PM Daily Market Commentary – 8/28/2019

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  • Thu, Aug 29, 2019 - 12:14am

    #1

    davefairtex

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    PM Daily Market Commentary – 8/28/2019

Gold fell -3.17 [-0.20%] to 1550.71 on heavy volume, while silver climbed +0.15 [+0.82%] to 18.45 on extremely heavy volume. The buck rallied [+0.22%] along with SPX [+0.65%] and crude [+0.34%]. Surprisingly, bonds rallied also [10Y -2.4 bp – a new low].

Gold chopped sideways in a narrow range; the short black candle was slightly bearish (28%) and forecaster moved lower but remains in a reasonably strong uptrend. Gold remains in an uptrend in all 3 timeframes.

COMEX GC open interest rose +14,729 contracts; another large increase; 7 days (46 tons!) of global production in new paper. Without all the new paper, we probably would have seen new highs for gold in spite of the dollar’s rally.

Futures are projecting a 100% chance of one rate cut in September. The December projection is 100% chance of one rate cut, an 83% chance of two cuts, and a 35% chance of 3 cuts.

Silver chopped higher today, with the gains coming during the London session. The long white/spinning top was a bullish continuation, and forecaster moved lower but remains in a very strong uptrend. Volume continues to increase as price rises. Silver remains in a strong uptrend in all 3 timeframes. Silver is moving into somewhat overbought territory; RSI-7 is 84.

COMEX SI open interest fell -11,587 contracts. An SI contract roll happened today; its hard to know how much of the decrease in OI had to do with the upcoming contract expiration. Is there a problem at COMEX? I don’t track deliveries, but the rising prices and very heavy volumes going into a first notice day is…well it’s interesting. Volume over the past week has been about double normal.

The gold/silver ratio fell -0.86 to 84.05. That’s bullish.

The miners mostly moved lower today; GDX fell -0.49% on moderate volume, and GDXJ fell -0.64% on very light volume. XAU moved up +0.15%, the high wave candle was a bullish continuation, and forecaster inched lower but remains in a strong uptrend. XAU remains in an uptrend in all 3 timeframes.

The GDX:gold ratio fell -0.29%, and the GDXJ:GDX ratio moved down -0.15%. That’s slightly bearish.

Platinum jumped +4.25%, palladium fell -0.87%, while copper rose +0.35%. This is the third positive day for copper – one more day and this moves beyond a “reaction rally”. Platinum’s massive move broke out to a 6-month high, and the daily volume was immense. I couldn’t find any reason for the rally. Perhaps platinum is just catching up to gold and silver, at long last.

The buck rose +0.21 [+0.22%] to 97.77. The short white candle was neutral, but forecaster moved higher, breaking out into an uptrend. Even though the buck is back above all 3 moving averages, weekly and monthly forecasters remain in downtrends. Maybe my longer-term DX models are broken in some way.

Large currency moves include: GBP [-0.44%]. CNY inched up to yet another new high [7.17].

Today the Queen approved PM Johnson’s plan to suspend Parliament; Johnson is suspending Parliament with some legal cover, but it is clearly an attempt to limit the amount of maneuvering the Remainers in Parliament can do prior to the EU exit date of October 31st. Remainers are outraged; they see Parliament (and themselves) as the true expression of “democracy” in the UK – versus the referendum actually voted on by the people of the UK which approved the UK’s exit from the EU some 3 years ago.

Crude rose +0.19 [+0.34%] to 55.70. The high wave candle was a bullish continuation, and forecaster moved higher into an uptrend. The EIA report at 10:30 more or less confirmed yesterday’s very strong API report (crude: -10m, gasoline: -2.1m, distillates: -2.1m), but the report’s release marked the top for crude today. Crude remains in an uptrend in all 3 timeframes.

SPX climbed +18.78 [+0.65%] to 2887.94. The closing white marubozu was bullish (43%), and forecaster moved higher into an uptrend, but SPX remains in a downtrend in both weekly and monthly timeframes.  That monthly pattern still looks quite bearish, and September approaches.

Energy led (XLE:+1.43%) along with discretionary (XLY:+1.25%), while utilities (XLU:-0.27%) and tech (XLK:+0.09%) did worst. This was a mixed sector map today.

VIX fell -0.96 to 19.35.

TLT rose +0.13%, the long black candle was bearish (44%), and forecaster moved lower but remains in an uptrend. TY was unchanged; the doji candle was mildly bearish (34%), but forecaster inched higher and remains in a strong uptrend. TY remains in an uptrend in all 3 timeframes. The 10-year yield fell -2.4 bp to 1.47%; the 30-year fell -3 bp to 2.07%. This is yet another multi-year low for the 10-year yield, and a new all time low for the 30-year yield. Money continues to flood into bonds, regardless of the equity market rally.

JNK rose +0.25%, the long white candle was a bullish continuation, and forecaster moved higher into a relatively mild uptrend. BAA.AAA differential moved up +1 bp to +92. Still no worries from the low-quality credit market.

CRB jumped +0.88%, with just 2 of 5 sectors moving higher, led by energy (+1.69%).

Platinum’s huge rally – well I wasn’t expecting it, but I should have been. I think traders are looking at gold’s big move, and trying to buy something that looks similar, but hasn’t gone up as much, and I think that might explain both the platinum and silver rallies. That’s just guesswork, but is based on the highly extended ratios (gold/silver, and gold/platinum) that the other metals are showing.  Silver’s ratio is unwinding rapidly.  Is it now platinum’s turn?

My tinfoil hat conspiracy theory says the following: it is easier to keep a lid on gold prices if you can also plaster the related (much smaller market) metals like silver and platinum, both of which are very highly correlated to gold. “Give me lever long enough and a fulcrum on which to place it, and I shall move the world.” Pound silver, and gold drops. Pound platinum, and gold drops some more. Both silver and platinum markets are very small; moving them requires little effort. Moving gold – much more effort. Silver and platinum: a long, long lever, used to move the much “heavier” gold price.

So to borrow a phrase from the enthusiastic Russiagate-promoting television anchors: “if true”, if the campaign to keep gold down required the pounding of both silver and platinum right down to the costs of production and to 30-year highs in gold/silver (and all time highs in gold/platinum), the snapback for both silver and platinum now that big money has started to care about gold again could be enormous. Gigantic. Titanic. Monumental.  Open your thesaurus for other adjectives.  Manipulation only works when nobody cares.  Once money moves for real…all manipulation does is give traders cheaper entry points and more dips to buy.  Yay manipulation!

If true.  [*Not financial advice].

I sound like a pumper, I really do, but I’ll leave you with the gold/platinum ratio, which other members have posted, but I’ll post again just to reinforce. [Note: I’m not long platinum. Doh!]  While it is probably true the “diesel” problems in Europe contributed to platinum’s difficulties in the last few years…it is still heavily overextended to the downside, compared with gold.  That’s an all time high in the ratio!  This doesn’t happen very often!

Not financial advice!

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  • Thu, Aug 29, 2019 - 05:46am

    #2
    phusg

    phusg

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    Thanks for all the platinum

When I read your commentary I thought what the heck I’ll swap my speculative leveraged silver long for platinum. Sold again after a couple of hours for what was a nice little ride up. Thanks for the idea*

*Not a financial testimonial.

Feeling too nervous to go long silver again as PMs seem to be hitting resistance and RSIs are high as you say. Platinum seems to turn with RSI >60 and we’re at 65 otherwise I may have stayed with it along your ratio retracement thought line.

But seems to be risk-off in general with China sounding conciliatory. Also the dollar solidly above 98.2 has to start weighing on PM at some point I guess.

  • This reply was modified 3 weeks, 2 days ago by  phusg. Reason: minor
  • Thu, Aug 29, 2019 - 06:44am

    #3
    Lions

    Lions

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    Wells Fargo advisors endorse platinum and silver

In a recent article by Wells Fargo advisors, they are advising people not to buy gold but instead to buy silver and platinum as gold is currently much too expensive at

  • Thu, Aug 29, 2019 - 06:55am   (Reply to #2)

    #4

    davefairtex

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    re: Thanks for all the platinum

phusg-

Glad it worked out.

My concern about “conciliatory” Chinese is that they are just sucking the US in – temporarily – while they prepare to militarily intervene in Hong Kong ahead of the October 1 celebration.  The theory being, since Trump doesn’t want to wreck the talks, he will be much more reluctant to find that Hong Kong is no longer “sufficiently autonomous” – i.e. he won’t yank the preferential trade relationship in the event of an invasion by the PLA.

Of course, there is this bipartisan vibe in Congress about supporting Hong Kong too.  A Chinese invasion and military crackdown might just turn US popular opinion firmly against China – it has been mildly positive in favor of China for a long time now – but that vibe might be enough to override any veto from Trump.  The desire to paint Trump as a “supporter of dictators” will collide with all that Chinese money that has enriched the (bipartisan) political class in the US for decades now.  That, plus the permanent war group in Washington that is perennially looking for a new target might be interested in painting China as the new enemy.

Its a really interesting dynamic.  Cross-currents, as Powell says.  Everything is on a knife’s edge right now.

BRExit too.  Heaven only knows how that one turns out.  So many things up in the air.  And the ECB meets on the 12th.  At least it’s not boring, hmm?

  • Thu, Aug 29, 2019 - 08:09am   (Reply to #2)

    #5
    phusg

    phusg

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    re: re: Thanks for all the platinum

Military intervention in Hong Kong?! That wasn’t on my realms of possibility radar yet; you’re making me want to run for a safe haven hill…

I’m just not keen on silver at this moment with the SIL miners down whilst the stock markets generally are up and the possible resistance of the 2017 high. And surely platinum needs a rest after two 3% days on the trot?

Note to self: listen to Dave and don’t try to be too cute. Just go low leverage long silver and stick with it until something big changes.

  • Thu, Aug 29, 2019 - 09:43am   (Reply to #2)

    #6

    davefairtex

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    military intervention: Hong Kong

phusg-

Oh yeah.  PLA rolled in the armored vehicles in “a normal rotation” just last night.  Let’s see if I can get a picture.  Here:

https://www.scmp.com/news/china/military/article/3024820/chinese-militarys-move-hong-kong-sunrise-was-routine-annual

There’s also Carrie Lam hinting at using basically martial law (used last time: 1967) which makes pretty much everything thing she does “legal”.

https://www.scmp.com/news/hong-kong/politics/article/3024616/hong-kong-leader-carrie-lam-leaves-door-open-invoking

And they’re also talking up the whole “violent protesters” meme.  You can’t send in the army if there aren’t violent protesters.

[EDIT]

And here’s China “caving”:

https://www.bloomberg.com/news/articles/2019-08-29/china-indicates-it-won-t-retaliate-against-newest-u-s-tariffs

Its all leading up to the October 1 celebration.  China wants everything all quiet for the big party.  That gives them about 5 weeks.  That’s why I’m suspicious of China’s sudden willingness to talk.

I’m not sure silver is a buy here at RSI 84.  It might need a rest.  Then again – I’m not selling.  It might just keep going higher too.  I’m terrible at timing the daily chart moves, so I just don’t.  (Jesse Livermore tells me this is the wrong thing to do too.  He recommends “sitting” when you’re right long term.  “It’s a bull market.”  So don’t freaking sell.)

I think the miners are under pressure from long-suffering (and frazzled) goldbug selling.  [I judge this from looking at my own internal emotional sense – “OMG THAT MINER IS UP 80%!!!  SELL!]  Once that selling pressure is gone, and gold (and the miners) become more popular with the great unwashed, they should rocket higher.  Eventually.

Remember how I whined about silver in the basement for all those months?  It finally responded.  I’m not so great at timing, but I do spot things out of balance.

I whined about platinum too, but then I kind of gave up and forgot.  And then it caught up in a big hurry.

If you bought now, it might well be an interim top.  Then again – it might not.  That’s why its not financial advice!  🙂

  • Thu, Aug 29, 2019 - 03:27pm

    #7
    Luke Moffat

    Luke Moffat

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    Yep, and then some…

Today the Queen approved PM Johnson’s plan to suspend Parliament; Johnson is suspending Parliament with some legal cover, but it is clearly an attempt to limit the amount of maneuvering the Remainers in Parliament can do prior to the EU exit date of October 31st. Remainers are outraged; they see Parliament (and themselves) as the true expression of “democracy” in the UK – versus the referendum actually voted on by the people of the UK which approved the UK’s exit from the EU some 3 years ago.

Very much agree with this snippet, Dave. It’s as if the mother is scolding her wayward children – if you can’t play with your toy (parliament) nicely then I’m going to take it away until you’ve grown up a bit. It really is an indictment of our pathetic and cowardly politicians who will not enforce the result of the referendum.

Here is the opening line from Chapter 2 of the Labour Party’s 2017 Manifesto,

“Labour accepts the referendum result and a Labour government will put the national interest first. ”

Here is what has been observed,

“Labour will use the results of the referendum, and subsequent political debate, to deadlock parliament in an attempt to force a general election. Labour will then determine how it interprets the results of the referendum for its own benefit.”

If these so-called pro-democracy members of parliament really believed in representative government then they would all resign tomorrow. Nothing but contempt and disdain for the people they are supposed to represent. The worst thing about all this is that it makes me sound like an apologist for the Monarchy, what a shower of shite we have in the House of Commons. Strange times indeed.

 

 

 

  • Thu, Aug 29, 2019 - 06:55pm

    #8

    lambertad

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    Excellent China Interviews

On the topic of China, here are two excellent interviews by Kyle Bass. First one with Steve Bannon, which was quite informative. The second, with Miles Kwok was absolutely astounding and he makes an amazing prediction about Jack Ma, who, I didn’t know, was forced to sign over a significant portion of Alibaba to 5 UNNAMED individuals and he is now retired! That’s like Bezos signing away his fortune to 5 unnamed folks. WTH!

 

 

  • Fri, Aug 30, 2019 - 07:27am

    #9

    sand_puppy

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    Well damn

Listen to the Kyle Bass interview on China posted above!!

The story of a “committee” (the CCP) to represent “the people” that became another oligarchy/aristocracy a la 1984.

 

  • Fri, Aug 30, 2019 - 09:41am

    #10

    davefairtex

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    yeah wow

I’m going to second your “well damn” comment.

I finally blocked out an hour and listened to the whole thing.  The most compelling thing was the theft of Jack Ma’s shares and his forced resignation.  “They want all the babies back.”  This action aligned with the overall picture painted by Guo Weng.

I thought it was particularly interesting that he became extremely careful when Xi’s name came up.

And it does seem to line up with what is happening in Hong Kong.

This is where we want our manufacturing to be?

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