PM End of Week Market Commentary - 12/2/2016

davefairtex
By davefairtex on Sat, Dec 3, 2016 - 7:03am

 

On Friday gold rose +5.60 to 1179.20 on moderately light volume, and silver rose +0.23 to 16.80 on moderate volume.  The Nonfarm Payrolls report was slightly above expectations, but the buck decided to fall rather than rally on the news - the NFP release approximately marked the low point for PM for the day, and soon after the release both gold and silver started moving higher, closing at or near the highs.  Traders being willing to take both gold and silver home for the weekend was a distinctly positive sign.

This week, we see a nascent recovery in PM; every PM component except gold has managed to climb back above the 9 EMA which is a first step on the road to recovery. (Perhaps you thought it might have been admitting you have a problem?  "My name is Gold, and I'm in a downtrend.") The sector overall remains in long term downtrend. Half the items (gold, platinum, senior mining shares) have executed “death crosses” (the 50/200 box) which are a long term bearish trading signal. Copper – the only industrial metal on the list - is the sole happy participant, remaining in a strong uptrend in spite of the sell-off this week.

Name Chart Chg (W) 52w ch EMA9 MA50 MA200 50/200 Last Crossing last
Silver Miners SIL 5.36% 83.72% rising falling rising falling ema9 on 2016-12-02 2016-12-02
Junior Miners GDXJ 4.91% 82.97% rising falling rising falling ema9 on 2016-12-02 2016-12-02
Senior Miners GDX 3.69% 51.74% rising falling rising falling ema9 on 2016-12-02 2016-12-02
Platinum $PLAT 2.47% 9.75% rising falling falling falling ema9 on 2016-12-02 2016-12-02
Silver $SILVER 1.30% 19.40% rising falling rising falling ema9 on 2016-12-02 2016-12-02
Gold $GOLD -0.58% 11.05% falling falling falling falling ma200 on 2016-11-08 2016-12-02
Copper $COPPER -2.41% 27.67% rising rising rising rising ma200 on 2016-10-27 2016-12-02

Following the break through 1200 last week, gold continued selling off this week, making a new low to 1162.20 on Thursday before printing a two-candle swing low on Friday. The candle code wasn't so impressed with this swing low, giving it just an 18% chance of success. Perhaps it was the low volume? Its hard to say.  An 18% success rate for a swing low is a really low rating.

December rate-increase chances are at 93%.

This week, gold open interest fell by -27,303 contracts, down to 362k contracts total.

Unlike gold, silver avoided making new lows this week. Mostly, silver just chopped sideways but on Friday it managed to print a “confirmed bullish doji” (shorthand for a two-candle pattern in which the first candle is a doji that makes a low, and the next-day candle closes above the top of the doji). The candle print is bullish, with an 86% chance of the doji marking a low. The gold/silver ratio fell -1.33 to 70.19, underscoring silver's recent out-performance trend. All of these outcomes are positive signs for silver.

Like silver, miners avoided making a new low also this week, and on Friday the miners were able to break out of the bearish descending triangle pattern and close back above the 9 EMA. Volume on the breakout was fairly good. Friday's candle print was less inspired, a “confirmed bull high wave” which had a low rating – only a 19% chance of a low, but I like the moderately high volume breakout from the triangle anyway.

The GDX:$GOLD ratio also ticked higher this week, which is a bullish sign, as did the GDXJ:GDX ratio.

USD

The buck fell this week, dropping -0.69 to 100.76, printing a swing high on Monday and ending the week well below the 9 EMA. If we assume the buck remains in an uptrend because of big impending trouble in the Eurozone (juxtaposed with Trump threatening to raise trade barriers on big exporters Europe and Japan), we might assume that any dollar correction could be temporary in nature. Perhaps we only have a short respite in the buck? The Italian referendum is this weekend, and if it passes, the Euro could take another leg down. Any convincing drop through 105 signals a much deeper crisis. Add to this the Yen chart, which has yet to recover in any meaningful way. The Yen did print a swing low on Friday, but the chart still looks like the momentum remains to the downside.  All this is dollar-positive.

The candle print for the buck on Friday was a spinning top, which does not mark a low (sub-10%).

US Equities/SPX

The US equity market fell -21.40 [-0.97] to 2191.95.  SPX printed a swing high on Monday, crossed below the 9 EMA on Thursday, and now appears to be headed into a correction of some sort.  VIX rose +1.78 to 14.12.

You can see from the sector map that the market is bifurcating. Doing well are energy, financials, materials and industrial equities – in short, commodities, the big industrials, and banks. These all remain in strong uptrends. Doing poorly are utilities, consumer staples, and healthcare, all of which have executed “death crosses”.  Money is flowing from one group of sectors to another group, dividing the market into winners and losers.

Name Chart Chg (W) 52w ch EMA9 MA50 MA200 50/200 Last Crossing last
Gold Miners GDX 3.69% 51.74% rising falling rising falling ema9 on 2016-12-02 2016-12-02
Energy XLE 2.90% 14.93% rising rising rising rising ema9 on 2016-11-30 2016-12-02
Financials XLF 1.07% 15.55% rising rising rising rising ema9 on 2016-11-07 2016-12-02
Materials XLB 0.85% 10.99% rising rising rising rising ma50 on 2016-11-08 2016-12-02
Industrials XLI 0.16% 16.83% rising rising rising rising ema9 on 2016-11-07 2016-12-02
REIT RWR 0.09% 1.79% rising falling rising falling ema9 on 2016-12-02 2016-12-02
Utilities XLU -0.76% 11.75% falling falling rising falling ema9 on 2016-11-30 2016-12-02
Cons Staples XLP -1.27% 2.51% falling falling falling falling ema9 on 2016-11-30 2016-12-02
Healthcare XLV -1.54% -2.45% falling falling rising falling ema9 on 2016-11-22 2016-12-02
Cons Discretionary XLY -1.86% 2.21% falling rising rising falling ema9 on 2016-11-30 2016-12-02
Technology XLK -2.73% 7.33% falling falling rising falling ma50 on 2016-12-01 2016-12-02
Homebuilders XHB -2.80% -5.48% falling falling rising falling ma200 on 2016-12-01 2016-12-02
Telecom XTL -3.24% 17.00% falling rising rising falling ema9 on 2016-11-30 2016-12-02

Gold in Other Currencies

Gold continued to drop in all currencies; gold in XDR fell -10.93.

Rates & Commodities

TLT fell -1.01% this week making a new low on Thursday. On Friday, TLT printed a two-candle swing low which the candle code assigns a mid-range rating of 66% of this being the low. Of course we also saw a swing low last week and nothing came of it, but eventually one of these will stick and bonds will bounce.

JNK rallied +0.27% on the week, managing to squeak back above its 50 MA on Friday. JNK is still not in an uptrend, having more or less chopped sideways all week long.  JNK has a hard time moving higher when the overall bond market drops.

CRB rose +3.21%, driven entirely by the massive rally in crude oil. CRB made a “higher high” on Thursday, is back in a reasonably strong uptrend in the medium term, and on the weekly chart appears to be heading for a retest of the highs set back in May.

Crude rose +5.72 to 51.68, leaping higher following the announcement that OPEC had agreed to limit supply by 1.2 million barrels. From what I can tell, the Saudis will be the ones doing the heavy lifting, although the question remains, how well will everyone hold to their promises to limit production. For now, oil appears to be ready to test the previous high set back in October – a break above that would probably result in a flurry of short-covering.

Physical Supply Indicators

* SGE premium to COMEX has risen to $26.73 over COMEX. This is a high rating; the Chinese remain very strong buyers of physical gold at these prices, and these premiums say there is a shortage of gold in China.

* The GLD ETF tonnage on hand fell -14.82 tons, with 870 tons in inventory.

* ETF Premium/Discount to NAV; gold closing of 1179.20 and silver closing of 16.80:

 PHYS 9.65 -0.53% to NAV [up]
 PSLV 6.38 -0.22% to NAV [up]
 CEF 11.94 -7.43% to NAV [up]

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

* Big bar premiums are higher for gold [1.96% for 100 oz bars in NYC], lower for silver [+2.81% for 1000 oz bars in NYC], and higher for silver eagles at +17.56% [NYC].

Futures Positioning

COT report covers trading through Nov 29th, when gold closed at 1179 and silver 16.67.

In gold, commercials covered -30k shorts, while managed money bailed out of -10k longs. Its hard to know if “this is enough”, but the short/long positions have retraced about 2/3 of the 2016 gold rally.

In silver, commercials covered -7.7k shorts, while managed money sold -1k longs. I believe managed money long positions could well be at a low point for silver, based on the previous trend of contract accumulation.  This situation could explain silver's outperformance this week.

Gold Manipulation Report

There was one spike down in gold on Thursday, which was a precursor to the actual low set later in the day at 1162.20.  Given that Friday saw the swing low, this particular spike could be viewed as a possible probe for determining just how many buyers were present in the 1160 price range - a form of technical "are we here yet" technique for locating the bottom.  Since the spike started out at 1173, and gold closed the week at 1179, the spike definitely didn't move prices lower, except for just a few hours.

Summary

In the PM space, everything had a good time this week except for gold. Silver and the miners look ready to reverse, have printed swing lows and having closed above the 9 EMA. Gold remains the laggard. Not even a correction in the buck was enough to drag gold back into positive territory.

Gold COT report shows a continuing flood of short-covering by the commercials, and a slowing pace of long liquidation by managed money. In silver, long liquidation has almost stopped, and absolute levels of commercial short and managed money long positions seem extended enough to indicate a low for silver.

Gold and silver big bar shortage indicators show no signs of shortage in the west; ETF premiums did improve this week, but GLD's tonnage dropped. In Shanghai, premiums continue to increase, with the SGE trading at a $26 premium to COMEX – about 2%. Historically, that's a very large premium. The Chinese love to buy discounted gold. What's more, elevated SGE premiums have sometimes (but not always) picked the bottom in gold.  [SGE Premium in the chart below was run through a 5 point moving average to smooth out the spikes]

So last week I suggested that gold would reverse if the buck corrected. That didn't happen – unless you count the weak swing low on Friday. PM still seems a bit iffy to me as a result. Perhaps traders are worried about what I drew in the USD chart – the concern is, any fall in the buck might be short-lived, because of problems in the EU that could end up sending the Euro crashing through 105.

But then we have those gold-price-dip-buying Chinese. And the paper is starting to run low at the COMEX. No really, it is – we're down to absolute “COMEX paper ton” levels last seen at gold=1044 lows in 2015. The panic out of paper has been both large and rapid.

So are we there yet in terms of a low? In silver, quite possibly. In gold, I'm less certain. The wildcard remains the buck, and the buck-gold price interaction. If gold continues to sell off every time the dollar rallies, that remains the danger.

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5 Comments

Penny551's picture
Penny551
Status: Silver Member (Offline)
Joined: Nov 8 2012
Posts: 154
Goldbug Humor

 "My name is Gold, and I'm in a downtrend."

That made me chuckle.  I'm not sure many outside of this circle would get it, though :)

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5416
Rule #3: Minimize Key Supporters

I was amused to read an article in WAPO (your favorite propaganda news org) that was entitled, "Trump's Cabinet is looking Less Trumpian than Expected" and how what it was saying fit quite neatly into the context provided for us by my favorite video, Rules for Rulers:

https://www.washingtonpost.com/politics/trumps-emerging-cabinet-is-looking-less-trumpian-than-expected/2016/12/03/bf0949c2-b8bc-11e6-959c-172c82123976_story.html?utm_term=.ad6381497ba9

The emerging Cabinet has gone a long way toward mollifying some of Trump’s Republican critics, and several of the picks — including the wife of the Senate majority leader as transportation secretary — are tailor-made to encourage cooperation between the administration and GOP leaders on Capitol Hill. The incoming team is preparing not only to implement longtime Republican goals — such as repealing the Affordable Care Act and cutting taxes — but also to push for Trump’s iconoclastic and controversial campaign promises on issues such as a border wall and trade.

This was taken straight from the section on rule #3: Minimize Key Supporters, where R4R explains the cull that happens in the revolutionary team when the new dictator achieves power.  Specifically, how "the keys necessary to achieve power were not necessarily the same as those required to keep it, and having someone on the payroll who was vital then, but useless now, was like spending money on the citizens: treasure wasted on the irrelevant."  [I want a shirt that has this scene on the cover; starting at 5:00]

While Giuliani remains a finalist for secretary of state, the prospects for both men to hold sway in Trump’s Cabinet seem to have faded.

“I think Giuliani and Gingrich are just loose fruits right now,” said Douglas Brinkley, a presidential historian at Rice University. “No one knows where to put them.”

So Rule #3: Kill Unnecessary Keys.  Metaphorically, of course.

How will Gingrich and Giuliani help Trump to retain power?  I don't know.  If they can't show him, they'll end up as bodies on the ground...

thatchmo's picture
thatchmo
Status: Gold Member (Offline)
Joined: Dec 14 2008
Posts: 456
Mother of Invention....

 

"Politics is the entertainment branch of industry." Frank Zappa

Probably could have mis-qouted: "military-industrial complex".  Not entertained.  Aloha, Steve.

 

Edwardelinski's picture
Edwardelinski
Status: Gold Member (Offline)
Joined: Dec 23 2012
Posts: 319
On Gingrich:

They are dancing on the streets on K-Street.The Neocons could not have dreamed of a better outcome.According to the Hill Gingrich has raised his speaking fees due to access to Trump.The revolving door of filth continues.The US Marine Corp in essence has now been given a blank check to run bat-sh**crazy.Increasing Marine Battalions,stealth fighter jets from Lockheed Martin,Guilianni cyber security coverage etc.If i was the mother of a Marine i would have to be medicated.Be afraid...The alternative sites wont report on this,because.....

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5416
the treasure

I'm not surprised about any of it - although I'd argue that the neocons would have been much happier with HRC in charge, because she would have been Trump on Steroids.

In our current democracy, part of "the treasure" that the Ruler gets to dispense is exactly this: with even perceived access to power comes a payday.  And so Trump's entire entourage gets well even before dispensing a single favor.

What do we imagine the Clinton Foundation was all about, except buying influence with a prospective chief executive of the nation in advance?

Conversely, with no access comes no influence, and with no influence comes a much reduced payday.  That's why both Norway and Australia have dramatically reduced their "donations" to the "Clinton Foundation" immediately following HRC's electoral defeat.

There's no need to bribe a failed politician.  I'll bet her speaking fees are sharply reduced also.  No $600,000 speaking fees from Goldman anymore.

 

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