PM End of Week Market Commentary - 12/11/2015

By davefairtex on Sat, Dec 12, 2015 - 4:59am

On Friday, gold was heading lower, until at about 9:40 eastern it suddenly spiked higher, causing it to regain all its lost territory and then some.  Silver was not so fortunate, making a new low of 13.75, rebounding somewhat but still closing solidly down.

On the week, gold fell -12.10 [-1.11%], silver plunged -0.65 [-4.50%], GDX dropped -3.03%, and GDXJ lost -2.68%.  Platinum fell -4.43%, while palladium lost -3.85%.  Gold was the strongest of the group, as it often is when prices fall, but everything in the complex moved lower together.

Not to spoil the punchline or anything, but this week's massive losses in oil [-11.91%] which broke below the lows set back in 2009, really took a toll on most everything, including both equities and PM.

Gold more or less tracked sideways this week, losing a bit of ground after the big rally last Friday, but the 9 EMA acted as support all week long, which is a good sign.  There does appear to be a fairly steady bid for gold at around 1070 at COMEX.  I especially liked seeing the strong rebound on Friday after an early-morning dip to 1061.

Silver looked very promising after last Friday's big move higher, but that didn't last long; Monday saw silver lose most of its gains, and then Tuesday silver lost the 9 EMA, and it never recovered.  Silver ended up making a new low on Friday of 13.75, invalidating the swing low from last week.  My sense is, silver was negatively affected by the relatively severe commodity price drop and specifically the massive drop in oil prices this week.


Miners managed to remain above the 9 EMA just like gold; while they were not particularly strong, they managed to resist the downward pull of the severe commodity drop.  For example, the XLE (energy ETF) dropped -6.55% on the week falling far below their 9 EMA, while the gold miners kept their drop to about half that, and they closed the week above 9 EMA.


The dollar fell -0.79 this week to 97.55, printing a lower low, which places the USD formally into a downtrend.  That spike lower last Thursday turned out to be just the start, rather than being simply a one-day affair.  The following rebound off the drop was feeble, and was sold hard within a few days.  It will be interesting to see how the buck reacts to whatever the Fed comes up with next Wednesday.  If the Fed is hawkish and hints at a series of rate increases, the buck might well rally right back up to 100.  However if the Fed is dovish and suggests this rate increase is one-and-done, we might even see more selling in USD.

Some commentators predict the End of Times from a rate rise (I think they have large bond portfolios), others say it shouldn't matter at all.  I'm not certain what the market has baked into the cake.  That's the real question - its never the specifics of the news that counts, it is how the market reacts to it that matters.  I'll be watching the buck on Wed at 14:00 Eastern.  It should be interesting.

Mechanically, I'm quite curious to see how the Fed will make the rate hike happen.   Will they sell a bunch of bonds and sop up some of those excess reserves?  Raise the amount they pay for excess reserves?  Some other way?

US Equities/SPX

SPX had a bad week, losing -79.32 [-3.79%] to close at 2012.37, dropping below the previous low of 2020.  This places SPX into a downtrend as well, having printed a clear lower high and lower low just on Friday.  SPX is now below all 3 moving averages and looking at the chart, there is a whole lot of "air" between where it is now, and the previous low down at 1871.  VIX went nuts, rising +9.58 to 24.39.

My sense is, the huge drop in oil prices (and the drop in junk debt) has rattled the equity market, which (as Chris points out) is still far above "where it should be" given current economic conditions.  Believe it or not, the US market actually outperformed all of the others this week.  Notice that all markets have dropped below all three moving averages, and all of them have also executed a death cross (50 below 200).

The failure of SPX to make new highs means that most likely, we eventually will re-test the lows at 1871.

Name Chart Chg (W) 52w ch EMA9 MA50 MA200 50/200 Last Crossing last
United States VTI -3.81% -0.63% falling rising falling rising ma50 on 2015-12-09 2015-12-11
Developed Asia VPL -4.01% -1.83% falling rising falling rising ma50 on 2015-12-08 2015-12-11
Eurozone EZU -4.28% -6.21% falling rising falling rising ema9 on 2015-12-08 2015-12-11
Europe IEV -4.42% -7.87% falling falling falling rising ema9 on 2015-12-07 2015-12-11
Latin America ILF -5.32% -29.76% falling falling falling rising ma50 on 2015-11-27 2015-12-11
Emerging Asia GMF -6.10% -11.24% falling rising falling rising ema9 on 2015-12-07 2015-12-11

Gold in Other Currencies

Gold was mixed this week, falling in USD, Euro, JPY, and XDR while rising in RUB, BRL, INR, and CNY.  That suggests that although the dollar fell this week, the emerging markets currencies dropped a lot more.


Rates & Commodities

Bonds (TLT) had an excellent week, rising +2.64%, with much of that move coming on Friday.  TLT looks to be breaking out on the daily chart, and further downside moves in equities will most likely propel it even higher.

Junk bonds had a terrible week - it is definitely worth a chart - dropping a massive -3.96% on high volume, plunging to new lows on a flurry of negative articles about junk debt.  One junk bond mutual fund closed down because of limited liquidity to fund client redemptions; investor money will be returned "real soon now" - once the market for the junk debt becomes more liquid, and good luck with that.  "Everybody knows" that CCC credit is a pretty good fortune-teller for the future of the equity market, and right now, that near term future isn't looking so great.  "Risk off" is an understatement.

The CRB (commodity index) sold off hard, dropping -4.58% and printing an ugly red candle that once again moved the CRB to new all time lows.  Blame China, blame deflation - it is a bit astonishing that the equity market has managed to stay aloft under these circumstances.

WTIC fell a massive -4.78 [-11.91%] closing the week at 35.36.  Once oil dropped through 40, price more or less collapsed, driving through the previous low (Aug 2015) of 37.75, and then the low from 2009 of 35 and change.  Not even a bullish Petroleum Status Report which showed an actual drop in oil inventories was enough to stem the selling.  I felt this was key: when something sells off on good news, the future direction is most probably downhill.

Physical Supply Indicators

* Shanghai premiums for the Au9999 contract were +3.72 vs COMEX, down -4.63 on the week.

* The GLD ETF tonnage on hand fell -4.17 tons, with 634.63 tons remaining

* Gold is in more serious backwardation at COMEX, with the spread in the first two contracts at -1.20.

* ETF Premium/Discount to NAV; gold closing of 1057.50 and silver 14.08.

 PHYS 8.83 -0.77% to NAV [down]
 PSLV 5.37 +0.23% to NAV [up]
 CEF 10.12 -11.16% to NAV [down]
 GTU 38.42 -2.02% to NAV [up]

ETF premiums were mixed.

* Bullion Vault gold (!/orderboard) shows no particular premiums for gold this weekend, but perhaps a 1% premium for silver.

* HAA big bar premiums are lower for gold [1.93% for 100 oz bars in NYC], higher for silver [4.11% for 1000 oz bars in NYC].  Silver Eagle premiums rose [24.10% in NYC].

Futures Positioning

Gold commercials added +5.1k shorts, and sold -5.9k longs - probably during that large spike up on Friday.  Managed Money added +2.5k longs.  There was not much change in the COT this week; it remains very bullish for gold.

Silver commercials sold -1k longs, and Managed Money sold -1.8k longs as well.  There was not much change for silver either; it remains relatively bullish for silver.

Moving Average Trends [9 EMA, 50 MA, 200 MA]

Gold and the miners are managing to stay barely above their 9 EMA lines; the others, not so much.

Name Chart Chg (W) 52w ch EMA9 MA50 MA200 50/200 Last Crossing last
Gold COMEX.Gold -0.70% -12.13% rising falling falling falling ema9 on 2015-12-04 2015-12-11
Junior Miners GDXJ -2.68% -19.73% rising rising falling rising ema9 on 2015-12-09 2015-12-11
Senior Miners GDX -3.03% -23.82% rising rising falling rising ma50 on 2015-12-07 2015-12-11
Platinum COMEX.Platinum -4.19% -32.08% falling falling falling rising ema9 on 2015-12-11 2015-12-11
Silver COMEX.Silver -4.45% -19.00% falling falling falling rising ema9 on 2015-12-08 2015-12-11
Silver Miners SIL -6.45% -30.54% falling falling falling rising ema9 on 2015-12-07 2015-12-11

Gold Manipulation Report

There were no meaningful 0.5% "after-hours" spikes in PM during the past week; gold did have one spike on Monday, but it ended up moving price only about $2.  Contrast this with the three spike seen mid-June that pushed prices down more than $40, and that's why I call the $2 move not meaningful.


While last week it appeared that gold and silver were ready to take off, this week that story was undermined by a dramatic drop in oil, which dragged down the entire commodity complex along with it.  Gold's swing low remains in play, but silver made a new low this week and so it needs another swing low for it to even think about a rebound.

The gold/silver ratio shot higher, up +2.65 to 77.30; that's clearly bearish.  GDX:$GOLD ratio dropped a bit, but remains bullish.  GDXJ:GDX rose slightly, but remains somewhat bearish.

COT report continues to signal a low for PM, favoring gold over silver.  While the commercials have no interest in seeing further price drops, I believe prices won't move higher until the negative tug from falling oil prices abates.

Gold and silver big-bar physical shortage indicators are looking tighter; in the west, ETF premiums were mixed, GLD tonnage dropped, and gold has moved more severely into backwardation at COMEX.  Big bar premiums for gold at HAA were down, silver's premiums rose, as did silver coin premiums.  In Shanghai, premiums fell to $4 vs COMEX.

Up until recently the rising dollar, the Fed rate rise, an overhang of commercial shorts, and expectations for the ECB print-fest were keeping gold prices down.  Now, its falling oil prices.  Still, without the commercials interested in pushing prices lower, gold is managing to stay afloat.  This coming week we have the long-awaited FOMC meeting where the big mystery isn't about a rate rise, but rather about how large it will be, and how many more will follow.  How that affects gold - I can't even pretend to know at this point, things are just that confused.  Perhaps it just boils down to this: a more hawkish Fed probably means more (near term) trouble for gold.

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HughK's picture
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The NASDAQ: Golden cross or fool's gold?

The NASDAQ did manage to beat its Nov. 3 high (2147) on Dec. 2 (2156) but neither of these succeeded in breaking the July 20 high of 5218.  While the NASDAQ did realize a golden cross on Tuesday of this week, with the 50 day moving average rising above the 200 day, it's probably just pyrite, as the close on Friday is pulling things down again.



Arthur Robey's picture
Arthur Robey
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That marked divergence in the

That marked divergence in the value of foreign currencies after 2014 has got me puzzled. 

What changed in 2014? I went through the news from that time. It was the Maidan, Egyptian revolution  and the beginnings of Syria's woes. 

I found SP's  controversial photo though. It looks as though it is authentic after all.

Residents wait to receive food aid distributed by the UNRWA in Syria
Updated 27 Feb 2014, 1:49pm
Residents in Syria wait to receive food aid distributed by the UN Relief and Works Agency (UNRWA) at the besieged al-Yarmouk camp, south of Damascus on January 31, 2014, in this handout picture made available to Reuters on February 26, 2014.

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Dave Fairtex,

I'm curious as to your background, and how you got to writing for Peak Prosperity. Your daily summaries are very much appreciated.

Luke Moffat's picture
Luke Moffat
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Weekend Viewing

I just stumbled across this and thought it worth sharing

Grant Williams on the current state of economic affairs including the link between economics and war. And a mention of Kondratiev Waves!

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I'm a software engineer (and political scientist) by training, got an early interest in markets when implementing trading room systems for Dow Jones Telerate.  Things kind of grew from there, in fits and starts, and here I am today, writing for PP and conducting research in applied machine learning at the same time.  Maybe at some point, those two interests will intersect, but they have only done so intermittently to date.



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Weekend Viewing
Luke Moffat wrote:

I just stumbled across this and thought it worth sharing

Grant Williams on the current state of economic affairs including the link between economics and war. And a mention of Kondratiev Waves!

I enjoyed that.  Grant is a really fantastic observer and communicator.

Coincidentally, I just interviewed him so keep an eye out for Grant on an upcoming podcast.

Arthur Robey's picture
Arthur Robey
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Grant Williams

Grant Williams composed a great presentation.  But what were his assumptions? 

Here are three that may deflect his prognosis. (To some degree )

  • Artificial intelligence,
  • a lowering of the population due not to war (which is surprisingly ineffective) but to catastrophically low fecundity
  •  and some exotic energy source that is overlooked due to a fundamental misunderstanding of the laws of physics. 

I found this on the issue of artificial intelligence.

Scientists teach computers how to learn like humans


Luke Moffat's picture
Luke Moffat
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Hi Arthur, On a

Hi Arthur,

On a point-by-point basis;

1) Artificial Intelligence - I suppose this depends on what people mean by it. Are we talking about intelligent tools in the service of Homo Sapiens or are we talking about a new master race whereby humans will serve thinking machines? Will thinking computers eventually demand rights? And on what basis? Do they recognise the 'self' in distinction from the perceivable environment and other beings within in?

As a starter for ten my own interest in Artificial Intelligence gets me to focus on how I think, why does my brain prefer the writings of Nietzsche over reality television? Why are people on this site able to grasp large streams of data which enable them to establish coherent narratives rather than submit to the garbage spewed by mass media? And what will our clever robots do? Will they follow our own epigenetic coding or will it be something different? How are they rewarded? By the release of serotonin like we humans or by a reward code passed as a stream of numbers?

I think all that stuff matters in any discussion about Artificial Intelligence. For what it's worth, I don't think we'll design machines that are able to pass sentient judgements on external variables - our society spends so much energy turning people into zombies that I can't see the rational in creating a superior consciousness. But of course I have no way of knowing

2) Fecundity - I remember the limits to growth curves showing a rise in births rates. What causes the fall in population is the explosion of death rates. My general feeling is that high birth rate countries will continue to export their excess population to other regions of the world as has historically been the case (usually to the detriment of the indigenous population).

3) I assume you're referring to Cold Fusion? Guilty. I don't yet know enough about that to comment on its viability - it'll have to be this week's homework :) My gut feeling is that we're a petroleum society - every aspect of our civilisation is made to cater for its products; from agriculture, to transport, to fabrication. Overhauling that system is a monstrous amount of work

All the best,


Arthur Robey's picture
Arthur Robey
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Thanks for your reply. 

I first state that I am emerging from the Materialist philosophy  that has dominated Western thought since the Enlightenment.  Therefore what follows should be held in that light. 

Sir Roger Penrose put forward the idea that thought derives not from the brain. But that carbon nanotubes that are observed to exist in the dendrites of the neurons of the brain are tuned to resonate with the quantum field.  I hear that a Dutch mathematician begs to differ. My money is on Sir Roger. He is a formidable mathematician.

And  we have Rupert Sheldake who argues lucidity that form follows field. (That word again).  With the emergence of Quantum computing and it's probabilistic results and wholistic grasp of the nature of it's information processing (superposition) I expect that that they will be sentient

Thought Bubble: Would the powerful mechanism of Evolution bypass Quantum physics? If so,  why? 

Hawkins believes that artificial intelligence to be mankind's greatest threat. I'm of the opinion that if we have a tool we will use it.  That is our nature. 

Contrary to popular belief we are very poor breeders.  We have to cover our females many times before they fall pregnant. That this onerous duty exists supports the Ape/hypothesis. We are hybrids.  Any small thing can upset our fecundity. And we are flooding our environment  with hormones. 

You are guilty of nothing. My interpretation of the lack of interest by the controlled MSM is that they have something far better. But that they will release it when the population is much smaller.

My apologies to Dave. This seems to have nothing to do with Gold. But context is everything. Money and gold included. 

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