PM End of Week Market Commentary - 4/14/2017

davefairtex
By davefairtex on Sat, Apr 15, 2017 - 9:04am

On Thursday gold rose +1.20 to 1290.10 on heavy volume, and silver rose +0.06 to 18.55 on very heavy volume. PM spiked modestly lower at the US open, but rapidly recovered, ending the week more or less at the highs. Friday was a market holiday; there was no trading in most of the major items.

On the week, the metals were mostly higher; senior miners did best again, rising to test the 200 MA. Both silver and gold did quite well, with both blasting through their 200 MA on Tuesday. Silver ran into resistance at 18.50 but managed to close above it by end of week. Junior miners really lagged, actually printing a swing high on Thursday.  Copper plunged through support, but managed to claw its way back on Thursday.

I don't think I've seen a time when gold was above all 3 averages, while GDXJ was below all 3.

Name Chart Chg (W) 52w ch EMA9 MA50 MA200 50/200 Last Crossing last
Senior Miners GDX 4.43% 10.29% rising rising falling rising ma50 on 2017-04-04 2017-04-14
Silver Miners SIL 3.17% 25.50% rising falling falling rising ma50 on 2017-04-11 2017-04-14
Silver $SILVER 3.06% 14.23% rising rising rising rising ema9 on 2017-04-11 2017-04-14
Gold $GOLD 2.71% 3.70% rising rising falling rising ma200 on 2017-04-11 2017-04-14
Platinum $PLAT 2.09% -2.50% rising falling falling falling ema9 on 2017-04-11 2017-04-14
Junior Miners GDXJ 0.38% 14.33% falling falling falling falling ema9 on 2017-04-13 2017-04-14
Palladium $PALL -0.84% 45.91% falling rising rising falling ema9 on 2017-04-13 2017-04-14
Copper $COPPER -2.78% 18.40% falling falling rising falling ema9 on 2017-04-07 2017-04-14

Gold closed up +34.00 on the week, with the bulk of the move happening on Tuesday for reasons that are still unknown to me. Gold is now well above the 200 MA, with round number 1300 not very far away. As of the close on Thursday, the RSI-7 for gold is now 85, which is well into overbought territory. Friday's spinning top/NR7 print was mildly bearish.

The June rate-increase chances plunged -13% to 58%. That's a big change - perhaps that's the reason behind the breakout.

COMEX GC open interest rose +42,373 contracts, or 131 tons of new paper gold. That's about 2.3 times the amount of actual gold mined this week.

Silver rose +0.55 [+3.06%] this week, with the bulk of the move happening Tuesday when silver printed a very strong swing low. Tuesday's rally erased the dramatic drop that occurred last Friday and then some. Last week's correction in silver took the metal out of the overbought situation it was in last week; now it has some more room to run. Last Friday's move looked alarming to me, but the candle code called it correctly: it really wasn't that bearish after all. Silver closed the week at a multi-month high, printing a spinning top that the code felt was neutral.

On the week, the gold/silver ratio fell -0.24 to 69.57.

Miners did well, with GDX up +4.43% while GDXJ rose just +0.38%. To put it bluntly, junior miners suck right now. The GDXJ:GDX ratio continues to plummet. After reading something written by Fleckenstein at KWN, I started to wonder, is GDXJ a flawed ETF? I looked at the Sprott junior gold miner ETF: SGDJ, and while it has a different pattern, it is underperforming also. GDXJ printed a swing high on Thursday, which had a 54% chance of marking the top. The high wave print for GDX was neutral.  GDX is overbought, with RSI-7=80.

USD

The buck fell -0.67 to 100.43 on the week; a big chunk of the USD losses came from the Yen, which shot up +2.20%, making new highs. The pound also did well, +0.83%. No doubt the falling dollar helped PM to rally, but my sense is this move was probably half about the declining rate-increase chances, and half about a flight to safety (into the Yen!) than anything else. That last might be a misnomer; the move-to-safety could just be nervous Mrs. Watanabe pulling her money she sent overseas back to Japan.

US Equities/SPX

SPX fell -26.59 [-1.13%] to 2328.95 this week, with most of the damage happening on Thursday. SPX is now below its 50 MA for the first time since Trump's election last November. SPX is right on the cusp of breaking down much more substantially; the close on Thursday was right at the lows. Traders did not want to be long over the three-day weekend.  The closing black marubozu is bearish.

The sector map shows a Trump rally unwind: market was led lower by financials (XLF:-2.64%), followed by materials and industrials. XLF looks as though it is about to break down. There is a whole lot of air if XLF loses 23. Financials were bid up on expectations of 3 rate increases and a whole lot of borrowed money injected into the economy to Make America Great Again.  Energy equities (XLE:-1.83%) printed a very ugly swing high on Thursday: 88% chance of a top.

That sector map is revealing if all you do is just look at the colors.  Utilities (XLU) & consumer staples (XLP) are the sectors traders run to when they are feeling defensive.

VIX screamed higher, up +3.09 to 15.96.

Name Chart Chg (W) 52w ch EMA9 MA50 MA200 50/200 Last Crossing last
Gold Miners GDX 4.43% 10.29% rising rising falling rising ma50 on 2017-04-04 2017-04-14
REIT RWR 0.98% -0.32% rising rising falling rising ma50 on 2017-04-06 2017-04-14
Utilities XLU 0.54% 6.16% rising rising rising rising ema9 on 2017-04-12 2017-04-14
Cons Staples XLP 0.26% 3.57% rising rising rising rising ema9 on 2017-04-07 2017-04-14
Homebuilders XHB -0.14% 5.13% falling rising rising rising ema9 on 2017-04-12 2017-04-14
Healthcare XLV -0.58% 5.64% falling rising rising rising ma50 on 2017-04-13 2017-04-14
Cons Discretionary XLY -0.81% 9.18% falling rising rising falling ma50 on 2017-04-13 2017-04-14
Telecom XTL -1.22% 21.51% falling falling rising falling ema9 on 2017-04-03 2017-04-14
Technology XLK -1.30% 17.63% falling rising rising falling ma50 on 2017-04-13 2017-04-14
Energy XLE -1.49% 7.86% falling falling rising falling ema9 on 2017-04-13 2017-04-14
Industrials XLI -1.70% 14.59% falling rising rising falling ema9 on 2017-04-12 2017-04-14
Materials XLB -2.43% 12.06% falling falling rising falling ema9 on 2017-04-12 2017-04-14
Financials XLF -2.64% 22.99% falling falling rising falling ema9 on 2017-03-31 2017-04-14

Gold in Other Currencies

Gold rallied in all currencies this week, and was up +33.84 in XDR.

Rates & Commodities

TLT shot up +2.29% this week, breaking above its multi-month trading range at long last. Money is shifting from stocks into bonds: in fact, this week's rally in TLT was stronger than the drop in SPX. As I have said before, buying the long bond is – usually – similar to shorting the equity market, plus you get paid a small sum every month that you stay in the position. Puts have a much larger upside, but their value decays fairly rapidly. Candle print for TLT on Friday was a doji, which the code felt was mildly bearish.

JNK fell -0.16% this week; a slow-motion decline. JNK did end the week below the 9 EMA, but given what happened in SPX, I'd have to say JNK isn't yelling risk off just yet. It's more neutral.

CRB rose +0.36% this week, with 4 of 5 sectors reporting gains. Livestock was best, while industrial metals were hit hard. Copper alone was hammered down -2.78%, breaking support on Wednesday.

The crude oil rally slowed down this week, rising +0.77 [+1.47%] to 53.18. Crude managed to reach 54 briefly on Wednesday, after which it fell back. The spinning top/NR7 candle on Thursday was neutral. Crude remains overbought, and the rally is looking a bit tired. The EIA report on Wednesday showed inventory draws across the board, with the crude inventory down -2.2 million barrels and gasoline down -3.0 million barrels, but the market sold off a bit after digesting that information. The IEA (a different group than the US EIA) released a report that suggested the oil markets were close to balance right now.

http://oilprice.com/Energy/Oil-Prices/IEA-Oil-Markets-Are-Balancing-At-A-Rapid-Pace.html

Physical Supply Indicators

* SGE premium to COMEX fell -2.74 to 7.48 over COMEX. The rally in gold is reducing the premium – but the premium remains.

* The GLD ETF tonnage on hand rose +12.43 tons, with 849 tons in inventory.

* ETF Premium/Discount to NAV; gold closing of 1290.10 and silver closing of 18.55:

 PHYS 10.61 +0.36% to NAV [up]
 PSLV 7.00 -0.49% to NAV [down]
 CEF 13.21 -6.4% to NAV [up]

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

Futures Positioning

There was no COT report this week, since the markets were closed on Friday.

Gold Manipulation Report

There were no after-hours spikes seen this week.

Eurozone Status

  • French Presidential Elections: first round: 23 April 2017. That's next Sunday. First round looked like a predictable two-person race last month, but has become suddenly much more interesting: Melenchon, a near-communist, has risen dramatically and is now polling at 19.5%, with Macron at 23%, Le Pen at 22.5%, and Fillon at 19%. Melenchon is anti-EU, anti-globalization, but pro-immigration, and anti-NATO. One interesting proposal is his 100% income tax on all French nationals making more than 360,000 Euros.  https://en.wikipedia.org/wiki/Jean-Luc_M%C3%A9lenchon

  • German Elections; October 2017: currently the polls show Merkel 34/Shulz 31. Both parties are pro-Euro. Non-event.

  • Greek bailout; June 2017 they need to pay 7 billion Euros. An April 7th meeting of the Eurogroup ended with no agreement, but Chairman Dijsselbloem suggested that there was agreement on the large issues. Next meeting: May 22nd.

  • Turkey & the migrants: no news. Turkish referendum happens Sunday.  Gun to my head: Erdogan probably wins, although it may require fraud to do so.

  • Italian Elections: no progress towards an early election; Grillo's 5-star party remains at 29%, which is a 2.5 point lead over their next closest competitor.

Summary

Gold blew through its 200 MA as did silver, and even the miners managed to test their own 200 right at end of week. Dropping rate-rise chances, a 11-ton bomb dropped in Afghanistan, a confrontation with North Korea, a falling dollar, an unwinding Trump equity rally, and a rising neo-communist star in France all made their contribution. The weak juniors have me wondering, but those strong breakouts in both gold and silver take precedence.  Normally I'd be concerned with peace breaking out and things returning back to normal.  I'm not sure that will happen this time around.

The GDX:$GOLD ratio continues to improve, while the GDXJ:GDX ratio plunged to new lows.

No COT report this week because of the 3-day weekend.

Gold and silver big bar shortage indicators shows no shortage in the west; ETF premiums were mixed and GLD tonnage rose. In Shanghai, premiums fell.

The French first round election has my attention right now. The strong move by Melenchon tells you everything about how pissed the French are right now. They're a cranky bunch in general (one would think that producing great wine & cheese would mellow them - but no), and inequality is driving the voters towards both the far right and the far left. This looks a whole lot like what happened in Germany in 1932: because the moderates back then had sold out so completely, the choice for people who wanted actual change was between the German Communist Party and the Nazis. France doesn't have stormtroopers marching in the streets right now, but the corruption of the center leaves any voter who wants actual change little choice but to move towards the fringe.

Economic news in the US is worsening. We had a disappointing payrolls report a week ago (with average weekly hours falling), a drop in Retail Sales this past Friday, bank credit remains flat, with NYSE margin credit at all time highs. Banks have moved more money into excess reserves, and auto sales are falling. GDPNow projections for Q1 have dropped to 0.5%.

Trump's tax plan is no longer looking like a near-term thing. Chatter is now about August, and the plan is changing also. Likewise, no new information about the trillion-dollar infrastructure plan. Its looking more and more as though Stockman was right: no money injection.

I was looking for a surprise last week; I got two: 1) Melenchon, and 2) North Korea.

If Melenchon pulls even with the more mainstream candidates, things could get very, very interesting. Before, the favorite scenario was Le Pen wins round #1, but then gets beaten round #2 by someone mainstream enough to please Brussels. My sense is, the focus of the establishment has been to keep Le Pen from winning. This has left the field open for Melenchon.  A Melenchon/Le Pen result would be a lose-lose for Brussels.  Fillon/Macron is a win-win.

In the upcoming week, a tightening race in France will be gold positive, especially in Euro terms. Probably dollar-positive too, although the effects on the buck are probably muted by dropping rate-rise chances.

Who knows what will happen with North Korea.

It's a "got gold?" sort of time right now.

Trend-following code says:

Uptrend: gold, silver, platinum, copper, miners, crude, natgas, treasury bonds.

Downtrend: SPX, USD.

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3 Comments

Jeffleonard90@gmail.com's picture
[email protected]..
Status: Bronze Member (Offline)
Joined: Aug 17 2012
Posts: 28
Silver COT

Thoughts on this weeks silver COT report, seems like the commercial shorts set a new record every week.

 

Cold Rain's picture
Cold Rain
Status: Silver Member (Offline)
Joined: Jul 26 2016
Posts: 213
JNUG Suspends Creation Orders

This is interesting:  http://www.zerohedge.com/news/2017-04-15/junior-gold-miner-etf-suspends-creation-orders-due-shortage-underlying-instruments

Eannao's picture
Eannao
Status: Silver Member (Offline)
Joined: Feb 28 2015
Posts: 116
"Gun to my head: Erdogan probably wins"

That's an apt turn of phrase when referring to a referendum in Turkey!

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