PM Daily Market Commentary - 11/5/2015

davefairtex
By davefairtex on Fri, Nov 6, 2015 - 3:14am

Gold fell -4.00 to 1103.00 on heavy volume, while silver dropped -0.12 to 14.94 on moderate volume.  PM more or less edged lower throughout the trading day, with both metals making new lows for this cycle.

Seventh straight down day for gold.  At least downside velocity is slowing.  1097 support is critical; a break below that ends the uptrend.  Nonfarm Payrolls tomorrow at 08:30 Eastern will most likely decide gold's near-term fate.  My computer is suggesting gold might be approaching a low, but it is still short gold.

Same direction for silver, but the selling isn't nearly as heavy.  Silver remains above its uptrend line, and the downside velocity of its move lower is definitely not as strong.  I think silver has a reasonable chance of finding support at its uptrend line.  My computer is - surprisingly - long silver.

Miners finally were pushed through support, with GDX losing -3.69% on heavy volume, while GDXJ dropped -2.04% on moderately light volume.  The GDX chart is starting to look a bit more ugly, as once it lost the 50, there is no support visible until about 13.20.  Newmont Mining, one of the larger miners and a reasonably low cost producer, was absolutely crushed today, dropping -7.94% on heavy volume.  I'm still trying to figure out why.  That sort of move is usually about earnings - but NEM reported solid earnings this week, substantially beating expectations.  NEM is 7.5% of GDX.

The buck tried to rally today but largely failed, printing a doji candle on the day, which sometimes mark tops of rallies.  USD rose +0.02 to 98.05.  If we get a weak report tomorrow for payrolls, this might well be the top in the buck for a while.  If the payrolls are strong, the buck could keep going higher.  The chart for the buck is still quite bullish; the dollar is overbought, but it remains above its 9 EMA.

SPX sold off a bit today but found support on its 9 EMA; at the close SPX was off just -2.38 to 2099.93.  By some standards, SPX printed a swing high on the day - but not a "closing swing high" (meaning today's low was lower than the highest candle's low, but today's close was not).  If that confused you, try this: there are technical hints of a top for SPX.   VIX fell -0.46 to 15.05.  My computer is now short the Nasdaq 100, but it remains long SPX.

JNK continued dropping today, down -0.25% closing below its 9 EMA for the first time in four weeks.   JNK is slowly moving lower, and I believe it is hinting at a return to risk-off in the near future.  Likely part of the problem is renewed weakness in crude oil.

Bond ETF TLT fell -0.26%, making a new low for this cycle.  Bonds are now in a downtrend, and they do not look like they will rally unless equities weaken significantly.

The CRB was hit again today, dropping -0.87% and heading towards the lower end of its recent trading range.

WTIC also fell, dropping -1.19 [-2.55%] to 45.39, moving below the 9 EMA and the 50 MA.   Crude is back to the middle part of its own trading range.  My computer remains short oil.

A low for gold could be near - at this point, it is quite oversold and ready for a bounce.  If we see a weak Nonfarm Payrolls report, gold will almost certainly reverse, as will the dollar.  A strong payrolls report will probably see gold violate its 1097 support level and perhaps even re-test the lows at 1075.

Did I mention that Nonfarm Payrolls is often a market-moving event?  Its especially true when the Fed uses payrolls data as one of the two inputs into its rate rise decision-making process.

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11 Comments

davefairtex's picture
davefairtex
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very strong NFP report: +271k

Gold off -18 to 1087, silver -0.25 to 14.75, buck up more than 1 point to 99.30, a new cycle high, last reached back in April 2015.

Average hourly earnings up +0.4%, a big move.  Looks like a strong report, Fed might actually raise rates if this continues.

Huge move up in the buck is hard on PM at this point.  If the move in the buck holds into the close, gold most likely closes right around where is is...well below 1100.  There is a chance gold could drop below the previous low of 1075.

I'd also be concerned about the follow-through next week also.

KugsCheese's picture
KugsCheese
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Re: Very Strong NFP Report: +271k

Company Birth/Death Model comes to the rescue!  I will wait for more analysis later today on this B.S. report.

Jim H's picture
Jim H
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This is the outcome Kranzler and friends anticipated....

From yesterday,

http://investmentresearchdynamics.com/extreme-and-blatant-gold-futures-m...

....This brings me back to my explanation for the extreme and blatant stock/gold market manipulation this week.  A friend and colleague of mine from NYC does great work on how the BLS uses its fraudulent “birth/death” model to manipulate the non-farm payroll report every month.  The employment report for October comes out Friday this week.  Historically the BLS inserts a big bump up in the birth/death jobs additions in October.  My colleague believes that the number reported will be manipulated higher than the 177k estimate in order to support Janet “Tourettes Syndrome” Yellen’s rate-hike in December fairytale:

BD model adds 145,000 jobs. NFP for October comes in at 190,000. Mark Zandi gets quoted in every wire service saying it’s a clear indicator of the underlying strength and improvement in the economy All jump even harder on the consensus December Fed rate hike band wagon Stock market rips lower and Gold gets hammered to under $1100 Stock market rips at 3:30pm into the Friday close as they force massive short covering into green and Gold goes unchanged on the day. A bullish comment from Jim Bullard is optional…

This view is well-crafted and will likely be right.  However, with each passing non-Government economic report which shows jobs being cut, especially in the manufacturing, energy and financial sectors, the big job additions reported by the BLS take the Government numbers deeper into the credibility hole.   The extreme manipulation and intervention in the U.S. stock/gold market reflects the extreme degree of desperation which the Fed/Treasury/banks are exerting in order to prevent the markets from revealing the truth about the degree to which the U.S. political/financial/economic system has been completely engulfed in fraud and corruption.

 

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Time2help
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Re: Extreme Manipulation
Jim H wrote:

http://investmentresearchdynamics.com/extreme-and-blatant-gold-futures-m...

...The extreme manipulation and intervention in the U.S. stock/gold market reflects the extreme degree of desperation which the Fed/Treasury/banks are exerting in order to prevent the markets from revealing the truth about the degree to which the U.S. political/financial/economic system has been completely engulfed in fraud and corruption.

Bullish?

davefairtex's picture
davefairtex
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AHE, cherry-picking predictions

Avg hourly earnings is up 0.4%.  That's a big deal, almost 5% per year annualized.  It has nothing to do with births or deaths.

And if you all want to engage in prediction, its probably best to take your position in a post PRIOR to the event to obtain the credit for it.  The after-the-fact stuff saying how brilliant your particular guru is - well that's  just lame.  An actual scientific approach would be to trot each of that guru's predictions out PRIOR to the event each time they make one, so we can see just how solid they really are.

Otherwise - it will look as though you only trot Mr Guru out when the "prediction" comes true for his victory lap.

And I have to say - you are all ignoring the reaction of the buck.  Up +1.20 points in a day - that's a huge move.  You imagine its all manipulation focused on hammering gold when the buck pops that hard? Like it or not, buck is the dog, and gold is the tail.

Time2help's picture
Time2help
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A big fat joke

It's allllllll fake.

KugsCheese's picture
KugsCheese
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davefairtex wrote: Avg hourly
davefairtex wrote:

Avg hourly earnings is up 0.4%.  That's a big deal, almost 5% per year annualized.  It has nothing to do with births or deaths.

And if you all want to engage in prediction, its probably best to take your position in a post PRIOR to the event to obtain the credit for it.  The after-the-fact stuff saying how brilliant your particular guru is - well that's  just lame.  An actual scientific approach would be to trot each of that guru's predictions out PRIOR to the event each time they make one, so we can see just how solid they really are.

Otherwise - it will look as though you only trot Mr Guru out when the "prediction" comes true for his victory lap.

And I have to say - you are all ignoring the reaction of the buck.  Up +1.20 points in a day - that's a huge move.  You imagine its all manipulation focused on hammering gold when the buck pops that hard? Like it or not, buck is the dog, and gold is the tail.

Is there a median number instead of average hourly earnings?

davefairtex's picture
davefairtex
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AHE

Is there a median number instead of average hourly earnings?

Not that I know of.

It was time series "AHETPI" from FRED.  There are a bunch of other series like this; interesting ones include AHECONS (construction) and AHEMAN (manufacturing).

Over the past year, the increases in AHETPI have been around 2% annualized.  Last year this time it was $20.77.  If we annualize this month's increase of $0.09, that's a 5% annual rate, or a $1.08/hr increase instead of $0.41/hr.  If it continues, this hints of wage-push inflation.

Again, no births or deaths involved.

This is for "total production and non-supervisory employees in private industry."

KugsCheese's picture
KugsCheese
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NFP Report

From ZeroHedge a short while ago: As the chart below shows, in October the age group that accounted for virtually all total job gains was workers aged 55 and over. They added some 378K jobs in the past month, representing virtually the entire increase in payrolls. And more troubling: workers aged 25-54 actually declined by 35,000, with males in this age group tumbling by 119,000!

Ref: http://www.zerohedge.com/news/2015-11-06/most-surprising-thing-about-todays-jobs-report

 

Jim H's picture
Jim H
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Of this wage push inflation....

DaveF said,

this hints of wage-push inflation.

I will wait for others to dig in to the numbers to figure out what is really behind them... Here's what I do know;

1)  There continue to be more crappy jobs, less good jobs;

http://www.zerohedge.com/news/2015-11-06/who-hired-october-full-breakdow...

Below is the breakdown of select industries which, according to the BLS, were most active in October hiring. The breakdown:

  • Education and Health: +57K
  • Professional Services: +54K
  • Retail Trade: +44K
  • Leisure and Hospitality: +41K
  • Temp Help: +25K

And Manufacturing workers: +0

In short, one more month where the bulk of job additions went to the lowest paying jobs, including teachers, waiters, entry level professionals, retail trade, and temp workers, while the US industrial economy continues to stagnate.

And this from our friend CHS - my guess is that the increasing, "wage" numbers are being modulated by employer costs that do not end up in the workers pockets directly;

http://www.oftwominds.com/blognov15/crap-jobs11-15.html

3. The total compensation costs of employees is rising even if wages are flat. Employees (and the vast majority of pundits, most of whom have never hired a single employee with their own money) tend to overlook the overhead costs paid by employers: workers compensation insurance (soaring), healthcare insurance (soaring), disability insurance, unemployment insurance, 401K or pension contributions, etc.

Total compensation costs = wages + labor overhead. If labor overhead costs are climbing, the employer is paying more per employee even though the employees aren't getting a dime more in wages.

2)  I personally, and to my great displeasure, laid off two six figure engineers a week ago.  My org. lost five, the site I report to lost ~ 160.  This is US based high tech. manufacturing.  The crapification continues....     

davefairtex's picture
davefairtex
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Posts: 5693
detail & big picture

I think both the detail and the big picture numbers are interesting.  Thanks for helping to dig into the details.

Jim- Sorry you had to lay people off, that's absolutely no fun at all.  Worst thing about management.

The increase in average pay is still a big deal, I feel.  Either that's because existing low wage people are getting increases, or more expensive people are being hired.  I have no idea which one it is.  Will the Fed know the difference?  Will they care?  Will it affect their decision to raise rates?

Utilities were absolutely crushed today.  $UTIL, a very boring index, is down -4.02%.  TLT and IEF both gapped down too.

Market seems to be saying it believes a rate increase is now baked into the cake.  I'm not saying the market is the source of all wisdom, but that seems to be its collective read based on the latest NFP report.

We can all gnash our teeth and say what a pack of lies it all is (and that's a popular thing to do, certainly) but the pay increase number is one of the critical things I focus on.  And I think the Fed does too.

FWIW, the EMRATIO (Civilian Employed/Civilian Pop) actually ticked up this month.  Overall the series isn't doing very well, but this month it actually improved.  CIVPART (Civ Labor Force/Civilian Pop) did not.

Lots of people out there try to see the negative in everything they read - even when the news is positive.  I definitely was expecting a negative outcome overall from this NFP report, but I was wrong.  Still, I feel it is important to be honest when things don't turn out the way I expected them to.  I think its disingenuous to work overtime to make a positive report into something negative so that I can pretend I wasn't wrong.

And I think a fair number of commentators do that.

I don't feel this NFP report makes everything "all right with the world" - anything but - but I do think it will provide the Fed an excuse to raise rates next meeting.

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