by end of day. In spite of the rally, the doji candle was a bearish continuation, and forecaster moved lower, and is now in a strong downtrend. SPX remains in a downtrend in all 3 timeframes.
Sector map was led higher by staples (XLP:+1.50%) and REITs (XLRE:+1.40%), while energy (XLE:-0.62%) and tech (XLK:-0.18%) did worst. This was a fairly bearish sector map.
VIX fell -0.92 to 21.18.
TLT jumped +1.11%, making yet another new high today. The long white candle was a bullish continuation, and forecaster moved slightly higher into a strong uptrend. TY also broke out to a new high today, up +0.37%. The long white candle was a bullish continuation, and forecaster inched higher and remains in a strong uptrend. TY remains in an uptrend in all 3 timeframes. The 10-year yield fell -5.2 bp to 1.53%, a 3-year low. The 30-year fell -5 bp to 1.98%, a new all-time low. The move in the 30-year is starting to look a little like what happened in October 2008.
JNK rallied +0.36%; the bullish harami was bullish (39%), and forecaster moved higher but remains in a slight downtrend. BAA.AAA fell -2 bp to +87 bp; the large moves in the market didn’t appear to affect the differential at all.
The rally in BAA bonds has been nothing short of remarkable: a 140 bp decline (to 3.82%) since the yield highs that came out of the minor market panic last December. One would think that BAA debt would decline as people became more worried about a recession, but one would be wrong. “Things are different this time” – because traders expect the central banks to buy up all that crappy debt to “stimulate the economy.” Money is pouring into low grade debt just as fast as it is pouring into US treasury bonds. This makes sense only in a world of expected central bank intervention.
CRB fell -0.36%, with 3 of 5 sectors falling, led by energy (-1.41%).
Gold continues to move slowly higher, in spite of an ongoing rally in the buck. Bonds remain the star, especially the 30-year which has risen to all time highs (all-time low yields). But low-quality debt is also attracting gobs of money; the last time BAA bonds were at a 3.82% yield was back in 1956! Given the flight to safety we are seeing in every other sector, low-quality bonds absolutely should NOT be rallying this way. That’s deformation in action – actually, anticipated deformation. Armstrong: “money moves in anticipation of events.”
Gold is also just 10 points away from a new all time high in Euros. A breakout above that level could result in a whole lot more buying over in Europe. Then again, we should probably expect more selling pressure as we approach that previous high.
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