PM End of Week Market Commentary - 3/31/2017

davefairtex
By davefairtex on Sun, Apr 2, 2017 - 5:55am

 

On Friday gold rose +6.80 to 1251.60 on light volume, and silver climbed +0.14 to 18.27 on moderate volume. Gold was under selling pressure until about 30 minutes before the open in New York; at that time gold suddenly spiked higher, eventually climbing about $10 off the lows.  Silver did even better.

This week was another strange week.  Overall, silver powered higher and is in a clear uptrend, above all 3 moving averages.  Platinum and the miners are now below all 3 moving averages, with platinum performing worst of all the metals this week.  Gold is camped somewhere in the middle.  I look at the tea leaves and I have no idea what it all means.

Name Chart Chg (W) 52w ch EMA9 MA50 MA200 50/200 Last Crossing last
Silver $SILVER 2.81% 18.28% rising rising rising rising ma200 on 2017-03-27 2017-03-31
Copper $COPPER 0.61% 21.64% falling rising rising falling ema9 on 2017-03-31 2017-03-31
Silver Miners SIL 0.47% 35.87% rising falling falling rising ema9 on 2017-03-31 2017-03-31
Gold $GOLD 0.42% 1.39% rising rising falling rising ema9 on 2017-03-31 2017-03-31
Senior Miners GDX -0.48% 14.22% falling falling falling rising ema9 on 2017-03-28 2017-03-31
Junior Miners GDXJ -0.61% 29.19% falling falling falling rising ema9 on 2017-03-28 2017-03-31
Palladium $PALL -1.32% 41.47% rising rising rising falling ma50 on 2017-03-16 2017-03-31
Platinum $PLAT -1.56% -2.53% falling falling falling falling ema9 on 2017-03-28 2017-03-31

Gold closed up +5.20 on the week. This week, gold ran into resistance at the 200 MA, and after a few days trying to break higher, ended up selling off briskly on Thursday and printing a swing high. The rally on Friday resulted in a simple long white candle, which the code felt was neutral – this does not negate Thursday's swing high. This suggests gold probably remains in its recent downtrend.

That said - if we factor in the dollar's +0.78% move this week, gold actually looks significantly better. The chart of gold in Euros made a new closing high on Friday, and there is no sign of a swing high or any other bearish indicator.

The June rate-increase chances rose to 63%.

COMEX GC open interest fell -43,510 contracts.

Silver rose +0.50 [+2.81%] this week, with the bulk of the moving coming on Monday. In spite of the strong dollar, silver was able to cross its 200 MA and stay above it for the entire week. It appears that the 200 MA is now acting as support for silver. That's bullish. Unlike gold, silver did not print a swing high this week. The candle code thought silver's “closing white marubozu” print on Friday was also bullish.

The gold/silver ratio fell -1.63 this week to 68.49. That's bullish too.

Miners did poorly this week, with GDX printing a swing high to go along with GDXJ's swing high from last week. GDX fell -0.48%, while GDXJ dropped -0.61%. They were modest losses to be sure, but the miners continue to underperform the metals. GDX:$GOLD ratio fell, which is a sign of risk off in PM. There was a miner rally for much of the day on Friday, but then the miners sold off into the close. The “spinning top” candle print for GDX was seen as somewhat bearish – a continuation of the current downtrend – even though gold and silver both closed near their highs for the day.  As has been the case for several weeks, enthusiasm for the metals has not translated into bids for the miners.

USD

The buck printed a swing low on Tuesday, and closed up +0.78 to 100.22, moving back above round number 100 and the 9 EMA. The recovery in the buck is all about the Euro, which fell -1.44 [-1.38%] this week to 106.58. Euro printed a swing high on Tuesday, is now back below all 3 moving averages, the pace of the decline looks quite steep, and if this continues, the buck will certainly continue moving higher. This does seem to be providing headwinds for gold when priced in dollars, but the gold rally in Euros continues to look strong and steady.

US Equities/SPX

SPX rose +18.74 [+0.80%] this week to 2362.72, with the majority of the gains (and the swing low) happening on Tuesday. Friday's candle print was a spinning top/NR7, which looked neutral. SPX is now back above its 9 EMA, but it remains in an early pattern of lower highs and lower lows; for now, this is just a bounce in a downtrend.

The sector map shows a strongly rallying energy sector, along with consumer discretionary, materials, and homebuilders. That's actually fairly bullish-looking, except for the financials which continue to look weak. XLF was unable to re-cross its 9 EMA or its 50 MA; I think its still a short candidate. If the dollar weren't rallying so strongly (suggesting capital flows from other places into the US), I'd say it was a good opportunity.

VIX fell -0.59 to 12.37.

Name Chart Chg (W) 52w ch EMA9 MA50 MA200 50/200 Last Crossing last
Energy XLE 1.95% 12.94% rising falling rising falling ema9 on 2017-03-28 2017-03-31
Cons Discretionary XLY 1.61% 11.19% rising rising rising rising ema9 on 2017-03-28 2017-03-31
Materials XLB 1.45% 16.96% rising rising rising rising ema9 on 2017-03-28 2017-03-31
Homebuilders XHB 1.25% 10.02% rising rising rising rising ema9 on 2017-03-28 2017-03-31
Technology XLK 0.89% 20.18% rising rising rising rising ema9 on 2017-03-28 2017-03-31
Industrials XLI 0.82% 17.29% rising rising rising falling ema9 on 2017-03-28 2017-03-31
Financials XLF 0.81% 29.88% falling rising rising falling ema9 on 2017-03-31 2017-03-31
Telecom XTL 0.60% 24.27% rising rising rising falling ma50 on 2017-03-31 2017-03-31
REIT RWR 0.58% -3.02% rising falling falling rising ema9 on 2017-03-29 2017-03-31
Healthcare XLV 0.09% 9.71% falling rising rising rising ema9 on 2017-03-17 2017-03-31
Cons Staples XLP -0.22% 2.86% falling rising rising rising ema9 on 2017-03-17 2017-03-31
Gold Miners GDX -0.48% 14.22% falling falling falling rising ema9 on 2017-03-28 2017-03-31
Utilities XLU -1.12% 3.41% falling rising rising rising ema9 on 2017-03-29 2017-03-31

Gold in Other Currencies

Gold rallied in most currencies this week; it fell only in Rubles and Rupees. Gold in XDR was up +14.31.

Rates & Commodities

TLT fell -0.14%, first making a new high on Monday, then a swing high on Tuesday – the same day of the good-sized move higher in equities. Friday's candle print was a bullish “piercing” pattern, which the code gave an 85% chance of marking a low. I suspect TLT's future depends entirely on the equity market at this point. TLT remains above its 9 EMA and 50 MA. TLT is hinting at risk off.

JNK staged a strong rally this week, climbing +1.07%, confirming the double bottom pattern, and is now back above all 3 moving averages and looking quite bullish. The “bearish harami” pattern printed on Friday is not bearish at all – its more neutral. JNK is signaling risk on.

CRB rose +1.32% this week, almost entirely because of the rally in energy prices. CRB printed a swing low and then rallied for four straight days. It is well above its 9 EMA, and moving slowly back up towards the 50. The other commodity groups are not helping much.

Crude oil rose +2.71 [+5.63%], printing a swing low on Tuesday and then rallying for four straight days. Friday's “closing white marubozu” candle was seen as bullish. Oil closed at the highs for the day on Friday; traders did not appear to want to be short oil over the weekend. Wednesday saw the largest move, due to the relatively bullish EIA report which showed a small crude inventory build, and a larger gasoline inventory draw. Also helping crude were “armed protesters” in Libya which shut down production, knocking 150k barrels per day off world oil supply.

This week's crude oil COT report showed managed money to have dumped a large number of long positions and added a large number of shorts after the drop three weeks ago. At the same time, the commercials have gone heavily long. Over the past couple of years, commercials have steadily “bought the dip” in crude, while managed money has tended to sharply increase their short positions right at the lows. From the COT perspective, we could go significantly higher from here in crude, perhaps right back to the trading range at 54.

Physical Supply Indicators

* SGE premium to COMEX fell -4.08 to +10.06 over COMEX.

* The GLD ETF tonnage on hand fell -0.30 tons, with 832 tons in inventory.

* ETF Premium/Discount to NAV; gold closing of 1251.60 and silver closing of 18.27:

 PHYS 10.22 -0.47% to NAV [down]
 PSLV 6.90 -0.57% to NAV [down]
 CEF 12.86 -6.10% to NAV [down]

* 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 [1.75% for 100 oz bars in NYC], lower for silver [+3.16% for 1000 oz bars in NYC], and lower for silver eagles at +15.05% [NYC].

Futures Positioning

COT report covers trading through Tuesday March 28th, when gold closed at 1254.80 and silver 18.21.

In gold, commercials added +27k shorts, while managed money added +21k longs and closed -14k shorts. Commercials appear to have added to their shorts at the 200 MA, but not dramatically. Commercial shorts remain at relatively low levels, and so gold remains in a bullish COT configuration.

In silver, commercials added 7.9k shorts, while managed money added +14k longs. The managed money buying seems to be responsible for the rally in silver this week. Last week's pattern of commercial long buying during a rally was not repeated this week.

Gold Manipulation Report

There were no after-hours spikes seen this week.

Eurozone Status

  • French Presidential Elections; May 2017: relatively likely EU non-event. Current polls have for the 2nd round: Macron 60/Le Pen 40. Simple math says that if this improvement continues at this same rate, Le Pen could win.

  • German Elections; October 2017: Merkel/Shulz remain tied. Both parties are pro-Euro. Non-event.

  • Greek bailout; June 2017 they need to pay 7 billion Euros. No agreement yet. Greece appears to be heading into recession.

  • Turkey & the migrants: the referendum to change the Turkish constitution is polling at about 50/50 right now, up strongly from the 58/42 “no” position where it was back in January. How will a politically stronger Erdogan affect the EU? The EU provides a good foil for him to rail against. Early voting starts Monday, ending April 16th. http://www.independent.co.uk/news/world/middle-east/turkey-referendum-vo...

  • Italian Elections: no progress towards an early election; Grillo's 5-star party continues to poll at roughly 30%, a 3 to 5 point lead over their next closest competitor.

Summary

A rebound in the buck caused headwinds for gold and the miners; silver continued moving higher in spite of the currency moves. GDX:$GOLD ratio continues to fall, albeit somewhat more slowly. The Euro is back to looking ill again, while gold-in-Euros continues to power higher.

Gold COT continues to look bullish, although commercials have started to add to their short positions once again this week. In silver, managed money added a large number of longs this week, providing fuel for the silver rally. While the silver COT isn't at a bearish extreme just yet, it could get there within a few weeks time.

Gold and silver big bar shortage indicators shows no more hints of shortage in the west; ETF premiums all fell and GLD tonnage fell slightly. In Shanghai, premiums continue to decline, but remain meaningfully higher than COMEX.

In Europe, Le Pen is edging closer to Macron. She has 20 points to make up. If she continues to improve her poll numbers at this rate, she will pull even in the polls by the May 7th election day. If that happens, she probably wins.

What caused the Euro to top out this week and decline so suddenly? Le Pen?  I don't know. Maybe there was a Trump Tweet I missed.

Commodities may have bottomed out; crude did very well this week, copper looked ok, and perhaps that helped silver. Its hard to know. Charts show that silver is strong; COT says that managed money is buying heavily. Financials continue to look weak, which hints at risk off for equities.

Risk is increasing right now in PM.  Silver is still rallying, but both gold and both miner ETFs have printed swing highs.

Trend-following code says:

Uptrend: silver, copper, crude, natgas, SPX, treasury bonds, USD.

Downtrend: gold, platinum, and the miners.

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2 Comments

Eannao's picture
Eannao
Status: Silver Member (Offline)
Joined: Feb 28 2015
Posts: 165
COT Interpretation

Dave,

my knowledge of COT reports comes solely from Mike Maloney. He regularly discusses graphs of the COT reports in his 'Insiders Reports'. His simple interpretation is that 'the Commercials are nearly always right' i.e. they increase their short positions as the price rises and then cover them for profit in the subsequent pull back. Therefore, he views increasing Commercial shorts as a bearish indicator. Currently in silver, with Commercial shorts at practically all-time-highs, he predicts more downside for silver.

Would you agree with this? Are there other conclusions that you draw from the COT report? You may have explained this in past reports. If so, apologies for the repetition.

Thanks, E.

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5683
silver COT

E-

Sorry for not replying earlier.  The COT right now is a bit confusing, especially in silver.  Managed money has gone hog wild buying silver contracts over the past 3-4 years or so.  Literally, the number of contracts on the long side has tripled ever since silver dropped back below $20.  There is the normal range of cyclicality, and then there's the baseline number of contracts outstanding that don't get rinsed out on the dips.

I ran the "non-commercial long" positions through a 52-week moving average to smooth out the cycles.

So while the commercial shorts are "largest ever", so are the non commercial longs.  Some do get rinsed out during the bumps, but the baseline just keeps rising.

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