PM End of Week Market Commentary - 11/7/2014

davefairtex
By davefairtex on Sat, Nov 8, 2014 - 5:31am

On Friday gold rose +37.40 to 1178.70 on the highest volume in six months; silver was up +0.41 to 15.81 on very heavy volume.  Both metals were hammered around noon in Shanghai making new lows; gold dropped to 1130, while silver hit 15.04.  About an hour and a half later, buyers finally showed up in the futures markets, and both metals suddenly rallied retracing the losses from the earlier assault.  After that rally, PM never looked back, moving steadily higher all day long, and closing at the highs.

While one could say that the modestly subpar Nonfarm Payrolls report at 0830 EST kicked off the big rally in PM, I trace the inception of Friday's rebound to that failed attempt to drive gold lower in Asia.  After a lot of study of intraday gold charts, I have concluded that failed attempts to move the market lower tend to mark lows in gold downtrends.  In other words, as soon as the shorts can't push things lower, the trend often changes soon afterwards - especially when prices are deeply oversold.  My code for that is, "the buyers showed up."

On the daily chart, gold appears to have bottomed today - it even closed above that pesky EMA-9.  It is interesting that gold's rally today stopped just below the June 2013 gold low of 1179.40.  Sometimes the markets really love symmetry - that, and it suggests 1179.40 may well act as resistance on the way back up.

Miners took their cue from gold and gapped higher at the open, rocketed higher in the first minutes of trading in NY, traded sideways for most of the day, and then shot up into the close.  GDX was up +8.31% on the highest volume in six months, and GDXJ was up a massive +11.33%, also on the highest volume in six months.  To me this looks like short covering; it would not surprise me if PM took a breather on Monday after such a big one-day move.  Still in looking at the weekly chart, this looks like a probable low for the miners.

For the week, gold was down -3.70 [-0.32%], silver dropped -0.46 [-2.82%], GDX was up +8.31% and GDXJ +6.42%.  Gold printed a doji, silver printed a hammer, and the miner ETFs posted big gains.  A huge number of ETF shares traded hands over the past week, and this tells me that this week's hammer candle print is significant.

The USD

On Friday, the buck fell -0.58 to 87.63; the dollar traded mostly sideways up until the Nonfarm Payroll report was released at 0830 EDT.  After that release, the dollar started falling, and didn't stop until end of day.

On the week, the buck was up +0.66 [+0.76%], printing an inverted hammer on the weekly chart and looking like it just might possibly have topped out.  The drop in the buck on Friday likely helped PM to rally.  After looking at a number of USD currency pairs, I get the sense that most of them are quite oversold against the dollar, and this aligns relatively well with a top in the buck.

Miners

During the week, the miners spent the first four days consolidating, and then broke higher on Friday as gold broke above its EMA-9.  One might point out that miner gains on Friday were so massive it looks like just a big short covering rally, and I'd agree.  We'll only know if this rally has legs if there is follow-through next week.  Still, a lot of things align suggesting this might be a low - severely oversold market, high volume over the past week, a breakout from consolidation, and a rally in GDX:$GOLD.

Last week, we talked about the HUI/Gold ratio - closely related to the GDX:$GOLD ratio, and how either gold was overvalued, or the miners were undervalued.  This week we got the hints of an answer: as gold and the miners roared back, so did the GDX:$GOLD ratio.  Take a look:

The ratio is hinting that gold has made a low.  How long and how far gold will rebound is anyone's guess.  But a rising GDX:$GOLD ratio is bullish for PM.  As you can see, we have only seen one brief close above the ratio's EMA-9 since the end of August - and that was just a headfake.

US Equities/SPX

The US market slowed this week, up only +13.87 [+0.69%] but managed to make another all time high at 2031.92.  The USD and SPX seem to be at least loosely correlated; when money flows into the US, at least some of it ends up in the equity market.  SPX is overbought right now, and is starting to look a bit tired.  Rising commodities and bonds hint to me that perhaps SPX may become starved for cash a bit in the near future.  What's more, if the SPX were to falter, PM might well benefit from a rotation of money out of SPX and into commodities and the beaten-down mining shares.

Rates & Commodities

Bonds rose +0.66% this week, remaining within a narrow trading range.  TLT has been chopping sideways within a range for the past three weeks all during the SPX rally.  To me that shows good strength in bonds.  If and when SPX corrects, I'll guess that TLT will rally strongly.

JNK also traded sideways this week, up +0.02% - almost flat on the week.  JNK is not giving us any hints as to risk on or risk off.

Commodities bottomed out this week, off -0.81% but they have been rallying for the past two days.  The commodity index has yet to break above its EMA-9, but it would not take much for it to do so.  Rising commodity prices would help PM move higher.

WTIC was down -2.27 to 78.43 on the week, while Brent was down -2.47 to 83.39.  Neither oil contract was able to close for more than a day above their respective EMA-9 averages, indicating that oil remains in a downtrend.  This is contrary to oil equities, which have rallied modestly for the past three weeks, likely dragged higher by the advancing SPX.  An optimist would imagine that oil equities are leading oil higher, which in turn would aid PM.  So far, however, oil has refused to cooperate.

Physical Supply Indicators

* Premiums in Shanghai vs COMEX are down -1.47 to +0.67 over COMEX.  I'm starting to wonder if some market force is now in place that arbitrages away premiums in Shanghai.  I haven't seen a significant premium in Shanghai for quite some time.

* The GLD ETF lost a huge -14.05 tons, with 727.15 tons remaining.

* ETF Premium/Discount to NAV; gold closing (15:59 close price on October 24) of 1171.50 and silver 16.13:

  OUNZ 11.74 +0.14% to NAV [up]
  PSLV 6.40 +4.92% to NAV [up]
  PHYS 9.72 -0.40% to NAV [up]
  CEF 11.49 -9.17% to NAV [down]
  GTU 39.13 -9.93% to NAV [down]

Once again, Sprott funds have increased in premium, while non-delivery funds have dropped.

Futures Positioning

The COT report is as of November 4th, when gold was trading at 1167 and silver at 16.01.  During the coverage period, gold dropped around $55 and silver dropped $1.20.

For gold during this period, Managed Money increased shorts by +6.2k contracts, and dumped -15.1k longs, a big change.  Producers covered 11k shorts and added +1k longs.  Mostly, Managed Money bailed out of longs as gold cracked 1179.40 support.

In silver, things were a bit confusing; Managed Money closed 1.9k shorts and increased longs by +2.4k contracts.   Producers short exposure was virtually unchanged, and they dropped -1.1k longs.  Given silver dropped $1.20 during the coverage period - I'm not exactly sure how it happened, or who did it.

Moving Average Trends [20 EMA, 50 MA, 200 MA]

Gold: short term DOWN, medium term DOWN, long term DOWN.

Silver: short term DOWN, medium term DOWN, long term DOWN

Not much good news here.  Price of PM is still below all moving averages.

Summary

This week both gold and silver made new multi-year lows, but rebounded Friday on heavy volume.  It is unclear to me what the catalyst for the rebound was, but the time that the event took place was clear: afternoon in Shanghai, something caused gold to rally and it just never looked back.  Sometimes trends end on a big news event - and sometimes they end when prices are hammered down so low the buyers just can't resist.  However if we wait around trying to sort out exactly why prices moved, we might navel-gaze too long; I prefer to just look at the signal and take action and figure out the whys and wherefores if and when they become apparent later on.

For both PM and the miners, moving averages are all pointing lower. The gold/silver ratio is up +1.98 to 74.55 - and even on Rally Friday, it jumped +0.47.  Those are both bearish signals.  However, GDX:$GOLD has broken upwards, GDXJ:GDX is bouncing somewhat, and SIL:$SILVER has managed to clear its EMA-9, which are all bullish signals.  The miner ratios tend to be leading indicators since they are more responsive, while moving averages tend to trail a few weeks to a month behind.  Since our leading indicators have turned positive, that's an early sign of a potential trend change in progress.

The COT reports showed heavy Managed Money long liquidation in gold on the break below the 1179.40 low, while Producers were covering short.  Curiously, there was not much change in the COT report for silver.

Shanghai premiums remain barely positive, ETF premiums increased for the Sprott funds, and a large amount of gold left GLD.  If we factor in the stories about the US mint running out of silver coins, we'll call physical demand relatively strong right now.

Bottom line: buyers showed up strongly in gold, less so in silver, and quite dramatically in the mining shares.  Quite likely much of the move was due to a burst of short-covering, and next week we get to see if those buyers will continue to chase prices higher.

My sense is based on timing, oversold PM, oversold miners, and gold's move above its EMA-9 we've likely seen the lows in gold for a time - although I'd be more confident in my call if silver was outperforming gold.

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4 Comments

robie robinson's picture
robie robinson
Status: Diamond Member (Offline)
Joined: Aug 25 2009
Posts: 1190
another100 ozs.

after milking yest. We don't need cash much, I had some extra and bought some more.

Gotta go and see if i can beat "Chance" and "Peanut" to their parlor

Penny551's picture
Penny551
Status: Silver Member (Offline)
Joined: Nov 8 2012
Posts: 154
Thx!

Dave-

This is fast becoming my favorite end of week PM commentary. Thx for the hard work and sharing your expertise w/ the PP community!

 

mica's picture
mica
Status: Member (Offline)
Joined: Nov 9 2014
Posts: 1
My hopes are up

I am putting my money to ultimate bottom. Here attached is silver weekly chart with trendline I draw in 2012. When it broke upside that line in june I was surely afraid price would come back to test it as it often does.

And it did

KennethPollinger's picture
KennethPollinger
Status: Platinum Member (Offline)
Joined: Sep 22 2010
Posts: 654
List of Junior SILVER miners

Does anyone have any comment about which five of these MIGHT be the ones to jump into in light of Dave's entry above???

Silver Mining Companies

 

As the price of silver continues to go up, more and more old deposits and mines are being re-evaluated. Thus there are a lot more juniors that are actively exploring for silver. I have tried to list only those silver juniors who are what one may call a "pure silver" company. Meaning one whose main focus is silver. On an added note, we at junior miners here really like silver. We have been buying physical silver for years. We also like to trade silver stocks and have done quite well at it in the last few years.

Also staying on the note of silver here, I also have a small section written on how I started to trade silver online now. You can read abouttrading silver onlinehere. I use to trade gold online but now with gold price quite high and silver being really active and more affordable, my returns on my trades have been in the green for a change.

Listed companies below arein alphabetical order. If your company is not listed, justemail mewith your URL, a bit of info and your stock ticker code. We will get you listed right away.

If you are a junior silver company and would like to befeaturedon juniorminers, justemail meand let me know.

For some interesting and even some boring information about silverClick Here.


 

Abcourt Mines(TSX-V: ABI)
Silver in Val Dor Quebec.

Alcyone Resources(ASX: AYN)
A Silver developer gearing up to start mining in late 2011 at their Texas Silver Project in Queensland.

Alexco Resource Corp.(TSX: AXR) (AMEX: AXU)
Keno Hill property located in the Yukon Territory, Canada.

Argent Minerals Limited(ASX: ARD)
A Silver explorer in the feasibility stage of their Kempfield Silver Project in New South Wales, a decision to mine is expected late 2011.

Argentex Mining Corporation(TSX-V: ATX) (OTCBB: AGXMF)
Advanced silver and gold properties in Santa Cruz, Argentina

Apogee Minerals(TSX-V: APE)
Silver in Bolivia

Arian Silver(TSX-V: AGQ)
Silver In Mexico

Aura Silver Resources(TSX-V: AUU)
Silver property located in the San Jose Mining District, Oaxaca, Mexico.

Avino Silver & Gold Mines Ltd.(TSX-V: ASM)
Silver in Mexico, British Columbia and Yukon Territory.


Bear Creek Mining Corp.(TSX-V: BCM)
Corani Project a potential bulk-tonnage silver mine with robust base-metal credits in Peru.

Brixton Metals Corporation(TSX-V:BBB)
Exploration company with a strong management team, focused on high grade Silver, Gold and base metals at the Thorn project in Northwest BC.


Canasil(TSX-V: CLZ)
Projects in British Columbia, Canada and Durango, Sinaloa and Zacatecas States, Mexico.

Cobar Consolidated Resources(ASX: CCU)
A Silver developer who is working towards production in late 2011 at the Wonawinta Silver Project in western New South Wales, Australia.

Colibri Resource Corp.(TSX-V: CBI)
Silver in Mexico.

Consolidated Spire Ventures Ltd.(TSX-V: CZS)
Several active projects in Canada and Mexico

Continuum Resources Ltd.(TSX-V: CNU)
Properties in Mexico


Dia Bras Exploration(TSX-V: DIB)
Silver in the State of Chihuahua, northern Mexico.


ECU Silver(TSX: ECU)
Silver in Mexico

Endeavour Silver Corp.(TSX: EDR) (AMEX: EXK)
Canadian based silver mining company focused on the growth of its silver production, reserves and resources in Mexico.

Esperanza Resources(TSX-V: EPZ)
Projects in Mexico and Peru.

Excellon Resources Inc.(TSX-V: EXN)
Silver properties operating in Durango State, Mexico


First Majestic Silver Corp.(TSX: FR)
Not really a junior but is a silver producing mining company with a focus on Mexico.

Fortuna Silver Mines(TSX-V: FVI)
Silver in Mexico and Peru.

Fury Explorations(TSX-V: FUR)
Silver in Nevada and Mexico.


Garibaldi Resources(TSX-V: GGI)
Projects in Mexico.

Genco Resources Ltd.(TSX-V: GGC)
Multiple mining sites including the La Guitarra Mine located in the companies wholly-owned Temascaltepec Mining District of central Mexico.

Golden Goliath(TSX-V: GNG)
Silver properties in Mexico.

Golden Tag Resources Ltd.(TSX-V: GOG)
Canadian based mineral resource exploration company searching for high-grade silver and gold deposits in Mexico and Canada.

Great Panther Resources Limited(TSX: GPR)
Company owns a 100% interest in two operating mines and two high quality exploration projects in Mexico, and employs almost 600 people.


Hi Ho Silver Resources Inc.(CNQ: HHS)
Hi Ho Silver is a Canadian exploration company seeking Silver and Molybdenum based out of Mississauga, Ontario, Canada, trading on the CNQ (HHS) and Frankfurt (H9T) exchange.


Impact Silver Corp.(TSX-V: IPT)
Profitable silver producer with an extensive portfolio of advanced silver projects in Mexico totaling 623 sq km. IMPACT currently produces silver from multiple mines feeding a 500 tonnes per day processing plant at the Royal Mines of Zacualpan, with a fourth mine, the open pit Capire Project, scheduled for production early 2012.

International Minerals(TSX-V: IMZ)
Silver mine in Peru.

Intrepid Mines Limited(TSX: IAU)
Mines and properties in Australia, Argentina, Canada.


Kimber Resources(TSX: KBR) (AMEX: KBX)
Silver in Mexico.

Klondike Silver(TSX-V: KS)
Exploring for and developing silver and associated lead/zinc deposits in the famous Slocan silver camp in southern British Columbia.

Kootenay Gold(TSX-V: KTN)
Kootenay has completed several exploration programs on the Promontorio Silver Property, consisting of an airborne geophysical survey, geological mapping, till sampling, prospecting, a 3D IP survey and more than 41,000 meters of diamond and core drilling. A 25,000 meter diamond drill program is underway which focuses on a 1000 meter long corridor extending from the Southwest Zone through the Pit Resource to the Northeast Zone. The purpose of the drill program is to provide infill and step out drilling from the many drill intercepts within the trend with the objective of increasing the current resource.


MAG Silver Corp.(TSX: MAG)
A silver exploration company focused on projects located within the Mexican Silver Belt.

Malachite Resources NL(ASX: MAR)
The company�s projects are located in the eastern states of Australia, where gold, silver and base metals are targeted.

Mexican Silver Mines(TSX-V: MSM)
Developing three former silver producing properties in northeastern Mexico.

Minco Silver(TSX: MSV)
The company's primary focus is the Fuwan silver property in China.

Minera Andes(TSX: MAI)
Silver & gold in Argentina.


Oremex Resources Inc.(TSX-V: ORM)
50.8 million ounce silver resource at its Tejamen property in Mexico.

Orko Silver Corp.(TSX-V: OK)
Large land position in Durango State and is involved in three projects in Mexico.

Oro Silver(TSX-V: OSR)
Silver properties in Mexico.


SNS Silver(TSX-V: SNS)
100% ownership of the Crescent Mine in Idaho.

Sabina Silver Corp(TSX-V: SBB)
Silver exploration in Nunavut.

St. Eugene Mining Corporation Ltd.(TSX-V: SEM)
Exploring zinc/silver/lead targets at its Moyie Project at Cranbrook, British Columbia.

Scorpio Mining(TSX: SPM) Silver in Mexico

Silver Eagle Mines Inc.(TSX: SEG)
Exploring and developing high grade silver deposits in the Mexican mineral belt.

Silver Fields Resources Inc.(TSX-V: SF)
Silver with current projects located in British Columbia, Idaho, Montana, and Zacatecas Mexico.

Silverstone Corp(TSX-V: SST)
Silver in Mexico and Portugal

Silver Grail(TSX-V: SVG)
Stewart -Eskay Creek mining area of northwestern British Columbia.

Silver Quest Resources Ltd.(TSX-V: SQI)
Silver projects throughout North America.

Silver Mines Limited(ASX: SVL)
A Silver explorer with an exciting high grade Silver project (Webbs) in northern New South Wales, Australia.

Silvermex Resources Ltd(TSX-V: SMR)
Silver in Mexico.

South American Silver Corp.(TSX: SAC)
Malku Khota silver project in Bolivia.

Southern Silver Exploration Corp.(TSX-V: SSV)
Properties and project in Mexico and Arizona.


Teuton Resources Corp.(TSX-V: TUO)
Silver and gold in the Stewart mining camp area of British Columbia.


UC Resources(TSX-V: UC)
Silver in Mexico.


Valencia Ventures(TSX-V: VVI)
Chile and Yukon

Vendome Resources Corp.(TSX-V: VDR)
Vendome Resources Corp is a mining exploration company currently exploring for silver in our Mexican properties by the Guerrero Metal Belt. We are traded on the TSXV under the symbol VDR.

Read more:junior miners | silver companies | silver explorers | silver miners | silver mining | silver mines | silver bullion |http://www.juniorminers.com/silver_a.html#ixzz3Ia73adsn
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