PM Daily Market Commentary - 4/28/2017

davefairtex
By davefairtex on Sun, Apr 30, 2017 - 3:35am

On Friday gold rose +4.10 to 1269.50 on moderate volume, while silver fell -0.07 to 17.22 on moderate volume also. Gold staged a modest rally; silver attempted to rally too but failed, and ended up making a new low. The gold/silver ratio continued to climb.

The metals looked quite bearish this week, juniors leading seniors down, silver leading gold down as well. Palladium broke out to new highs, while copper is slowly recovering. This is a more typical picture of a bear move in PM. The more common PM components are now below all 3 moving averages; gold is the only item remaining above the 50 and 200.

Name Chart Chg (W) 52w ch EMA9 MA50 MA200 50/200 Last Crossing last
Palladium $PALL 4.11% 32.53% rising rising rising falling ema9 on 2017-04-20 2017-04-28
Copper $COPPER 2.01% 17.14% rising falling rising falling ema9 on 2017-04-25 2017-04-28
Gold $GOLD -1.28% 0.11% falling rising falling rising ema9 on 2017-04-24 2017-04-28
Platinum $PLAT -2.76% -10.05% falling falling falling falling ema9 on 2017-04-24 2017-04-28
Silver Miners SIL -2.87% -0.60% falling falling falling falling ema9 on 2017-04-19 2017-04-28
Silver $SILVER -4.25% -2.16% falling falling falling rising ma50 on 2017-04-25 2017-04-28
Senior Miners GDX -5.84% -8.43% falling falling falling falling ma50 on 2017-04-24 2017-04-28
Junior Miners GDXJ -6.69% -11.41% falling falling falling falling ema9 on 2017-04-13 2017-04-28

Gold fell -16.40 on the week, selling off following the in-line performance of Le Pen in the French first round presidential elections. “The Eurozone is saved, no need to own gold”, but that sentiment only took gold down to its 200 MA, where it seemed to find a bid. Friday's candle was an opening white marubozu/NR7, which the code feels is somewhat bullish. Its not a reversal bar, but NR7s can sometimes end up breaking sharply in one direction or another, a bit like a coiled spring. Candle code is hinting at a bullish outcome.

The June rate-increase chances rose +14% to end the week at 67%.

COMEX GC open interest fell -8,255 contracts.

Silver plunged -0.77 [-4.25%] this week, dropping 5 days in a row. This marks 10 straight down days for silver. Dip-buying in silver more or less disappeared on Tuesday, which saw a 35 cent decline, the largest one-day drop over the past two weeks. Silver ended the week with a failed rally/spinning top candle, which the code felt was mildly bearish – and is also a new low. Friday probably does not mark a low for silver. The gold/silver ratio rose +2.22 to 73.72. The only positive note for silver is that the volume has started to fall off substantially. Since silver is heavily oversold (RSI-7=17), it is possible a near-term low for silver is approaching.  Maybe next week.

Silver broke its uptrend line this week, which is another bearish development.  If it breaks the previous low at 16.80, selling could pick up again, as more managed money longs get stopped out.

COMEX SI open interest fell -34,525 contracts, about 15%, or 5369 paper tons of supply removed from the market. That tinkling sound you hear in the background are the commercials - ringing the cash register.

Miners had a bad week, with GDX dropping -5.84% and GDXJ plunging -6.69%. Most of the damage happened on Tuesday, after which the miners spent the remainder of the week more or less chopping sideways. On Friday, GDX printed a high wave candle and rallied +1.93%, which the candle code found bullish. GDXJ printed a spinning top and moved up only +1.70%, which the code found somewhat bearish – the move in GDXJ had a "failed rally" look to it. Both miner ETFs broke support this week, with GDXJ looking substantially sicker than GDX. The GDX:$GOLD ratio spent most of the week collapsing, but on Friday it did tick higher, which tends to support the reversal case for GDX. The GDXJ:GDX ratio continued to move slowly lower.

USD

The buck fell -0.99 to 98.84 this week, with all of the damage happening on Monday following the elections in France. The move in the buck was mostly about the Euro, which rallied +1.63% on the week. The pound did well too, up +1.05%, breaking out to levels last seen in September 2016. Call me crazy, but it seems like the better the prospects for a hard BRExit, the better the pound seems to do.   Candle print for the buck was a spinning top, which the code felt was somewhat bullish.  The buck appears to be having problems moving back above its 200 MA.

US Equities/SPX

SPX rose +35.51 [+1.51%] to 2384.20 this week, with the market moving briskly higher on Monday and Tuesday following the elections in France. However, Trump's tax plan appeared to be a bit of a fizzle (at least from the market's perspective), and by Friday we saw the market drop, with SPX printing a “bearish belt hold” candle which the code felt was bearish. It also happened to be a swing high. Still, SPX is now above all 3 moving averages, has resumed its uptrend, and remains within spitting distance of a new all time high.

The sector map looked like risk on this week, although with sickcare as the leader (XLV:+2.47%) that may be the prospects of repeal-and-replace picking some new winners in the sickcare industry. (Who would have imagined this outcome from a Congress run by pro-cartel Republicans?) Worst performer are REITs and utilities, which makes sense during a risk on move. The fly in the ointment is the continued under-performance of the financial sector (XLF:+1.60%), which although it did manage to rally on the week, was quite unable to move above its 50 MA, and was the worst performer on Friday (-0.97%).  XLF's poor relative performance could be hinting at a move lower for equities.

VIX was crushed, losing -3.81 to 10.82.

Name Chart Chg (W) 52w ch EMA9 MA50 MA200 50/200 Last Crossing last
Healthcare XLV 2.47% 6.49% rising rising rising rising ma50 on 2017-04-25 2017-04-28
Technology XLK 2.28% 27.95% rising rising rising rising ema9 on 2017-04-20 2017-04-28
Cons Discretionary XLY 2.05% 14.29% rising rising rising rising ema9 on 2017-04-17 2017-04-28
Materials XLB 1.67% 12.01% rising rising rising falling ma50 on 2017-04-24 2017-04-28
Financials XLF 1.60% 23.62% falling falling rising falling ema9 on 2017-04-28 2017-04-28
Industrials XLI 1.42% 17.44% rising rising rising falling ema9 on 2017-04-20 2017-04-28
Telecom XTL 1.33% 21.92% falling falling rising falling ema9 on 2017-04-28 2017-04-28
Homebuilders XHB 0.77% 11.90% rising rising rising rising ema9 on 2017-04-17 2017-04-28
Cons Staples XLP 0.33% 5.29% falling rising falling rising ema9 on 2017-04-27 2017-04-28
Energy XLE 0.07% 0.34% falling falling falling falling ema9 on 2017-04-26 2017-04-28
Utilities XLU -0.06% 7.42% falling rising falling rising ema9 on 2017-04-28 2017-04-28
REIT RWR -2.98% -1.39% falling falling falling rising ma50 on 2017-04-27 2017-04-28
Gold Miners GDX -5.84% -8.43% falling falling falling falling ma50 on 2017-04-24 2017-04-28

Gold in Other Currencies

Gold dropped in all currencies this week, and was down -16.83 in XDR.

Rates & Commodities

TLT fell -0.96% this week, falling hard on Monday and Tuesday but managing to recover perhaps half of its losses during the rest of the week. Friday saw a “bullish belt hold” print, which the code agreed was actually bullish. TLT was not so happy with the French election results, but so far at least it has retained a bid.

JNK had a good week, rallying +0.73% and making a new high. JNK has resumed its uptrend, and it is signaling risk on. Friday's doji candle print was slightly bearish.

CRB was flat this week, closing down just -0.08%, printing a swing low on Friday after making a new low Thursday. From what I can see, most of the good news in CRB is due to a sharp rally in livestock, which is up about 8% in the last 4 days.

Crude dropped slightly this week, down -0.44 to 49.19, seeming to find support on the 200 MA. Thursday there was a strong sell-off (making a new low to 48.20) that was bought, resulting in a bullish doji candle print. Friday's print was a long-legged doji, which the code felt was neutral. We may have seen the near-term low for crude, although the market doesn't look too eager to push prices higher. Perhaps that awaits next week's crude inventory report from the EIA.

One positive note is that the recent plunge in crude oil prices has rinsed out a large number of managed money longs; since the highs of 54 in February, 130k managed money long crude contracts (29%) have bailed out, which is becoming more supportive of a near-term low in crude.

Physical Supply Indicators

* SGE premium to COMEX rose +3.06 to +11.41 over COMEX.

* The GLD ETF tonnage on hand fell -5.33 tons, with 853 tons in inventory.

* ETF Premium/Discount to NAV; gold closing of 1269.50 and silver closing of 17.22:

 PHYS 10.35 -0.57% to NAV [down]
 PSLV 6.51 -0.35% to NAV [down]
 CEF 12.58 -7.8% to NAV [down]

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

* Big bars premiums at HAA were: gold [400oz, NY] 2.14% and silver [1000oz, NY] 3.87%.

Futures Positioning/COT

COT report is through April 25th, when gold closed at 1265.50, and silver at 17.63.

This week in gold, the commercials added +6k contracts short, while managed money added +8k longs. Both were minor changes. Gold managed money longs are starting to build, as is the commercial short position. That said, I don't think we're at a high just yet, but that's just a guess.

In silver, the commercials closed -12.2k shorts, an 8% decrease, while managed money bailed out of 10.8k longs, a 10.8% decrease. Commercials have finally started ringing the cash register after printing up a large amount of paper silver over the past months. From the COT report perspective, we are not at a low yet for silver – we need quite a bit more short covering in the commercials to bring us back to even a neutral position.

Gold Manipulation Report

There were two after-hours spikes this week; one for gold, and one for silver. They both happened on Monday, shortly after the market opened following the French first round presidential elections Sunday night. The big dips down were largely bought; it was Tuesday when the big sell-off happened, and that was not caused by a spike.

Eurozone Status

  • French Presidential Elections: first round complete, second round: 7 May 2017. Current numbers: Macron 59.5%, Le Pen 40.5%. Le Pen is clearly gaining over the past week. Will two weeks be enough for her to close the gap? 10 points is a big difference. Macron's big selling point appears to be that he's not Le Pen, and he's not a career politician.

  • German Elections; October 2017: currently the polls show Merkel 36/Shulz 30. Shulz is slowly losing ground. Both parties are pro-Euro. Non-event.

  • Greek bailout; June 2017 they need to pay 7 billion Euros. This week, Comrade Chairman Dijsselbloem of the Eurogroup publicly admitted - for the first time - that Greece will need debt relief for its finances to become sustainable. The market has seen a sharp rally in the Greek equity market, which rose 8% and broke out to new highs week. (ETF: GREK). Next Eurogroup meeting: May 22nd. Reading the tea leaves, it is looking like the EU will probably dodge a near-term GRExit bullet, although the devil is definitely in the details where “debt relief” is concerned. Might the Trump administration have helped the IMF to finally grow a spine?

  • Turkey & the migrants: Turkey continues to adhere to the migrant agreement, according to Greece, resulting in a 95% reduction in the flow vs same period last year. https://www.dailysabah.com/diplomacy/2017/04/27/turkey-sticking-to-migration-deal-greece-says-citing-low-arrivals Price tag of the deal: 3 billion Euros, of which the EU has coughed up only 790 million. Erdogan suggests everything could be happy again between the EU and Turkey if the EU would please just send the rest of the money.  He is sounding a bit more relaxed after winning his referendum.

  • Italian Elections: there was some progress towards an early election. This week Italy's President made a strong request that the parliament pass a new electoral law (because of the failed referendum, a new electoral law is needed before an election can take place), which is one important thing standing in the way of new elections in Italy. M5S (5-Star Party) fell to 28.1%, while the PD has risen to 27.8%.

Summary

Le Pen's failure to beat her poll numbers in the French presidential first round on Sunday resulted in money racing from safe havens back into risk assets; SPX and JNK rallied, while gold, silver, and TLT fell. The “biggest tax cut ever” in the US was a bit of a sell-the-news event, as there were a lot of details yet to be filled in. (You can't put too many details on one sheet of paper – at least not in a 12-point font anyway). A continuing resolution kept the government funded for another week. US Q1 real GDP came in at 0.7% (+0.96% nominal). Ouch.  You gotta love that ~1% inflation number they used

COT report shows the commercials are ringing the cash register in silver, but not in gold. Managed money longs are now bailing out of silver.

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

Next up in the US: sickcare repeal-and-replace, sure to pick some new winners in the industry.  You can make that guess just by looking at XLV's performance.  Also, the debt ceiling.  My guess: the chastened "Freedom" caucus will go along with it. Trump has a powerful motivator for them to cave: his loyal base, 94% of whom are happy with the job he is doing, 96% of which would vote for him again, and who (probably) will get quite annoyed at the "Freedom" caucus if they get in the way of Making America Great Again.  Trump did a good job pointing a finger at them last time around.

We also have FOMC next Wednesday where we get to hear hints about what will occur at "the real meeting" in mid-June, as well as Nonfarm Payrolls on Friday.  We also have a flock of Fed speakers making the rounds on Friday and Saturday.  In this case, there are 7 Fed speakers to a flock.

One last black swan: the price of Canadian banking industry's coal mine canary "Home Capital" fell 60% on Wednesday, after the terms of a new line of credit were announced: interest rate 22%.  This exacerbated an already-in-progress bank run, which sucked about 1.5 billion out of savings accounts at the bank in about a week.   We know Canada has a massive property bubble.  At some point it will blow.  How will that affect Canadian banks, and through contagion, US banks?  That's an interesting question.  If Zero Hedge is right and this is Canada's "New Century" moment, it could take a year for things to go south.

http://www.cbc.ca/news/business/home-capital-faq-1.4090098

Technically, the sell-side momentum in silver is slowing down, gold has found support on its 200 MA, GDX is signaling a possible low in PM, and TLT is saying something similar.  However, we probably need SPX to top out to really make it happen.  Article here (http://www.zealllc.com/2017/gldhtgst.htm) suggests that gold and equities are inversely correlated right now, and I tend to agree.

Trend-following code says:

  • Uptrend: copper, natgas, SPX.
  • Downtrend: gold, silver, miners, platinum, crude, long bond, USD.

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11 Comments

lambertad's picture
lambertad
Status: Silver Member (Offline)
Joined: Aug 31 2013
Posts: 179
Favorite quote

"I think it would be very hard for them to [survive] unless they can get confidence back in the company,".

Well, I'm sure the C-suite has been working hard all weekend on that exact thing. Not sure why anyone would trust their money in a financial company who had to take a 22% loan to sure up their books. 

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5410
trust in finance

Well, I'm sure the C-suite has been working hard all weekend on that exact thing. Not sure why anyone would trust their money in a financial company who had to take a 22% loan to sure up their books.

Yeah, we already saw what happened in 2007.  "I"m sure it will be contained to subprime", or words to that effect.  Judge Judy's line applies here: "How do you know when a teenager is lying?  When their lips are moving."

Same thing applies to bank executives (or central bankers) when faced with a bank run.

I remember how quickly IndyMac went down.  And then WAMU.  They were big, and then suddenly, they were just gone.  Not saying for sure the same thing is happening in Canada, but you just don't play around with property bubbles.  That home loan leverage operating in reverse is just brutal.  And its really hard on banks when it goes into reverse.  And its the subprime ones that die off first.

And boy do they go fast.

Something to keep an eye on.

 

Cold Rain's picture
Cold Rain
Status: Gold Member (Offline)
Joined: Jul 26 2016
Posts: 363
Stockman

Looks like yet another Stockman doomsday scenario fails to materialize.  As expected, congress will kick the can again, rather than shut the government down.  $1T spending increase.  Trump is caving like the walls of Jericho on everything.  His big tax cut will probably end up being a tax increase when it's all said and done.  One thing is clear, nothing is changing in DC.  Same poor fiscal policy.  Same poor geopolitical policy.  Same poor domestic policy.  The only thing really different has been the rhetoric.  And the fact that the Fed seems intent on raising rates now.

Armstrong thinks next week is a turning point in the markets.  I believe he expects the Dow to bust out higher...at least that's what it seems like he's saying.  He never comes out and says, "I expect the Dow to move higher."  It's always, "Well, the market failed to elect the weekly bullish reversal.  With next week into the 8th being a turning point, we see a relative strength, which in the past, we would have seen relative weakness preceding a crash.  So we haven't had enough energy to move the market higher for a period of time, which exhausts itself as we move through 2017.33.05.50 but could fuel the fire for a rally when everyone is expecting a crash, if the weekly bearish is followed by two daily panic cycles."

Ok.

Oh, and KJU has "failed" another missile launch, threatened to sink the US nuclear sub, threatened Israel with a merciless thousandfold punishment, and stated that they're going to accelerate their nuclear weapons program to the maximum and that a nuke test could come any minute.  Been a busy weekend for the man.

PMs are lower, of course.

Happy Monday!

cmartenson's picture
cmartenson
Status: Diamond Member (Offline)
Joined: Jun 7 2007
Posts: 5727
Monday is as Monday does

Yes...I had to break out my surprised face to discover that Monday(tm) is offering higher stawks and and lower PM's in the US.

And no, I was not at all expecting any doomsday government shutdown to occur.  Never does and it never will because that would mean each party shooting themselves in the feet.  

Can successfully kicked...

And yes, Trump is folding more rapidly than a cheap tent in a high wind.  DC wins again.  Nothing actually changes.  Again, here's my surprised face.

Cold Rain's picture
Cold Rain
Status: Gold Member (Offline)
Joined: Jul 26 2016
Posts: 363
Not Windy

Chris, the funny thing is, it isn't even all that windy...more like a fresh breeze, actually.  All it took was for Trump to get into DC.  That's it.  It's going to be interesting to see if they actually get the votes to pass healthcare later this week.  Whatever it turns out to be most likely won't be much better than what's already in place.

As far as NK goes, that could be the one thing to really rock the markets.  However, I don't think we'll get to the point where bullets are fired.  I believe we'll see a deal or sanctions or whatever, and that one day we'll wake up and KJU is dead or disappeared.

Cold Rain's picture
Cold Rain
Status: Gold Member (Offline)
Joined: Jul 26 2016
Posts: 363
Bloodbath

Dave, could we use the term "bloodbath" today?

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5410
bloodbaths

I think of GDX down 8%, GDXJ down 11% - that's a bloodbath.  Silver down a buck, gold down $30.

This is more of an unpleasantness.  :)

Then again, we have another two hours left...

I guess - if I'm not feeling like I have to reach for the thesaurus to look up new words for "crushed", its probably not a bloodbath.

Cold Rain's picture
Cold Rain
Status: Gold Member (Offline)
Joined: Jul 26 2016
Posts: 363
Ok

Point taken!  Still, sucks to in the PM business when breakouts are never allowed.

Anyway, how bout that VIX with a 9 handle today?  Sweet.

And the Atlanta Fed has finally come to their senses and started the new quarter off right with an unusually reasonable and incredibly attainable 4.3% estimate for Q2 GDP.  They are so good at this.

And look at that Nasdaq go!

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5410
inner peace

CR-

We're working on that inner peace, remember?  Language is important.  If you say it's a bloodbath, then you'll react like that emotionally, and that causes all sorts of internal damage.  Maybe save that up for the times when we really do have a bloodbath.

Also if you say that "they aren't letting gold rally" - you are forgetting the Le Pen rally that "they" didn't seem to be able to stop.  All they could do was slow it down.  And now that we're back to risk on, its mostly not "them" that is causing the downtrend - that's just money rotating away from gold and into risk assets.

Look at TLT.  It isn't happy either.

Yeah.  The 9-handle in the VIX is pretty crazy.

Cold Rain's picture
Cold Rain
Status: Gold Member (Offline)
Joined: Jul 26 2016
Posts: 363
All Good

Yeah man, "bloodbath" is subjective, but I'm using it in context of there just being unrelenting selling for most of the day.  Your description of it is probably better suited to its use.  Anywho, I guess what I mean by "letting it rally" is that pretty much, stock indexes go up and up and up.  Bitcoin goes up and up and up.  Real estate goes up and up and up.  PMs go up and then get hammered back down.  It's a game, and the big guys win every time.  It would be nice to see a leg higher and then a leg higher and then a leg higher instead of always giving most of the gains back.  In the PM space, gold has done ok since the end of 2015, but that doesn't mean it's not about to be managed back down.

The big open market dumps do not in any way reflect real price discovery.  I believe we had another today.  They are designed to move the market and break sentiment.  And they work beautifully.  One day, they won't be effective.  But for now they are.  It's cool, though.  I'd just like to see it less manipulated.

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5410
up and up

Yes I agree - when you are long, a strong uptrend is a whole lot more fun than this sideways chop we're going through right now.

But if we're buying the anti-establishment currency, we kind of have to expect the establishment to take a dim view of the action whenever it does well.  Likewise, when the establishment (Brussels in this case) gets a reprieve, our anti-establishment currency will probably take a hit.

I think morale in PM snapped after Le Pen didn't do better-than-expected.  There were a large number of open market spikes prior to the election that didn't seem to do very much.  Now, after the election, they are shockingly effective.

 

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