PM End of Week Market Commentary - 6/9/2017

davefairtex
By davefairtex on Sun, Jun 11, 2017 - 6:58am

On Friday gold moved down -11.50 [-0.90%] to 1268.80 on heavy volume, while silver dropped -0.25 [-1.41%] to 17.18 on heavy volume also.  The buck rallied +0.36 to 97.04; at least part of gold's fall was due to a currency effect.  Certainly, the probable reversal in the buck isn't doing gold any favors right now.

Copper and palladium moved up strongly, while gold and silver tipped over and sank.  Longer term, silver and platinum look especially weak, as they are both below all 3 moving averages, as are SIL and GDX.  Gold remains relatively strong; the longer term charts comparing gold with silver really highlight silver's relative weakness, and that's visible in the PM sector map below too: silver is all red, while gold remains above both the 50 and the 200 MA lines.

Junior miners were the surprise winner this week, managing to lead the pack in spite of gold's correction.  They are something to watch in the upcoming week, as the much-worried-about redecoration of the GDXJ will occur on June 17th.

Name Chart Chg (W) 52w ch EMA9 MA50 MA200 50/200 Last Crossing last
Junior Miners GDXJ 2.85% -19.22% rising falling falling rising ma50 on 2017-06-08 2017-06-09
Copper $COPPER 2.64% 29.57% rising falling rising falling ema9 on 2017-06-08 2017-06-09
Palladium $PALL 2.15% 52.67% rising rising rising rising ma50 on 2017-05-30 2017-06-09
Silver Miners SIL 0.80% -8.30% falling falling falling rising ema9 on 2017-06-09 2017-06-09
Senior Miners GDX 0.31% -13.29% falling falling falling rising ema9 on 2017-06-09 2017-06-09
Gold $GOLD -0.99% -0.29% falling rising falling rising ema9 on 2017-06-09 2017-06-09
Platinum $PLAT -1.61% -6.41% falling falling falling rising ema9 on 2017-06-07 2017-06-09
Silver $SILVER -2.08% -0.58% falling falling falling falling ema9 on 2017-06-09 2017-06-09

Gold fell -12.70 this week; there was a solid rally on Tuesday, followed by three straight days down. Gold ran into a whole lot of selling at the magic 1297 level, and there seemed to be a fair amount of energy put into keeping it from breaking out prior to Thursday's day-o-chaos. I say this because of a massive increase in the open interest that appeared on Tuesday: 26,323 contracts were added on that day alone, which was probably enough to keep gold from punching through 1297. Had there been a true chaotic outcome on Thursday, its probable that this would not have been enough to contain price, but since the outcome from that day was something of a let down (from the “safe haven” standpoint), a good chunk of the selling on part of Thursday and all of Friday was probably driven by the sell-the-news nature of the event.

Friday's relatively brisk move down resulted in a long black candle, which the code found to be bearish. Gold printed a swing high on Thursday, and dropped through its 9 EMA on Friday. These are all bearish signs.  Next support levels are 1260 (which is also the 50 MA) as well as 1220.  I'm not sure 1260 holds.

The June rate-increase chances (“more risk-free money for the bankers”) rose +4 to 99%.

COMEX GC open interest rose +15,304 contracts this week. There appeared to be a fair amount of short-covering on Friday's drop: -9,927 contracts.

Silver fell -0.37 [-2.08%] this week, managing a close above the 200 MA on Tuesday, followed by 3 days down, just like gold, where it smashed through all three moving averages. Friday's candle print was an opening black marubozu which the code found to be bearish.  There really isn't much good news for silver.

The gold/silver ratio rose +0.81 to 73.85. That's bearish.

COMEX SI open interest fell -1,549 contracts.

Miners did a surprising thing: they actually managed to close higher on the week. All of the gains came from a massive rally Tuesday, while the rest of the week was spent selling off. Friday GDX had a failed rally – what would be a gravestone doji under other circumstances - which the code felt was slightly bearish. It also printed a four-candle swing high, which is also bearish. Lastly, GDX is now below all 3 moving averages once again. That's bearish also. GDXJ did much the same thing, all except for the swing high. Juniors outperformed seniors, which is a notable change from the months of under-performance. Once the gold price stabilizes, the juniors might be a good vehicle once more, but it is quite likely that both ETFs will continue selling off as long as gold continues to drop.

On the week, the GDX:$GOLD ratio rose, and so did the GDXJ:GDX ratio. Both of these were bullish outcomes.  On Friday, GDX closed below its uptrend line.  That's bearish.

USD

This week the buck reversed direction, rising +0.55 to 97.04, printing a swing low and closing above its 9 EMA. The doji candle printed on Friday was neutral. The big loser vs USD this week was the pound (-1.13%), which sold off hard after the UK election results were known late Thursday evening. The euro also dropped -0.77%. The currency moves tell us that more than half of gold's losses were currency effects.

US Equities/SPX

SPX fell -7.30 [-0.30%] to 2431.77. The only excitement happened on Friday, when the tech sector was absolutely hammered (XLK:-2.47%) after some guy at Goldman Sachs suggested valuations were too high. The strong reaction suggests to me the market may be a bit nervous. The market overall printed a bearish engulfing on Friday, but the code didn't think it looked all that bearish.

The sector map shows the financials in the lead, with energy second; financials were boosted by the passage in the house of the Make the Bankers Great Again (also called “Financial Choice Act”) which proposes to extract the few remaining teeth from the Dodd-Frank legislation. Energy's bounce comes after a steady six-month decline.  It might also presage a low in oil.  Maybe. Tech & consumer discretionary did worst, with tech's losses coming entirely on Friday. This week was a mixed bag; its hard to sort out direction from all the confusion.

VIX rose +0.95 to 10.70. VIX is back out of the single-digits. Woohoo!

Name Chart Chg (W) 52w ch EMA9 MA50 MA200 50/200 Last Crossing last
Financials XLF 3.58% 27.56% rising rising rising falling ema9 on 2017-06-07 2017-06-09
Energy XLE 2.04% -3.54% rising falling falling falling ema9 on 2017-06-09 2017-06-09
Materials XLB 1.45% 13.58% rising rising rising rising ema9 on 2017-05-24 2017-06-09
REIT RWR 0.57% -1.99% rising rising falling rising ma200 on 2017-06-09 2017-06-09
Gold Miners GDX 0.31% -13.29% falling falling falling rising ema9 on 2017-06-09 2017-06-09
Healthcare XLV 0.13% 7.13% rising rising rising rising ema9 on 2017-05-22 2017-06-09
Industrials XLI -0.44% 18.85% rising rising rising rising ema9 on 2017-06-08 2017-06-09
Homebuilders XHB -0.58% 10.52% rising rising rising rising ema9 on 2017-06-08 2017-06-09
Cons Staples XLP -1.05% 4.77% falling rising rising rising ema9 on 2017-06-08 2017-06-09
Utilities XLU -1.12% 5.86% falling rising rising rising ema9 on 2017-06-08 2017-06-09
Telecom XTL -1.39% 23.30% falling rising rising falling ema9 on 2017-06-09 2017-06-09
Cons Discretionary XLY -2.03% 13.93% falling rising rising rising ema9 on 2017-06-08 2017-06-09
Technology XLK -2.05% 26.46% falling rising rising rising ema9 on 2017-06-09 2017-06-09

Gold in Other Currencies

Gold fell in every currency this week except GBP; gold in XDR was down -14.12.

Rates & Commodities

TLT fell -0.97% this week, printing a swing high on Wednesday and closing the week below both the 200 and the 9 EMA. Some buyers did show up on Friday, most likely because of the surprising sell-off in tech, but it seems pretty clear that TLT has moved into a downtrend at this point. This reinforces the case for a move lower in PM too.

JNK fell -0.40% this week, dragged lower by the plunge in oil prices. JNK may have found support at the 50 MA on Thursday, but this week was a risk-off week.

CRB fell -0.62%, making a new low on Wednesday after the big drop in crude. Commodities continue to make new lows after topping out back in January.

Crude dropped another -1.75 [-3.66%] to 46.01 this week. Crude had a bit of a dead cat bounce on Tuesday, but then Wednesday the EIA report surprised the market by reporting a bearish crude and gasoline inventory build. At the moment of the EIA reportrelease, crude dropped more than a buck fifty in about 5 minutes – it was a very rapid and ugly move down. Buyers did appear at 46, and crude may have made a new (temporary) low at around that level. We'll see if that lasts through the next API report. The news on oilprice.com is uniformly bearish: “is $50 oil still realistic? Oil prices collapse. JPM slashes oil price forecast by $11.” And so on.  From a news-contrarian viewpoint, this could possibly signify a low for oil.

Physical Supply Indicators

* SGE premium to COMEX dropped to +4.70 over COMEX.

* The GLD ETF tonnage on hand rose +16, with 867 tons in inventory.

* ETF Premium/Discount to NAV; gold closing of 1281.50 and silver closing of 17.55:

 PHYS 10.34 -0.49% to NAV [up]
 PSLV 6.53 +0.19% to NAV [up]
 CEF 12.59 -7.5% to NAV [down]

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

* Big bars premiums at HAA were: gold [400oz, NY] 2.11% and silver [1000oz, NY] 3.45%.

Futures Positioning/COT

COT report is through June 6th, when gold closed at 1296.60, and silver at 17.70. The last coverage day was the very top in gold for this cycle, so this will provide a rare, precise COT picture of a high.

This week in gold, the commercials added +38k shorts, more than a 10% move, while managed money added +54k longs, more than a 20% move. These were big changes; both commercials and managed money were at 6-month highs for their COT positions, which definitely seems to confirm the top for gold that we saw on Tuesday.

In silver, the commercials added +4.1k shorts, while managed money added +7.6k longs. Managed money short positions did not change. This does not appear to mark a top for silver; there are not very many new managed money longs for the commercials to harvest.  While silver's chart may look bad, the COT report doesn't appear to be signaling a top.

Gold Manipulation Report

Interestingly, it appears that the after-hours spike games just don't seem to be happening much these days. For whatever reason, the moves down that appear to be engineered are now happening during either the London or the US trading hours.

Eurozone Status

  • German Elections; October 2017: currently the polls show Merkel/CDU with a 14.5 point lead. Shulz continues to lose ground. Both parties are pro-Euro. Non-event – but the upcoming election makes it problematic for the Germans to act on any debt relief for the Greeks.

  • Greek bailout; July 2017 they need to pay 5.6 billion Euros. This week, IMF offered to participate in the next bailout round if debt forgiveness specifics are clearly defined (but not necessarily executed on) by the EU at the upcoming Eurogroup meeting scheduled for Thursday of next week. Germany is insisting that this is a problem as any debt relief needs to be passed by the German parliament, and the Germans are reluctant to do this prior to their elections in October.  The Greek equity market (ETF: GREK) fell this week but remains relatively close to its recent highs.  Hope is not dead that the IMF might be able to extract some reasonable behavior out of the Eurogroup.

  • Turkey & the migrants: no news on the migrant deal, or visa free travel for Turks this week. There was a fascinating article from Pew Research on the use of google trends to capture the digital footprints of migrants. Article here: http://www.pewglobal.org/2017/06/08/digital-footprint-of-europes-refugees/

  • Italian Elections: the new electoral law failed in parliament this week; the agreement between the parties didn't hang together long enough to get the law passed. An electoral law probably needs to be passed if the elections are to be held in 2017.

Summary

For PM, this week was a sell-the-news event, as Comey's testimony, the ECB meeting, and the UK election didn't result in any grand catastrophe. The buck appeared to reverse back into an uptrend, bonds topped out – all the factors we watch to see where things might be headed indicate that a near-term high is probably in for PM.

Gold COT confirms the top in gold, as both the commercial shorts and managed money longs are at six-month highs. Silver looks quite different – it is not near any sort of peak just yet.

Gold and silver big bar shortage indicators shows no shortage in the west; ETF premiums rose slightly, as did GLD tonnage. In Shanghai, premiums remain positive but continued to fall.

Next week we have the FOMC meeting on Wednesday, which the market assumes will include a “rate increase” (more free money for the bankers, but with the actual base money not becoming any more scarce), a BOJ meeting, the retail sales report, and an industrial production report. Most likely the market will be focusing most on the Fed's balance sheet reduction plan, which would actually make base money more scarce and thus decrease liquidity – and thus potentially impact asset prices. A near-term decision to implement such a plan might well drive bond prices substantially lower (and thus, rates higher), as participants front-run the Fed's operation.

How this affects PM – gun to my head, balance sheet reductions are probably negative for PM.

We also have the Eurogroup meeting on Thursday, where the Greek situation will – presumably – be decided. Will the Germans cave on debt reduction? Or will the IMF decide once again that they don't really need sustainable debt in the Greek case "just because."

Lastly, that sell-off in tech on Friday could lead to something interesting, if it has legs.  We'll just have to see how it plays out.

Note: If you're reading this and are not yet a member of Peak Prosperity's Gold & Silver Group, please consider joining it now. It's where our active community of precious metals enthusiasts have focused discussions on the developments most likely to impact gold & silver. Simply go here and click the "Join Today" button.

21 Comments

PeakGold's picture
PeakGold
Status: Bronze Member (Offline)
Joined: Jun 3 2017
Posts: 78
If silver breaks $17.10, I'm

If silver breaks $17.10, I'm going short.

I don't think $16.60 will hold, and there seems to be plenty of momentum heading south...

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5408
grid algorithm

Peak-

While I support the concept of a short on silver (at least conceptually - I just generally close my long in practice) I still don't understand your grid-drawing algorithm.

I get the parallel parts, and some of the grid lines, but not the others.

For instance, I understand the lowest uptrending grind line - it touches 3 different lows (more or less).  But the other two uptrending lines?  They touch nothing - at least no "closing" points.

And the grid lines are anything but regularly spaced.

It seems like one of those things where you, if you put your mind to it, can (ex post facto) draw your grid lines wherever you like.  The lower downtrending line, for instance.  Why not draw it against the Dec/16 low instead of the June/16 low?

I really wish you had a computer algorithm do this for you so things would remain regular and consistent.  That way we could see if there was real merit there.

PeakGold's picture
PeakGold
Status: Bronze Member (Offline)
Joined: Jun 3 2017
Posts: 78
hi

If you extend the lines out they correspond with the general "pattern" in silver price over the years as well. Silver touched $17.10 twice on Friday, but that price did not show up in netdania weekly lows because of how quickly it happened, otherwise the last candle would show a low on the $17.10 uptrending line...

http://i.imgur.com/PbVbeNp.png

Anyways, you could draw more lines or fewer as you say to "sell the story," but the lines presented here all correspond with an important bottom, or catching point in silver price. Maybe I'm batsh*t crazy. I'm not going to rule that out, but this is how I trade and you can see how I do.

Penny551's picture
Penny551
Status: Silver Member (Online)
Joined: Nov 8 2012
Posts: 154
Classic Noseline Pattern

Personally, I'm going short if silver drips below the runny noseline... :)

sc?s=%24SILVER&p=D&yr=0&mn=6&dy=0&i=p36941277357&a=528873102&r=1497196950071

PeakGold's picture
PeakGold
Status: Bronze Member (Offline)
Joined: Jun 3 2017
Posts: 78
Nice, Penny. Why don't you

Nice, Penny.

Why don't you offer criticism like an educated adult (like Dave) instead of teasing me. 

Here is an idea. Why don't you post your Monday trade and we can compare results? What is your entry and exit strategy?  You see, I'm in the interest of making money and not in the interest of exchanging insults with grown-up children.

Would love a better model for trading. Thanks.

Penny551's picture
Penny551
Status: Silver Member (Online)
Joined: Nov 8 2012
Posts: 154
Peak

Peak,

My sincere apologies...i meant that in good fun, but can def see where it could be taken wrong.  I like that we can all learn form each other in this forum and have a respectful exchange of ideas exchange of ideas.  

Regards,

Steve

Penny551's picture
Penny551
Status: Silver Member (Online)
Joined: Nov 8 2012
Posts: 154
Watching $16.82...

sc?s=%24SILVER&p=D&yr=0&mn=6&dy=0&i=t88937882790&a=520657153&r=1497218441119

Penny551's picture
Penny551
Status: Silver Member (Online)
Joined: Nov 8 2012
Posts: 154
Dollar

Will be intersting to see how dollar reacts if/when it tests the 50/200DMAs...

sc?s=%24USD&p=D&yr=0&mn=6&dy=0&i=t02153304391&a=520657147&r=1497218541426&r=1497218583294

Uncletommy's picture
Uncletommy
Status: Platinum Member (Offline)
Joined: May 4 2014
Posts: 569
Advance apologies!

I have never traded in precious metals and prefer land and agricultural. While a land purchase can be viewed as a long position and agriculture a quasi-short position, in the worst case scenario, at least I get my seed back. I watch this site more for a glimpse of the behavior of gold and silver bugs. Hedging grain futures is about the most I can handle and is the only foray into speculation that I allow myself.  Traders make me nervous touting the benefits of value preservation of commodities, but even there I succumb to their arguments. It prompted me to recall my basic bias:

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5408
algorithm, currencies, support & resistance

Peak-

Ok.  I'm truly not trying to be difficult, I'm just trying to understand the algorithm used to actually anchor the lines to draw.  It seems like sometimes you use closing prices, and sometimes you use the highs or the lows.  The rules don't seem consistent.

So if I were going to write some code to replicate your technique, I don't think I could.  Being a programmer, this disturbs me.  :)

It is certainly clear that things do move in channels, and there is order underlying the whole thing, but remember this: silver is traded in many different currencies around the world, not just USD.  The chart for silver in EUR has a very different set of support & resistance levels than the one in USD.  Or a different "grid" from your perspective.

As you know, the reason why any of this works is human psychology.  The vertical resistance levels are about longs who are trapped, waiting to get out at break-even.  Vertical support is about shorts who decide to bail out at a point of maximum gain, and/or dip-buyers who missed out on the move last time and swore that if price ever got that low again, they'd buy.

No doubt your grid lines have to do with the increased willingness to take a loss as price continues to move down - as well as the increasing eagerness to buy the dip prior to the previous low, because you don't want to miss out.

But once you add in currencies, the support & resistance levels (and the grid-lines) are multi-dimensional.  Viewed only in USD, there are "hidden" Euro-based support & resistance lines, as well as (presumably) those in CNY, and GBP.  The "thickness" of each support & resistance level would probably be based on the overall amount of market participation from people in each currency.

It might be interesting to draw support & resist lines for gold using the previous major lows and highs in all currencies, plot the lines in USD, and see how they line up.  Do they line up?  Wouldn't that be interesting if they did?

Just maybe that's why things sometimes "bounce" when there is no visible support, or they top out when there is no visible resistance.  Perhaps there IS support, just in another (major) currency.

So if I had an algorithm for how to generate your gridlines, I could do this using other currencies too, project them onto the USD chart, and see if the grids overlapped.

Martin Armstrong says that you absolutely can't ignore how things loo in other currencies.  Back in the day, he had clients from Japan who would view the performance of the DJIA - but through the JPY lens.  Their charts looked quite different from ours.  He claims that the reason for the '87 crash was that the US wanted to devalue the buck by 40%.  If you are a Japanese investor and you hear about a 40% hit coming to your trade, you run away, you don't walk.  Who wants to take a 40% hit?

Maybe I'll go off and code this up and see what pops out.  Support & resist lines from major highs & lows in a variety of currencies.  Armstrong uses closing prices - daily, weekly, monthly.

PeakGold's picture
PeakGold
Status: Bronze Member (Offline)
Joined: Jun 3 2017
Posts: 78
extended chart

Steve, thank you for clarifying. Good luck with your trade!

Dave, below are those lines extended out... Very clearly you can see the pattern. I appreciate your interest in this as I think it's pretty cool too, and I hope you can take it a step further... It will be your claim to fame! (just give me a little credit)

Yes, unfortunately it's a combination of highs, lows, closes, and opens. There may be a pattern with the spacing, but it's probably some fibonocci nonsense ;)

https://i.imgur.com/cyaDQjf.png

thc0655's picture
thc0655
Status: Diamond Member (Offline)
Joined: Apr 27 2010
Posts: 1613
Waiting for a break below $13.84

I'm waiting for a new low in silver below $13.84 which I'm pretty sure I won't ever see again. However if silver  makes a new below that I'll buy more physical. Or gold if it makes a new low. In the meantime I'm buying land to build on. I'm no analyst, trader or speculator, though I do learn a lot here.

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5408
support & resist levels, weekly, 5 currencies

So here are the weekly-chart support & resist levels in 5 currencies, calculated from the peak/trough closing prices over a 13-week period in each of the major currencies.

In other words, when a peak is made, that's a resistance point.  When a low is made, that's a support point.  When a support level is violated, it becomes resistance, but just once.  If a breakout then occurs on that support-turned-resistance, it is eliminated.

Likewise, all support/resist lines are calculated and then tracked using the gold chart in each native currency.  Then, to get today's "international support/resistance" chart, those points are converted back into USD at the current FX rate.

Complicated enough?  Chart looks fairly simple though.  See the "USD" lines to see which bars generated the support & resist points for the buck.  Looks like about 1225.

reflector's picture
reflector
Status: Gold Member (Offline)
Joined: Aug 20 2011
Posts: 269
GDXJ rebalancing resulting in mining stock arbitrage opportunity

just watched an informative video with the ever-brilliant rick rule, ceo of sprott us holdings.

to summarize, apparently, the success of the gdxj ETF (a junior mining index fund) is forcing gdxj to re-balance and ditch quality smaller-cap miners that can't absorb the large in-flows from gdxj without the fund over-owning those miners (some SEC rule i believe limits them to owning no more than 5% of a stock).

rule believes this forced selling will result in good quality junior miners being oversold by as much as 25%, an arbitrage opportunity.

on the other end of the re-balancing, gdxj will be looking to start buying up larger-cap miners to add to its index, which represents another opportunity.

PeakGold's picture
PeakGold
Status: Bronze Member (Offline)
Joined: Jun 3 2017
Posts: 78
Looks like an interesting

Looks like an interesting start. It seems the JPY looks like the best choice at the moment?

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5408
silver version

Here's the version using silver.  Again, these are support bars are calculated from previous lows in the given currency.   Nearest support is from a previous low made about 6 weeks ago in JPY.  In fact there are a cluster of 3 similar-level lows: EUR, JPY, and GBP .  I'd guess that support area (16.50 to 16.75) is probably stronger than the USD level at 16.25.

Note that the old USD low in March @ 17 has already been 'used up' because silver broke through it first to the downside, and then again to the upside again in May.  USD also will provide another support at 15.75 (from Dec 2016) if the 16.25 low falls.

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

Just wanted to drop a post and say thanks for the discussion, guys.  Great stuff.

Looks like we're going to be seeing an excellent buying opportunity in gold and silver over the coming weeks.  Jeff Nielson still thinks we're going to see gold around $1000 and silver near $10, as prices are pushed lower before exploding higher.  He doesn't think you'll be able to buy metal there, but feels like it needs to be driven down that low in order to break the manipulation and drive prices much higher. We're probably a lot closer to $10 in silver than $20.  Prices are just wanting to trend lower, for whatever reason.

PeakGold's picture
PeakGold
Status: Bronze Member (Offline)
Joined: Jun 3 2017
Posts: 78
Went short today

Got an entry position in DSLV today. Good luck to everyone trading this week!

PeakGold's picture
PeakGold
Status: Bronze Member (Offline)
Joined: Jun 3 2017
Posts: 78
Dave,I'm looking forward to

Dave,I'm looking forward to to seeing how your model develops. I'm definitely sticking with my own price calls, but I'm looking forward to the comparison...

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

Lol, will probably be green within the hour.  Another one day downturn, followed by the standard reversal pattern.

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

Got an entry position in DSLV today. Good luck to everyone trading this week!

Congrats!  Going to be a super great trade.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Login or Register to post comments