PM Daily Market Commentary - 6/16/2017

davefairtex
By davefairtex on Sun, Jun 18, 2017 - 8:39am

 

On Friday gold moved down -0.30 to 1255.20 on moderately light volume, while silver fell -0.04 to 16.68 on moderately heavy volume.

It was a bad week for PM; silver led gold lower, the senior miners performed even worse, but the juniors actually broke even – a somewhat startling performance, and probably related to that GDXJ adjustment scheduled to occur this weekend. Palladium did best - it has been a star performer for quite a while now, up 62% over the past year.  However palladium is an anomaly right now; mostly PM is just a sea of red.

Name Chart Chg (W) 52w ch EMA9 MA50 MA200 50/200 Last Crossing last
Palladium $PALL 1.00% 61.78% rising rising rising rising ma50 on 2017-05-30 2017-06-16
Junior Miners GDXJ 0.64% -17.02% falling falling falling falling ema9 on 2017-06-14 2017-06-16
Gold $GOLD -1.07% -2.05% falling falling falling rising ma50 on 2017-06-15 2017-06-16
Platinum $PLAT -1.10% -4.29% falling falling falling falling ema9 on 2017-06-07 2017-06-16
Copper $COPPER -2.29% 25.86% falling falling rising falling ma50 on 2017-06-16 2017-06-16
Silver $SILVER -2.94% -3.05% falling falling falling falling ema9 on 2017-06-09 2017-06-16
Senior Miners GDX -3.37% -13.44% falling falling falling falling ma50 on 2017-06-14 2017-06-16
Silver Miners SIL -4.76% -10.61% falling falling falling falling ema9 on 2017-06-09 2017-06-16

Gold fell -13.60 this week; mostly it was about the selling following the aftermath of the FOMC meeting, where the Fed announced more details of its balance sheet reduction plan. The announcement cut short a strong rally on Wednesday that was kicked off by a weak Retail Sales report, and once gold reversed, it sold off for the remainder of the week. Friday's print was an doji/NR7, which since my code rev, won't yield any sort of signal if it doesn't make a new high or low. Gold is not yet oversold, and there is not a lot of support at current prices levels - at least viewed in USD.

The December rate-increase chances is at 36%. Market thinks the Fed is probably done for the year. Next major step for the Fed: balance sheet reduction.

COMEX GC open interest fell -22,981 contracts.

Interestingly, when viewed in Euros - using weekly closing prices - gold actually stopped right at a support level.  Here's a chart that shows this.  Note how horrid the price chart looks like when viewed in Euros.  On this chart, most likely, support breaks, and drives down to the next level at (Euro) 1086 - that's $1216 in USD.

Silver fell -0.50 [-2.94%] this week, with most of the losses happening early in the week. While gold's drop accelerated following FOMC, silver's descent actually slowed down. Friday's print was a short black/NR7 candle, which did not make a new low.  Currently the next (USD) support level is at around 16.20.  Interestingly, silver managed to stop this week at a Euro support level which was exactly at 16.68.  Hmm.  Maybe I should start paying more attention to this multi-currency thing.

The gold/silver ratio rose +1.42 to 75.27. That's bearish.

COMEX SI open interest fell -6,795 contracts.

Senior miners had a bad week, with all of the damage coming on Wednesday following the FOMC announcement – it was a massive bearish engulfing candle print for both ETFs, however the follow-through I expected on Thursday and Friday simply didn't materialize. Friday's print for GDX was a doji, which the code found neutral. Still, the miners did substantially better than I expected. The junior miners actually managed to close up on the week; to me this is a sign that the junior miner malaise is probably now over.

The GDX:$GOLD ratio fell on the week, which is bearish, while the GDXJ:GDX ratio rose, and that's bullish.

USD

This week the fell, losing -0.17 to 96.87. The buck put in a swing low on Thursday after the FOMC announcement and it was looking relatively strong, but Friday it sold off, printing a dark cloud cover, which looks pretty ominous (71% chance of a high). Has the buck reversed or not? I'm not sure.

US Equities/SPX

SPX rose +1.38 [+0.06%] to 2433.15. Mostly, equities chopped sideways in a relatively narrow range, remaining quite close to a new all time high. Tech continues to have problems after last week's sell-off; it led the market lower this week. Except for tech, the equity market was a bit of a watching-paint-dry experience.

Sector map shows homebuilders led, while tech and staples did poorly.  Sector map is still a mess, not showing any sort of direction clearly at this point.  Tech doesn't generally trail, and utilities did far too well for this to be a generally bullish move.

VIX fell -0.32 to 10.38.

Name Chart Chg (W) 52w ch EMA9 MA50 MA200 50/200 Last Crossing last
Homebuilders XHB 1.21% 16.10% rising rising rising rising ema9 on 2017-06-08 2017-06-16
Industrials XLI 1.13% 22.66% rising rising rising rising ema9 on 2017-06-08 2017-06-16
REIT RWR 0.86% -2.08% rising rising falling rising ma200 on 2017-06-09 2017-06-16
Utilities XLU 0.82% 6.56% rising rising rising rising ema9 on 2017-06-14 2017-06-16
Healthcare XLV 0.22% 9.30% rising rising rising rising ema9 on 2017-05-22 2017-06-16
Telecom XTL 0.18% 24.43% falling rising rising rising ema9 on 2017-06-15 2017-06-16
Financials XLF 0.00% 31.49% rising rising rising falling ema9 on 2017-06-07 2017-06-16
Energy XLE -0.18% -0.53% rising falling falling falling ema9 on 2017-06-16 2017-06-16
Cons Discretionary XLY -0.24% 15.09% falling rising rising rising ema9 on 2017-06-14 2017-06-16
Materials XLB -1.12% 14.38% falling rising rising rising ema9 on 2017-06-15 2017-06-16
Cons Staples XLP -1.27% 3.59% falling rising rising rising ema9 on 2017-06-16 2017-06-16
Technology XLK -1.37% 26.87% falling rising rising rising ema9 on 2017-06-09 2017-06-16
Gold Miners GDX -3.37% -13.44% falling falling falling falling ma50 on 2017-06-14 2017-06-16

Gold in Other Currencies

Gold fell in every currency this week except the Ruble; gold in XDR was down -14.14.

Rates & Commodities

TLT rose +1.57% this week, with all its gains coming after the FOMC announcement on Wednesday. TLT broke out to new highs, and has climbed more than 8% off the lows set back in March. TLT has been the hands-down winner in recent weeks; it is saying risk off.

JNK fell -0.16% this week, with all of the damage happening on Friday. JNK printed a swing high on Thursday, and is hinting at risk off.

CRB took another leg down this week, dropping -2.10%, making a new low on Thursday. Much of the loss came from crude's big drop on Wednesday.  4 of 5 groups fell this week; it was just a bad week for the commodities sector.

Crude dropped -1.15 [-2.50%] to 44.86 this week. All the damage came on Wednesday, following an EIA report that (I guess) wasn't as bullish as the market had hoped. Crude just cratered immediately following the report, dropping more than a buck in about 5 minutes. The 10:30 EIA reports seem to be turning into a regularly scheduled “smash oil down a buck” event, with the rest of the week being relatively uneventful. Friday's short white candle was seen as neutral by the candle code.

Physical Supply Indicators

* SGE premium to COMEX rose to +8.92 over COMEX.

* The GLD ETF tonnage on hand fell -13.32, with 854 tons in inventory.

* ETF Premium/Discount to NAV; gold closing of 1255.20 and silver closing of 16.68:

 PHYS 10.23 -0.61% to NAV [down]
 PSLV 6.33 +0.02% to NAV [down]
 CEF 12.49 -6.5% 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] 1.98% and silver [1000oz, NY] 3.37%.

Futures Positioning/COT

COT report is through June 13th, when gold closed at 1268.50, and silver at 16.81. The coverage period did not include the FOMC announcement day.

This week in gold, the commercials closed -16k shorts, while managed money bailed out of -15k longs. It wasn't much change this week; managed money still appears to be over-extended on the long side, and that (most likely) means danger for gold.

In silver, the commercials closed -4.5k shorts, while managed money added +5.2k longs. It was not much of a change for silver this week also, but managed money has bailed out of a large number of long positions, and as such the outlook for silver from the COT report is not bearish at this point.

Gold Manipulation Report

There were no after-hours spikes to report this week.

Eurozone Status

  • German Elections; October 2017: currently the polls show Merkel/CDU with a 14 point lead. Both parties are pro-Euro.

  • Greek bailout: the Eurogroup voted to give Greece more bailout money, even though the IMF chose not to participate. Well the IMF pretended to participate by saying any number of supportive things, but said it would not provide any actual money until the terms of debt relief were made clear.

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

  • Italian Elections: no progress on a new electoral law in Italy. In municipal elections held this weekend, the M5S Party did less well than expected, with none of their mayoral candidates managing to make it to the second round of voting. In national polls they remain tied with the PD, polling at about 29%.

Summary

There was more selling in PM this week, as the FOMC announced a specific plan to reduce its balance sheet “which could start soon” - perhaps as soon as next meeting, starting at $10 billion per month and then ramping up to $50 billion per month, until most if not all the excess reserves are finally mopped up. The negative PM (and positive dollar) response to the FOMC announcement overwhelmed the effects from the unexpectedly weak retail sales report.

There were no significant changes in the COT report this week; managed money longs are overextended in gold, and it will probably require an extended move lower to flush them out.

Gold and silver big bar shortage indicators shows no shortage in the west; ETF premiums fell across the board, and GLD tonnage fell. It looks as though western gold holders are bailing out. In Shanghai, premiums increased as prices fell.

While a strong case has been made for a recession arriving within the next 6-9 months due to a vanishing global credit impulse, that is not where we are today. Right now, the Fed's GDPNow estimate has 2Q GDP at 2.9%, a long way from from recession territory. The reduction in status-quo-threatening political turmoil has, at least for the time being, put a damper on the buying enthusiasm for PM in the west. The Fed looks set to start reducing its balance sheet. Its not an ideal setup for a near term move higher in PM.

The bond-gold correlation that has held for the past 4 months broke down this week.  Bonds continued higher, while gold sold off.  Might this be an indication of manipulation?  Its hard to know for sure.  Just know that we can't rely on TLT right now as a helpful indicator for where gold will end up moving.

The buck appears to be at a turning point; if it starts to move higher, we could see a more substantial move lower in PM.  It could go the other way too, of course - right now the buck is at a decision point and its hard to say which way it will jump.

Trend-following code says:

Uptrend: long bond.

Downtrend: crude, gold, silver, copper, platinum, natgas, USD. Crude might be ready to reverse.

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3 Comments

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 4681
weekly closing resistance & support levels

Here is my annotated weekly support/resistance levels in the 5 major currencies.  Note how gold ended this week right at the combined EUR+JPY support level at 1254/1255.  If it keeps doing this, I'll make this a regular feature.

PeakGold's picture
PeakGold
Status: Bronze Member (Offline)
Joined: Jun 3 2017
Posts: 67
There's silver $16.60

 

So if silver does not bounce of $16.60, I'm looking at $16.22 as the last chance of a turn around because we need to see a close above $16.60 if bullish on Friday. It's possible $16.60 was bottom though... 

http://i.imgur.com/1Yq3dk0.png

Dave can you remind me again how those resistance areas were calculated? I'm trying to wrap my head the predictive power of your model.

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 4681
vertical support

So this model is simply the immediate previous low for the commodity, calculated in the foreign currency, using weekly closing prices.

In other words, construct a chart of silver, denominated in Euro.  It doesn't look much like the chart denominated in dollars.  Go find the prior weekly closing low, in Euros: 14.88.  Draw the line on the Euro chart to the present.  Now convert Euros to USD (1.1216).  That's 16.68.

Now do this for all 5 currencies, and plot their previous lows as support lines on the USD chart.

 

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