PM End of Week Market Commentary - 11/3/2017

davefairtex
By davefairtex on Sat, Nov 4, 2017 - 1:46am

On Friday gold fell -6.60 [-0.52%] to 1270.20 on very heavy volume, and silver plunged -0.29 [-1.69%] to 16.83 on very heavy volume also. The somewhat weak nonfarm payrolls report released at 8:30 am initially caused gold to spike higher and the buck to fall, but that quickly reversed – and then gold plunged and the dollar shot higher after a strong Non-MFG ISM report came out at 10 am.

The PM sector map was mixed this week; palladium broke out to new highs, while most everything else more or less moved sideways. The silver miners did worst. Apart from palladium, everything remains below its 9 MA, and most items are below all 3 moving averages. This suggests that in both short and longer term timeframes, PM remains in a downtrend.

Name Chart Chg (W) 52w ch EMA9 MA50 MA200 50/200 Last Crossing last
Palladium $PALL 3.13% 61.21% rising rising rising rising ema9 on 2017-10-31 2017-11-03
Copper $COPPER 0.35% 38.88% falling rising rising falling ema9 on 2017-10-27 2017-11-03
Platinum $PLAT 0.32% -7.53% falling falling falling falling ema9 on 2017-11-03 2017-11-03
Junior Miners GDXJ 0.06% -24.16% falling falling falling falling ema9 on 2017-10-16 2017-11-03
Silver $SILVER -0.24% -8.31% falling falling falling falling ema9 on 2017-11-03 2017-11-03
Gold $GOLD -0.35% -2.56% falling falling rising falling ema9 on 2017-10-20 2017-11-03
Senior Miners GDX -0.62% -11.34% falling falling falling falling ma200 on 2017-10-24 2017-11-03
Silver Miners SIL -2.12% -25.16% falling falling falling falling ema9 on 2017-10-16 2017-11-03

Gold fell -4.40 [-0.35%], mostly just chopping sideways this week with a modest downward bias. Friday's print was a confirmed shooting star – this is normally a fairly bearish candle pattern, but in this instance, the code found it to be neutral. Forecaster dropped -0.06 to read -0.15. Gold is in a slight downtrend, but on the chart gold appears to be just moving sideways. Gold in Euros looks as though it has a slightly clearer downtrend. Gold on the weekly chart remains in a downtrend also, but the trend is quite weak: forecaster -0.09.

The December rate-increase chances fell to 96%.

COMEX GC open interest fell -458 contracts this week.

Silver fell -0.04 [-0.24%] this week; this sounds relatively boring, but silver actually rallied sharply on Wednesday, and then was smashed on Friday, ending the week mostly unchanged. Volume was especially heavy the last 3 days of the week. Friday's print was a swing high/confirmed high wave, which had a 66% chance of being a reversal. Forecaster plunged -0.62 to -0.28. Friday's strong move down ended up with silver looking weaker than gold.

The gold/silver ratio fell -0.08 to 75.47, which is slightly bullish.

COMEX SI open interest rose by +9,534 contracts. That's 1482 tons of new paper silver. Half of that increase (+5,050 contracts) came on Wednesday – looks like someone was capping the rally.

Miners moved sideways also, with GDX down -0.62% while GDXJ rose +0.06%. Friday the miners sold off relatively hard initially, but spend the rest of the day slowly moving higher. Print for GDX was a spinning top (40% reversal), while GDXJ printed an opening black marubozu which was a bearish continuation. The miner ETFs ended the week mixed: GDX -0.22, GDXJ +0.03. The HUI daily forecaster was -0.07. My conclusion: miners are chopping sideways, like most of the other PM items. Longer term, the HUI weekly remains in a strong downtrend.

The GDX:$GOLD ratio fell -0.42% on the week, and the GDXJ:GDX ratio gained +0.69%. That's neutral.

USD

The buck chopped sideways this week also, head-faking lower only to recover on Friday following the reasonably strong Non-MFG ISM report released at 10 am. Friday's print was a spinning top, which the code felt was neutral. The daily forecaster (now a 5-day forecaster, which is my attempt to reduce the number of headfakes it sees) ended the week at +0.24, which is still an uptrend. I think the 5-day forecaster looks pretty reasonable. This stuff is a work in progress. On the weekly chart, the forecaster remains in a strong uptrend, at +0.45. Dollar continues to move higher. Trend in place tends to remain in place.

Since currency moves tend to be really important for PM, I'm including the weekly chart for USD.  Its also quite a clear trend, which helps clarify why I'm a little concerned about gold longer term.

US Equities/SPX

SPX rose 6.77 [+0.26%] on the week, moving mostly sideways until Friday when it made another new all time closing high. SPX forecaster closed the week at a bullish-looking +0.49.

Sector map this week has energy leading along with tech, while homebuilders and discretionary trailed. The problem with homebuilders came about because of the Trump tax cuts – that home mortgage interest deduction is now limited to a $500k mortgage, with second homes no longer qualifying. What's more, increasing the standard deduction to $12,000 means that even with the interest deduction theoretically remaining in place, itemizing will only help 4% of Americans, which also serves to reduce the impact of the mortgage interest deduction. Winners and losers, as always, usually show up in market prices.

VIX fell -0.66 to 9.14. This is the lowest weekly close for VIX...that I've seen.

Name Chart Chg (W) 52w ch EMA9 MA50 MA200 50/200 Last Crossing last
Energy XLE 1.99% 0.79% rising rising falling rising ma200 on 2017-10-31 2017-11-03
Technology XLK 1.52% 37.25% rising rising rising rising ema9 on 2017-10-26 2017-11-03
REIT RWR 0.73% 4.68% rising falling falling rising ema9 on 2017-11-02 2017-11-03
Utilities XLU 0.29% 14.78% rising rising rising falling ema9 on 2017-11-02 2017-11-03
Cons Staples XLP 0.08% 2.04% falling falling rising falling ema9 on 2017-10-18 2017-11-03
Financials XLF 0.00% 36.98% rising rising rising rising ema9 on 2017-11-01 2017-11-03
Materials XLB -0.49% 27.23% falling rising rising rising ema9 on 2017-11-02 2017-11-03
Gold Miners GDX -0.62% -11.34% falling falling falling falling ma200 on 2017-10-24 2017-11-03
Healthcare XLV -0.65% 23.61% falling rising rising falling ma50 on 2017-10-30 2017-11-03
Industrials XLI -0.68% 27.31% falling rising rising rising ema9 on 2017-10-30 2017-11-03
Cons Discretionary XLY -0.76% 19.28% rising rising rising rising ema9 on 2017-11-03 2017-11-03
Homebuilders XHB -1.87% 30.57% falling rising rising rising ema9 on 2017-11-02 2017-11-03
Telecom XTL -4.09% 6.46% falling falling falling falling ema9 on 2017-11-01 2017-11-03

Gold in Other Currencies

Gold fell in most currencies, and was down in XDR by -7.75.

Rates & Commodities

TLT charged higher, up +1.95% following through strongly after last week's swing low. TLT's print on Friday (a long white) was a bullish continuation. Forecaster is at a very bullish +0.74. Bonds are on a roll. I'm guessing this may have something to do with the ECB's relatively dovish announcement last week – but its hard to know for sure. Bonds are saying risk off right now.

JNK fell -0.62% on the week, with most of the losses coming early on Wednesday. I'm not sure what caused the sell-off in JNK. Friday's candle print was a spinning top, which was a bearish continuation. Forecaster for JNK ended the week at a very bearish -1.08. Shorter term, JNK has made a lower high, and a lower low – that's a downtrend. JNK is saying risk off right now.

CRB rose +1.33%, a nice gain that was due to strong rallies in livestock (+3.85%) and energy (+2.78%). 3 of 5 sectors climbed. CRB made a new high that dates back to March 2017.  CRB is now starting to look slightly overbought in the weekly timeframe (RSI7=73), and it is very overbought in the daily (RSI7=88).

Crude shot up +1.55 [+2.86%] to 55.73, closing above the 54 resistance zone for the first time in two years. Helping oil this week was a relatively strong EIA report, with stocks in oil (-2.4m), gasoline (-4.0m) and distillate (-0.3m) all dropping. The North American rig counts fell by 10, and a series of news reports showed good compliance by OPEC, and a drop in production in Libya and Kurdistan/Northern Iraq due to turmoil. There were some signs of short covering on Friday as oil moved above 55.

The crude COT report shows a huge build in short interest by the commercials (90k contracts) but also a big increase in longs (37k). Managed money covered 36k shorts and added 20k longs. While the commercial short position is historic (highest short numbers ever), managed money remains below where it was in early 2017 the last time oil hit 54. We could still have more room to run, especially if we keep getting good news. Oil equities – especially services – do not appear to believe in this rally just yet.

This week you get a weekly chart, because the daily chart won't show the breakout in context.  Note how this is the highest weekly close on the chart - which goes back to late 2015.

Physical Supply Indicators

* SGE premiums over COMEX are at +7.81.

* The GLD ETF tonnage on hand fell -5.02, with 846 tons in inventory.

* ETF Premium/Discount to NAV:

 PHYS 10.35 -0.65% to NAV [up]
 PSLV 6.31 -0.81% to NAV [up]
 CEF 13.13 -2.7% to NAV [down]

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

* Big bars premiums were: gold [1kg] 1.32% and silver [1000oz] 3.27%.

Futures Positioning/COT

The COT report was as of October 31st, when gold closed at 1277.30 and silver at 16.85.

In gold, the commercial net position was unchanged; 2.9k longs were added, and 2.9k shorts were added also. sold. Managed money net fell by 2.4k contracts; 10kk longs were sold, but 7.6k shorts were covered. These were very minor changes. Managed money shorts are for the most part gone, and managed money longs are about halfway gone too. Commercial shorts are still near their highs, so the COT report isn't showing anything conclusive about a low for gold.

In silver, the commercial net rose by 5.5k contracts; 3.2k shorts were covered, and 2.3k longs were added. Managed money net fell by 6.6k; 1.8k longs were sold, and 4.8 shorts were added. Managed money positions remain low for both longs and shorts, while the commercial short position remains relatively high. Silver doesn't look conclusive either.

Gold Manipulation Report

There were no after-hours spikes this week.

Eurozone Status

Summary

The details of tax reform proved to be less exciting (for the market) than anticipated, FOMC sounded a bit more dovish than expected, nonfarm payrolls was weaker than expected, but the ISM report was stronger. It all netted out to “not much changed” on the week.

Gold and silver big bar shortage indicators shows no signs of shortage; premiums on big-bar gold and silver remain normal. GLD tonnage fell, while ETF premiums were mixed but mostly higher. Shanghai premiums fell slightly, but remain positive.

COT report shows only small changes in commercial short positions for gold and silver again this week. Both COT reports look unclear; some components might mark lows, but it is by no means coming down clearly either bullish or bearish.

We could summarize this week in the following way: buck and Euro moved sideways, and so did PM. The gyrations on the daily charts end up resulting in no directional change on the weekly.

Buck remains in an uptrend – Euro in a downtrend. There won't be any central-bank-generated news for at least another month, so the current trend probably remains in place.

However the USD does have some latent political risk – Trump, as usual.

The ongoing “Russia” probe run by former FBI director Muller hit a new milestone this week: it was able to get a relatively young staffer on Trump's campaign to plead guilty to lying to a Federal Agent about conversations he had with a Russian professor. As a friend of mine (a former FBI agent) said to me, “it's not the crime that gets you, its the cover-up.” Had the staffer simply told Muller's team about the conversations, they wouldn't have had any leverage to use on him at all. I'm guessing Muller is in the process of turning that leverage into testimony against other Trump campaign officials, in exchange for leniency on the lying-to-a-Federal-Agent charge against the young staffer. [Contrast with the approach on the HRC email server case: there were lots of immunity deals, and no guilty pleas.]

Viewed from a larger perspective, Trump remains useful to the Republicans until that tax reform bill gets passed. After that...they can all “reluctantly” vote for articles of impeachment against the guy who clearly colluded with a foreign power to get elected. [Please ignore HRC buying the primary.].  And then we end up with Mike Pence! Pencil that in to your calendar for January, 2018. Note to self: don't lie to the FBI. Its like tax evasion: if they can't get you for anything else, they'll get you for that.

That's the dollar-negative thing I see on the horizon, and it may yet be several months out.  I think it will start to heat up just in time for the 2018 primary campaigns.

There is nothing too impactful to the markets on the calendar for next week.

Trend-following code says:

Uptrend: natgas, crude, USD, SPX.

Downtrend: gold, silver, copper, platinum, treasurys, miners.

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3 Comments

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5414
big commodity rally

So far I'm seeing big mvoes for gold, silver, copper, platium, lumber, crude, and natgas.

Crude has cleared 57.  I'm guessing there's a fair amount of short covering.

Even the miners are doing well.  Wow!  If they close here, they'll have broken above their recent trading range...

 

cmartenson's picture
cmartenson
Status: Diamond Member (Offline)
Joined: Jun 7 2007
Posts: 5727
Problem and Solution?

Problem:  Commodities and precious metals spiking.

Solution: Just pull the plugs. stat!

At the moment my CME feeds are 100% down via Charles Schwab.  It's a rinky-dink platform to be sure, but I find it entirely suspicious that it has become unavailable during a strong up moment.

I will be further unsurprised to discover that once the CME feeds are back up that somehow gold and silver have suffered a tasty retreat from their daily heights.

It's happened before.

Wash, rinse, repeat.

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5414
btc update 2017-11-06

Sell signal today for bitcoin.  Swing high (65% reversal), plus the forecaster kicked off a massive -1.11 point drop into negative territory.

The doji/high wave on Sunday wasn't that horrible: a 40% chance of being a reversal.

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