PM Weekly Market Commentary - 1/11/2019

davefairtex
By davefairtex on Sun, Jan 13, 2019 - 7:40am

On Friday, gold rose +0.98 [+0.08%] to 1292.61 on heavy volume, while silver rose +0.04 [+0.26%] on moderately heavy volume. Gold and silver tried to rally on Friday, but a brisk plunge in the Euro just after 9 am pulled prices back down to mostly-even.

The weekly metals sector map shows a clear reversal in the PM group this week; juniors fell faster than seniors, silver dropped more than gold, and the miners moved down harder than the metal. Copper and palladium did best – I suspect that's reflective of optimism in the US-China tariff negotiations. That suggests that a settlement might not be an entirely PM-positive outcome.

Name Chart Chg (W) 52w ch MA9 MA50 MA200 50/200 Last Crossing last
Palladium $PALL 3.33% 18.78% rising rising rising rising ema9 on 2018-12-26 2019-01-11
Copper $COPPER 0.34% -17.44% falling falling falling rising ema9 on 2019-01-11 2019-01-11
Gold $GOLD 0.13% -2.65% rising rising falling rising ema9 on 2019-01-10 2019-01-11
Silver Miners SIL -0.12% -21.42% rising rising falling rising ema9 on 2019-01-02 2019-01-11
Gold/Euro $GOLD:$XEU -0.44% 2.26% rising rising rising rising ema9 on 2019-01-08 2019-01-11
Silver $SILVER -0.73% -8.00% rising rising falling rising ema9 on 2019-01-10 2019-01-11
Senior Miners GDX -1.03% -9.84% rising rising falling rising ema9 on 2019-01-10 2019-01-11
Platinum $PLAT -1.55% -17.71% rising falling falling rising ema9 on 2019-01-11 2019-01-11
Junior Miners GDXJ -1.89% -9.63% rising rising falling rising ema9 on 2019-01-10 2019-01-11

Gold rose +2.49 [+0.19%] this week, one of the few items in the group to move higher. Gold attempted to rally, but the rally failed; the doji candle was unrated, while weekly forecaster remained in an uptrend. While gold may be showing signs of fatigue on the daily chart, the weekly and monthly both remain in reasonably strong uptrends. Gold/Euros does not look quite as strong; some of gold's strength is a currency effect.

The market is projecting no cut in March, and a split decision in December (a 13% rate decrease, 15% rate increase).

COMEX GC open interest rose +20,740.  That's a fairly large increase in OI.

No COT report this week because of the government shutdown!

Silver fell -0.12 [-0.73%] on the week, underperforming gold. Silver ended the week below the 9 MA, suggesting that we may be entering a correction. However, forecaster is actually slightly positive on the daily chart, and both the weekly and monthly remain in uptrends. The weekly dark cloud cover candle pattern is not a reversal pattern; it is quite weak. Tea leaves suggest silver remains in an uptrend, at least for now.

COMEX SI open interest rose +10,833 contracts this week. Wow. That's 26 days of global production in new paper at COMEX. And silver really didn't even move. Someone is really loading up short, but so far at least, price has not moved significantly.

Miners moved lower this week, with XAU down -0.22%. The weekly spinning top candle was a bullish continuation, and forecaster declined but remains in a weakened uptrend. The monthly forecaster issued a sell signal this week, assuming we close here by end of month. At this point, miners could go either way; they remain in an uptrend in both the daily and weekly timeframes.

GDX:$GOLD fell -1.22% while the GDXJ:GDX ratio dropped -0.86%. That's bearish.

USD

The buck fell -0.52 [-0.54%] to 95.10. On the daily chart, the buck has been fairly choppy, moving lower in fits and starts, but on the weekly and monthly charts, the downtrends are much clearer. The weekly spinning top candle was a bearish continuation, and DX issued a very mild sell signal.weekly sell signal, putting DX in a downtrend in all 3 timeframes.

Major moves this week were: CNY [+1.51%], GBP [+0.94%], EUR [+0.63%]. It sure looks as though currency traders are betting on a settlement in the US-China trade dispute.

US Equities/SPX

SPX climbed +64.32 [+2.54%] to 2596.26. SPX moved steadily higher all week long, but on the daily chart it seems as though the upside energy was fading a bit going into Friday. Weekly, the pattern was bullish, and weekly forecaster issued a buy signal, which puts SPX in an uptrend in both the daily and weekly timeframes. This probably has a fair amount to do with optimism over the US-China trade negotiations; other signs (like the jump in CNY this week) support this.

The sector map shows signs of some recovery; almost everything is back above the 9 MA, with homebuilders doing best. Looking at the XHB chart, it has managed to recover maybe 40% of its recent losses. Staples and utilities did worst; I'd say this map is neutral. You want to see tech and financials leading, and they're fairly low on the list this week.

Name Chart Chg (W) 52w ch MA9 MA50 MA200 50/200 Last Crossing last
Homebuilders XHB 5.14% -22.81% rising rising falling rising ma50 on 2019-01-07 2019-01-11
REIT RWR 4.93% -0.11% rising falling rising falling ema9 on 2019-01-04 2019-01-11
Telecom XTL 4.73% -3.19% rising rising falling rising ma50 on 2019-01-11 2019-01-11
Defense ITA 4.58% -7.14% rising falling falling rising ema9 on 2019-01-04 2019-01-11
Industrials XLI 4.17% -14.55% rising falling falling rising ema9 on 2019-01-04 2019-01-11
Cons Discretionary XLY 3.72% 0.86% rising rising rising rising ma50 on 2019-01-08 2019-01-11
Energy XLE 3.57% -19.13% rising falling falling falling ema9 on 2018-12-31 2019-01-11
Technology XLK 3.32% -4.34% rising falling falling falling ema9 on 2019-01-04 2019-01-11
Healthcare XLV 2.15% 1.92% rising rising rising falling ma200 on 2019-01-11 2019-01-11
Materials XLB 1.93% -17.41% rising rising falling rising ema9 on 2019-01-04 2019-01-11
Financials XLF 0.99% -15.43% rising falling falling falling ema9 on 2018-12-27 2019-01-11
Utilities XLU 0.87% 5.30% rising falling rising falling ma200 on 2019-01-08 2019-01-11
Cons Staples XLP 0.72% -8.83% rising falling rising falling ema9 on 2019-01-04 2019-01-11
Gold Miners GDX -1.03% -9.84% rising rising falling rising ema9 on 2019-01-10 2019-01-11

Globally, the US was at the top of the heap.

Name Chart Chg (W) 52w ch MA9 MA50 MA200 50/200 Last Crossing last
United States VTI 3.06% -6.40% rising falling falling falling ema9 on 2019-01-04 2019-01-11
Latin America ILF 2.99% -5.65% rising rising falling rising ma200 on 2019-01-04 2019-01-11
Emerging Asia GMF 2.26% -17.33% rising rising falling rising ma50 on 2019-01-09 2019-01-11
Europe IEV 1.78% -16.91% rising falling falling rising ma50 on 2019-01-11 2019-01-11
Eurozone EZU 1.74% -19.71% rising falling falling rising ema9 on 2019-01-04 2019-01-11
Developed Asia VPL 1.35% -17.00% rising rising falling rising ema9 on 2019-01-04 2019-01-11

VIX fell -3.19 to 18.19.

Rates & Commodities

TLT fell -0.97%, moving lower for 4 of 5 days this week. The drop wasn't too severe, but bonds do look a bit weak right now. TY dropped -0.16%, ending the week below the 9 MA, and causing both the daily and weekly forecasters to issue mild sell signals. The 10-year treasury yield rose +4.2 bp to 2.70%. Its a fairly mild bond sell-off given the rise in equities.

JNK shot up +2.11%, a very strong move for crappy debt, clearing the previous new high, and generally supporting the risk on move in equities. While JNK faded a bit on Friday, it remains in a strong uptrend.

Crude rallied hard this week, up +3.48 [+7.15%] to 52.14. On the daily chart, crude ran right up to the 50 MA, and appears to have run into some selling pressure – crude forecaster issued a sell signal on Friday. Crude remains in an uptrend on the weekly and monthly timeframes; the longer term patterns suggest a continuing rebound for crude. The EIA report on Wednesday was bearish (crude: -1.7m, gasoline: +8.1m, distillates: +10.6m); those were some really large build in product inventories. Crude ended up higher on the day after the EIA came out, which I consider to be a very bullish response by the market. Rising crude prices are definitely helping equities to recover.

Physical Supply Indicators

* The GLD ETF tonnage on hand fell -0.54, with 798 tons in inventory.

* ETF Discount to NAV:

 PHYS 10.46 -0.24% to NAV [decrease]
 PSLV 5.65 -3.40% to NAV [decrease]
 CEF 12.66 -3.41% to NAV [decrease]

* Bullion Vault gold (https://www.bul lionvault.com/gold_market.do#!/orderboard) shows no premium for gold and a 2c premium for silver. [Calculation uses kitco's closing spot prices in NY, minus the mid-point of bullion vault's current bid/ask on the metal in New York.]

* Big bars premiums were: gold [1kg] 1.4% and silver [1000oz COMEX] 3.56%.

Grey Swans & Geopolitics

  • Ebola: total cases 628, with 383 deaths, an overall fatality ratio of 61%. There were 21 new cases.  Things seem to be getting better, although its hard to know for sure because of delays in detection of new cases due to instability in the region. https://www.who.int/csr/don/10-january-2019-ebola-drc/en/

  • Turkey: the 10-year yield ended the week at 16.01%, while USD/TRY closed at 5.44, up +2.29% on the week. All quiet in Turkey.

  • Migration-EU: Victor Orban, PM of Hungary, stated that no compromise was possible with Germany over migration. “German politics does not respect Hungarians' decision not to become an immigrant nation.” Does “More Europe” mean the total loss of a nation's right to determine who can live there? This probably will split Europe right down the middle. https://www.reuters.com/article/us-hungary-orban-germany/hungary-pm-no-compromise-possible-with-germany-on-migration-idUSKCN1P41FC

  • EU elections: Coming up on May 23-26; in the past, nobody cared, but this time the question of migration will almost certainly energize voters on both sides of the issue.

  • China – Tariffs: The latest round of US-China trade negotiations concluded in Beijing on Thursday, with some positive indications visible to the tea-leaf readers. The talks went on for a day longer than expected (and positive), and China's top trade negotiator supposedly dropped by the room during the talks, which was unexpected (and positive). A Chinese government spokesman said that structural issues (such as forced tech transfers and IP rights) saw progress. https://www.cnbc.com/2019/01/10/beijing-issues-statement-on-us-china-trade-talks.html

  • Yield Curve Inversion: the 2-10 spread fell -1 bp to +16 bp.

  • North Korea: KJU visited Xi in Beijing for an unannounced visit, at the invitation of Xi. Xi also accepted KJU's invitation to visit North Korea. A summit between Trump and KJU may be coming closer. I have maintained that the US-North Korea outcome will depend on the successful conclusion to the US-China trade talks – almost certainly Xi is retaining this as a bargaining chip.

  • Mueller Investigation: No news. Rumor is, the investigation will wrap up in the next few months.

  • Government Shutdown: at 22 days, it is the longest shutdown in history, complete with news stories about trash piling up in national parks, all over $5.7 billion dollars to build “the Wall” (or a “fence”, whatever you want to call it). The problem is, neither Republican nor Democrat politicians want the wall, because it will a) actually curb migration, and curbing migration will b) support wages of the working class to the detriment of the large corporate donors. So Trump is largely on his own here.

Summary

Both crude and equities moved higher this week – one almost certainly influencing the other. Good vibes from the US-China trade talks definitely helped also. This took a toll on safe haven assets such as bonds and PM, but the moves lower in the havens was relatively modest. Crappy debt did very well, moving strongly higher for the second week in a row.

The government shutdown remains a negative influence, but it doesn't seem to be a major one. Perhaps the market assumes the folks in Washington will eventually come to some sort of compromise. In the old days, the Dems would just ask for some program they've wanted for a while, Trump would give it to them in exchange for The Wall, and life would go on. However, early polls had Americans mostly blaming Trump for causing the shutdown (and I suspect that's what kept the Dems from compromising - “we're winning!”), but a more recent poll suggests that Americans ever so slightly blame the congressional Democrats for keeping the shutdown from getting resolved. If the Dems slip in the polls further, that should encourage them to just split the difference and move on.  My guess: another week or two.

Big bar gold premiums on gold and silver remain low, discounts at the ETFs have continued to fall, and there appears to be no shortage of physical metal at the moment.

No COT report as a result of the government shutdown.

I think the market is looking ahead to a positive outcome for the US-China trade deal. These are the #1 and #2 economic powers in the world, and the settlement of this issue could potentially change the way business gets done in China for US firms, as well as (presumably) providing for more US exports to China too. I get the sense that the deal is not that far off, maybe a month – perhaps less - from being concluded.  No doubt the details are leaking out to well-connected insiders on both sides, and that is moving prices in advance of the actual event itself.

Weekly trends (in order of strength):

Uptrend: junky debt, gold, silver, crude, gold/Euros, platinum, SPX, bitcoin, BAA corporates, miners, copper.

Downtrend: USD, 10-year treasury.

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5 Comments

MGRS's picture
MGRS
Status: Bronze Member (Offline)
Joined: Feb 28 2013
Posts: 31
EU bureaucratic thinking

I followed your link about Hungarian migration, and came across this gem (or turd, depending on your level of sarcasm), regarding German doctors emigrating to Switzerland:

“I can understand them. Switzerland is a beautiful country. But what is clear is that there is a shortage of these professionals in Germany. And then Polish doctors work in our country, and in turn there is a shortage of them in Poland,” he told Swiss tabloid Blick am Sonntag.

“That cannot be right. We should therefore think about whether we need to create new regulations on the luring away of people with certain professions within the EU, and without fundamentally calling into question the freedom of movement within Europe,” he was quoted as saying.

https://www.reuters.com/article/us-eu-migration-germany/eu-may-need-rule...

I was just struck by the enormous conceit of this statement.  Rather than viewing the emigration as a voluntary choice, likely due to better conditions across the border, it's a problem to be solved with "new regulations" and no recognition that you're impinging on those doctors' freedoms and not addressing the fundamental reasons they would want to leave.  Not even looking into the "why" behind the trend.  Just put in a "regulation" - how simple!

This is how these people think. 

 

phusg's picture
phusg
Status: Bronze Member (Offline)
Joined: Jul 16 2014
Posts: 62
brain drain

You seem to think all of the EU's thinking is summarized in the short article. Of course they see emigration as a voluntary choice due to better conditions over the border. Switzerland is not part of the EU and so can compete for EU brains by non-EU (de)regulations, just as their banking sector does. Naturally EU countries don't like this because it costs an awful lot to fully train a doctor.

They recognize they don't want to impinge on freedom of movement, the last part of your quote from the article even clearly states exactly this.

Why is it that EU bureaucrats get all the heat for in this group for abuses of power, over-regulation and stupidity when the current American administration, although admittedly shaking some things up for the better, is incredibly far from perfect itself? I guess it's human nature to search for others flaws to help avoid seeing your own.

I think your post says more about how you think than 'these people'. All the best.

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5809
the battle in Europe

From what I can see, the critical battle in Europe right now is about sovereignty.

Are you allowed, as a nation-state, to say you don't want a bunch of migrants to come into your country?  As always there are winners and losers to migration.  Winners: companies, rich people, and the migrants themselves.  Losers: lower-to-middle class locals, whose wages get hammered by competition from all the migrants.

Small wonder that the elites and machine politicians are all for open borders and migration rights.  Who doesn't want cheaper cooks, maids, nannies, gardeners, and butlers?

Some day the local workers will figure out they've been hornswoggled by the elites, who have cynically weaponized political correctness to achieve their ends.  Don't like a bunch of new migrants competing for your job and driving your salary lower?  You're a Racist!  Xenophobe!  Far-right-winger!!

Once labor figures out they've been duped, the backlash from labor should be pretty interesting to behold.  It might just be the thing that blows apart the EU.

I think we get to see the next phase of this struggle in this May's EU election.

PaulJam's picture
PaulJam
Status: Bronze Member (Offline)
Joined: Dec 4 2016
Posts: 84
I'd add

Rather than viewing the emigration as a voluntary choice, likely due to better conditions across the border, it's a problem to be solved with "new regulations" and no recognition that you're impinging on those doctors' freedoms and not addressing the fundamental reasons they would want to leave

Not to mention little consideration on the part of the regulators of the neo-liberal neo-colonial economic policies that motivate migration from developing countries in the first place.  What a mess.

 

Eannao's picture
Eannao
Status: Silver Member (Offline)
Joined: Feb 28 2015
Posts: 180
Immigration & welfare

Dave, I think you hit it out of the park with this comment!

The lower and middle classes not only pay the price of lower wages, but also the price of higher taxes due to the increased demands on the welfare system.

I think immigration works great if there's minimal welfare. Immigrants will mainly come to work and the country will benefit. However, if there is a tasty welfare system to be joined, then immigration has the potential to be a burden on the country.

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