PM End of Week Market Commentary - 10/13/2017

davefairtex
By davefairtex on Sun, Oct 15, 2017 - 2:00am

On Friday gold rose +10.20 [+0.79%] to 1306.10 on heavy volume, while silver climbed +0.18 [+1.08%] to 17.45 on heavy volume also. Gold and silver both spiked higher at 8:30 am, following the release of the CPI report as well as Retail Sales – which of the two reports caused the move?

CPI was +0.5% m/m (6% annualized), while CPI ex food & energy was up just +0.1% (1.2% annualized). Retail sales were up +1.6% m/m, or 19.2% annualized; that's almost certainly just about the hurricanes. Since the rate-rise chances dropped to 82%, I'm going to say the PM move was about a relatively inflation-free (core) CPI report, which is what the Fed uses to assess whether or not they will raise rates. That's just a guess, though.

Everything rallied this week, but the items in the lead were palladium and copper; I'm not sure what this means; perhaps the strong numbers out of China (just in time for that party Congress) may have contributed. In PM, silver led gold, but the miners lagged fairly badly. Is there something wrong with the miners? Something. I can't say what. Most of the rest of the group is above all 3 moving averages, and all the non-miners have executed golden crosses. It was a good week.

Name Chart Chg (W) 52w ch EMA9 MA50 MA200 50/200 Last Crossing last
Palladium $PALL 7.15% 54.25% rising rising rising rising ema9 on 2017-10-09 2017-10-13
Copper $COPPER 3.60% 47.53% rising rising rising rising ma50 on 2017-10-05 2017-10-13
Silver $SILVER 3.53% -0.40% rising rising rising rising ma200 on 2017-10-11 2017-10-13
Platinum $PLAT 3.32% 0.98% rising falling rising falling ema9 on 2017-10-10 2017-10-13
Gold $GOLD 2.13% 3.71% rising rising rising falling ma50 on 2017-10-13 2017-10-13
Senior Miners GDX 1.06% 1.49% rising rising rising rising ema9 on 2017-10-06 2017-10-13
Silver Miners SIL 1.00% -13.68% rising rising rising falling ma50 on 2017-10-06 2017-10-13
Junior Miners GDXJ 0.09% -11.57% rising rising rising rising ma200 on 2017-10-12 2017-10-13

Gold rose +23.84 [+1.06%], moving up 5 days out of 5. The dollar did its part, dropping -0.78% - we could say that much of gold's move was just a currency effect. On Friday, gold was especially strong, closing at the high. It looked as though traders might be a bit worried about what might happen over the weekend in Europe. Candle print on Friday was a closing white marubozu, which was a bullish continuation. Forecaster closed the week at +0.23, which is a moderate uptrend.

On the weekly chart, we see a very clean-looking swing low, and the weekly forecaster produced a buy signal. Gold looks good on the weekly timeframe.

The December rate-increase chances fell to 82 following the CPI report on Friday.

COMEX GC open interest rose +16,154 contracts this week.  Much of the increase happened on Friday (+9,058).

Silver rose +0.59 [+3.53%] this week, outperforming gold once again. Silver printed its swing low on Monday confirming last Friday's big reversal bar, and never looked back, rising 5 days in a row. Silver printed a closing white marubozu candle to end the week, which is a bullish continuation. Forecaster ended the week at +0.41, which is a solid uptrend. Silver's weekly chart looks great, printing a swing low. Silver's weekly forecaster issued a buy signal as well. Silver looks quite strong; it could be that the strong rallies in copper and palladium are helping to pull silver prices higher.

The gold/silver ratio fell -1.03 to 74.87, which is bullish.

COMEX SI open interest rose by +4,898 contracts.

Miners brought up the rear, looking quite weak especially given the strong performance in almost everything else. GDX moved slowly higher, while GDXJ just chopped sideways. Candle prints aren't showing anything determinative, but the forecasters show both ETFs projected to be in downtrends: GDX at -0.09, and GDXJ at -0.21.

The GDX:$GOLD ratio fell -1.24% on the week, and the GDXJ:GDX ratio lost -0.96%. That's bearish.

USD

The buck printed a swing high on Monday and followed through for two more days, but managed to find some buyers on Thursday and Friday. While the doji candle print on Friday seemed to be a bearish continuation, the forecaster ended the week at -0.03, jumping +0.34, so it saw something it liked.  Which one is correct?  I'm cautiously positive (short term) on the Euro, mainly because of the upcoming taper. 

Currencies have a whole bunch of conflicting influences right now; there's Catalonia in Europe, which is a negative for Euro, but also the upcoming ECB taper, which is a strong positive. Likewise in the US there is the prospect of the Trump tax cuts, which is a strong positive for the buck, Trump himself which is various degrees of negative, as well as the Fed's pace of rate increases, which is generally a positive. Where the currency market goes from one day to the next is driven largely by these factors.

I'm not sure a trend will develop until something major happens.

US Equities/SPX

SPX rose just +3.84 [+0.15%] on the week, making a new all time high on Friday. Really the market just chopped sideways with a slight upward bias all week long. Candle print on Friday was a short black/spinning top, which was a bullish continuation. The forecaster dropped down to a still-positive +0.17, which suggests the uptrend might be weakening. However, looking at the weekly SPX forecaster, it remains quite bullish.

This week's sector map looks somewhat bearish; REITs, consumer staples, and utilities don't lead bull markets, and they did best this week.

VIX fell -0.04 to 9.61.

Name Chart Chg (W) 52w ch EMA9 MA50 MA200 50/200 Last Crossing last
REIT RWR 1.71% 1.04% rising rising rising rising ma50 on 2017-10-09 2017-10-13
Cons Staples XLP 1.41% 4.22% rising falling rising falling ema9 on 2017-10-10 2017-10-13
Utilities XLU 1.35% 12.77% rising rising rising falling ma50 on 2017-10-13 2017-10-13
Gold Miners GDX 1.06% 1.49% rising rising rising rising ema9 on 2017-10-06 2017-10-13
Technology XLK 0.92% 28.21% rising rising rising rising ema9 on 2017-09-27 2017-10-13
Materials XLB 0.78% 26.38% rising rising rising rising ema9 on 2017-09-28 2017-10-13
Industrials XLI 0.17% 26.18% rising rising rising rising ma50 on 2017-09-11 2017-10-13
Energy XLE 0.10% -2.95% falling rising falling rising ema9 on 2017-10-12 2017-10-13
Homebuilders XHB -0.47% 22.42% rising rising rising rising ema9 on 2017-09-25 2017-10-13
Cons Discretionary XLY -0.55% 15.50% rising rising rising falling ema9 on 2017-10-13 2017-10-13
Healthcare XLV -0.57% 17.59% falling rising rising falling ema9 on 2017-10-13 2017-10-13
Financials XLF -0.83% 35.18% falling rising rising rising ema9 on 2017-10-12 2017-10-13
Telecom XTL -1.52% 10.00% falling falling rising falling ema9 on 2017-10-12 2017-10-13

Gold in Other Currencies

Gold rallied in all currencies, and was up in XDR by +20.67.

Rates & Commodities

TLT charged higher this week, up a strong +1.83%. Almost half the gains came on Friday. Forecaster ended the week at a strong +0.50 reading. Candle print was a spinning top which was a bullish continuation. The (related) 30 year treasury weekly chart shows a swing low, and a strong uptrend also. I must confess to being a bit annoyed – I let my bias against buying bonds when the Fed is normalizing stop me from jumping in long when my code triggered a buy signal on Tuesday.

JNK was unchanged on the week; it is drifting sideways. Forecaster is pointing down, however, with a rating of -0.38.

CRB rose +2.14%; all 5 groups rallied this week. CRB is now above all 3 moving averages. On the weekly chart, CRB is now mostly moving sideways instead of moving lower.

Crude rose +2.24 [+4.54%] to 51.59. The sharp rally in crude had a number of possible causes:

You get to pick which item (or items) caused the move. Candle print on Friday was an opening white marubozu which the code felt was a bullish continuation. Forecaster for oil closed the week at +0.29, which is an uptrend. Because oil is such a news-driven market right now, the daily forecaster has seen a number of head-fakes recently – it isn't trading very well right now. The weekly is doing a bit better – it too remains in an uptrend.

Physical Supply Indicators

* SGE premiums over COMEX are at +6.28.

* The GLD ETF tonnage on hand fell -0.89 tons, with 853 tons in inventory.

* ETF Premium/Discount to NAV:

 PHYS 10.60 -0.70% to NAV [down]
 PSLV 6.55 -0.52% to NAV [up]
 CEF 13.54 -1.7% 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] 1.13% and silver [1000oz] 2.95%.

Futures Positioning/COT

The COT report was as of October 10th, when gold closed at 1290.30 and silver at 17.14.

In gold, the commercial net position rose by +1.4k contracts; 4k shorts were covered, and 2.5k longs were also sold. Managed money net fell by -8k contracts; 11k longs were sold, and 3k shorts were covered. This was not a big change. About half the “required” number of managed money longs have been rinsed, there are very few managed money shorts in place, and there are a large number of commercial shorts outstanding. We are not at a clear “COT low” for gold.

In silver, the commercial net fell by -1.9k contracts; 1.8k shorts were added, and 102 longs were sold. Managed money net rose by 0.8k contracts; 2k longs were added, as were 1.2k shorts. These were minor changes in position. There are not enough managed money shorts to squeeze for silver, but perhaps enough longs have been rinsed, its hard to say.

Gold Manipulation Report

There was a minor 0.03 downspike in silver that happened on Monday. Pretty clearly that move didn't affect the trend.

Eurozone Status

  • Merkel has agreed to a 200,000 person limit on migrants and refugees entering Germany per year as a precursor to forming a government with the pro-business FDP (who wants hard limits) and the Greens (who are against any limits). I wonder how long that will work out. https://www.theguardian.com/world/2017/oct/09/germany-merkel-agrees-to-2...

  • Italian Elections: New polling data shows anti-Euro M5S are dead even with the PD: 26.9% to 26.9%. A combination of FI + LN (both semi-anti-Euro parties) are now 28.7%.

  • Catalan Independence Referendum:

  • The latest in retro migrant transport – sailing vessels smuggling migrants from Turkey to Italy. Price: 6000 Euro per person. Children get a 50% discount. Probably beats one of those unseaworthy dinghys where people tend to drown. I'll take the yacht trip, please.  https://euobserver.com/migration/139449

Summary

The metals staged a reasonably good rally this week, following through from last Friday's strong reversal bar. Sometimes those candle prints work out fairly well. A falling dollar helped, as did a rising bond market, along with very strong performances from copper and palladium. The only skeleton at the feast were the mining shares. Why were they so lackluster this week? I don't know.

Gold and silver big bar shortage indicators shows no signs of shortage; premiums on big-bar gold and silver remain normal. GLD tonnage fell slightly, while ETF premiums were mixed. Shanghai is in premium, but its not particularly dramatic.

COT report shows small changes in commercial short positions for gold and silver. Gold is still out of balance, but we could be at a low for silver.

While PM is now in an uptrend, my eye is as always on the currency market. I think if Spain can avoid civil war, we will probably see a resumption of the Euro uptrend. I get the sense that traders are eyeing the upcoming ECB meeting where Draghi will be (more or less) forced to continue tapering his bond purchases. The ECB weekly forecaster has flipped to an uptrend, and although it does tend to bounce around fairly often, if it is correct then PM should be supported in its move higher.

I do wonder about the story behind the mining shares. Why the poor performance? Is it a tell of some sort? I have no idea.

Trend-following code says:

Uptrend: gold, silver, copper, platinum, crude, natgas, treasurys, SPX.

Downtrend: miners, USD.

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2 Comments

Penny551's picture
Penny551
Status: Silver Member (Offline)
Joined: Nov 8 2012
Posts: 154
Made me chuckle...

"...Trump himself which is various degrees of negative"

Not sure why, but that made me laugh pretty hard.  Perhaps it's because that's an incredibly vague statement, yet I knew exactly what you meant.  :)

Nice report!

Cold Rain's picture
Cold Rain
Status: Gold Member (Offline)
Joined: Jul 26 2016
Posts: 363
Welp

Bye bye $1300.  That didn't last long.  Not too bullish.  Mining shares toasted.

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