PM End of Week Market Commentary - 11/25/2016

davefairtex
By davefairtex on Sat, Nov 26, 2016 - 5:05am

On Friday gold fell -4.20 to 1186.10 on heavy volume, and silver rose +0.15 to 16.59 on very heavy volume. Gold and silver both sold off early in Asia making new lows, and then managed to recover somewhat – with silver doing substantially better than gold.

On the week, gold fell -21.20 [-1.76%], silver dropped -0.06 [-0.39%], GDX fell -2.09%, and GDXJ moved down -2.09%. In addition, platinum dropped -1.65%, palladium rose +2.07%, while copper screamed up +8.70%. Copper is now trading at 2.69, up 28% over just the last month. Copper is seriously overbought, but it still seems to be motoring higher.

Gold's break through 1200 support was the major event in PM this week. On Friday, gold made a new low to 1170.30 before bouncing back. The drive through 1200 occurred on Wednesday, triggered by the dollar breaking out to new highs. Gold is now very oversold (RSI-7=11), and the “high wave” candle print on Friday is bullish: a 43% chance of a low.

If the buck cooperates by topping out, I believe we will see a bounce in gold in the very near future.

December rate-increase chances are at 94%.

This week, gold open interest fell by -62,441 contracts, almost double last week's drop. Quoth the commercials: ka-ching! ka-ching!

Silver also made new lows this week, but ended up dropping substantially less than gold. This caused the gold/silver ratio to fall back a bit, losing -1.21 to 71.49, which seems relatively bullish. The candle print on Friday was a bullish harami, which the candle code says is quite bullish; a 73% chance of marking a low. Since copper did absurdly well this week, this probably helped provide some measure of support for silver.

Miners

Miners drifted sideways and lower this week; they managed to avoid making a new low, which is certainly better than both gold and silver, but the candle print on Friday was a bit feeble: a very low-rated “spinning top”, which the candle code gives a sub-10% chance of marking the low. There appeared to be some relatively strong buying on Wednesday (the day gold plunged through 1200 support) that kept the miners from making a new low, and over the last 3 trading days we saw the miners rally in the last 30 minutes of trading. The GDX:$GOLD ratio was up slightly on the week, while the GDXJ:GDX ratio was unchanged. Ultimately, plunging gold prices didn't send the mining shares over the cliff, and that's good news.

USD

The buck rose +0.24 to 101.45, breaking to a new high of 102.02 on Thursday before retreating. The buck was very close to printing a swing high on Friday, avoiding that outcome by just 0.03. The buck is overbought (RSI-7=77) and momentum is definitely starting to slow. The candle print on Friday was just a “long black” candle, which the candle code says could go either way – although the probability of a top is higher than the rating for a continuation – around 60/40. A look at the Euro chart also shows slowing momentum, although like with the buck, there is no clear reversal yet in the Euro. The Yen is extremely oversold (RSI-7=7), but momentum for the Yen does not appear to be slowing.

US Equities/SPX

The US equity market rallied +31.45 [+1.44%] to 2213.35, making a new all time high on Friday. US small cap stocks (RUT) have been up 15 straight days – that has to be some kind of record – and both RUT and DJIA made new all time highs on Friday. SPX is overbought (RSI-7=82), but the “white marubozu” candle print on Friday is just a 15% chance of marking the top. VIX dropped -0.51 to 12.34.

This week was about materials, industrials and energy; the very strong rally in industrial metals seemed to be the proximate cause. Sickcare performed worst - and looking at the moving averages, sickcare has definitely diverged from the rest of the market.

Name Chart Chg (W) 52w ch EMA9 MA50 MA200 50/200 Last Crossing last
Materials XLB 2.57% 8.64% rising rising rising falling ma50 on 2016-11-08 2016-11-25
Industrials XLI 2.30% 13.82% rising rising rising rising ema9 on 2016-11-07 2016-11-25
Energy XLE 2.24% 7.30% rising rising rising falling ema9 on 2016-11-14 2016-11-25
Cons Discretionary XLY 2.19% 1.85% rising rising rising rising ma50 on 2016-11-10 2016-11-25
Homebuilders XHB 2.13% -5.93% rising rising rising falling ma200 on 2016-11-17 2016-11-25
Utilities XLU 1.88% 10.32% rising falling rising falling ema9 on 2016-11-25 2016-11-25
Telecom XTL 1.65% 19.10% rising rising rising falling ma50 on 2016-11-08 2016-11-25
Cons Staples XLP 1.43% 2.52% rising falling rising falling ema9 on 2016-11-25 2016-11-25
Technology XLK 1.35% 9.31% rising rising rising falling ma50 on 2016-11-17 2016-11-25
REIT RWR 1.35% -1.38% rising falling rising falling ema9 on 2016-11-22 2016-11-25
Financials XLF 1.13% 12.28% rising rising rising rising ema9 on 2016-11-07 2016-11-25
Healthcare XLV -0.32% -3.62% falling falling rising falling ema9 on 2016-11-22 2016-11-25
Gold Miners GDX -2.09% 53.23% falling falling rising falling ema9 on 2016-11-10 2016-11-25

Gold in Other Currencies

Gold had a bad week in almost every currency; only in Yen did gold do well, and that's just because JPY fell -1.90% on the week vs USD. Gold dropped in XDR by -25.90.

Rates & Commodities

TLT was almost unchanged, falling just -0.02% on the week. TLT is trying hard to put in a low, but missed a swing low this Friday by just a few pennies.

JNK rallied +1.32%, moving back to within a few pennies of its 50 MA. JNK appears to be headed back into an uptrend, although it is not quite there yet.

CRB rose +1.41%, led by a massive rally in industrial metals. CRB had some problems on Friday because of the big move down in crude oil.

Crude rose +0.13 to 45.96, rallying strongly on Tonday and Tuesday, and then plunging almost $2 on Friday. The gyrations in oil are all about expectations for the OPEC talks next week; first there was happy news from Russia saying they were on board for a production freeze, but then Friday saw the Saudis withdraw from the “non-OPEC” meeting next Monday (“why meet with non-OPEC until we get the OPEC group in line” - boom, oil drops $2), while on the same day Iraq agreed to participate in production cuts for the first time. Oil equities were down just slightly even though oil cratered on Friday. I think the setup for an oil rally is a good one. The drop on Friday sets up a slingshot for next week. I don't think OPEC can afford to fail this time – nobody wants to see oil down at $35.

If you are feeling brave, you can buy a CL futures contract Sunday night, which is 1000 barrels of “paper oil”, or $1000 for every $1 change in the price of crude. For the poor folks (like me) there is the half-sized QM contract; a $500 gain/loss per $1 change in the underlying. If OPEC passes something, its probably a $10,000 gain per CL contract. If they don't agree, then maybe an $8,000 loss.

Physical Supply Indicators

* SGE premium to COMEX has risen to $22.19 over COMEX. Chinese are buying the dip with both hands.

* The GLD ETF tonnage on hand fell -30.25 tons, with 885 tons in inventory.

* ETF Premium/Discount to NAV; gold closing of 1186.10 and silver closing of 16.59:

 PHYS 9.66 -1.01% to NAV [down]
 PSLV 6.28 -0.59% to NAV [up]
 CEF 11.73 -8.95% to NAV [down]

* Bullion Vault gold (https://www.bullionvault.com/gold_market.do#!/orderboard) showed no premiums for either gold or silver.

* Big bar premiums are lower for gold [1.92% for 100 oz bars in NYC], higher for silver [+3.43% for 1000 oz bars in NYC], and higher for silver eagles at +16.03% [NYC].

Futures Positioning

There was no COT report this week because of the Thanksgiving holiday in the US.

Moving Average Trends [9 EMA, 50 MA, 200 MA]

No material change this week. Everything is still a sea of red, although with silver and the silver miners performing best, things aren't as bad as they could be, and the downside momentum especially for silver has definitely slowed.

Name Chart Chg (W) 52w ch EMA9 MA50 MA200 50/200 Last Crossing last
Silver $SILVER -0.39% 17.87% falling falling rising falling ema9 on 2016-11-11 2016-11-25
Silver Miners SIL -1.21% 77.09% falling falling rising falling ma200 on 2016-11-11 2016-11-25
Platinum $PLAT -1.65% 8.57% falling falling falling falling ema9 on 2016-11-10 2016-11-25
Gold $GOLD -1.76% 12.21% falling falling falling falling ma200 on 2016-11-08 2016-11-25
Junior Miners GDXJ -2.09% 80.36% falling falling rising falling ma200 on 2016-11-10 2016-11-25
Senior Miners GDX -2.09% 53.23% falling falling rising falling ema9 on 2016-11-10 2016-11-25

Gold Manipulation Report

On Friday, two hours into the trading day in Asia, there were two 2k+ contract down spikes in a 3 minute period that took gold down about $11 to the new low of 1170.30. Buyers appeared fairly rapidly, eventually pushing price back up above the 1180 line of departure. I'd call this more bullish than bearish behavior, and if this was an attempt to break the price of gold sharply lower on the light trading day after Thanksgiving, it failed.

Summary

A dollar breakout to a new high of 102.02 caused gold to plunge through 1200 support; silver followed gold lower but was not as badly hit, and the miners bounced off support. SPX, DJIA, and RUT all made new all time highs this week. In the west, we appear to be back to a “nobody cares” situation for gold, with money pouring into equities and especially small cap stocks.  Crude is experiencing a lot of volatility because of the upcoming OPEC meeting next week; an agreement means a $10 spike higher, and a failure means crude probably drops down into to the mid-30s.

No COT report this week. The big drop in open interest for gold suggests a whole lot of short-covering by the commercials, but we won't know the details until next Monday when the COT numbers are released.

Gold and silver big bar shortage indicators show no signs of shortage in the west; the ETF premiums were mostly lower, and GLD's tonnage dropped. However in Shanghai, premiums have exploded, with the SGE trading at a $22 premium to COMEX, and in India there is talk of a gold import ban.

Gold is now quite oversold, silver is showing some signs of strength and may have put in a low on Friday, and the miners haven't plunged through support just yet, so things are looking as though we may be nearing a low. For this to happen, the buck needs to cooperate. The dollar needs to top out, and for that to occur, the Euro also needs to print a low. Most likely, bonds would also need to bounce too. Momentum indicators suggest all this is possible and in the near term too. Gun to my head, do I think gold is at-or-near a low? Probably yes. It is oversold enough, momentum is slowing, the buck is starting to look a little tired – so I'd say more likely than not, yes. If not Monday, then probably by Wednesday. But I need to see a swing high in the buck to increase the odds.

One wildcard is the Indian gold import ban. If that happens, gold probably experiences another leg down, regardless of what the current TA picture is showing.

The key question in my mind is, would this be “a” low or would it be “the” low? Martin Armstrong's indicators loom large in my mind. His computer places great emphasis on the 1200 break, and the weekly close below 1200, to him, means that gold has further to fall, and that any bounce we see now is just a reaction rally that will eventually be sold.

Armstrong likes to say that the strongest gold rally will come in the form of a “slingshot” move; first a plunge to get everyone out, and then a strong rally that nobody will want to buy because of the preceding scary plunge.  He has said for years that he expects to see a massive dollar rally that will break the back of the US economy, dragging gold below $1000 before the yellow metal “slingshots” higher on a massive “crisis of confidence in government” move.

So based on that, my answer is, this will probably be “a” low, rather than “the” low. In the longer term, I don't think this dollar rally is over. Europe has a lot of issues yet to be resolved, there are a number of important elections coming up over there, and any one of them has the ability to turn into an existential threat to the Eurozone – not to mention the possibility of Turkey opening the “refugee tap” and letting three million Syrians flood across the border into Europe.  Those things are all Euro-negative, which would be dollar-positive.

One would think this political uncertainty would help gold, and at some point, it probably will. However, first we have to rinse out all the “I'm buying gold because of negative rates” gold longs. Are they all gone yet? That, I don't know.

Let's see if next week we get a bounce. And the COT, we need to see that too. And the buck, it needs to top out. Still, gold at $1180 beats gold $1370, doesn't it? Didn't someone say a while back “we'll never see gold at these prices ever again?”  I was so hoping he was right.

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6 Comments

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5683
Silver option expiration charts

Here are three charts, with the OPEX dates given to me by member Luke marked as blue circles.

I think the idea was, "silver always reverses after OPEX" - or it sells off right before OPEX, or something like that.  You can judge for yourself.  I should start a new facebook channel called "IFLD"

2014-02-25 1.000000
2014-03-26 1.000000
2014-04-24 1.000000
2014-05-27 1.000000
2014-06-25 1.000000
2014-07-28 1.000000
2014-08-26 1.000000
2014-09-25 1.000000
2014-10-28 1.000000
2014-11-24 1.000000

2015-03-26 1.000000
2015-04-27 1.000000
2015-05-27 1.000000
2015-06-25 1.000000
2015-07-28 1.000000
2015-08-26 1.000000
2015-09-24 1.000000
2015-10-27 1.000000
2015-11-24 1.000000

2016-01-26 1.000000
2016-02-24 1.000000
2016-03-28 1.000000
2016-04-26 1.000000
2016-06-27 1.000000
2016-08-25 1.000000
2016-11-22 1.000000
 

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5683
A Tax on ATM/cash withdrawals?

Martin Armstrong says that the drumbeat is getting louder to eliminate cash.

The latest idea?  Out of Europe - a tax on ATM withdrawals.

I have to admit, that's not one I saw coming.

https://www.armstrongeconomics.com/world-news/taxes/war-on-cash-taxing-cash-withdrawals/

We are entering a very dark phase in this battle to retain out liberty. A proposal now being whispered behind the curtain in Europe is to impose a tax on withdrawing your own money from an ATM. The banks support this measure as a whole because they see this as preventing bank runs.

Not to mention driving people to electronic transactions, where those same banks get a (minimum) 1% processing fee/cut every time money changes hands.

Banks: a "roach motel" for your money.

KugsCheese's picture
KugsCheese
Status: Diamond Member (Offline)
Joined: Jan 2 2010
Posts: 1469
Re: A Tax On ATM/Cash Withdrawals?

In America the ATM increased bank productivity and lowered costs.    But since banking is a cartel it was allowed to eventually add a fee to cash withdrawal.    I call this a cartel tax.  Thankfully some small banks have seen the light and associated to not charge a fee to its members used their pool of atms.  

thc0655's picture
thc0655
Status: Diamond Member (Offline)
Joined: Apr 27 2010
Posts: 1708
Cash withdrawal anecdote

I never have any trouble withdrawing $1,000 - $5,000 on payday or shortly thereafter at my small, solvent community bank.  But this story is maddening:

http://www.thecommonsenseshow.com/2016/03/25/what-happened-when-i-tried-to-take-1500-cash-out-of-bank-of-america-bank-holiday-is-near/

Yesterday, I went to Bank of America to withdraw $1500 cash. You would of thought I had a sign around my neck saying that I was a heroin dealer.

The teller went and got a bank officer who began to question me:

Bank Officer: Sir, what are you using the money for?

Me: I am using it for a legal personal matter. Beyond that, it is none of your business.

Bank Officer; Sir, we can put a hold on your account. 

Me: Mr. Bank Officer, I will remove my entire account and deposit it to another bank if I do not have my money in five minutes and I want my money in $100 bills. 

Bank Officer: Sir, your threats will not work here and if you are not cooperative and fill out this form, I will call the police and notifiy the IRS. (He wanted me to fill out a Cash Transaction Report which is not required unless your withdrawing $10,000  or more)

Me: Mr. Bank Officer, I refuse to fill out your report because it is not required unless I withdraw $10,000 and your may call who you want…. You obviously do not know the law and who I am. Between my writing and broadcasting, I reach over 2 million people per month. I would say that statistically about 400,000 people have B of A accounts who listen to me or read my articles. Before the end of this month, you will see sizable withdrawals based upon my recantation of this conversations in the public domain. By the way, I am recording this. 

The bank officer walked away and disappeared and then came back in a few moments. He instructed the teller to process my request. 

Bank Officer: I have reviewed your account history and you have been an excellent customer. You are obviously using the money for honorable purposes. I apologize for any misunderstanding.

Me: Thank you. The purposes for the use of my money, is none of your business, it is a matter for law enforcement. You should think about this when you try to bully the next guy. 

I am certain that the threat of my reach and potential action against Bank of America did not influence bank officer’s decision to honor my request. I am sure he called his boss and that they have now filed a Suspicious Activity Report (SAR), and my business affairs will come under the scrutiny of the IRS and possibly the FBI. I have no doubt that they would love to turn me into the next Bundy family member of the banking world. I will have more to say on this topic later in the article.

An Interesting Aside

I requested that my money withdrawal be disbursed in one hundred dollar bills. They had one, count it, one, one hundred dollar bill in the entire bank.

I asked the teller if the bank was making good on the rumor that they were phasing out one hundred dollar bills in their incremental move towards a cashless society. The $10 per hour teller said she they did not know what I was talking about. At that point, and being a little worked up, I asked the teller which arm she was going receive the chip so she could continue buying and selling and working for B of A? She had no idea what I was talking about.

Luke Moffat's picture
Luke Moffat
Status: Gold Member (Offline)
Joined: Jan 25 2014
Posts: 384
OPEX Charts

Thanks for charting, Dave.

The theory I had based on 2016 charts is that the day after OPEX would mark the monthly low. Fairly basic, but I was just curious. Agreed that it's pretty inconclusive given 2014 and 2015 data but I traded the 23rd November low anyway just as little experiment. I was thinking that behaviour around OPEX might also mark trend reversals.

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5683
possible GDX swing low

I think we've probably got a swing low today for PM.  I'm just not sure if the buck has topped out yet - but it might be a process rather than a one-day thing.  Currently we have a swing low in GDX - and a nascent double bottom, which if we can get GDX above 22.25, its a reasonably strong pattern.  First two hours are behind us, and things still seem strong.

Of course if the buck breaks out again, it will probably all come unraveled.  Sometimes things are a process rather than a single day event.

Even if we do have a bounce off the lows, I'm not sure how long it lasts...we just have to let prices tell us.  The buck remains the wildcard.  Traders for sure are looking to buy, they just don't know where the buck goes next.

SPX is also looking a little toppy right now - a correction in general equities would probably help money flow into PM.

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