PM End of Week Market Commentary - 7/14/2017

davefairtex
By davefairtex on Sat, Jul 15, 2017 - 7:58am

 

On Friday gold rose +11.30 to 1228.00 on heavy volume, while silver climbed +0.29 to 15.95 on moderately heavy volume. A strong move down in the buck helped the metals substantially: when viewed in Euros, the move in gold today was fairly tepid, up only +0.22%. Both metals launched at 8:30 am, the same time that a weak Retail Sales report was released (-0.2% m/m), along with a CPI report that showed a 0% m/m change in inflation. At that moment, Euro jumped higher, right along with gold and silver.

On the metals sector map, we can see a typical bullish PM market pattern; junior miners leading seniors, silver leading gold, and miners leading metal. Silver miners are doing best. All metal components have regained their 9 EMA lines – and they all did this on Friday. Its a good-looking picture.

Name Chart Chg (W) 52w ch EMA9 MA50 MA200 50/200 Last Crossing last
Silver Miners SIL 4.66% -34.00% rising falling falling rising ema9 on 2017-07-14 2017-07-14
Junior Miners GDXJ 3.55% -34.82% rising rising falling rising ema9 on 2017-07-14 2017-07-14
Senior Miners GDX 2.78% -27.84% rising rising falling rising ema9 on 2017-07-14 2017-07-14
Silver $SILVER 2.47% -21.70% rising falling falling rising ema9 on 2017-07-14 2017-07-14
Palladium $PALL 2.40% 31.57% rising rising rising rising ema9 on 2017-07-11 2017-07-14
Copper $COPPER 1.74% 20.29% rising rising rising rising ema9 on 2017-07-14 2017-07-14
Platinum $PLAT 1.57% -16.67% rising rising falling rising ema9 on 2017-07-14 2017-07-14
Gold $GOLD 1.33% -8.05% rising falling falling rising ema9 on 2017-07-14 2017-07-14

Gold rose +16.10 [+1.33%] on the week, with most of the gains coming on Friday. The rebound off the lows was initially quite slow – it appeared as though gold was slogging higher against a lot of resistance - but by end of week gold had managed to regain its 9 EMA. Friday's long white candle was seen as neutral (which I'll start calling a “continuation” from now on). Gold's new uptrend likely remains in place. Forecaster is also now quite positive: +0.45 appears to show a reasonably strong uptrend is now in place.

The December rate-increase chances fell to 43%.

COMEX GC open interest rose +9,495 contracts this week.  Managed money continues to load up short.

Silver rose +0.38 [+2.47%] on the week, clearly outperforming gold. The massive candle from last Friday's silver smash dominates the technical picture; silver has still not managed to print a swing low. Still, the silver forecaster now has silver at a rating of +0.24, which is somewhat bullish. Silver did suffer a brisk sell-off on Thursday, but it seems to have made a full recovery; Friday's long white candle was seen as somewhat bullish also.  Its not as good as what we see in gold, but its not bad either.

The gold/silver ratio fell -0.87 to 77.01. That's bullish.

COMEX SI open interest rose by +1,028 contracts.

While the miners did well when viewed on the weekly timeframe, the last 3 days have seen a fair amount of selling pressure. In the last half of the week, GDX has gapped up, and then sold off for most of the day. Volume is increasing too. This looks like traders selling a rally, which is generally not a good sign. So far the candle code hasn't found this to be bearish, and Friday's short black candle was seen as a neutral/continuation pattern. The forecaster shows GDX as slightly bullish: it didn't like that selling pressure very much either, it seems.

The GDX:$GOLD ratio rose this week, as did the GDXJ:GDX ratio. That's bullish. Last 3 days don't look quite so strong; much of the change in the ratios came on Monday.

USD

This week the buck plunged -0.88 to 94.89, with much of the damage happening on Friday. As mentioned, the plunge on Friday (new low: 94.83) seemed to be caused either by poor retail sales, or a low CPI reading – take your pick. Friday's long black candle was seen as a probable continuation rather than a low. The buck appears weak, and is getting weaker. Euro is at 114.67, a high that dates back to May 2016.

You folks expecting the buck to turn to confetti any moment - I think this move is mostly about the ECB talking about tapering.  That, and the unwind of the Trump rally.

US Equities/SPX

SPX charged higher, up +34.09 to 2459.27, the somewhat ominous end to last week completely wiped out by a new all time high set just on Friday. Last week's nascent downtrend: gone.

The equities sector map shows a strong performance by tech and energy, while financials did worst. Tech spent all this week in rally mode. Looks like traders were excited to buy the dip. Even long-suffering energy managed to put in a good performance for a change.

VIX plunged -1.68 to 9.51. That's the lowest I've seen. Future so bright, you've got to wear shades. Wait a few days and buy puts. They're usually a good deal < 10 VIX. Its a thought anyway.

Name Chart Chg (W) 52w ch EMA9 MA50 MA200 50/200 Last Crossing last
Technology XLK 3.36% 26.22% rising rising rising falling ma50 on 2017-07-12 2017-07-14
Gold Miners GDX 2.78% -27.84% rising rising falling rising ema9 on 2017-07-14 2017-07-14
Energy XLE 2.17% -5.59% rising falling falling falling ema9 on 2017-07-11 2017-07-14
Materials XLB 2.05% 13.66% rising rising rising rising ema9 on 2017-07-07 2017-07-14
Healthcare XLV 1.15% 8.08% rising rising rising rising ema9 on 2017-07-12 2017-07-14
Industrials XLI 1.12% 18.28% rising rising rising rising ema9 on 2017-07-07 2017-07-14
Cons Discretionary XLY 1.11% 10.88% rising rising rising falling ma50 on 2017-07-14 2017-07-14
REIT RWR 1.04% -8.54% rising rising falling rising ema9 on 2017-07-14 2017-07-14
Utilities XLU 0.84% 0.14% rising rising rising rising ema9 on 2017-07-14 2017-07-14
Telecom XTL 0.66% 16.34% rising rising rising rising ema9 on 2017-07-14 2017-07-14
Homebuilders XHB 0.54% 10.50% rising rising rising rising ema9 on 2017-07-12 2017-07-14
Cons Staples XLP 0.39% -1.76% rising rising rising falling ema9 on 2017-07-14 2017-07-14
Financials XLF -0.52% 30.26% rising rising rising falling ema9 on 2017-06-27 2017-07-14

Gold in Other Currencies

Gold rallied in most currencies, falling only in Ruble and GBP.  Gold in XDR moved up +11.21.

Rates & Commodities

TLT rose +0.50% on the week, recovering somewhat from the big taper tantrum that followed Draghi's speech about stopping the ECB's QE program. The gains came in fits and starts however, and Friday's candle looked bearish – a bearish belt hold – but the candle code felt it was not a problem. TLT's forecaster went positive this week, and remains in bullish territory.

JNK shot up +0.98% this week, rising 4 out of 5 days, and rallying right up the previous high set two weeks ago. A close above the previous high will end the downtrend. JNK is signaling risk on.

CRB rose +2.12% on the week, moving slowly higher. 3 of 5 groups rallied; energy, industrial metals, and PM. CRB needs a close above the 50 MA – which is not very far away – to start suggesting that it is emerging from its multi-month downtrend.

Crude had a good week, rising +2.43 [+5.48%] to 46.81. Apart from a momentary blip on Wednesday, crude spent the week moving higher and on Friday managed to close above its 50 MA. Crude's forecaster is solidly bullish, at +0.59. Friday's closing short white marubozu is seen by the candle code as slightly bearish – but probably not a top. US rig counts were flat this week; oil +2, natgas -2. A report came out suggesting that Permian break-even was around $45/bbl. The technicals for oil look better this week. A little anyway.

Physical Supply Indicators

* SGE premium to COMEX fell -0.20 to 11.15 over COMEX.

* The GLD ETF tonnage on hand fell -6.51, with 829 tons in inventory.

* ETF Premium/Discount to NAV; gold closing of 1228.00 and silver closing of 15.95:

 PHYS 10.03 -0.55% to NAV [up]
 PSLV 6.08 +0.24% to NAV [down]
 CEF 12.09 -6.1% to NAV [up]

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

* Big bars premiums were: gold [400oz] 2.18% and silver [1000oz] 3.67%.

Futures Positioning/COT

COT report is through July 3rd, when gold closed at 1217.00, and silver at 15.82.

This week in gold, the commercials added +17k longs, and closed -17k shorts. Commercials have the largest long position they've had since early 2016 and the shorts continue to keep coming down. Managed money bailed out of -6k longs and added +4k shorts; small changes, but managed money is now back up to January 2016 levels of gold short interest. Its definitely a bullish positioning for gold.

In silver, commercials closed -10.7k shorts, and added +3.9k longs. That's a really large net change. Commercials are at the same “net” position that they were at the lows in December 2015. Managed money sold -4.1k longs and added +3.4k shorts. That's a medium-sized change. Managed money is now net short silver – they are more bearish now, collectively, than at the silver lows in December 2015. This points to a major low for silver.   Below is a chart of the commercial position - managed money position.  It hasn't been almost flat for 18 months.  Usually managed money is net long, and commercials are net short.  Right now, they are almost in balance.

Gold Manipulation Report

There were no after-hours spikes this week.

Eurozone Status

  • German Elections; October 2017: Merkel's lead is increasing; it is now a 14.5 point lead.

  • Latest Draghi-taper rumor: he will address the central banker gang at Jackson Hole, where it is thought he will give out some more details on the ECB's plans to taper its QE program.

  • Italy is drafting a code which attempts to limit the NGO's ability to act as a migrant sea taxi service. Some NGO boats allegedly fire off flares, causing the Libyan smugglers to launch boats into the ocean, and the migrants are then rescued from these boats by the NGOs ships who then transfer them to other ships, who take them to Italy. 4000 migrants were landed at Italian ports just this week. http://www.reuters.com/article/us-europe-migrants-italy-idUSKBN19Z14W?il=0

  • Turkey & the migrants: no news.

  • Italian Elections: no progress on a new electoral law in Italy. In national polls, M5S is dead even with the PD.

Summary

This was a week of recovery for PM and the other metals also, and a fair amount of that had to do with a plunge in the buck to new lows. In Europe, gold has stopped dropping, and is now slowly moving higher. Its an improvement and a reversal of the downtrend, but emphasis is on the word “slowly” rather than on the word “higher”.

The COT reports show a continued increase in short interest by managed money and a decline in short interest by the commercials, for both gold and silver. Silver continues to look especially bullish, with the net positions approximating where they were at the lows in Dec 2015. Managed money is now net short silver for the first time since 2015. This is about as bullish of a report as you'll see.

Gold and silver big bar shortage indicators shows a mixed picture in the West; premiums on big-bar silver have ticked higher, while premiums on gold remain normal. ETF premiums were mixed, and GLD tonnage fell. In Shanghai, premiums fell slightly.

So while the technicals are good, my primary indicator is the COT report. Right now, its all bullish. In silver, its a once-in-2-years bullish situation, right now. That doesn't mean we shoot the moon starting Monday, but once the commercials start to force prices higher, there are a huge number of managed money shorts that will flee, leaving daily moves of $0.50 - $1.00 in their wake. Day after day, prices will scream higher. Well, that's what has happened before anyway.

Its hard to know if this will happen this week, or next, but it should happen in the near future. Something will end up appearing to be the proximate cause of the bounce (kind of like Friday's big rally that appeared on the heels of the Retail Sales/CPI report), but in reality the commercials will probably just use that as an excuse to blow away the managed money shorts.

Is my model too simple? Maybe. But those commercials usually prevail.

And even our fundamental friend Bron over at monetary-metals.com is saying that there is a $2 discount for silver and a $100 discount for gold – caused by the impact of the futures markets on price. At some point, the futures will be unwound, and its effect on price will diminish and price will rise accordingly. Theoretically anyway.

The one concern (and you knew I had to have one) is about timing: the mining shares looked pretty ill over the past 3 days. Why aren't they more enthusiastic if things are just about to break loose? I'd be a lot more comfortable about the timing of the next PM launch if traders were gobbling up shares of the miners. Which they aren't doing.

Still, I remain long silver since I think it will be the big winner, at least according to the COT. I'm just not sure when.

Trend-following code says:

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

Downtrend: USD.

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9 Comments

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 4619
bitcoin TA

If I were to judge a good buying opportunity for bitcoin, I might consider counting the number of enthusiastic articles on PP about bitcoin, and buy once the traffic has died down to nothing for at least two months.  I'm not sure we're there just yet, but I suspect we're getting close.

Accordingly...we have that hard fork coming up on Aug 1.  That's 15 days from now.  Most likely, people are selling in advance of this date, trying to front-run the worry.  Today bitcoin is trading at 1908, clearly through the 2050 support level.

The breakdown of major support at 2400 looked classic; an initial breakdown through support, a rally back to old support (now resistance), and a much more intense sell-off after the failure to break through resistance that took us down rapidly right through 2050 and down to our current level at 1900.

If buyers appear immediately prior to the hard fork, which is what I expect, I think that will be a good buying opportunity.  I say that because the hard fork will (most likely) be a "buy the news" event, kind of like how gold gets sold hard ahead of FOMC meetings when we're at max worry, only to rally the day of, and right afterwards.

In the meantime, I invite you all to watch the breakdown and pray for a brisk drop down to 1300.  We may not make it that far before the buyers appear - but who knows.  There are a whole lot of new longs that are (probably) being rinsed out right now.  (Apologies if you are a new long and are stressed by the drop).

My money is on 1300.  Well, kind of.  I don't actually have money on it.  But that's my target.  Subject to change.  I'm looking for my code to help me spot the buy opportunity.

Meantime, I believe patience is required.

Did I mention that selling the secondary high was a good idea at 2700?  I did.  If you'd done that, you could get in now (!) at 1900, and collected the $800 profit per coin.  That's better than a poke in the eye with a sharp stick.  Not that I'd buy now, its still dropping too hard, and we have 15 days left until the event.  If gold & silver have taught me anything, its that its best to watch - until just a few days before the event.

ETH/USD: $143.

I still like ETH just fine.  I just don't like paying full price for it.

dip

Ethereum will dip...any day now.

 

johojo's picture
johojo
Status: Member (Offline)
Joined: Apr 2 2017
Posts: 1
Thanks for sharing your thoughts

Your scenario seems quite plausible. I've read that, assuming all goes well with the August 1 switch, there's another technical decision point surfacing in early November. Do you anticipate turmoil then, as well?

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 4619
outta my depth

Ha I've reached the limits of my bitcoin expertise!  Perhaps mrees will reappear to answer your question.

I'm just basing this particular trade on what I know about people, fear, greed, and my read about the current technical situation.  He's the one with the deep understanding of whats coming up, and how it is likely to affect things.

Hopefully he will reappear to answer your question once bitcoin resumes an uptrend.

When stuff sells off in anticipation of disaster, I'm more on the buy side.

I also know this bitcoin trader who has been at this for a while now.  "This is NOTHING", he scoffs.  Well, its not nothing to have your net worth cut by 40%, but I guess compared to the drop from $1100 to $200 a few years back, this isn't all that bad.

And things need to happen in a particular timeframe, too.  If my scenario plays out, we probably have time for only one more drop before Aug 1.  This current downside move feels like its just about out of steam.  My code gave a relatively bullish read off yesterday's candle - but that clearly didn't hold.  Today's candle looks to be quite a bit stronger and - assuming it holds through end of day - will probably lead to a bounce relatively soon.  If the downtrend remains intact, we should bounce for a few days, the buyers should fade, more sellers should come in (and the new dip-buyers should be discouraged and bail out), and if we're lucky, we get one more move down before the big day.

Theoretically anyway.  I mean, its just a story I'm telling.  I could be totally wrong.

Timeframe lines up pretty well though.

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 4619
bitcoin 7/16

For 7/16, the candle code sees a high wave and assigns a 65% of 7/16 being a near-term low.  I think we probably bounce from here, although my best guess is that this isn't the final low ahead of Aug 1.

Bitcoin 3-day forecaster code went short 8 days ago at 2500, and now assigns a rating of -0.94, which is pretty bearish.  Of course, the forecaster tends to be the most bearish right at the turning points, so you might say that's actually a good sign.

The volume on 7/16 was very heavy - and that tends to be a good sign to mark lows, especially if the candle has a long lower shadow.

MJB's picture
MJB
Status: Silver Member (Offline)
Joined: Jan 5 2016
Posts: 117
Cant Argue

Decent analysis Dave, much appreciated.

Anyone been following the ICO markets lately? First time I've ever experienced a 30x gain and then lost 66% of that.. talk about a roller coaster! None of this is a realized gain though, still fully invested in some form of crypto or another. For me is it now a tax game. I am told if I turn crypto into fiat (USD) it triggers a taxable event while trading crypto ratios is not.

I could have sold at the top, gave half to the govt and kept half. That's no fun at all. Neither is seeing the portfolio value in USD fall almost 50%. Such is life I suppose. Still waiting on the BTC to silver eagle ratio to be 1:150.. 

Any trading tax advice you are willing to offer? 

I'd call a 50% retracement in ETH a good dip.. probably not going back to $7 where Mark advised me and anyone who would listen here at PP to buy. Also Litecoin has really held it's own during the pullback of ETH and BTC. I am hearing very good things. It is much faster and has cheaper transaction fees than BTC does.

A new ERC20 Token worth looking into is called Veritaseum. A trading platform based on the blockchain. Awesome idea IMO. I know you are a skeptic about how these things work so here is a chance to see real world application. I can only hope the CME Group is paying attention!

 

https://steemit.com/cryptocurrency/@getitfrommike/veritaseum-brings-good...

PeakGold's picture
PeakGold
Status: Bronze Member (Offline)
Joined: Jun 3 2017
Posts: 65
Silver

This morning's price drop looks like a confirmation of support. 

PeakGold's picture
PeakGold
Status: Bronze Member (Offline)
Joined: Jun 3 2017
Posts: 65
hmm

As of right now, it looks like we may see $16.00 again tomorrow. Support broke. PMs just don't seem to want to go up at the moment...

Windycityphil@gmail.com's picture
Status: Member (Offline)
Joined: Nov 4 2016
Posts: 1
What's next Lite coin after BTC Aug 1 event ?

What's going to happen to Lite coin

after BTC 8/1 event ?

PeakGold's picture
PeakGold
Status: Bronze Member (Offline)
Joined: Jun 3 2017
Posts: 65
silver

 Silver priced decided not to work it's way down to the low 16s, but instead decided to retest resistance. I jumped out of my new long position at $16.30 from $16.12 because I'm still not convinced we hit bottom, and I am playing it safe. Maybe I can get a better price tomorrow.

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