PM End of Week Market Commentary - 5/12/2017

davefairtex
By davefairtex on Sun, May 14, 2017 - 1:38pm

 

On Friday gold moved up +2.80 at 1227.80 on moderate volume, while silver rose +0.14 to 16.46 on moderate volume also. A brisk plunge in the buck didn't seem to help gold much; gold ran into selling at the 9 EMA, while silver, unencumbered by the selling barrage, did substantially better.

It was a week of nascent recovery for the metals sector; junior miners did extremely well, leading the senior miners higher. Both GDX and SIL have now regained both their 9 and 50 MAs. While silver led gold, both metals remain below their 9 EMA lines suggesting that the real recovery is yet to appear.

Name Chart Chg (W) 52w ch EMA9 MA50 MA200 50/200 Last Crossing last
Junior Miners GDXJ 7.50% -11.74% rising falling falling rising ema9 on 2017-05-11 2017-05-12
Silver Miners SIL 5.83% -0.08% rising rising falling rising ma50 on 2017-05-12 2017-05-12
Senior Miners GDX 5.43% -7.45% rising rising falling rising ma50 on 2017-05-12 2017-05-12
Platinum $PLAT 0.77% -12.22% rising falling falling falling ema9 on 2017-05-12 2017-05-12
Silver $SILVER 0.73% -3.18% falling falling falling falling ma50 on 2017-04-25 2017-05-12
Gold $GOLD -0.05% -2.92% falling falling falling rising ma50 on 2017-05-03 2017-05-12
Copper $COPPER -0.39% 21.88% rising falling rising falling ema9 on 2017-05-12 2017-05-12
Palladium $PALL -1.08% 35.41% rising rising rising rising ema9 on 2017-05-12 2017-05-12

Gold was largely unchanged, dropping -0.60 on the week, making a new low on Tuesday followed by a recovery on Thursday and Friday that pulled gold back to almost even. Gold has yet to print a swing low, and remains below its 9 EMA. Gold appears to have support at 1220. Friday's candle print was a spinning top/NR7, which the code felt was somewhat bearish: 23% chance of marking a top. Gold-in-Euros has been chopping sideways for the last 7 trading days; it remains right at 1120 support, but its hard to say looking at the chart if the support will hold.

The June rate-increase chances remains at 79%.

COMEX GC open interest fell -7,235 contracts.

Silver rose +0.12 [+0.73%] this week, making a new low on Tuesday, and then rallying strongly on Thursday and Friday, printing a swing low on Thursday. Silver's print on Friday was a closing white marubozu/NR7 candle, which the code felt was bullish. Silver's RSI7 has now risen above 30, which is the customary point for a rebound to start picking up speed. Silver is no longer oversold, although silver does remain below the 9 EMA.

The gold/silver ratio fell -0.58 to 74.59, and has now crossed back below its 9 EMA. MACD for the ratio is also just about to execute a bearish crossover. When the gold/silver ratio starts heading south, that is a bullish sign for PM.

COMEX SI open interest rose +23,924 contracts.

Miners had a fantastic week, with all ETFs up at least 5%. The high-percentage GDX swing low from last Friday proved to be accurate. However at this close this Friday there were hints of trouble; GDXJ's doji/NR7 candle was seen by the code as somewhat bearish (a 37% chance of marking a top), while GDXJ's bearish doji star looked substantially worse, with a 68% chance of marking the top for GDXJ. Perhaps the miners have gotten a bit ahead of themselves.

On the week, the GDX:$GOLD ratio screamed higher, up almost 6%, while GDXJ:GDX ratio printed its own swing low on Thursday. SIL:$SILVER is the winner this week, outperforming all the other ratios, managing to close right at its 200 MA. Money appears to be selecting the silver miners in preference to the rest. (And anecdotally, my silver miners have been my best performers). Juniors are just now starting to recover from their underperformance; its hard to say if the bottom is in for the juniors, since we still have that GDXJ rebalancing ahead of us scheduled for mid-June. Overall however, the ratio performance is bullish for PM.

USD

The buck rose +0.58 to 99.03 for the week, printing a swing low on Monday, poking briefly above its 200 MA mid-week, only to print a swing high on Friday, which the candle code felt was a 53% chance of marking a top. The buck was actually looking fairly good right up until the unexpectedly weak Retail Sales report appeared on Friday at 8:30am, which immediately caused the buck to sell off hard, and the Euro to take off. That report more or less single-handedly caused Friday's swing high in the buck.

Initially gold rallied off that retail sales report, but from what I saw, the rally was capped by a wave of selling that hit right when gold rose to the 9 EMA @ 1231. Make of that what you will.

US Equities/SPX

SPX fell -8.39 [-0.35%] to 2390.90 on the week. SPX took 3 shots and failed 3 times to close above round number 2400. It came closest on Wednesday, with a close of 2399.63. SPX had a bit of trouble on Thursday due to the aftermath of Trump's firing of FBI Director Comey, but the selling lasted all of an hour before buyers appeared and pushed prices back up again. Friday's candle was a spinning top/NR7, which the code found to be slightly bullish. One might imagine that Friday's weak retail sales numbers might cause the equity market some problems, but one would be wrong. Still, SPX does appear to be meandering lower, with the usually-leading financials dropping a bit more rapidly.

Materials, REITs, and financials led the market lower, although overall it looked to be a modest unwind of the Trump reflation trade more than anything else.

VIX fell -0.17 to 10.40.

Name Chart Chg (W) 52w ch EMA9 MA50 MA200 50/200 Last Crossing last
Gold Miners GDX 5.43% -7.45% rising rising falling rising ma50 on 2017-05-12 2017-05-12
Telecom XTL 1.09% 27.21% rising rising rising falling ema9 on 2017-05-12 2017-05-12
Technology XLK 1.07% 31.13% rising rising rising rising ema9 on 2017-04-20 2017-05-12
Energy XLE 0.65% 2.92% rising falling rising falling ema9 on 2017-05-10 2017-05-12
Utilities XLU 0.00% 4.23% rising rising rising rising ema9 on 2017-05-12 2017-05-12
Cons Discretionary XLY -0.32% 13.70% falling rising rising rising ema9 on 2017-05-11 2017-05-12
Cons Staples XLP -0.47% 1.93% falling falling rising falling ema9 on 2017-05-12 2017-05-12
Homebuilders XHB -0.48% 13.52% falling rising rising rising ema9 on 2017-05-12 2017-05-12
Healthcare XLV -0.91% 8.63% falling falling rising falling ema9 on 2017-05-10 2017-05-12
Industrials XLI -0.93% 18.92% falling rising rising falling ema9 on 2017-05-12 2017-05-12
Financials XLF -1.17% 25.28% falling falling rising falling ema9 on 2017-05-11 2017-05-12
REIT RWR -1.35% -5.54% falling falling falling falling ma50 on 2017-04-27 2017-05-12
Materials XLB -1.63% 13.38% falling falling rising falling ema9 on 2017-05-09 2017-05-12

Gold in Other Currencies

Gold was mixed this week; gold in XDR rose +3.29.

Rates & Commodities

TLT moved up +0.08% this week, falling during the first part of the week, making a new low on Thursday but then printing a swing low on Friday on a strong (+0.76%) rally driven almost entirely by that weak retail sales report. Candle code thinks Friday's swing low is quite bullish, with a 63% chance of marking a low. Even if equities aren't worried by retail sales, bonds certainly appear to be: TLT is back to signaling risk off. Again – I've grown allergic to buying puts, but bonds are another way to short the equity market. And they pay you interest while you wait – although it is not very much (2.74%!), it sure beats the time decay built into put options.

JNK moved higher on the week, rising +0.43% and ended the week clearly above its 9 EMA. JNK is nearing a test of its recent high, and continues to signal risk on.

CRB regained most of what it lost last week, rallying +2.12%, printing a swing low, and ending Friday with a bullish-looking white marubozu candle which very seldom marks a top. On Friday, every single commodity group rallied led by livestock which was up 2.03%. Commodities have pretty clearly put in a low.

Crude moved higher off last Friday's massive spinning top candle, closing the week up +1.45 [+3.12%] to 47.98. Crude rallied strongly and printed a swing low on Wednesday after the EIA report showed a surprisingly bullish inventory draw across the board. Isn't it interesting how that sort of positive news appears just after managed money has bailed out of their long positions and the commercials have covered their shorts? Friday's candle was a doji/NR7, which the code felt was bullish. Oil likely continues moving higher next week, subject to the API/EIA reports on Tuesday & Wednesday.

Physical Supply Indicators

* SGE premium to COMEX - I couldn't get data for it this week.

* The GLD ETF tonnage on hand fell -1.19 tons, with 852 tons in inventory.

* ETF Premium/Discount to NAV; gold closing of 1227.80 and silver closing of 16.46:

 PHYS 10.03 -0.58% to NAV [down]
 PSLV 6.27 +0.25% to NAV [down]
 CEF 12.20 -6.7% to NAV [down]

* Bullion Vault gold (https://www.bullionvault.com/gold_market.do#!/orderboard) showed some modest premiums for silver, but none for gold.

* Big bars premiums at HAA were: gold [400oz, NY] 2.22% and silver [1000oz, NY] 3.2%.

Futures Positioning/COT

COT report is through May 9th, when gold closed at 1221.30, and silver at 16.18.

This week in gold, the commercials closed -34k (11%) shorts, while managed money bailed out of -44k longs (22%). These were large changes in position for both participants, but we are not quite at a turning point – it would take another week like this.

In silver, the commercials closed -12.6k shorts (-10%), while managed money bailed out of 10.2k longs (-13%), as well as adding +11k shorts (+31%). While it wasn't as large as last week, these are still large moves for silver. Right now, positions for silver are more extreme than they were at the time of the Jan 2017 reversal.

In crude, commercials added +76k longs (+10%), while managed money added +47k shorts (+35%). One of these two will be really wrong about where oil is going; my bet is that it's managed money, who have decided to load up short at the lows, right after bailing out wholesale of their long positions over the past few weeks. Managed money short positions are at a level roughly consistent with the the previous 5 low points in crude over the past 2 years.

Gold Manipulation Report

No significant after-hours spikes for either gold or silver.

Eurozone Status

  • German Elections; October 2017: currently the polls show Merkel 36/Shulz 27. Shulz continues to lose ground. Both parties are pro-Euro. Non-event.

  • Greek bailout; July 2017 they need to pay 7 billion Euros. No news this week. Market still giving Greece a vote of confidence, with GREK up +0.95% on the week, near multi-year highs. Next meeting of the Eurogroup: May 22.

  • Turkey & the migrants: no news on the migrant deal, or visa free travel for Turks this week.

  • Italian Elections: it was a quiet news week in Italy too. M5S (5-Star Party) is polling at 29.2%, while the PD is at 28.4%.

Summary

This week was relatively news-free, with only the sacking of FBI Director Comey on Thursday and a weak Retail Sales report on Friday to disturb the waters. A flurry of short-covering by the commercials in both gold and silver appeared to help the metals put in lows; the miners saw this and immediately rocketed higher. Swing lows were seen everywhere except for gold. Commodities looked especially strong, and the long bond is also starting to look more healthy following the Retail Sales report Friday. Juniors lead seniors, silver leads gold, it looks good for a trend reversal so far.

COT report shows that the commercials rang the cash register this week in both gold and silver. Silver appears to be at a point low enough for a meaningful reversal, while gold still has a ways to go before it arrives at the promised land.

Gold and silver big bar shortage indicators shows no shortage in the west; ETF premiums fell and GLD tonnage didn't move much.

Most of the indicators are pointing towards a low for PM at this time; silver's COT looks pretty strong, a commodity rebound is supportive for higher PM prices, and crude's positive COT helps the overall commodity picture, and of course there is the rally in the miners.    The swing low in GDX a week ago was our first clue, and now we're waiting for lagging gold to catch up with the rest of the complex.

Next week looks to be another relatively quiet news week in the US: industrial production & housing starts on Tuesday, but that's about it for excitement.  Political risk in Europe has abated at least for now; perhaps Trump will provide something interesting here in the US.

Trend-following code says:

Uptrend: silver, miners, platinum, crude, natgas, long bond, USD.

Downtrend: gold, copper, SPX.

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4 Comments

Cold Rain's picture
Cold Rain
Status: Silver Member (Online)
Joined: Jul 26 2016
Posts: 217
Happy Monday

It's a happy day for PMs, at least so far (and oil and equities).  Not sure why the big surge this morning, but it's nice to see.  Let's see how it holds up after I hit "post".

Cold Rain's picture
Cold Rain
Status: Silver Member (Online)
Joined: Jul 26 2016
Posts: 217
Miserable Monday

For the miners anyway.  Nice reversal there.  And the metals have been down pretty much since my earlier post, of course.

Luke Moffat's picture
Luke Moffat
Status: Gold Member (Offline)
Joined: Jan 25 2014
Posts: 332
This one's on you! :)

CR,

I place the blame squarely on your shoulders! :)

Cold Rain's picture
Cold Rain
Status: Silver Member (Online)
Joined: Jul 26 2016
Posts: 217
Yup
Luke Moffat wrote:

CR,

I place the blame squarely on your shoulders! :)

LOL you sound a lot like Mrs. Cold Rain!

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