PM End of Week Market Commentary - 9/29/2017

davefairtex
By davefairtex on Sun, Oct 1, 2017 - 3:07am

 

On Friday gold fell -7.40 to 1282.50 on moderately heavy volume, while silver dropped -0.22 to 16.68 on moderate volume. We can't blame Friday's move down on the buck, which moved lower. No, this latest move lower was just about PM. It is dropping all on its own now. That's not a good sign.

The metals sector map was a sea of red this week; the losses weren't particularly heavy, but the only item that rallied was palladium. The rest of the metals are all below their 50 MA lines, and half of the group is through the 200. Silver is leading gold lower, and the miners are leading metals lower – but only by a modest amount. It is a bearish picture.

Name Chart Chg (W) 52w ch EMA9 MA50 MA200 50/200 Last Crossing last
Palladium $PALL 1.85% 30.55% rising rising rising rising ema9 on 2017-09-27 2017-09-29
Copper $COPPER -0.19% 34.70% falling rising rising rising ema9 on 2017-09-29 2017-09-29
Gold $GOLD -1.38% -3.10% falling rising rising rising ma50 on 2017-09-27 2017-09-29
Silver Miners SIL -1.49% -27.25% falling falling falling falling ema9 on 2017-09-26 2017-09-29
Platinum $PLAT -1.94% -11.32% falling falling falling falling ma200 on 2017-09-19 2017-09-29
Junior Miners GDXJ -2.04% -25.11% falling rising falling rising ema9 on 2017-09-26 2017-09-29
Silver $SILVER -2.08% -12.99% falling rising falling rising ma50 on 2017-09-26 2017-09-29
Senior Miners GDX -2.17% -13.98% falling rising rising rising ema9 on 2017-09-26 2017-09-29

Gold fell -18.00 [-1.38%] on the week. The week started well, with with a strong safe-haven rally on Monday. However that rally was then unwound, with gold driving through round number 1300.  On Friday, gold hit a new low to 1278.20.  The candle print on Friday was a long black candle, which the code felt was a bearish continuation. Forecaster dropped -0.07 to end the week at -0.34; that's a downtrend. Gold is now below the 50 MA.

The December rate-increase chances rose to 76%.

COMEX GC open interest fell -32,478 contracts this week. The sound you hear in the background are the commercials ringing the cash register.

Here's a weekly chart I've been working on.  Model had to be fairly complicated to get this result, and you can see this is far from perfect.  Still, ROI from this set of trades would have been $454 over the 2 year period using a long/short strategy, and $316 with a long-only strategy.

Silver fell -0.36 [-2.08%] this week; it staged a modest rally on Monday, and then sold off, driving through round number 17. On Friday, made a new low to 16.64. Silver printed an opening black marubozu, which the code felt was a bearish continuation. Forecaster dropped -0.39 to a bearish -0.52. Silver has resumed its downtrend.  Chart below is a daily chart; I don't have the weekly one working yet.

The gold/silver ratio rose +0.55 to 76.89, which is bearish.

COMEX SI open interest fell by -5,644 contracts.

Miners also staged a nice rally on Monday, but then sold off through end of week. Friday's print for both GDX and GDXJ were black marubozus, which the code felt were probably bearish continuations. GDX forecaster ended the week at -0.35, while GDXJ's forecaster closed at -0.20. This is a bit shallower than where we were last week - it appears to me that the downside velocity in the miners has slowed. If gold and silver continue to fall, no doubt the miners will keep dropping, but so far at least the selling is not particularly intense.

The GDX:$GOLD ratio fell -1.21% on the week, and the GDXJ:GDX ratio rose +0.13%. That's probably bearish.

USD

The buck was a primary driver this week, rising +0.91 [+0.99%] to 92.88. The move driven by a combination of a poor showing by Merkel and her party in the German federal election last weekend, a hawkish speech by Janet Yellen, and a Trump Tax Plan. The dollar rally petered out somewhat by end of week, however, printing a swing high which the code felt had only a 37% chance of marking the top. That's not very impressive. USD forecaster plunged back to just below even, however, closing the week at -0.02. Here's what that looks like from the monthly perspective. The monthly forecaster shown below does not yet show a reversal, although certainly the pace of the downtrend has slowed greatly.

US Equities/SPX

SPX rose +17.14 to 2519.36, making another new all time high this week. Friday's print was a closing white marubozu, which the code felt was probably a continuation.

The sector map shows signs of a Trump reflation trade, with a special mention about the home builders which shot higher this week. Energy and financials also did well, while utilities brought up the rear.

VIX fell -0.08 to 9.51.

Name Chart Chg (W) 52w ch EMA9 MA50 MA200 50/200 Last Crossing last
Homebuilders XHB 3.51% 18.34% rising rising rising rising ema9 on 2017-09-25 2017-09-29
Energy XLE 1.90% -1.69% rising rising falling rising ma50 on 2017-09-11 2017-09-29
Financials XLF 1.69% 35.82% rising rising rising rising ma50 on 2017-09-18 2017-09-29
Technology XLK 0.99% 24.34% rising rising rising falling ema9 on 2017-09-27 2017-09-29
REIT RWR 0.71% -5.64% falling falling falling falling ma50 on 2017-09-19 2017-09-29
Cons Discretionary XLY 0.60% 13.45% rising falling rising falling ma50 on 2017-09-29 2017-09-29
Telecom XTL 0.60% 5.88% rising falling falling falling ema9 on 2017-09-27 2017-09-29
Materials XLB 0.44% 19.83% rising rising rising rising ema9 on 2017-09-28 2017-09-29
Industrials XLI 0.35% 22.71% rising rising rising rising ma50 on 2017-09-11 2017-09-29
Healthcare XLV 0.18% 14.50% rising rising rising falling ema9 on 2017-09-29 2017-09-29
Cons Staples XLP 0.11% 2.47% falling falling rising falling ma200 on 2017-09-21 2017-09-29
Utilities XLU -0.34% 7.54% falling rising rising falling ma50 on 2017-09-20 2017-09-29
Gold Miners GDX -2.17% -13.98% falling rising rising rising ema9 on 2017-09-26 2017-09-29

Gold in Other Currencies

Gold fell in all currencies again this week, dropping in XDR by -10.39.

Rates & Commodities

TLT fell -1.14% on the week, with all the damage happening on Wednesday, when TLT suffered a large gap down at market open – after first head-faking higher on Tuesday. TLT's forecaster closed the week at -0.53, and is back in a downtrend.

JNK rose +0.32%, moving steadily higher all week long. Higher energy prices, and a general risk on sense sucked money into junk debt.

CRB fell -0.26%, moving slowly lower on the week.

Crude moved up +0.98 to 51.64 [+1.93%], making a new high to 52.86. All of the gains on the week came on Monday's breakout above 51. Wednesday's EIA report showed a crude draw (-1.8m) gasoline build (+1.1m) and distillates draw (-0.8m). It appeared to be a mostly neutral report. Rig counts on Friday showed +5 rigs for the US, but -7 for Canada. Friday's print was a doji, which the code had no comment on. Crude's forecaster ended the week almost flat at -0.03. Crude remains above all 3 moving averages.

The strong move on Monday was probably driven by an independence referendum in Kurdistan last weekend where the people voted 9:1 to secede from Iraq. Turkey responded by threatening to shut off the oil pipeline that the Kurds use to export their oil – which is their primary source of hard currency revenue. Iraq shut down access to the international airports in the area. Lots of other fallout explained here: https://www.cnbc.com/2017/09/28/turkey-raises-oil-threat-after-iraqi-kurds-back-independence.html

Physical Supply Indicators

* SGE Au9999 contracts rose to a +10.11 premium vs COMEX. Chinese are continuing to buy the dip.

* The GLD ETF tonnage on hand rose +8.57 tons, with 865 tons in inventory.

* ETF Premium/Discount to NAV:

 PHYS 10.44 -0.54% to NAV [up]
 PSLV 6.28 -0.41% to NAV [down]
 CEF 12.67 -6.5% to NAV [up]

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

* Big bars premiums were: gold [1kg] 1% and silver [1000oz] 3.12%.

Futures Positioning/COT

The COT report was as of September 26th, when gold closed at 1297.20 and silver at 16.84.

In gold, the commercial net position rose by +20k contracts; 14k shorts were covered, and 5k longs were added. Managed money net fell by -37k contracts; 33k longs were sold, and 5k shorts were added. Commercials rang the register, while managed money longs were rinsed. This is the typical pattern for a downtrend in gold.

Let's say a “COT low” for gold would be around 130k total contracts for managed money. Right now we're at 219k. At 32k per week, that's another 3 weeks of downtrend before they are all cleared out.

In silver, the commercial net rose by +6.1k contracts; 4.7k shorts were covered, and 1.4k longs were added. Managed money net fell by -9.8k contracts; 8.8k longs were rinsed, while 1k shorts were added. Silver doesn't have a large surplus of managed money longs; perhaps only one more week and we'll be close to a potential low for silver.

Gold Manipulation Report

No after-hours spikes were seen this week.

Eurozone Status

Summary

The rebounding buck helped cause a further move downhill in PM this week, with the dollar rallying for three days straight after the German elections and the announcement of the Trump tax plan.

Gold and silver big bar shortage indicators shows no signs of shortage; premiums on big-bar gold and silver remain normal. GLD tonnage increased again, while ETF premiums mostly fell. Shanghai premiums vs COMEX have increased; this says the Chinese are buying.  The rise in GLD tonnage also suggests that western gold buyers are also buying the dip, at least to some degree anyway.

COT report shows a drawdown of some of the commercial shorts. While that is positive, if we assume this plays out in the usual way, in gold at least we have several weeks more to go before the “COT wash-and-rinse cycle” will be complete.

We remain in a Fed tightening phase. This is affecting PM, interest-rate sensitive issues (utilities), as well as bonds. It also boosts the dollar.

Downtrend in PM remains intact - both for the daily and weekly timeframes.  I keep saying this, but if the long term trend for the buck reverses here, gold could be at the receiving end of a great deal of selling pressure.  Let's hope that the buck just chops sideways instead.

Trend-following code says:

Uptrend: crude, natgas, USD, SPX.

Downtrend: gold, silver, copper, platinum, miners, treasury bonds, utilities.

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1 Comment

Mohammed Mast's picture
Mohammed Mast
Status: Silver Member (Offline)
Joined: May 17 2017
Posts: 171
Warmth

You know the older I get the warmer I like it. I love the south but may have to go tropical. Gold and silver are the same way.  Go south. Of course bitcoin is going North so I admit to some confusion

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