PM End of Week Market Commentary - 6/17/2016

davefairtex
By davefairtex on Sat, Jun 18, 2016 - 9:51am

On Friday, gold rose +20.10 [+1.57%] to 1301.60 on moderately heavy volume, while silver rose +0.32 [+1.86%] to 17.44 on moderate volume.  Gold outperformed silver, erasing yesterday's losses and then some, finally closing above round number 1300 for the first time in more than a year.

On the week, gold climbed +25.30 [+1.98%], silver rose +0.19 [+1.10%], GDX fell -0.65%, and GDXJ was up +1.00%.  Platinum fell -2.31%, palladium dropped -1.75%, and copper rose +1.33%.  Gold is pretty clearly outperforming everything else - both on the charts and more rarely, even on a percentage-wise basis. 

For the first part of the week, gold moved slowly higher, then on Thursday gold had a $40 trading range, first rocketing all the way up to 1320, and then selling off hard back down to 1280.  Those who imagine this was some bullion bank conspiracy probably missed the other items that were moving similarly, such as the buck, oil, and copper.  It all seemed about a sudden switch to risk on based on the murder of a UK member of parliament.

Friday saw gold bounce back strongly as traders bought the dip; on the chart we see that gold managed to hold its 9 EMA, and the Friday rally resulted in a new closing high, which wiped out the losses from the big Thursday sell-off.  While volume on Thursday was massive, Friday's bullish candle print (a "bullish tasuki line" ) does look hopeful; say a 40% chance of the gold rally continuing higher from here and the accompanying volume on Friday's rally looked reasonable too.  Friday's close above Thursday's open was a good sign, as is the close above round number 1300.

Silver followed gold, except it was weaker.  Thursday's big rally didn't make a new high, and Friday's bounce back didn't close above Thursday's open price.  Still, the 9 EMA continues to provide support, and until silver breaks below the 9, it remains in an uptrend, even if it is behaving a bit weaker than the yellow metal right now.

Miners

Senior miners actually fell this week, but overall it looked more as though they chopped sideways with the 9 EMA acting as support.  Miners did print a new high on Thursday, but that was the big sell-off day for gold, so the new high did not last.  It feels like there is a fair amount of selling pressure right now; there have been a number of days where miners opened up, and then sold off all day long.  That behavior is evident in the four red candles over the past six trading days.

The USD

USD fell on the week, dropping -0.29 [-0.31%] to 94.34.  The nothing-burger FOMC meeting and the accompanying dovish press conference by Chair Yellen started the decline on Wednesday, with a brief spike higher on Thursday as the buck first rallied, and then fell because of large moves in the Euro over BRExit issues.  Right now, it feels as though the currency market is at least somewhat convinced that the UK will remain in the EU.  The momentum towards BRExit seems to have been clipped by the assassination of the UK member of parliament.

US Equities/SPX

US equities fell -24.85 [-1.19%] to 2071.22, dropping below its 50 MA this week but printing a bullish-looking spinning top on Thursday which has yet to be confirmed.  The correction, such as it is, is a slow moving affair.  VIX rose +2.38 to 19.41.

The sector map shows the sharp contrast between sectors - financials and homebuilders are below their 200 MA, while the high-yielding REIT and utility groups remain solidly green.  Miners, in spite of their recent struggles, remain up there with the high yielding equities.

Name Chart Chg (W) 52w ch EMA9 MA50 MA200 50/200 Last Crossing last
REIT RWR 0.60% 10.66% rising rising rising falling ema9 on 2016-06-15 2016-06-17
Telecom XTL 0.12% -3.33% rising rising rising rising ema9 on 2016-06-17 2016-06-17
Utilities XLU -0.04% 20.22% rising rising rising falling ema9 on 2016-06-16 2016-06-17
Gold Miners GDX -0.65% 36.18% rising rising rising rising ema9 on 2016-06-03 2016-06-17
Energy XLE -0.71% -12.70% falling rising rising rising ema9 on 2016-06-10 2016-06-17
Cons Discretionary XLY -0.71% 1.48% falling falling rising falling ema9 on 2016-06-10 2016-06-17
Homebuilders XHB -0.95% -8.67% falling falling falling rising ema9 on 2016-06-10 2016-06-17
Materials XLB -1.13% -5.07% falling rising rising rising ema9 on 2016-06-10 2016-06-17
Cons Staples XLP -1.22% 11.82% falling rising rising falling ema9 on 2016-06-17 2016-06-17
Industrials XLI -1.31% 1.19% falling rising rising falling ma50 on 2016-06-13 2016-06-17
Technology XLK -2.07% 1.83% falling falling rising falling ma50 on 2016-06-13 2016-06-17
Financials XLF -2.37% -8.63% falling rising rising rising ma200 on 2016-06-14 2016-06-17
Healthcare XLV -2.40% -6.47% falling rising rising falling ma50 on 2016-06-17 2016-06-17

Gold in Other Currencies

Gold staged another rally in most currencies this week - it was up in everything except the Yen, which rallied +2.67% vs the buck on the week.   Gold moved up +26.10 in XDR.  This is the third straight solid week for gold.

Rates & Commodities

Bonds (TLT) rose +0.83% on the week, making a new high but then topping out Thursday, and then printing a swing high on Friday.  TLT's reversal still leaves bonds above the 9 EMA, but the two-day swing high candle pattern has a 30-50% chance of marking the top for bonds.  This suggests risk on.

JNK fell -0.94% on the week, ending below its 9 EMA but managing to rally back above the 50.  It may have put in a low on Thursday, but junk still isn't looking all that enthusiastic.  Mild risk on.

The CRB fell -0.27%, dipping briefly below its 9 EMA only to rebound back above it, helped by oil's big rally on Friday.  CRB had a golden cross a few weeks back, and remains in a strong uptrend.

WTIC was virtually unchanged again this week, down -0.02 to 48.86.  Oil spent 4 of 5 days dropping, with a particularly bad day on Thursday.  However, Friday made up for all of it, with crude printing a "bullish belt hold" - one of the better single-candle patterns which provides a 44-57% chance of a low here.  With Friday's 5% gain, crude ended up bouncing neatly of the 50 MA and is now back above its 9 EMA.  As of Friday, this appears to be a brief correction within a larger uptrend for crude.

Physical Supply Indicators

* Gold is now trading at a discount of -3.83 vs COMEX.

* The GLD ETF tonnage on hand rose +13.96, with 907.88 tons in inventory.

* Gold is not in backwardation; the two front month contracts differ by +3.60.

* ETF Premium/Discount to NAV; gold closing of 1297.60 and silver 17.445.

 PHYS 10.84 +1.35% to NAV [down]
 PSLV 6.65 -0.12% to NAV
 CEF 13.65 -1.79% to NAV [up]

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

* HAA big bar premiums are lower for gold [% for 100 oz bars in NYC], slightly higher for silver 1000 oz bars  [3.03% for 1000 oz bars in NYC], and lower for silver eagles at +15.07%.

Futures Positioning

COT report covers trading up through Tuesday June 14th.

Gold commercials went very heavily short again, adding +55k short contracts during last week's big move higher.  Managed money in turn added +45k longs and covered -6.4k shorts; last week's big move was entirely about managed money adding more long exposure.  Values are back to extreme (bearish) levels once again for gold.

In silver, commercials are now back to going short on rallies once again, adding +10k shorts while managed money added +9k longs and covered -3.3k short.   My hopes that the commercials were actually covering during rallies did not pan out longer term.  Interestingly, silver has also started to under-perform gold again.

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

Platinum is still lagging, but the rest of PM is back in the green.  We're back to an uptrend, even though the miners appear to be having a rougher time at the moment.

Name Chart Chg (W) 52w ch EMA9 MA50 MA200 50/200 Last Crossing last
Gold GC.CW 1.99% 8.29% rising rising rising rising ma50 on 2016-06-08 2016-06-17
Silver SI.CW 1.15% 8.47% rising rising rising rising ma50 on 2016-06-08 2016-06-17
Junior Miners GDXJ 1.00% 56.83% rising rising rising rising ema9 on 2016-06-03 2016-06-17
Silver Miners SIL 0.55% 36.92% rising rising rising rising ema9 on 2016-06-03 2016-06-17
Senior Miners GDX -0.65% 36.18% rising rising rising rising ema9 on 2016-06-03 2016-06-17
Platinum PL.CW -2.24% -10.29% falling rising falling rising ema9 on 2016-06-10 2016-06-17

Gold Manipulation Report

There was one 9 cent after-hours spike up in silver this week on Wednesday - once again, in the direction of the trend.  For all that the commercials are going short, they do NOT appear to be trying to hammer the market down.  My guess is, that strategy doesn't work so well when the managed money gang is loading up long, the way they are now.

Summary

Trend reversals again this week; the dollar is heading down again, and oil is moving higher.  SPX is on the edge of reversing too, while gold is still going in the face of Thursday's massive red candle print.

The gold/silver ratio rose +0.65 to 74.29; silver is back to underperforming again.  GDX:$GOLD fell; miners are now starting to under perform gold even more strongly than silver.  And yet GDXJ:GDX rose, which is a risk-on sign for PM and the miners overall.

COT report for both gold and silver shows large builds in commercial short positions, which are now back to highly bearish levels.  So far, that hasn't seemed to matter.

Gold and silver big bar shortage indicators show no signs of shortage.

Even though the market had assumed the FOMC would do nothing, gold still looked fairly happy following FOMC, likely spurred higher by the increasing chances of a BRExit.  But now my question is, how much of a sympathy vote will Remain get for their assassinated member of parliament?  The dollar reversal suggests traders have unwound bullish dollar positions in response to the event.  The economist has it 40/39 Leave/Remain, with 16% undecided.

Vote on BRExit is June 23rd.  I have no idea how it might turn out at this point.  We really only have two more trading days left before the event.  Perhaps buy puts AND calls to cover both cases?

Current view from the computer:

  • Uptrend: crude, gold, silver, copper, treasuries, natgas
  • Downtrend: USD, miners, copper, SPX, NDX.

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1 Comment

Penny551's picture
Penny551
Status: Silver Member (Offline)
Joined: Nov 8 2012
Posts: 154
9-EMA

Dave,

Amazing how well that 9EMA seems to work for PM.  I've been adding it to all of my stockcharts and the software at www.ProTrader1.com .  (Sorry, shameless plug, but really is a powerful trading tool for determining trends :)

Thx again for putting the commentary together.

Steve

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