PM End of Week Market Commentary - 8/4/2017

davefairtex
By davefairtex on Sun, Aug 6, 2017 - 1:13am

On Friday gold fell -10.10 [-0.79%] to 1264.30 on heavy volume, while silver dropped -0.41 [-2.46%] on heavy volume also. A stronger-than-expected Nonfarm Payrolls report caused a big rally in the buck [+0.76%], and that was the proximate cause for gold's plunge – for gold at least, it was all just a currency effect.

It was a bad week for much of PM – the odd man out was platinum, which rallied sharply. Otherwise, silver led gold lower, and the junior miners led the seniors lower. All of the miners, plus silver, are now below all 3 moving averages. Its pretty clear from this table that PM has entered a downtrend. Most of the damage happened on Friday, but PM was giving off hints of weakness all week long.

Name Chart Chg (W) 52w ch EMA9 MA50 MA200 50/200 Last Crossing last
Platinum $PLAT 3.32% -16.71% rising rising rising rising ma200 on 2017-08-03 2017-08-04
Copper $COPPER 0.28% 32.81% rising rising rising rising ema9 on 2017-07-14 2017-08-04
Palladium $PALL -0.64% 23.96% falling rising rising rising ema9 on 2017-08-04 2017-08-04
Gold $GOLD -0.89% -7.53% falling rising rising rising ema9 on 2017-08-04 2017-08-04
Senior Miners GDX -2.58% -28.53% falling falling falling falling ema9 on 2017-08-04 2017-08-04
Silver $SILVER -3.05% -20.34% falling falling falling falling ema9 on 2017-08-04 2017-08-04
Junior Miners GDXJ -3.72% -36.68% falling rising falling rising ma50 on 2017-08-04 2017-08-04
Silver Miners SIL -5.32% -37.05% falling falling falling falling ema9 on 2017-08-02 2017-08-04

Gold fell -11.30 [-0.89%] this week, with most of the damage happening on Friday. Even so, much of the week was spent slowly moving lower. Friday saw a plunge below the 9 EMA, as well as a 4-candle swing high. Gold in Euros also printed a swing high, and also dropped below its 9 EMA, but the drop on Friday was all about the currency. Candle code thought the long black candle was a continuation, while the gold forecaster dropped into bearish territory, reading -0.30. The forecaster plunged -0.46 just on Friday. Trend in gold is now down.

The December rate-increase chances rose to 45%.

COMEX GC open interest rose +10,220 contracts this week.

Silver fell -0.51 [-3.05%] this week, with most of the losses happening on Friday. The strong line candle on Friday is bearish, and the forecaster has now dropped well into bearish territory, showing a rating of -0.57. Silver also printed a 3-candle swing high on Friday. Silver is now below all 3 moving averages. Silver also has clearly changed trend.

The gold/silver ratio rose +1.70 to 77.87. That's bearish.

COMEX SI open interest fell by -1,648 contracts.

The miners moved steadily lower all week long, with Friday's sell-off acting as a sort of denouement. Both GDX and GDXJ printed long black candles, which appear to be continuations. Likewise, both ETFs printed swing highs, and dropped below all 3 moving averages. GDX forecaster plunged to -0.41, while the GDXJ forecaster dropped to an even more bearish -0.64. The volume on Friday's sell-off was substantially higher than normal. While the price move wasn't all that dramatic, the tone was unrelentingly bearish.

The GDX:$GOLD ratio fell, as did the GDXJ:GDX ratio. That's bearish.

USD

The buck spent most of the week moving sideways, but on Friday it shot higher after the better-than-expected Nonfarm Payrolls report, which showed average hourly earnings rising by 0.3% m/m. This hinted that wage inflation might have finally arrived. On the week, the buck rose +0.29 [+0.31%] to 93.33, printing a three-candle swing low and sending the forecaster up +0.60 points into bullish territory at +0.20. Buck is now above its 9 EMA for the first time in six weeks. I'd rate this as a probable reversal for the buck.

US Equities/SPX

SPX chopped sideways this week, rising +4.73 to 2476.83. Really not much happened. SPX remains above all 3 moving averages. That said – the DJIA moved solidly higher this week, while at the same time the RUT (Russell 2000) sold off. Armstrong likes to say that RUT represents domestic buyers, while DJIA represents international money.

The equities sector map shows financials and utilities in the lead, while telecom and energy were at the bottom.

VIX fell -0.26 to 10.03. Puts remain cheap.

Name Chart Chg (W) 52w ch EMA9 MA50 MA200 50/200 Last Crossing last
Financials XLF 1.93% 32.66% rising rising rising rising ema9 on 2017-07-31 2017-08-04
Utilities XLU 1.40% 4.49% rising rising rising falling ema9 on 2017-07-26 2017-08-04
Homebuilders XHB 1.15% 8.82% rising rising rising falling ema9 on 2017-08-04 2017-08-04
Industrials XLI 0.70% 19.31% rising rising rising falling ema9 on 2017-08-03 2017-08-04
Technology XLK 0.30% 23.63% rising rising rising falling ema9 on 2017-08-01 2017-08-04
Cons Discretionary XLY -0.39% 12.77% falling rising rising falling ema9 on 2017-08-02 2017-08-04
REIT RWR -0.45% -7.91% falling rising falling rising ema9 on 2017-08-02 2017-08-04
Cons Staples XLP -0.58% 0.95% falling falling rising falling ema9 on 2017-08-02 2017-08-04
Healthcare XLV -0.60% 5.87% falling rising rising rising ema9 on 2017-07-25 2017-08-04
Materials XLB -0.87% 12.28% falling rising rising falling ema9 on 2017-07-27 2017-08-04
Energy XLE -1.25% -1.91% falling falling falling falling ma50 on 2017-08-04 2017-08-04
Telecom XTL -2.05% 14.30% falling rising rising falling ma50 on 2017-08-03 2017-08-04
Gold Miners GDX -2.58% -28.53% falling falling falling falling ema9 on 2017-08-04 2017-08-04

Gold in Other Currencies

Gold fell in almost all currencies this week, with gold in XDR down -18.15.

Rates & Commodities

TLT rallied +0.84% this week, moving up strongly right up until Friday when it sold off following the Nonfarm Payrolls report release. Friday's candle print was a 2-candle swing high, which the code felt was a 44% chance of a reversal. Forecaster still shows a bullish rating of +0.49, however, so TLT remains in a short-term uptrend, at least for now.

JNK fell -0.51% on the week, printing a swing high on Tuesday and continuing to fall through end of week. Friday's spinning top was a continuation of the downtrend. JNK is showing risk off, although it seems to have found support at the 50 MA.

CRB fell -0.79%, with 3 of 5 groups dropping: agriculture, energy, and PM. Given last week's strong rally, this could certainly be just a rest. CRB has staged a relatively strong rally off the lows set in June, up almost 7% during that time. CRB remains above its 9 EMA, and in its medium-term uptrend.

Crude retreated this week, dropping -0.26 [-0.52%] to 49.53. It appears that crude has run into resistance at 50; perhaps shale drillers are adding production hedges, or maybe the commercials are loading up short. Regardless, oil spent the week moving down one day, and then up the next. Friday's candle print was a long white candle, which the code felt was neutral. Forecaster chopped back and forth, ending the week barely in bullish territory at +0.06.  To me, its hard to say which way things are headed.

COT report for crude shows that the commercials added shorts and sold longs, resulting in a -63k drop in their net position. Managed money covered short and added to their longs, with a +53k climb in their net position. All that boils down to potential trouble for oil here; sharp changes in positioning sometimes herald highs and lows.

Physical Supply Indicators

* No SGE data this week.

* The GLD ETF tonnage on hand fell -4.74, with 787 tons in inventory.

* ETF Premium/Discount to NAV; gold closing of 1264.30 and silver closing of 16.23:

 PHYS 10.25 -0.67% to NAV [down]
 PSLV 6.18 +0.23% to NAV [up]
 CEF 12.30 -7.9% to NAV [down]

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

* Big bars premiums were: gold [1kg] 1.00% and silver [1000oz] 3.45%.

Futures Positioning/COT

COT report is through July 25th, when gold closed at 1274.90, and silver at 16.70.

This week in gold, the commercials net position fell by 40k contracts; they sold 22k longs, and added added 18k shorts. Managed money net position rose by 45k contracts, adding 22k longs and bailing out of 23k shorts. The managed money short position continued to shrink; it could mark a short-term top for gold.

In silver, the commercial net position fell by 10k contracts; commercials added 7k shorts and sold 3.1k longs. This was a small change. Managed money's net position rose by 14.8k contracts, adding 4.5k longs and closing 10.3k shorts. This is a relatively small change in the managed money shorts.

Gold Manipulation Report

There were several after-hours spikes this week; one in the up-direction for silver, one each for gold and silver to the downside.  I got the sense that someone (or multiple someones) were probing support to see just how strong the bid underneath the metals was.  That's my guess anyway.

Eurozone Status

  • German Elections; October 2017: Merkel has a 14 point lead over Shulz.

  • Italy has deployed ships to intercept migrant boats within Libyan coastal waters. Supposedly the central government (such as it is) supports the move, but the non-central-government has threatened to attack the Italian ships. http://www.mcclatchydc.com/news/politics-government/national-politics/ar...

  • Italian Elections: no progress on a new electoral law in Italy; without a new law, elections will be held in Spring 2018. In national polls, anti-Euro M5S is even with the PD at 27%. A combination of FI + LN (both anti-Euro parties) are polling at 28%.

Summary

The Nonfarm Payroll report on Friday caused the dollar to print a swing low. That in turn caused gold and silver to sell off, with silver suffering substantially more than gold. Miners plunged also, driving through all 3 moving averages and ended the week looking quite bearish. The gold/EUR chart is nearing support; a break below support could lead to a whole lot of selling.

The COT report for gold shows that most of the managed money shorts have covered; this could mark a short-term top for gold, although there really aren't enough longs for the commercials to take advantage of. Likewise, the commercial shorts have not built up enough yet for this to be a serious top in gold from the COT perspective. If gold continues to move lower, it will be dollar-driven, not some game played by the commercials. Silver also does not show signs of a top; commercial shorts have increased but not by all that much; silver remains closer to a low than a high, at least from the COT perspective.

Gold and silver big bar shortage indicators shows no signs of shortage; premiums on big-bar silver remain slightly elevated, while premiums on gold remain normal. GLD tonnage fell.

Last week I asked, “will the dollar plunge continue?” I've been asking that for a while now, but on Friday we saw the first serious swing low for the buck in six weeks. Coming off a relatively rare triple-RSI accumulate situation (day/week/month RSI < 30), I believe that this is a reasonably high probability buy signal for the buck and/or sell signal for the Euro. While I don't have a weekly candle neural net trained up because of lack of data (hmm...I just got an idea that might fix that), the weekly candle print for the buck was a takuri line which is usually a decent single-candle reversal bar. The buck is also at support, which makes it a good time to rally. Last point: the COT report for the DX contract shows multi-year lows in commercial short positions. This situation has often marked the lows in the past.

If all these indicators prove out and this does mark a medium-term low for the buck, this will probably mean big trouble for PM. A 50% retracement in the buck (without some big confidence-crisis emergency to push people into the yellow metal) might well lead to a 5% drop in gold, a 10% fall for silver, maybe a 15% hit for the mining shares, and that's just from the currency move. If the folks over in the EU start selling too and gold drops below EUR 1070 support, things could get a lot worse in a hurry.

Trend-following code says:

Uptrend: platinum, USD, treasury bonds.

Downtrend: gold, silver, copper, natgas, crude.

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2 Comments

Penny551's picture
Penny551
Status: Silver Member (Offline)
Joined: Nov 8 2012
Posts: 149
Platinum: Interesting Chart...

sc?s=%24PLAT%3A%24GOLD&p=M&st=1980-01-01&en=today&i=p12450870157&a=538133402&r=1502025480708

Cornelius999's picture
Cornelius999
Status: Gold Member (Offline)
Joined: Oct 17 2008
Posts: 323
Is Mr. Kim of NK going to be

Is Mr. Kim of NK going to be the one to prick some bubble that matters?

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