PM End of Week Market Commentary - 12/1/2017

davefairtex
By davefairtex on Sun, Dec 3, 2017 - 5:21am

On Friday gold rose +5.60 [+0.44%] to 1283.20 on extremely heavy volume, while silver moved up +0.01 [+0.06%] to 16.47 on moderately heavy volume. PM had a reasonably large up-spike (and US equities cratered 40 points in 10 minutes) immediately after ABC news issued a report that Michael Flynn was “prepared to testify” that Trump ordered him to speak with the Russians – but ABC had to subsequently walk that back, for a variety of reasons:

http://thehill.com/media/362962-abc-news-suspends-reporter-after-faulty-flynn-report

Ross's suspension comes after ABC initially reported on Friday that Flynn would testify that Trump directed him during the campaign to make contact with Russian officials. Stocks plunged shortly after the report was put out.

The network soon issued a "clarification," saying that Trump had asked Flynn during the campaign "to find ways to repair relations with Russia and other hot spots," but drew backlash from conservatives and media figures for not calling it a "correction."

Maybe Ross bought puts.  :)  Although much of the move was unwound in PM, and almost all of it was unwound for equities, it does give us a taste as to how the market will react if things ever get more serious with Muller's investigation.

The PM sector map was clearly bearish this week. Silver led the group lower, miners were in the middle, and gold only had a very modest loss, while palladium rallied strongly, breaking out to new highs. Except for palladium, all components are below the 9, and all the miners are below all 3 moving averages. Its a fairly bearish picture.

Viewed over last 52 weeks, juniors and silver miners are now in negative territory. This may affect their performance during December – this is “tax loss selling” season, where the losers over the year are sold in order to offset gains in other areas. This tends to push prices of the losers down even further during this particular month.  It also leads to a pop in January in those same issues.

Name Chart Chg (W) 52w ch EMA9 MA50 MA200 50/200 Last Crossing last
Palladium $PALL 2.28% 35.25% rising rising rising rising ema9 on 2017-11-21 2017-12-01
Gold $GOLD -0.37% 9.34% falling falling rising falling ma50 on 2017-11-30 2017-12-01
Platinum $PLAT -0.41% 2.63% falling rising falling rising ema9 on 2017-12-01 2017-12-01
Junior Miners GDXJ -1.34% -7.30% falling falling falling rising ema9 on 2017-11-29 2017-12-01
Senior Miners GDX -1.49% 8.86% falling falling falling falling ema9 on 2017-11-29 2017-12-01
Silver Miners SIL -1.99% -9.81% falling falling falling rising ema9 on 2017-11-29 2017-12-01
Copper $COPPER -2.52% 17.38% falling rising rising rising ma50 on 2017-12-01 2017-12-01
Silver $SILVER -3.17% -0.57% falling falling falling falling ma50 on 2017-11-28 2017-12-01

Gold fell -4.80 [-0.37%]. The losses came on Wednesday and Thursday, while the recovery on Friday came following the ABC fake news event. Forecaster issued a sell signal on Wednesday, and on Friday it closed the week at -0.41, which is a downtrend. Gold ended the week bouncing off its shallow uptrend line; that's a positive sign.  Candle print on Friday was a bearish harami, which had a 35% chance of being a bullish reversal.

Weekly forecaster ended the week at -0.19, which is a downtrend. Monthly is also in a downtrend.

The December rate-increase chances rose slightly, to 93%.

COMEX GC open interest fell -58,272 contracts this week – 11% of the total open interest vanished, some 181 tons of paper gold. This is a very large change, and perhaps it explains why gold's drop was so minor. We did have a contract roll this week (December → March) and December is the largest delivery month of the year at COMEX. Maybe that had something to do with it.

Silver plunged -0.54 [-3.17%] to 16.47. This week, silver sold off relatively hard on Tuesday and Wednesday breaking below its previous low. Friday silver tried to rally after the ABC news report, but could not hold its gains through the close. Print on Friday was a southern doji, which had a 53% chance of being a bullish reversal. Silver's RSI7 is at 16, which is oversold. Forecaster actually recovered on Friday, up +0.34 to -0.43; that's still a downtrend, although the strong bounce supports the potential reversal thesis.

Silver is also in a downtrend in both the weekly and monthly timeframes as well.

The gold/silver ratio rose +2.19 to 77.91, which is quite bearish.

COMEX SI open interest fell by -3,816 contracts.

The miners fell this week; most of the damage happened on Wednesday. HUI daily forecaster issued its sell signal on Tuesday, while bouncing strongly on Friday (+0.33 to -0.08). That still leaves HUI in a downtrend, but it is hinting at a recovery. The same can be seen in GDX and GDXJ. Miners avoided breaking below their trading range this week, but not by very much. A drop below the range could lead to a lot of selling pressure.  Friday's shooting star candles were not bearish.

The HUI weekly chart flipped to sell (-0.06), while the HUI monthly issued a buy signal (+0.19). Monthly HUI has been pretty accurate.

The GDX:$GOLD ratio was flat, and the GDXJ:GDX ratio rose just +0.16%. That's neutral.

USD

The buck rose +0.11 [+0.12%] on the week, rallying on Tuesday but then giving most of that back Wednesday through Friday. There were some big moves on Friday after the fake news event, but those moves were mostly retraced. Dollar forecaster ended the week at -0.04, on the cusp of a buy signal.

Weekly recovered sharply, but remains in a downtrend (-0.19), while the November monthly ended with a buy signal (+0.17). All of this suggests the buck isn't sure of where it wants to go, but it is trying to put in a low longer term.

US Equities/SPX

SPX continued moving higher, up +39.80 [+1.53%] to 2642.22, making its new all time closing high on Thursday. Most of the gains followed success by the Republicans in moving their tax cuts through the Senate. The sector map tells us who the winners and losers in the tax bill will be: financials (+5.19%), homebuilders (+3.34%), industrials (+3.05%), with tech (-1.53%). Banks win. Anyone surprised? It was a bullish-looking sector map.

The drop on Friday was quite alarming, but since it was driven by fake news, I'm not certain we can pull any trend information from the event. It does give us a sense as to what a more serious move towards impeachment would do to the market: SELL. Forecaster ended the week at +0.38; that's an uptrend, but weaker than where it was last week.

VIX rose +1.78 to 11.43. The VIX actually rallied a further 3 points during that SPX fake-news sell-off, but gave almost all of it back by end of day.

Name Chart Chg (W) 52w ch EMA9 MA50 MA200 50/200 Last Crossing last
Financials XLF 5.19% 20.44% rising rising rising rising ema9 on 2017-11-28 2017-12-01
Homebuilders XHB 3.34% 30.15% rising rising rising rising ema9 on 2017-11-08 2017-12-01
Industrials XLI 3.05% 17.14% rising rising rising rising ma50 on 2017-11-27 2017-12-01
Energy XLE 2.65% -6.61% rising rising falling rising ma50 on 2017-11-30 2017-12-01
Cons Staples XLP 2.59% 11.82% rising rising rising rising ma200 on 2017-11-28 2017-12-01
Cons Discretionary XLY 2.09% 17.98% rising rising rising rising ema9 on 2017-11-03 2017-12-01
Healthcare XLV 1.87% 22.05% rising rising rising falling ma50 on 2017-11-28 2017-12-01
Utilities XLU 0.95% 21.63% rising rising rising rising ema9 on 2017-11-24 2017-12-01
Telecom XTL 0.77% 5.37% rising rising falling rising ma200 on 2017-12-01 2017-12-01
Materials XLB 0.39% 18.23% rising rising rising rising ema9 on 2017-11-16 2017-12-01
REIT RWR -0.18% 5.80% rising rising rising rising ema9 on 2017-11-30 2017-12-01
Gold Miners GDX -1.49% 8.86% falling falling falling falling ema9 on 2017-11-29 2017-12-01
Technology XLK -1.53% 36.52% falling rising rising rising ema9 on 2017-11-29 2017-12-01

Gold in Other Currencies

Gold was mixed this week, dropping just -1.65 in XDR.

Rates & Commodities

TLT had a volatile week, but ended down -0.20% - the strong rebound on Friday (+1.14% - and that's after giving half the rally back by end of day) after the fake news event giving us a sense as to what the bond market will do in a Trump impeachment scenario. “Money flees from stocks to bonds.” From looking at the TLT daily, it is difficult to see where the trend will be going next. However, looking at TY is a different story; TY didn't rally quite as strongly, and remains a downtrend. What's more, both the TY weekly and monthly charts remain in a downtrend.

JNK plunged -0.51%, with all of the losses coming after Friday's fake news event. JNK had actually lost perhaps 1% on Friday, but rebounded before end of day. JNK's forecaster issued a sell signal on Wednesday, and it remains in a downtrend. The BAA forecaster also issued what amounts to a sell signal in the weekly timeframe, but the monthly remains in an uptrend. JNK might be at a larger turning point here.

CRB fell -1.53%; CRB has traded mostly sideways for the past 4 weeks. 4 of 5 sectors fell this week, led by industrial metals (-2.09%). That's probably copper, which fell -2.41%. Copper is in a downtrend in both the daily and weekly timeframes; it remains in uptrend on the monthly, but the trend is fading somewhat.

Crude fell -0.68 [-1.15%] to 58.29, with most of the damage happening on Monday. This week saw OPEC renew its production limitation agreement, which didn't seem to move markets much at all – likely that was already factored into the price. (Not renewing the agreement, on the other hand, probably would have cratered oil). EIA report showed a mixed bag (crude -3.4m, gasoline +3.6m, distillates +2.7m), which did not move prices substantially. The week's rally came on Friday, where prices rallied more or less steadily throughout the day. Friday's North American rig count number was +13 – this marks 4 straight weeks of rig count increases. Shale is clearly happy with oil above $50. Forecaster ended the week with a buy signal, after Friday's rally.

Weekly forecaster remains in an uptrend, but the monthly issued a sell signal this month; new yearly highs make the monthly forecaster nervous.

COT report for crude has managed money at a low in shorts – mostly, they've been squeezed out by the long ascent towards $60. Commercial shorts are near highs. Its looking as though a top is here from the COT perspective.

Physical Supply Indicators

* SGE premiums over COMEX are at +5.96.

* The GLD ETF tonnage on hand rose +4.72 tons, with 848 tons in inventory.

* ETF Premium/Discount to NAV:

 PHYS 10.45 -0.40% to NAV [up]
 PSLV 6.18 -0.47% to NAV [up]
 CEF 13.13 -1.7% to NAV [up]

* Bullion Vault gold (https://www.bullionvault.com/gold_market.do#!/orderboard) a slight discount for gold and a slight premium for silver.

* Big bars premiums were: gold [1kg] 1.1% and silver [1000oz] 3.12%.

Futures Positioning/COT

In gold, the commercial net position fell 21k contracts, dropping 8k longs and adding 13k shorts. Managed money net rose 25k, with 21k longs added, and 4k shorts closed. Managed money gold shorts are all but gone. However, the position overall does not appear to mark either a low or a high.

In silver, the commercial net position rose 7.3k, closing 7.7k shorts and selling 358 longs. Commercials were ringing the register on the way down – this is typical of a downtrend. Managed money net fell by 8k, with 7.3k longs sold, and 676 shorts added. This also feels like the start of a downtrend.

Gold Manipulation Report

The after-hours game is no longer being played.

Instead, it all happens in the middle of the day. This week, silver was the victim, being hit several days in a row during the mornings in New York. The moves were quite obvious, with large moves happening over 1-minute bars, large numbers of contracts changing hands, and no other correlating events. Someone decided to sell silver “just because.” That, or they wanted to pull gold prices lower. Why do they care about gold? Because gold is negatively correlated with equities. If you want to keep equity prices from tanking, you better make sure gold doesn't rally, because those computers will start selling equities if they see gold starting to move higher.

All the items have unique linkages with other items. Silver is positively linked with gold; pound silver, and gold drops all on its own. Not as hard, but a bunch of selling pressure appears on gold almost instantly when silver is hammered. Gold is negatively linked to equities. Gold rallies, and that pulls equity prices lower.

We can't have a declining equity market - so silver must drop to hose gold, and gold must plunge to save equities.

Eurozone Status

  • Italian Elections: Anti-Euro M5S lead vs the PD: 26.7% to 24.9%. A combination of FI + LN (both semi-anti-Euro parties) are at 29.45%. FI appears to be the big winner in all this.

  • The SPD's starting position for working with Merkel to form a government involves “more Europe”, common EU tax (hello Ireland!) and welfare policies, and even with that, the SPD still hasn't definitively decided to open negotiations with Merkel about forming a government. And once they say yes, a new government won't be formed until 2018. Problem is, half of Merkel's party isn't particularly fond of the idea of more Europe. http://www.telegraph.co.uk/news/2017/12/01/merkel-faces-demand-eu-integr...

  • Catalonia regional elections are scheduled for Dec 21. Current polls have the separatists 45.3% to the unionist 44.2%. https://ig.ft.com/catalonia-poll-tracker/ The separatist leaders are mostly locked up (that's gotta be an accident, right?) making it rather difficult for them to campaign, but that central government strategy could backfire and instead just inspire a higher turnout from their supporters.

  • Pictures of migrants sold as slaves in Libya have encouraged the EU to stage an emergency evacuation effort for migrants detained in Libyan detention camps – back to their countries of origin, of course. It sure seems like a perfect “you should probably stay at home” PR campaign to deter migration. http://www.bbc.com/news/world-africa-42179434

Summary

Silver, miners, and gold have all entered downtrends this week. A rally on Friday, driven by the fake news event at ABC, provided some hints of a possible reversal, but news items like this (especially fake ones) are not great foundations on which to build sustained rallies, in spite of what the charts might show. However, it was a useful event, as it provides us some hint at what we might expect from the market if Trump Impeachment were to become an actual thing.

Impeachment: gold, silver, bonds up, equities & junk debt down. Not surprisingly, that's risk off, and in a big hurry too.

This week's downtrend in silver was both started and kept on track by repeated assaults on silver.

Gold and silver big bar shortage indicators are showing no sign of shortage; premiums on big-bar gold and silver are normal, GLD tonnage rose somewhat, and ETF premiums moved lower. Shanghai premiums remain positive, but have not markedly changed.

The Senate passed the Republican tax cut bill over the weekend, so we still have yet to see the market's response to that. At this point we have a pretty good idea of what the final bill will look like. Disregarding the particulars for a moment, after rallying hard in the months leading up to this point, will the actual passage of the bill end up as a sell-the-news event? This is what I'm expecting.

[And just as an aside - this is what a "real legislative body" looks like.  The EU's "fake parliament" never has this sort of drama, and that's because the EU parliament can't initiate legislation; all it can do is rubber-stamp a law that someone else has constructed.  This mens that all the winners and losers are pre-picked by someone else.  The entity that picks the winners & losers - that's where the real power lies.]

Note: Nonfarm Payrolls report is due out next Friday.

We're in a heavily news-driven market right now.  It feel to me as though literally anything could happen, up to and including a nuclear exchange with North Korea.  This isn't on any of my charts, its a gut feel.  Things seem to be coming to a head.  The next few months could be critical.

Forecasting code – weekly – says:

Uptrend: crude, JNK, SPX.

Downtrend: gold, silver, copper, miners, treasuries, USD.

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