PM End of Week Market Commentary - 1/22/2016

davefairtex
By davefairtex on Sun, Jan 24, 2016 - 9:56am

On Friday, gold fell -3.20 to 1098.20 on moderately heavy volume, and silver dropped -0.07 to 14.02 on moderate volume also.  Silver had an impressive mid-morning upward spike briefly hitting 14.36, but lost those gains completely within 90 minutes.  A rising dollar and rising equity market also put pressure on gold and silver.

On the week, gold rose +9.60 [+0.88%], silver climbed +0.11 [+0.79%], GDX fell -0.42%, and GDXJ was hit for -1.39%, with GDX and GDXJ making new lows and then rebounding.  Platinum was up +0.12% and palladium rose +2.00%.  Miners managed to see some improvement; forced selling seems to have ended by the second half of the week.

This week gold climbed above its 9 EMA, and stayed there for three days running.  Gold is edging up to its previous high of 1113.10, and appears to be finding the most support on days when equities are weak.  This suggests the bid for gold continues to come from safe haven flows.  Currently gold appears to be forming a bullish ascending triangle pattern.

Silver once again tried moving above its 50 MA; it managed to succeed for one day, but then was knocked back below during the next two days.  The large failed rally on Friday says that the shorts remain in control, and this looks somewhat bearish to me.  Silver closed the week right at its 9 EMA.  Silver did not seem to benefit at all from the large rally in oil - the positive correlation between silver and oil seems to have broken down within the past week or so.

Miners

Monday and Tuesday saw continued heavy selling in the miners, with both GDX and GDXJ breaking support to new multi-year lows.  The miners bounced for the remainder of the week, but the rally ran into resistance at the 9 EMA.  The miner charts still look weak, although it does appear that the 6-day wave of forced selling may finally be at an end.  If GDX can close back above that 9 EMA that would be a positive sign.  The concern I see on the chart is that the 9 EMA is a good place for a renewed wave of selling to occur.

The USD

This week, the buck continued moving higher, up +0.57 to 99.58.  The buck resisted attempts to push it below its 9 EMA, and overcame a failed rally on Thursday, and continues to advance on the previous high of 100.60.  Draghi's threat Thursday to print more money and drop rates further into negative territory resulted in that failed rally - the market didn't initially seem to be impressed - so on Friday he talked some more and largely succeeded in jawboning the Euro lower.

US Equities/SPX

SPX fell again this week, dropping -137.04 [-6.70%] to 1906.90.  On Wednesday, equities sold off hard, pushing SPX to 1812.29, which is quite a ways below the previous low of 1867 set back in August.  The market managed to rally back strongly, and on Friday SPX continued the recovery printing a swing low and managing to close back above its 9 EMA for the first time in four weeks.

While this all looks like a pretty good setup for a near-term rally - the large hammer candle Wednesday followed by the move higher on Friday do look quite convincing - the larger picture clearly shows SPX in a downtrend, and so that new lower low is really the important news of the week.  The downtrend remains firmly intact, and I expect the sellers will appear once this rally starts to slow.  VIX fell -4.68 to 22.34 on the week.

The SPX swing low was driven largely by a large rally in oil; if that oil rally starts to run out of steam, I'd expect to see renewed selling in SPX.

Gold in Other Currencies

Gold rose in all currencies this week, doing especially well in BRL, Rubles, and Yen.  Yen has topped out fairly dramatically vs the buck, and we're seeing that play out in gold.

Rates & Commodities

Bonds (TLT) fell -0.33% on the week; TLT made a new high on Wednesday, printed a swing high Thursday and continued lower Friday.   All that said, TLT remains above its 9 EMA, which shows it is still in an uptrend.  If the equity market continues moving higher, bonds will likely continue selling off.

JNK closed up +0.70% this week, printing a swing low on Thursday and managing to close above its 9 EMA Friday.    The weekly chart shows a convincing hammer candle also.  The swing for JNK supports risk on for equities.

The CRB (commodity index) actually managed to recover this week, climbing +2.42% and printed a swing low, led by oil, just on Friday.  It also managed to move above its 9 EMA too.  This is good, but we have seen swing lows in the commodity index relatively often during its long downtrend, and so far none of them have led to a durable rebound.

WTIC finally managed to put in a low, rising +1.57 [+5.12%], printing a swing low on Friday, and managing to close convincingly above its 9 EMA.  While the low of 27.56 was made on Wednesday, the reversal itself came on Thursday following a bearish-looking Petroleum Status Report which showed an inventory build.  This normally would have led to even more selling, but the failure of the bears to push prices lower is (in my opinion) what caused the rally.  Once bad news stops driving prices lower, the shorts start to cover, and then its off to the races in the opposite direction.

Still, the fact that the rebound appeared to be mostly about short covering makes the durability of the oil rally a bit questionable.

Physical Supply Indicators

* Shanghai premiums for the Au9999 contract fell -6.84 to just +2.22 vs COMEX.

* The GLD ETF tonnage on hand rose +6.25 tons, with 664.17 tons remaining.

* Gold has moved back into backwardation, with the spread in the first two contracts now at -0.30.

* ETF Premium/Discount to NAV; gold closing of 1089.70 and silver 13.90.

 PHYS 8.99 -0.89% to NAV [down]
 PSLV 5.36 -0.75% to NAV [down]
 CEF 10.34 -10.62% to NAV [up]
 GTU 39.42 -1.24% to NAV

ETF premiums were mixed.

* Bullion Vault gold (https://www.bullionvault.com/gold_market.do#!/orderboard) shows no particular premiums for gold and a 1% premium for silver.

* HAA big bar premiums are higher for gold [2.27% for 100 oz bars in NYC], higher for silver [3.88% for 1000 oz bars in NYC].  Silver Eagle premiums fell [20.27% in NYC].

Futures Positioning

COT report covers trading up through January 19th.

During the coverage period, the gold commercials net position changed relatively little; commercials closed -5k shorts and sold -1.5k longs.  Managed Money was more or less unchanged on the week.

Silver saw the commercials increased +4.2k shorts, while managed money closed a large -9.1k shorts.

I'm starting to get the sense that since the commercials aren't making money on silver using the cycle, instead they use their power to slam the market up or down by relatively large amounts in order to stop out managed money in both directions.  The price of silver has been roughly unchanged for the past two months, and yet we see some very large daily moves that seem calculated just to run stops.  And indeed, overall position for managed money has dropped - both longs and shorts.  It sure should be illegal, but of course it isn't.

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

From a moving average perspective, gold remains the leader, with silver next, and the miners trailing behind.  This is a bearish configuration.  Bullish setup would have miners leading, silver coming next, with gold lagging behind.

Name Chart Chg (W) 52w ch EMA9 MA50 MA200 50/200 Last Crossing last
Silver COMEX.Silver 1.03% -23.51% rising falling falling rising ma50 on 2016-01-22 2016-01-22
Gold COMEX.Gold 0.51% -15.71% rising rising falling rising ema9 on 2016-01-15 2016-01-22
Platinum COMEX.Platinum 0.48% -35.38% falling falling falling falling ema9 on 2016-01-06 2016-01-22
Senior Miners GDX -0.46% -41.88% falling falling falling rising ema9 on 2016-01-11 2016-01-22
Junior Miners GDXJ -1.39% -39.11% falling falling falling falling ema9 on 2016-01-11 2016-01-22
Silver Miners SIL -1.78% -50.31% falling falling falling falling ema9 on 2016-01-08 2016-01-22

Gold Manipulation Report

There were no meaningful "after-hours" spikes this week in silver or gold.

Summary

Commodites, oil, and equities printed swing lows this week, and bonds printed a swing high.  Its all a pretty orderly transition back to "risk on."   In spite of this, PM did not do particularly well; gold's rise still looks like a safe haven move, and silver remains chopping sideways with occasional large spikes both up and down.

The gold/silver ratio was mostly unchanged, rising +0.07 to 78.33.  It remains bearish.  GDX:$GOLD fell again this week, but may have reversed its momentum.  The ratio avoided making a new low by a slim margin.  It looks bearish, but with the potential for improvement.  Another week like this and the ratio sets a new low.   GDXJ:GDX fell also, but also rebounded.  It too looks bearish.

COT remains bullish for gold, and somewhat bullish for silver.  My sense is, the spikes up and down in silver are calculated to hose managed money, running stops in both directions while the price more or less chops sideways.  Seems like the answer could be to buy the dips and sell the rallies, at least short term anyways.

Gold and silver big-bar physical shortage indicators are somewhat lower; in the west, ETF premiums were mixed, GLD tonnage rose, and gold moved into backwardation at COMEX.  Big bar premiums for gold at HAA were mixed.  In Shanghai, premiums fell to $2 vs COMEX.  I put more weight on Shanghai than most of the other indicators.

Gold's near-term chart looks relatively positive; silver's near-term chart looks neutral/slightly negative, while the miner chart looks negative.  Still, hopefully mining shares have seen the end of their forced selling; three days of modest rally seems to suggest the big selling pressure is now past.  That doesn't mean an immediate rebound, but hopefully we won't be seeing another 22% drop in the near term, and that the GDX:$GOLD ratio can now start to recover.

Will PM start to benefit from the nascent rebound in commodity prices?  On the weekly chart, the correlation looks relatively strong, while the daily chart shows that gold is has been negatively correlated to commodities for the past few weeks.  I think if the bounce lasts long enough, PM will eventually benefit.  That is the question though - has oil put in a durable low, or is this just a dead cat bounce?  Odds are: dead cat bounce.  But with geopolitics involved, you just never know...

Note: If you're reading this and are not yet a member of Peak Prosperity's Gold & Silver Group, please consider joining it now. It's where our active community of precious metals enthusiasts have focused discussions on the developments most likely to impact gold & silver. Simply go here and click the "Join Today" button.

5 Comments

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5412
TCMDO: its just gone too!

Data Geek alert!

So I was wondering why my total credit market debt pages weren't updating - I hadn't seen any new values since Q1 2015.  Turns out, FRED got rid of TCMDO.  Instead, they've replaced it with two different series: ASTDSL (all sectors, total debt securities liabilities), and ASTLL (all sectors, total loan liabilities). 

So ASTDSL+ASTLL = TCMDO, more or less.  Well, turns out ASTDSL + ASTLL > TCMDO, so this does not end up being a trick to hide liabilities.  It really is just an accounting change.

The ECB SDW has this particular structure; total bonds, and total loans.  Looks like the Fed was adjusting their data presentation to reflect how Europe was tracking debt.

And here we are...its an even bigger number than before.

robie robinson's picture
robie robinson
Status: Diamond Member (Offline)
Joined: Aug 25 2009
Posts: 1182
Testing a theory

If I mention. Silver is on a run, then not only will it fall but fall immediately upon my notice!

robie robinson's picture
robie robinson
Status: Diamond Member (Offline)
Joined: Aug 25 2009
Posts: 1182
Testing a theory

If I mention. Silver is on a run, then not only will it fall but fall immediately upon my notice!

cmartenson's picture
cmartenson
Status: Diamond Member (Offline)
Joined: Jun 7 2007
Posts: 5727
Yep. Another discontinued series
davefairtex wrote:

Data Geek alert!

So I was wondering why my total credit market debt pages weren't updating - I hadn't seen any new values since Q1 2015.  Turns out, FRED got rid of TCMDO.  Instead, they've replaced it with two different series: ASTDSL (all sectors, total debt securities liabilities), and ASTLL (all sectors, total loan liabilities). 

So ASTDSL+ASTLL = TCMDO, more or less.  Well, turns out ASTDSL + ASTLL > TCMDO, so this does not end up being a trick to hide liabilities.  It really is just an accounting change.

Yeah, I noted that a while ago.  My last update for TCMDO was 1/1/15 so it's been a while.

Glad to know that you can still recreate it...

I'll pull the new series and update my charts...it will be interesting to see what the rate of growth is after the 2008/09 dip as compared to before.  By eyeball it looks to be compounding at ~6% while before it was ~8%.  

In the world according to Keen, that alone is enough to create all sorts of GDP troubles...

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5412
supporting your theory

robie-

I'm totally in agreement with your theory - but from my own angle.  I bought an SI future earlier, and I sold out near the high at 14.28.  In the past, silver would have been smacked down hard soon after the peak, but because I sold that peak, I'm expecting it to break through 14.50, just to confound me and my lack of intestinal fortitude.

If the market can find a way to hose me, it usually does.  :-)

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Login or Register to post comments