PM End of Week Market Commentary - 4/7/2017

davefairtex
By davefairtex on Sun, Apr 9, 2017 - 5:23am

 

On Friday gold rose +2.50 to 1256.10 on heavy volume, while silver fell -0.27 to 18.00 on very heavy volume. Both metals spiked higher early in the Asia trading session following the US missile attack on Syria, but after the initial spike faded, silver came under some sudden, heavy selling pressure just before 13:00 in New York. Silver was smashed lower, and it appeared as though a bunch of stops were run. It was a deliberate act, probably by the commercials. Gold followed silver lower, losing most of its gains.

While the buck did quite well on Friday, the moves in PM came as a direct result of the silver smash rather than any moves in currency markets.

On the week, the metals were mixed. Senior miners actually did best, with GDX breaking above both the 9 EMA and the 50 MA. Gold tried and failed to move above its 200 MA. Silver was pounded through its 9 EMA on Friday. Palladium remains strongest, and platinum weakest, with copper somewhere in the middle.

Name Chart Chg (W) 52w ch EMA9 MA50 MA200 50/200 Last Crossing last
Senior Miners GDX 3.02% 13.09% rising rising falling rising ma50 on 2017-04-04 2017-04-07
Silver Miners SIL 2.50% 36.34% rising rising falling rising ema9 on 2017-03-31 2017-04-07
Junior Miners GDXJ 1.61% 25.29% rising rising falling rising ema9 on 2017-04-03 2017-04-07
Palladium $PALL 0.49% 49.65% rising rising rising rising ma50 on 2017-03-16 2017-04-07
Platinum $PLAT 0.37% -0.26% falling falling falling falling ema9 on 2017-04-06 2017-04-07
Gold $GOLD 0.36% 1.14% rising rising falling rising ema9 on 2017-03-31 2017-04-07
Copper $COPPER -0.41% 27.20% falling falling rising falling ema9 on 2017-04-07 2017-04-07
Silver $SILVER -1.53% 18.15% falling rising rising rising ema9 on 2017-04-07 2017-04-07

Gold closed up +4.50 on the week, turning in a huge failed rally on Friday. While gold was able to smash through the 200 MA after the US missile attack, it could not hold onto its gains. It felt as though gold was dragged lower by the attack on silver; left to its own devices, gold probably would have closed the week above the 200 MA. Candle print on Friday was a shooting star, which the candle code found to be only slightly bearish.

The June rate-increase chances rose to 71%.

COMEX GC open interest rose +16,595 contracts.

Silver fell -0.28 [-1.53%] this week, with almost the entire move happening on Friday. Silver both made a new high on Friday, and then was smashed through its 9 EMA and 200 MA all on the same day. Martin Armstrong likes to say that “slingshot” moves are the most powerful. I believe this is an example. Silver used a great deal of energy on Friday breaking sharply higher following the US missile attack to 18.50, and as a result, the reversal off that move was even more impressive than it would have been otherwise. Curiously, the candle print was just a long black candle, which the code does not find to be particularly bearish.  I'm not sure what the code is thinking; Friday's print looks quite bearish to me.  Silver appears to have double-topped.  We'll see who is right next week.

The gold/silver ratio rose +1.32 to 69.80; the entire move in the ratio came on Friday.

Miners did well, with GDX up +3.02% and GDXJ up +1.61%. While both groups rallied on the week, seniors led the juniors, which isn't ideal. However, the GDX:$GOLD ratio rose sharply, which is bullish in general for PM. Friday saw a large gap up open, followed by steady selling pressure which increased after the silver smash.  Once the selling in silver stopped, the miners bounced back somewhat.   As a result of the bounce, the candle print was just a long black candle, which looked moderately bearish: a 36% chance of marking a top.  The miners aren't overbought right now; perhaps that's why it was only a moderately bearish day for GDX.

USD

The climbed +0.89 to 101.10, with most of the move happening on Thursday and Friday. The buck did particularly well on Friday, blowing through its 50 MA and printing a long white candle which looked bullish. Mostly the dollar move was due to the Euro, which fell -0.90% on the week. Support for the Euro is down around 105; the Euro ended the week at 105.95.

US Equities/SPX

SPX fell -7.18 to 2355.54 this week, with the most excitement happening on Wednesday following the release of the FOMC minutes: a 20 point rally turned into a 7 point loss. Friday's candle print was a doji, which the code says is neutral; current trend remains in place, which is down. SPX remains below its 9 EMA. A close below the 50 is the next waypoint in the SPX downtrend, and it is not far away.

The sector map shows telecom, homebuilders, and financials leading lower, with REITs and energy rising. It looks more bearish than bullish, mostly because of the financials.

VIX rose +0.50 to 12.87.

Name Chart Chg (W) 52w ch EMA9 MA50 MA200 50/200 Last Crossing last
Gold Miners GDX 3.02% 13.09% rising rising falling rising ma50 on 2017-04-04 2017-04-07
REIT RWR 0.99% -0.80% rising falling falling rising ma50 on 2017-04-06 2017-04-07
Energy XLE 0.66% 15.08% rising falling rising falling ema9 on 2017-03-28 2017-04-07
Materials XLB 0.34% 18.90% rising falling rising falling ema9 on 2017-04-04 2017-04-07
Cons Staples XLP 0.22% 2.97% rising rising rising rising ema9 on 2017-04-07 2017-04-07
Utilities XLU 0.18% 5.78% falling rising rising rising ema9 on 2017-04-07 2017-04-07
Industrials XLI 0.11% 19.50% rising rising rising falling ema9 on 2017-04-06 2017-04-07
Healthcare XLV 0.07% 7.00% falling rising rising rising ema9 on 2017-03-17 2017-04-07
Technology XLK -0.47% 20.89% falling rising rising rising ema9 on 2017-04-05 2017-04-07
Cons Discretionary XLY -0.78% 11.89% falling rising rising falling ema9 on 2017-04-07 2017-04-07
Financials XLF -0.88% 31.84% falling falling rising falling ema9 on 2017-03-31 2017-04-07
Homebuilders XHB -1.29% 8.70% falling rising rising rising ema9 on 2017-04-03 2017-04-07
Telecom XTL -1.51% 24.08% falling falling rising falling ema9 on 2017-04-03 2017-04-07

Gold in Other Currencies

Gold rallied in most currencies this week; it fell in Rupees and Yen. Gold in XDR was up +12.96.

Rates & Commodities

TLT was flat on the week, rallying sharply on Monday, and plunging hard on Friday. Candle print for Friday was a very bearish-looking closing black marubozu. Friday's move took TLT below its 9 EMA.

JNK fell -0.45% this week, with most of the trouble happening on Monday. JNK is now below its 50 MA and is looking a bit bearish.

CRB rose +0.66% this week, with 4 of 5 sectors reporting gains. Energy did best. CRB is slowly moving up towards its 200 MA.

Crude oil had another good week, up +1.56 [+3.07%] to 52.41. There were hints of tightening in oil supply; tanker traffic was down 16%, and so in spite of a mildly bearish EIA report which showed a small crude inventory build, oil prices did well. Oil equities did less well. Crude closed the week convincingly above its 50 MA, but the spinning top candle print was seen as bearish by the candle code; a 57% chance of marking the top. Oil has moved up more than $4 in two weeks, and it is moving into overbought territory (RSI-7=79).  Maybe its time for a rest?

http://oilprice.com/Energy/Crude-Oil/Tanker-Traffic-Points-At-Much-Tighter-Oil-Markets.html

Physical Supply Indicators

* SGE premium to COMEX moved up to +10.40 over COMEX.

* The GLD ETF tonnage on hand rose +4.4 tons, with 836 tons in inventory.

* ETF Premium/Discount to NAV; gold closing of 1256.10 and silver closing of 18.00:

 PHYS 10.30 -0.09% to NAV [up]
 PSLV 6.80 -0.44% to NAV [up]
 CEF 12.80 -8.2% to NAV [down]

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

* Big bar premiums are lower for gold [1.38% for 100 oz bars in NYC], higher for silver [+3.40% for 1000 oz bars in NYC], and higher for silver eagles at +15.44% [NYC].

Futures Positioning

COT report covers trading through Tuesday April 4th, when gold closed at 1258.00 and silver 18.32.

In gold, commercials added +10k shorts, while managed money added +13 longs and closed –5.5k shorts. Gold remains looking relatively bullish, but in the short term, the COT positions have moved back to where we were at the highs at the end of February.

In silver, commercials added 10k shorts, while managed money added +14.8k longs; these are big moves for silver. From the COT viewpoint, we are well into the danger zone of a top in silver. The smash on Friday lines right up with what the COT report would predict. For us to see a low in silver: managed money needs to be convinced to sell some 50k contracts.

Here's what the "highest commercial short position ever" looks like on the chart.  Last time we were close to these levels (6 weeks ago), silver was hammered down a buck-fifty in 6 trading sessions.  That's not a guarantee of any sort, but its a risk for sure.

Gold Manipulation Report

There were no after-hours spikes seen this week – although there was one fairly dramatic event on Friday in the early afternoon in New York that – maybe – marked the top in silver.

Eurozone Status

  • French Presidential Elections; May 2017: relatively likely EU non-event. Current polls have for the 2nd round: Macron 61/Le Pen 39. A third candidate, Melenchon, has jumped 3-4 points in the polls for the first round; roughly, its Le Pen 25/Macron 24/Melenchon 17.

  • German Elections; October 2017: currently the polls show Merkel 34/Shulz 32. 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: no news. Turkish referendum happens April 16th. Polls are all over them map. Winning this election is probably Erdogan's sole focus right now.

  • Italian Elections: no progress towards an early election; Grillo's 5-star party moved down slightly to 29%, which is a 2 point lead over their next closest competitor.

Summary

Gold tried several times to move above the 200 MA but failed to do so; even a missile strike on Syria was unable to cause gold to break out and hold over the 200. Silver looks worse, and if we look back at the recent high, the breakdowns in silver were always preceded by a day like we saw on Friday.

No meaningful news out of Europe. This week, it was all about the Fed's balance sheet and the missile strike on Syria. Rate rise chances for June increased fairly substantially; 71% is pretty much a done deal. The market almost entirely ignored the big Nonfarm Payrolls miss.  "It was the weather."  It also ignored the drop in the GDP Now forecast to 0.6%.  All we got was a slow slide downhill in SPX and a sideways move in TLT.

The GDX:$GOLD ratio improved, while the GDXJ:GDX ratio fell. The dollar rallied/the Euro fell. Gold remains strong when priced in Euros.

Gold COT continues to look bullish longer term, but in the shorter term the commercials have amassed a short position roughly equal to what it was at the highs back in February. In silver, commercial shorts are at all time highs; that's bearish for silver.

Gold and silver big bar shortage indicators shows no more hints of shortage in the west; ETF were mixed and GLD tonnage rose slightly. In Shanghai, premiums remain meaningfully higher than COMEX.

The COT for silver has me concerned. The commercials large short position gives them a clear incentive to hammer price lower, and it seemed to work fairly well for them on Friday. The usual question is, will the managed money longs hang on or will they be rinsed out as usual? Let's go with the odds and say “rinsed out.” Likely we move lower in silver – and usually, that means lower gold prices too.

Even so, miners are doing much better this week than last. Last week's goat is this week's hero. As one poster commented, its tough to find a sustained trend with all this back and forth.

If that SPX slow-motion correction ever ends up picking up some speed, gold could see a breakout higher. Likewise, a political surprise in Europe would help too, but I don't see one cued up for next week.  Then again, if it were a surprise, I wouldn't see it coming, now would I?

One might expect that a GDP Now reading of 0.6% might reduce the expectations for a rate increase, but one would be wrong. Has the Fed ever raised rates with GDP forecast this low? I haven't done the math, but I don't think so. This last point is about as clear an indication as you'll get that the Fed no longer believes that lower rates will do anything to improve the economy.

Trend-following code says:

  • Uptrend: platinum, miners, crude, natgas, treasury bonds, USD.
  • Downtrend: gold, silver, copper, SPX.

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7 Comments

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5412
another type of poll: French election

Apparently there is a town in France that has accurately picked the winner in almost every French presidential election for 40 years.  They only blew it once, in 2012.

https://www.bloomberg.com/news/features/2017-04-09/a-french-town-known-for-picking-presidents-sees-big-upset-ahead

The key section I saw was the following - it confirmed my sense of the "Shy Le Pen Voter" which perhaps is even more intense in France than it was for Trump in the US:

All the same, it’s difficult to find locals prepared to admit to backing Le Pen and her plans to pull France out of the euro.

Eric Agot, 52, who makes walnut oil at a 19th century water mill, may not vote because “I’ve had enough of corruption and unemployment — my wife’s been looking for a job for three years.”

Does he want France to leave the single currency?

“If I tell you, you’ll guess who I might vote for,” he says.

When they’re not facing a reporter’s notebook, people are much more open, goose farmer Coudray says.

“Everyone in the cafes seems to be for Le Pen,” he says. “It’s lucky that we vote at the polling station, and not in a cafe.”

RPSTemple's picture
RPSTemple
Status: Member (Offline)
Joined: Jan 24 2012
Posts: 9
Rinsed again?

Dave

The COT for silver has me concerned. The commercials large short position gives them a clear incentive to hammer price lower, and it seemed to work fairly well for them on Friday. The usual question is, will the managed money longs hang on or will they be rinsed out as usual? Let's go with the odds and say “rinsed out.” Likely we move lower in silver – and usually, that means lower gold prices too.

What happens if "managed money" decides to hang long and demand physical silver at the end of the current futures contract?  Instead of being "rinsed" by the commercials. There appears to be a premium for physical silver in Shanghai compared with the comex price.

When does the current silver futures contract expire?

Richard

RPSTemple's picture
RPSTemple
Status: Member (Offline)
Joined: Jan 24 2012
Posts: 9
Rinsed again?

oops Duplicate!

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5412
taking delivery

What happens if "managed money" decides to hang long and demand physical silver at the end of the current futures contract?

Current front month contract is SIK7, or May 2017.  First notice day is April 28th.

http://www.cmegroup.com/trading/metals/precious/silver_product_calendar_futures.html

I believe more people will take delivery someday, when confidence in the system vanishes.  But confidence must fail first.  Prices in all sorts of other items can give us a clue what sort of confidence the other traders currently have.  For instance, look at JNK.   This paper is the worst paper out there.  JNK is trading near its highs.  That's a sign that confidence in paper remains intact.  Unless that changes, we most likely won't see a tidal wave of traders demanding delivery on April 28th.

Usually - usually - lightning doesn't strike out of a clear blue sky.  Usually there are some clouds first.  Then some rain.  Then the clouds get darker.  Maybe there is some more rain and some wind.  And then you'd better be careful.

But right now, the high price of JNK is telling us, its a clear blue sky.

If you are planning to take delivery, I wouldn't wait until JNK starts tanking to do so.

I'm just telling you my mechanism for assessing the likelihood of such an event in the near term.  I'm rating it as "very unlikely" based on what I see today.

Boomer41's picture
Boomer41
Status: Silver Member (Offline)
Joined: Nov 30 2008
Posts: 135
Selling Bullion

Since the 'inevitable' collapse is taking much longer to arrive than anyone anticipated, I have decided to turn some of my bullion coins into cash to pay for household improvements.

Does anyone have advice on the best way to sell physical coins such as Maple Leafs?

sand_puppy's picture
sand_puppy
Status: Diamond Member (Offline)
Joined: Apr 13 2011
Posts: 1888
Gold Positive News

Gold positive news.

reflector's picture
reflector
Status: Gold Member (Offline)
Joined: Aug 20 2011
Posts: 269
re: Selling Bullion
Boomer41 wrote:

Since the 'inevitable' collapse is taking much longer to arrive than anyone anticipated, I have decided to turn some of my bullion coins into cash to pay for household improvements.

Does anyone have advice on the best way to sell physical coins such as Maple Leafs?

i don't have experience in selling bullion, only buying.

but if i wanted to sell, i'd email or call some of the bigger bullion dealers like apmex, goldsilver.com, provident metals, silver.com, and maybe a couple others, and ask what they are paying, and see who is paying the best.

provident is paying $19.10 for 2016 year maples

https://www.providentmetals.com/2016-1-oz-canadian-silver-maple-leaf.html

 

apmex are paying 20 cents over spot for random year maples:

"APMEX Buy Price: $18.56

Buy price shown is an indication only and is subject to vary if your transaction is less than $10,000 and/or the sell quantity relative to APMEX's current inventory position exceeds our needs."

http://www.apmex.com/product/1090/canada-1-oz-silver-maple-leaf-bu-rando...

 

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