PM End of Week Market Commentary - 2/10/2017

davefairtex
By davefairtex on Sun, Feb 12, 2017 - 9:15am

 

On Friday gold rose +5.30 to 1234.70 on moderate volume, and silver shot up +0.31 to 17.95 on heavy volume. Silver greatly outperformed gold – the bulk of the move in silver happened right alongside a massive move higher in copper, which started around 08:30, lasted for a few hours, and took copper to a new closing high of 2.78. On Friday alone, the gold/silver ratio plummeted -0.93 to 68.77, which is a sign of just how much better silver did.

For the metals this week, we saw a fairly picture-perfect move higher, at least from the relative movements of the PM category items. Junior miners are leading the seniors, and silver is leading gold. Copper's breakout is icing on the cake; copper and silver tend to move together, although the correlation isn't always perfect. As we know, copper prices are often used as a leading indicator for economic activity, and copper has risen by 32% over the past four months.

Name Chart Chg (W) 52w ch EMA9 MA50 MA200 50/200 Last Crossing last
Junior Miners GDXJ 6.50% 74.14% rising rising rising rising ma200 on 2017-02-06 2017-02-10
Copper $COPPER 6.18% 37.96% rising rising rising rising ema9 on 2017-02-10 2017-02-10
Palladium $PALL 4.65% 49.64% rising rising rising falling ema9 on 2017-02-06 2017-02-10
Senior Miners GDX 3.22% 37.67% rising rising rising rising ma200 on 2017-02-10 2017-02-10
Silver Miners SIL 2.81% 87.61% rising rising rising rising ma200 on 2017-02-09 2017-02-10
Silver $SILVER 2.54% 13.50% rising rising rising rising ma200 on 2017-02-10 2017-02-10
Gold $GOLD 1.07% -0.99% rising rising falling rising ema9 on 2017-01-31 2017-02-10
Platinum $PLAT 0.78% 5.37% rising rising falling rising ma200 on 2017-02-08 2017-02-10

Gold has risen 6 weeks out of the last 7, climbing +13.10 this week. However, on Thursday, gold printed a fairly bearish swing high, and Friday's rally was not all that bullish. The Friday candle was both a “bullish harami” and a spinning top – but both of these patterns were given very low ratings from the candle code.  Gold remains above its 9 EMA, and as a result remains in an uptrend, but the swing high printed on Thursday remains in place.

The May rate-increase chances remain unchanged at 31%.

COMEX GC open interest rose +11,491 contracts.

Most of silver's move this week came on Friday. On the week, silver rose +0.44 [+2.54%], with a new closing high coming on Friday. Friday's candle print was a “confirmed bullish NR7” which the candle code thinks is quite bullish. Silver's sell-off on Thursday was quite a bit milder than gold's sell-off too. It appears that resistance for silver is a combination of the 200 MA and round number 18 – at least that's where this week's rally ran out of steam. The gold/silver ratio fell -1.00 to 68.77. All of this is quite bullish. The contrast with gold is fairly stark, and I credit (or blame!) copper's breakout.

Miners moved higher, with GDX up +3.22% on the week, while GDXJ jumped +6.50%. Both miner ETFs closed above their 200 MA lines, which is a bullish milestone. The miner sell-off on Thursday was countered by a fairly strong rally Friday, resulting in a “piercing” candle pattern which the candle code rated as reasonably bullish. The miners look quite a bit stronger than gold itself; this resulted in a rising GDX:$GOLD ratio. The GDXJ:GDX ratio is also rising. Both of these moves are bullish for PM, as they continue to signal risk on.

USD

The buck rose 5 days out of 5 this week, climbing +0.95 to 100.74, moving above its 9 EMA, and executing a bullish crossover on the MACD. The dollar has moved into an uptrend, and the fact that gold hasn't corrected tells you just how strongly gold is rallying in Euros: up +2.64% for the week. The rise in the buck was caused by a -1.34% drop in the Euro, and an -0.54% drop in the Yen.

US Equities/SPX

The US equity market rose +18.68 [+0.81%] to 2316.10, making a new all time high on both Thursday and Friday, breaking above round number 2300 resistance. The move was ignited by a Trump comment that revealed the timing of his tax plan: it will appear in a few weeks, and it will be “phenomenal.” (It's true, it'll be terrific. You'll see.) This caused the Trump Trade (a collection of companies and instruments assumed to be winners from the new tax policy) to be put back on, after seeing the trade fade earlier in the week. I hope you haven't been short. Market has provided no short entry points – and that's why we wait for such things. Regardless of how overbought things are – they can always get overboughter, to quote a friend of mine. VIX fell -0.12 to 10.85.

VIX rose +0.39 to 10.97, which is still quite low.

This week, sector map shows industrials and homebuilders in the lead, while energy and materials brought up the rear. Both energy and materials put in reversal bars on Wednesday, with energy finally managing to move back into an uptrend after a long 9 week move down. (If you are long oil equities, 9 weeks really can seem like a long time).

Name Chart Chg (W) 52w ch EMA9 MA50 MA200 50/200 Last Crossing last
Gold Miners GDX 3.22% 37.67% rising rising rising rising ma200 on 2017-02-10 2017-02-10
Industrials XLI 1.74% 32.94% rising rising rising rising ema9 on 2017-02-03 2017-02-10
Homebuilders XHB 1.73% 25.84% rising rising rising rising ema9 on 2017-02-09 2017-02-10
Telecom XTL 1.66% 48.32% rising rising rising falling ema9 on 2017-02-08 2017-02-10
Cons Discretionary XLY 1.47% 25.10% rising rising rising rising ema9 on 2017-02-08 2017-02-10
Technology XLK 1.24% 32.51% rising rising rising rising ema9 on 2017-02-01 2017-02-10
REIT RWR 1.17% 15.53% rising rising rising rising ema9 on 2017-02-08 2017-02-10
Cons Staples XLP 1.17% 8.61% rising rising rising rising ma200 on 2017-02-07 2017-02-10
Utilities XLU 0.80% 7.86% rising rising rising rising ma200 on 2017-02-10 2017-02-10
Healthcare XLV 0.62% 13.13% rising rising rising rising ma200 on 2017-02-03 2017-02-10
Financials XLF 0.25% 48.96% rising rising rising rising ema9 on 2017-02-09 2017-02-10
Materials XLB 0.04% 34.31% rising rising rising rising ema9 on 2017-02-10 2017-02-10
Energy XLE -0.16% 36.05% rising rising rising rising ema9 on 2017-02-10 2017-02-10

Gold in Other Currencies

Gold rallied in every currency except the Ruble, and it did best in EUR. Gold was up +23 in XDR.

Rates & Commodities

TLT rallied this week, up +1.48% and closing above both the 50 and 9 EMA lines. Things looked great up until Thursday, when Trump's comment caused TLT to sell off hard, printing a bearish two candle swing high. Friday's “bullish belt hold” candle print was actually not very bullish. As a result, its hard to know where TLT goes next. There are an awful lot of people short bonds already, we have elections in the Netherlands coming in a month, the Greek crisis is heating up again – will she/won't she from the IMF, is a 3.5% surplus in perpetuity possible, and so on. Pulling back to the weekly chart, it does appear that a bullish MACD crossover is about to occur, and the weekly MACD has been a decent trend indicator for bonds. So I'm thinking bonds move higher from here, but I'm not sure exactly when.

JNK rose +0.05%, which is the same as no change at all. JNK remains above its 9 EMA, and continues to signal risk on. Or, perhaps, its not signaling risk off.

CRB rose +0.43%; CRB dipped briefly below its 50 MA, but bounced back above it on the strength of the rally in crude, industrial metals, and agriculture. CRB remains in an uptrend.

Crude rose +0.15 to 54.06, which sounds benign enough. The daily chart shows two heavy selling days on Monday & Tuesday, marking a low at 51.41, followed by a recovery for the last part of the week. The close above 54, although just by a few pennies, is the first time oil has closed above that price level since mid-2015. Part of the reason for the bounce was news out of OPEC that they had achieved a 90% compliance level with their negotiated production reduction. Just from a technical standpoint, the observed bid underneath oil right now is very strong. When oil threatened to more seriously break down on Wednesday following a very bearish petroleum status report, buyers jumped in and caused that reversal. Is it managed money? Is it the Saudis? Its hard to know. But it sure kept oil from breaking down.

Physical Supply Indicators

* SGE premium to COMEX rose to +12.19 over COMEX. Why are the Chinese still seeing a premium on gold even after the large rally? That's an interesting question. Chinese might be restricting gold imports, or the buying pressure might be really intense – with new and tougher capital controls, the escape hatches for Chinese savers are becoming fewer and fewer.

* The GLD ETF tonnage on hand rose +22.22 tons, with 837 tons in inventory.

* ETF Premium/Discount to NAV; gold closing of 1234.70 and silver closing of 17.95:

 PHYS 10.13 -0.05% to NAV [up]
 CEF 12.48 -7.30% to NAV [up]

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

* Big bar premiums are lower for gold [2.21% for 100 oz bars in NYC], lower for silver [+3.12% for 1000 oz bars in NYC], and lower for silver eagles at +17.44% [NYC].

Futures Positioning

COT report covers trading through Tuesday February 7th, when gold closed at 1235.50 and silver 17.70.

In gold, commercials added +6.6k shorts, and managed money also added +1.8k to their short position, while also adding +1.9k longs. In other words, not much happened. Managed money shorts remain at 72k contracts, which probably does not mark a top.

In silver, commercials continued to pile in short, adding +4.1k shorts. Meanwhile, managed money only added +1.1k longs. Note this doesn't cover silver's big rally on Friday. The commercial short position continues to grow, and is not far from possibly marking a top – perhaps 1-2 weeks, depending on the activity.

Gold Manipulation Report

There were no after-hours spikes seen this week.

Summary

The buck decided to reverse direction this week, but the new uptrend in the dollar just served to weaken gold's ascent, rather than derailing it completely. Silver made new highs, as did copper, platinum, and SPX.

Gold COT still looks bullish, with managed money owning 72k short contracts. The silver commercial short position is rising fast, and it will not be long until the commercials are at a point where (theoretically at least) a top in silver might come.

Gold and silver big bar shortage indicators still show no signs of shortage in the west; ETF premiums fell, while GLD tonnage rose. In Shanghai, premiums have started to rise again. This is curious behavior; perhaps Chinese capital controls have shut off the other exits, and that might be forcing people into gold.

The rise in gold alongside the rising dollar indicates that gold is doing very well in other currencies. That's a bullish sign, as is silver's new high, and the strong move in the miners. That said, gold is now overbought, and at some point the steam will run out of the current rally. Its hard to know when that might be, we just have to keep watching how prices behave. For now, the PM uptrend remains intact.

Next week we have the Industrial Production as well as Retail Sales report releases.  I don't know how much impact the actual economic data has anymore; instead prices appear to be moved by tweets and off-hand remarks made during or after various meetings at the White House. We're in a new era. Is it good, bad or indifferent? I don't know. It just is. We've elected a change agent, and now we definitely seem to be getting change.

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