PM End of Week Market Commentary - 9/22/2017

davefairtex
By davefairtex on Sun, Sep 24, 2017 - 5:53am

On Friday gold rose +6.20 to 1300.50 on moderate volume, while silver climbed +0.04 to 17.04 on light volume.  It was a day of slow recovery for gold, sideways chop for silver.  The buck was down slightly; currency played little part in gold's modest recovery.

The metals sector map continued moving lower this week, with silver leading gold, and junior miners leading the seniors. Copper was the sole metal in the green. Silver and platinum, the metals that dropped the most, managed to fall below both the 50 and the 200 MA lines. Juniors are also through their 200 MA. That's all bearish.  Curiously, silver miners are actually doing fairly well.

Name Chart Chg (W) 52w ch EMA9 MA50 MA200 50/200 Last Crossing last
Copper $COPPER 0.12% 34.92% falling rising rising rising ema9 on 2017-09-08 2017-09-22
Palladium $PALL -0.16% 32.08% falling rising rising rising ema9 on 2017-09-13 2017-09-22
Silver Miners SIL -1.56% -29.23% falling rising falling rising ma50 on 2017-09-18 2017-09-22
Gold $GOLD -1.74% -3.00% falling rising rising rising ema9 on 2017-09-15 2017-09-22
Senior Miners GDX -2.74% -15.39% falling rising rising rising ma50 on 2017-09-22 2017-09-22
Junior Miners GDXJ -2.81% -27.23% falling rising falling rising ma50 on 2017-09-22 2017-09-22
Silver $SILVER -3.37% -14.59% falling rising rising rising ma50 on 2017-09-21 2017-09-22
Platinum $PLAT -3.87% -11.69% falling rising falling rising ma200 on 2017-09-19 2017-09-22

Gold fell -23.00 [-1.74%] this week, with most of the losses coming after the FOMC meeting announcement on Wednesday. Gold did manage to close the week just above round number 1300. Friday's print wasn't a decisive candle pattern. The forecaster closed the week at -0.32, up +0.22 on Friday. Is this an imminent reversal for gold? It does look as though the downtrend is slowing down, but its not a reversal just yet.  I also don't like the gap between price and the 9 EMA.

The December rate-increase chances jumped up once more to 72%; the large move higher came following the FOMC announcement on Wednesday.  This is why I saw the FOMC announcement as "surprisingly hawkish."

COMEX GC open interest fell -39,523 contracts this week.

Silver fell -0.59 [-3.37%] this week. Most of the damage happened on Monday; the post-FOMC announcement drop was not that large. Silver managed to close the week above round number 17, which is a positive sign. Friday's print was an inoffensive doji, which didn't tell us anything. Forecaster closed the week at -0.32, which looks like a slowing downtrend.  Price is well below the 9 MA - absent any news, it probably needs to catch up before the trend will reverse.

The gold/silver ratio rose +1.27 to 76.34, which is bearish.

COMEX SI open interest fell by -3,977 contracts.

The miners sold off along with the metal, rallying on Friday to end the week.  GDX was close to a swing low but couldn't quite pull it off, while GDXJ actually did print a swing low, the candle code assigning it a 54% chance of a reversal.  Forecasters: GDX:-0.32, GDXJ: -0.13.  While GDX forecaster is showing that the downtrend is slowing, GDXJ's forecaster is saying that a reversal may be imminent - at least in the junior miners anyway.

The GDX:$GOLD ratio fell -0.66% on the week, and the GDXJ:GDX ratio fell -0.07%. That's bearish, however the GDXJ rally on Friday is hinting at a potential reversal.

USD

The buck rose +0.31 [+0.33%] to 91.97. All of the gains came the day of the FOMC announcement, which came out more hawkish than the market had expected. The Fed announced the commencement of its balance sheet normalization plan, which starts out slow ($10 billion/month) but will theoretically ramp up to $50 billion per month – assuming the economy doesn't run aground in the meantime.  The vast bulk of the work will be done long after Janet Yellen's term is up in February.  It's called delegation.

Is the buck ready to reverse yet?  Friday's print was a southern doji, but the code felt it was a bearish continuation.  In fact, the USD forecaster plunged -0.46 on Friday to read -0.07, which appears to suggest the buck is about to turn lower.  I guess no bounce in the buck yet.  That should help gold, at least a bit.

As a parlor game we could try to guess how much balance sheet normalization we might expect if all went well. During 2000-2008, the ratio of M2/BASE was about 8:1 – $8 in savings & checking for every $1 in base money. With M2 right now about 13.7 trillion, that would put BASE "ideally" at 1.7 trillion.  With the current Fed balance sheet at 4.46 trillion, that's a 2,760 billion reduction.  At $50 billion per month, that's a quick 55 months away.  At $10 billion per month, its 276 months.  That's somewhat less quick.

It'll be just like watching paint dry!

US Equities/SPX

SPX rose +1.99 to 2502.22, making a new all time high to 2508.85 but then retreating to end the week just above 2500. Friday saw a short white candle which was neutral.  SPX forecaster dropped to even to end the week.  SPX remains above all 3 moving averages, and quite close to the all time highs.

The sector map shows some significant sector rotation this week. Although the overall index went nowhere, money moved out of utilities, staples, and REITS and into financials, energy and industrials. If it weren't for the drop in tech & discretionary, I'd say that's a pretty bullish sector map.

VIX fell -0.58 to 9.59.  Back in single digits once more.

Name Chart Chg (W) 52w ch EMA9 MA50 MA200 50/200 Last Crossing last
Financials XLF 2.66% 30.54% rising rising rising falling ma50 on 2017-09-18 2017-09-22
Energy XLE 2.07% -1.97% rising rising falling rising ma50 on 2017-09-11 2017-09-22
Industrials XLI 1.96% 21.86% rising rising rising falling ma50 on 2017-09-11 2017-09-22
Telecom XTL 1.03% 4.78% rising falling rising falling ema9 on 2017-09-22 2017-09-22
Materials XLB 0.86% 18.93% rising rising rising rising ema9 on 2017-08-30 2017-09-22
Cons Discretionary XLY -0.10% 12.14% falling falling rising falling ema9 on 2017-09-15 2017-09-22
Technology XLK -0.37% 22.15% falling rising rising falling ema9 on 2017-09-21 2017-09-22
Homebuilders XHB -0.77% 11.38% falling falling rising falling ma50 on 2017-09-22 2017-09-22
Healthcare XLV -1.22% 11.24% falling rising rising falling ema9 on 2017-09-19 2017-09-22
REIT RWR -2.30% -7.37% falling rising rising rising ma50 on 2017-09-19 2017-09-22
Cons Staples XLP -2.35% 0.63% falling falling rising falling ma200 on 2017-09-21 2017-09-22
Gold Miners GDX -2.74% -15.39% falling rising rising rising ma50 on 2017-09-22 2017-09-22
Utilities XLU -2.78% 4.41% falling rising rising falling ma50 on 2017-09-20 2017-09-22

Gold in Other Currencies

Gold fell in all currencies again this week, dropping in XDR by -19.61.

Rates & Commodities

TLT moved lower this week, but ended up printing a swing low on Friday, with the low occurring on the day of the FOMC announcement, right at the 50 MA. While there doesn't seem to be a rush to buy bonds, it was probably a cover-short-on-the-news event. The forecaster has moved up to -0.25, which for TLT is a fairly shallow downtrend. TLT ended the week just below its 9 MA.  TLT just might have put in a low this week.

JNK rose +0.08%, barely moving at all this week. JNK has been more or less moving sideways, with the vertical trading range compressing as time goes on.

CRB fell -0.26%, making a new high on Wednesday falling back. PM was the big loser this week, falling -2.31%, dragging down the overall index.

Crude moved up +0.43 to 50.66 [+0.86%], making a new high to 51.11. The move higher in crude seems to have run into resistance. My guess is the shale drillers are at least partly responsible, adding production hedges so that they don't go out of business if oil declines once again. The EIA report showed crude build (+4.6m), gasoline draw (-2.1m), and distillates draw (-5.7m). Crude printed a doji/NR7 candle on Friday – candle code had nothing to say (it wasn't a new high). The forecaster was really upset, dropping -0.54, plunging to -0.21 on Friday. Forecaster senses a correction coming. Certainly the services equities took a tumble at the end of the week too.  It will be interesting to see what happens next week.

Physical Supply Indicators

* SGE Au9999 contracts jumped to a +7.36 premium vs COMEX. Chinese are buying the dip.

* The GLD ETF tonnage on hand rose +17.44 tons, with 856 tons in inventory. A tonnage-rise during a down week is a little unusual to see, especially one this large. That suggests western buyers are adding to GLD holdings as the price drops.

* ETF Premium/Discount to NAV:

 PHYS 10.56 -0.65% to NAV [down]
 PSLV 6.40 -0.4% to NAV [down]
 CEF 12.70 -7.1% to NAV [down]

* Bullion Vault gold (https://www.bullionvault.com/gold_market.do#!/orderboard) no premiums for gold or silver.

* Big bars premiums were: gold [1kg] 1.09% and silver [1000oz] 2.88%.

Futures Positioning/COT

There was no COT report this week.

Gold Manipulation Report

No after-hours spikes were seen this week.

Eurozone Status

  • German Elections: voting is happening this weekend. We'll know who won by Monday.  The big question is, how many people will vote for AfD?

  • Italian Elections: New polling data shows anti-Euro M5S is slightly ahead of the PD: 27% to 26.4%. A combination of FI + LN (both semi-anti-Euro parties) have risen slightly to a combined 29%.

  • Italy seized a German NGO's migrant rescue boat; an Italian judge will rule on Friday as to whether or not the vessel will be released. Was the NGO migrant rescue boat acting as a ferry service?  That's the question.  https://www.thelocal.it/20170920/german-ngo-jugend-rettet-calls-on-italy...

  • WAPO article describes the laundry list of EU modifications on deck after the elections are over in Germany. Included are:

Summary

The big mover this week was the Fed: the announcement on Wednesday revealed a semi-surprising hawkishness, which pushed the Euro higher, and gold and silver further downhill.

Gold and silver big bar shortage indicators shows no signs of shortage; premiums on big-bar gold and silver remain normal. GLD tonnage increased (a bit surprising in a downtrend), while ETF premiums fell. Shanghai premiums vs COMEX have moved into premium; this says the Chinese are buying.

Gold, silver, and the miners continue looking bearish.  There are hints of a potential rebound in the junior miner swing low, and positive signs from China buying the dip, but that's really no more than just a hint.

The buck seems to be chopping sideways, one day hinting it will rebound, the next dropping back into a downtrend.  So when things look confused, we pull back to the weekly chart.  Weekly chart clearly shows the buck in a downtrend.

Short-term trend-following code says:

Uptrend: crude, copper, USD, SPX.

Downtrend: gold, silver, platinum, natgas, treasury bonds, utilities.

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1 Comment

Giant Elk's picture
Giant Elk
Status: Member (Offline)
Joined: Dec 13 2014
Posts: 18
H&S for the USD against EUR

The DXY is showing an attractive triangle pattern too. My non-machine emotion-ridden intelligence tells me the buck's got a whole lot more bullish today smiley

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