PM Daily Market Commentary - 8/25/2015

davefairtex
By davefairtex on Tue, Aug 25, 2015 - 10:52pm

Gold fell -14.10 to 1140.30 on very heavy volume, while silver dropped -0.10 to 14.66 on heavy volume.  Gold gold off steadily all day long in Asia and London, with the selling accelerating right after 09:00 ET.  Silver, which seemed to get most of its selling done yesterday, also moved steadily lower for most of the day.  Dollar strength did play a part, but mostly the metals were just relatively weak.

After the huge-volume down day yesterday, gold sold off until it reached the 50 MA, where it seemed to find some support.  While gold printed a swing high today, and that's definitely something to watch, the fact that the selling stopped at the 50 is a good sign, since that is where you could expect the dip-buyers to show up.  If gold can hold above its 50 for the next few days, that's a sign that the uptrend remains in place.  Losing the 50 means that the buyers aren't as plentiful - if that happens then longs will bail out, shorts will get emboldened, that swing high will loom larger, and that means we probably will go lower.

Silver continues to meander lower.  After the big sell-off yesterday it seems to be headed for a re-test of the 14.33 low.  Although there is support at 14.50 I'm not sure enough buyers will show up to hold that level.  Perhaps if we get a dramatic commodity rebound, that would help.  I'm not sure that's something we should all stay up late waiting for, however.

With the equity market under seige, there are no buyers for the relatively speculative gold mining shares right now: GDX fell -3.26% on heavy volume.  I anticipate a re-test of the recent lows within a day or two, based on the downside velocity we're seeing now.  I would not buy miners right now: those candles look ugly.

Juniors dropped -2.38% - not quite as much as the seniors - but the chart looks similar; at this rate, it may take them an extra day to retest their low.

The USD rebounded strongly today, rising +1.19 to 94.54, and recovering most of yesterday's losses.  However, the rally was stopped at the 200 MA; the buck really needs to close above 95 to suggest that the dollar downtrend might be coming to an end.  Also, some of the dollar's move higher was erased after the closing prices were marked for USD.  Starting at about 15:10 ET, the dollar sold off fairly hard, losing about -0.50 in perhaps 45 minutes.  This went in tandem with an SPX sell-off at that time.  Based on this, I'm not sure the selling in the buck is over with just yet.

SPX staged an impressive rally overnight that continued through to the morning, but the 1950 price level proved to be a wall - sellers jumped in every time price moved up to that level.  SPX tried four different times, failed four different times, and as the end of the day loomed, traders decided they did NOT want to take the risk of holding SPX overnight, and price plummeted to the dead lows of the day.  After being up nearly 80 points earlier, SPX ended up closing down -25.60 to 1867.61.  SPX did not make a new low during market hours by the thinnest of margins, but after market close, the e-minis promptly sold off further, and a new low was made.

SPX printed a massive inverted hammer candle on the day, which signifies a failed rally.

So what happened today?  Since the dollar and SPX are still correlated, I interpret the late-day dollar selling which matched the late-day SPX selling to mean that our foreign friends are still looking to get out, and they are selling rallies if they can, and then bailing out on the drops if they must.

A falling dollar and a falling US market means a double-whammy for foreigners holding US assets - they lose much more rapidly, so what was a virtuous cycle of rising-dollar and rising-SPX turns into a vicious cycle of falling-dollar and falling-SPX.  There is still a lot of selling pressure right now.  I think we probably go lower, especially if the dollar continues to drop.

Armstrong had this to say, regarding DJIA (which still remains well above its low, and closed today at 15,666):

If this week’s low gives way and we close August BELOW 15555, look out below. We need to wipe out the TV pundits.

The VIX fell -4.72 to 36.02.  Given SPX dropped on the day, this tells me there was a "crash premium" built into the market that is now fading somewhat.  Today's 25 point loss is less scary than what the put buyers were worried could have happened.

We all have our opinions on where we think things will go.  Then, the market comes and tells us what is really going to happen.  Over the weekend I saw a rebound happening soon, but based on today's price action, I'm thinking it might be a bit further off.  The selling is not done yet and until it is, we will keep going down.

Bond ETF TLT had a really bad day, dropping -1.61%, moving through its 9 EMA but finding support on the 200 MA.  I have to say, bonds don't look great here.  With all the fear in the market, money should be going into bonds.  The fact that it's not - its a bad sign for treasurys.

The CRB (commodity index) managed to rise on the day, climbing +0.77% but not quite printing a swing low.  It also remains below its 9 EMA, which means the downtrend is still in place.

WTIC (oil) rallied also, climbing +1.58 [+4.15%] to 39.64 and retracing much of yesterday's loss.  However, oil has not printed a swing low (it needs a close above 40.47 to do that), and it still remains below that 9 EMA.  Until it does, oil remains firmly in its downtrend that it entered two months ago.

Copper on the other hand did manage to print a swing low today, but it remains below that 9 EMA.  Copper has printed swing lows several times in the past few months, only to subsequently resume its downtrend; I'd say copper needs to close above that 9 EMA for more than two days running before I get excited.

Shanghai premiums: +7.51 over COMEX.

Turning to my computer for guidance, I ask it, do you see any reversals today?  It says yes: there is a partial signal from the FTSE, and a full signal from the TSE - the Toronto Stock Exchange up in Canada.  But that's it, so far anyways.  And the mid-week reversals are preliminary; we need to wait to see if they are maintained through end of week to be sure.

So to summarize - today it appears that lower equity prices are probable, US bonds are starting to look ill, gold is fading, commodities have yet to reverse, and silver and the miners will do well to avoid plunging through their previous lows.  Cash.  Cash is a position too!

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8 Comments

Jim H's picture
Jim H
Status: Diamond Member (Offline)
Joined: Jun 8 2009
Posts: 2391
Options expiry and PM paper pricing

Jesse reminds us that the paper markets are still in charge of PM pricing, and that this time of month is especially ripe for games... so if you can't understand why metals are being hit.. maybe you can after reading this (written yesterday);

http://jessescrossroadscafe.blogspot.com/2015/08/gold-daily-and-silver-w...

There will be an option expiration tomorrow for precious metals on the Comex.

Gold and silver were hit in the classic contract dump early on in the New York Trade.

Surprisingly the US dollar also fell.   Stocks tried to stage a rally but faded badly and fell into the close.

I wanted to take a moment to give the reader a little better view of the paper precious metals landscape into year end.

In the fourth chart below you can see the Comex gold contracts listed, with their volumes.  As you can see the most active contract remaining is December.  It will be the next active month.   There is some minor activity in October because of the options activity.

The fifth chart shows the silver contracts.  There the most active contracts are September and December.

So, if tomorrow is the option expiration for the September contracts, we would expect to see the action become more pivotal for silver, since silver is going to be an active month for that contract.

Gold, not so much as the active month fades.  But that does not mean that gold will become quiet, except perhaps at The Bucket Shop.   There is clearly a huge market for gold, and the exchanges in the East will keep buying and delivering large amounts of bullion.

Lastly I show the small amount of 'delivery' at the Comex in gold yesterday in which Goldman was most notable taking 4400 ounces worth of contracts for their 'house account.'

Let's see what happens as we work our way through the option expiration tomorrow, and also see how the equity and bonds markets keep digesting this disruption in their long climb to bubbledom.

Honest markets are not a nicety; they are a necessity, a sine qua non for productivity and prosperity.

The appalling lack of reform in the Anglo-American markets is extracting a heavy price.   We may not see it, we may be distracted and befuddled as to the true nature of things.  We may be deluded, and blinded to the true nature of our involvement and actions with the global markets.

The rest of the world may not be so similarly inclined.  And therein we have the basis for the currency war.

And finally at the end there is a brief video from Jim Cramer about how one goes about manipulating markets like stocks and commodities.  You move prices up, and then you smack them lower to create negative sentiment.

You spread stories and biases with the media.   You abuse the market system under the noses of regulators with the acquiescence hopefully of your fellow professionals, wreaking carnage on honest people and the real economy.

Have a pleasant evening.

Go to the link if you want to see the referenced charts and tables....    Read this statement from above again, and then look at which metal is getting hit the hardest this morning;

So, if tomorrow is the option expiration for the September contracts, we would expect to see the action become more pivotal for silver, since silver is going to be an active month for that contract.

Arthur Robey's picture
Arthur Robey
Status: Diamond Member (Offline)
Joined: Feb 4 2010
Posts: 3936
Long term trend flattening?

I'll swear I can see the 200 MA flattening out.

Same on kitco. 

http://www.kitco.com/charts/techcharts_silver.html

Jim H's picture
Jim H
Status: Diamond Member (Offline)
Joined: Jun 8 2009
Posts: 2391
Paper vs PSLV divergence

This is as extreme a one day divergence as I have seen;

as of 12:09         Kitco Silver =  - 4.25%

                             SLV             =  -3.72%

                          PSLV             =  -3.03%

1.2 % delta between real Silver brokerage shares and the futures paper price... just today.  

Not enough sellers of the PSLV shares... not enough PSLV owners willing to, "panicked" out of their holdings.  There is no more clear indicator of the coming disconnect between the false paper moves vs. the supply:demand dynamics of real metal.  I agree with Chris that these distortions will probably not cease at this point until there is a complete break   

 

Jim H's picture
Jim H
Status: Diamond Member (Offline)
Joined: Jun 8 2009
Posts: 2391
Silver bank run is on...

Well, dealer run that is.  Texas Precious is out of almost ALL Silver products.. they only have high premium Perth Mint spiders and US Eagles left.  Zero bars of any type. Worst I have ever seen it. 

https://www.texmetals.com/products/silver-bars

But don't worry.. Dave says we will see it coming.  Here's what Kranzler wrote today;

http://investmentresearchdynamics.com/silver-shortage-update-another-del...

Then there’s silver.  By all apparent market indications, there is a serious shortage of silver that has developed, at least at the retail level.  Although charlatans from down under who avoided taking economics  in undergrad seem to think the 1000 oz Comex bar market is the bellweather, I would like to see a bona fide independent audit of the inventory reportedly being held in Comex vaults.  Note:  those reports are prepared by the banks – do you trust them?

Premiums on silver products in the U.S. have widened to levels not seen since 2008, when silver eagle premiums approached 100%.  Currently, my “bellweather” indicator is Apmex. The premiums on 500 oz monster boxes have widened today to $3.79 over spot.  This is the lowest premium product and it’s 27% over spot.  If you want to buy just one mint roll of 20, you will have to pay $5.75 over spot, or a 41% premium.

But it’s worse, certain products are not available.  We know 90% bags of coins are not available, although they can be had in onesies and twosies for about $7 over spot.  But a friend of mine ordered a 100 unit gold gram product from Apmex and was notified this morning that there is “a delay in processing” his order.  In the past he said shipment was immediate.  This particular product is minted by Valcombi and is a “tear away” sheet of 100, 1 gram units.  It’s perfect for preppers who seek fungability.  And now there’s a shortage of them…

Base on all the evidence from the physical market – and there’s a lot more evidence of shortages in silver – how do we explain the behavior of the price of gold and in the paper market?   Here’s two graphs of the trading in paper gold and silver – click to enlarge:

GOLD:                                                                                         SILVER:

UntitledUntitled1

 

Even Kranzler wants to nip at DaveBron's ankles.. man, Dave can't get a break here. 

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5685
ankle nipping

Even Kranzler wants to nip at DaveBron's ankles.

Eh, I don't take it personally.

Wait - were you (and he) really suggesting that people choose to buy silver at $7 over spot when they could buy PSLV at 3% under spot?  Seems kinda stupid to me.

But who am I to judge?  He has a bunch of people that pay him money to hear what he has to say every week.

robie robinson's picture
robie robinson
Status: Diamond Member (Offline)
Joined: Aug 25 2009
Posts: 1220
gainesville coin

had 300 ounces of 1oz coins. all indications there was more.

worry about the mare and successful parturition.

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5685
silver at HAA

Here's my latest dump from HAA, with me using the current price for silver to calculate the premiums:

Silver.Bars.1000.Oz.NYC 14.65 3.56%
Silver.Bars.1000.Oz.SLC 14.65 3.56%
Silver.Bars.100.Oz.NYC 15.03 6.24%
Silver.Bars.100.Oz.SLC 15.03 6.24%
Silver.Bars.100.Oz.SIN 15.44 9.13%
Silver.Bars.100.Oz.SYD 15.49 9.49%
Silver.1.Oz.Philharmonic.NYC 16.82 18.87%
Silver.1.Oz.Philharmonic.SLC 16.82 18.87%
Silver.Eagle.500coin.NYC 17.87 26.26%
Silver.Eagle.500coin.SLC 17.87 26.26%
Silver.1.Oz.Eagle.NYC 18.00 27.21%
Silver.1.Oz.Eagle.SIN 18.00 27.21%
Silver.1.Oz.Eagle.SLC 18.00 27.21%
Silver.1.Oz.Eagle.SYD 18.05 27.56%

PSLV premium (EOD today): +1.04%

HAA still seems to be able to supply bars to customers for 3.56% over spot.  It doesn't seem like we have a big bar shortage just yet.  Little bars, on the other hand, look to be in very tight supply.  I guess silver at $14/oz will do that.

KugsCheese's picture
KugsCheese
Status: Diamond Member (Offline)
Joined: Jan 2 2010
Posts: 1469
Wow, silver is telling a

Wow, silver is telling a story.  The coins must be in demand for hedging reasons unless there is a silver coin collecting fad going on!

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