PM Daily Market Commentary – 07/28/2020

Login or register to post comments Last Post 0 reads   13 posts
Viewing 10 posts - 1 through 10 (of 13 total)
  • Wed, Jul 29, 2020 - 03:40am

    #1

    davefairtex

    Status Member (Offline)

    Joined: Sep 03 2008

    Posts: 2134

    count placeholder4+

    PM Daily Market Commentary – 07/28/2020

Gold moved up +8.20 [+0.42%] to 1971.96 on extremely heavy volume, while silver fell -0.23 [-0.92%] to 24.65 on extremely heavy volume. The buck climbed +0.03%, SPX fell -0.65%, crude fell too -1.32%, while bonds moved higher [the 10-Year yield fell -2.0 bp].

Gold had an extremely large ($75) trading range today; it rallied early in Asia, but was almost immediately pounded lower, dropping that $75 over a 4 hour period, but then gold rallied into the close, ending the day in the green. The long white candle was a reasonably strong bearish reversal (42%), forecaster dropped, but remains in an uptrend. Gold is in an uptrend in all three timeframes.

Gold/euros climbed +10.29 [+0.62%] to 1680.71 on extremely heavy volume. The high wave candle was a possible bearish reversal (34%), forecaster climbed, moving higher into its uptrend. Gold/euros is in an uptrend in the daily and weekly timeframes.

COMEX GC open interest fell -5.2K contracts. Current open interest for GC: 56% of global annual production, down -0.49% today.

What to make of today’s huge volatility, that ended up with little change in price? The candle print did look unpleasant, and RSI-7 is now 92. This could mark a top.

Oh, also that contract roll finally happened after market close today; front month is now GCZ20. You will see an approximate $20 jump in “COMEX gold prices” tomorrow as a result; my “calendar weighting” code applies this gap between GCQ20 and GCZ20 ($18.90) slowly over time, in order to provide a smoother price chart. The smooth price chart helps forecaster project actual price moves we can make money from, rather than contract rolls, which we cannot make money from. This is true for all the futures prices I use, not just gold.

Silver followed the same track as gold – strong rally (to 26.27!) in Asia, two spikes lower, almost $4 peak to trough – with the bounce back not quite strong enough to pull prices back into the green. The long legged doji candle was a possible bearish reversal (35%), forecaster dropped, but remains in an uptrend. Silver is in an uptrend in all three timeframes.

COMEX SI open interest fell -831 contracts. Current open interest for SI: 107% of global annual production, down -0.48% today.

The gold/silver ratio climbed +1.07 to 80.00. That’s bearish.

Today’s monstrously large trading range day resulted in a somewhat bearish candle print; RSI-7 is 84, which is definitely overbought. There wasn’t any shorting that went on – at least not any shorts that survived until end of day. Perhaps that’s why the rebound off the lows was so strong. It was a huge volume day.

Normally, I’d say a high volume doji at the top of a trading range would be bearish, but I also have the sense there were shenanigans today, so it is hard to separate the “market’s natural voice” from the noise injected by the manipulation.

Miners gapped down at the open, rallied strongly in the first hour of trading, then moved sideways for the remainder of the day. GDX fell -0.64% on moderately heavy volume, and GDXJ dropped -1.28% on moderate volume. XAU declined -0.59%, the long white candle was a bullish continuation, forecaster dropped, but remains in an uptrend. XAU is still in an uptrend in all three timeframes.

The GDX:gold ratio dropped -1.06%, and the GDXJ:GDX ratio dropped -0.65%. That’s bearish.

No bearish reversal for the mining shares, although the daily uptrend looks weak at this point.

Platinum rose +12.78 [+1.29%], while palladium fell -8.82 [-0.37%]. Platinum was also hammered along with gold in Asia, but it bounced back reasonably strongly by end of day.

Copper moved up +0.01 [+0.34%] to 2.91 on moderate volume. The northern doji candle was a possible bearish reversal (37%), forecaster climbed, but remains in a downtrend. Copper is in a downtrend in both the daily and weekly timeframes.

Copper really looks to be in a state of indecision; it could go either way here.

The buck moved up +0.03 [+0.03%] to 93.64 on heavy volume. The spinning top candle was unrated, forecaster climbed, but remains in a downtrend. The buck is in a downtrend in all three timeframes.

Major currency moves included: GBP [+0.57%], AUD [+0.37%].

The buck tried to rally today, but the rally failed. No bullish reversal for the buck – but at least, no new low. Downtrends remain quite strong.

Crude fell -0.55 [-1.32%] to 41.16 on moderately light volume. The bearish engulfing candle was a reasonably strong bearish reversal (43%), forecaster fell, dropping into a downtrend. Crude is now in a downtrend in all three timeframes.

Today’s modest drop was enough to drag crude below the 9 MA. Forecasters really aren’t so happy with crude right now, but at least so far, price has refused to tip over and sink. Maybe it will this time. Trends are bearish, but not all that strong.

SPX fell -20.97 [-0.65%] to 3218.44 on moderate volume. The closing black marubozu candle was a possible bearish reversal (37%), but forecaster climbed, rising into an uptrend. SPX is in an uptrend in all three timeframes.

Materials [-2.25%] led the market lower, along with energy [-1.73%], while REITs [+1.98%] and utilities [+1.49%] did best. This was a very bearish sector map. You never like to see those utilities in the top 2.

The VIX rose +0.70 to 25.44.

Interestingly, the NYSE advance ratio actually was bullish today; 60% of issues advanced, although the overall market declined. Perhaps that’s why forecaster was bullish too.

TLT climbed +0.69%. The long white candle was a bullish continuation, forecaster climbed, moving higher into its uptrend. TLT is in an uptrend in the daily and weekly timeframes. The 30-Year yield fell -1.0 bp to +1.24%. The 30-year just keeps moving slowly higher.

TY climbed +0.21%. The long white candle was a bearish continuation, forecaster climbed, but remains in a downtrend. TY is in a downtrend in both the daily and monthly timeframes. The 10-Year yield fell -2.0 bp to +0.60%.

No change in bonds; the 10-year just continues to trade in its usual range, pinned in place by the Fed.JNK dropped -0.31%. The short black candle was a bullish continuation, but forecaster fell, dropping into a downtrend. JNK is in an uptrend in the weekly timeframe.

JNK dropped -0.31%. The short black candle was a bullish continuation, but forecaster fell, dropping into a state of no-trend. JNK is in an uptrend in the weekly timeframe.

Physical Supply

The GLD ETF tonnage on hand climbed +8.47 tons, with 1243 tons remaining in inventory.

ETF Discount to NAV:
* CEF -2.07%
* PHYS -1.56%
* PSLV -2.14%
Gold dealer big bar premiums:
* gold [1kg]: +0.07%
* silver [100 oz]: +10.49%

While the physical ETFs remain strongly in discount, and kilo bar premiums have evaporated, silver bar premiums remain in place.

Economic Reports

Yield Curve Inversion: the 1-10 spread fell -2 bp to +46 bp today. 1Y: 0.14% (+0 bp), 10Y: 0.60% (-2 bp).

Summary

So what caused all the volatility today in gold and silver? I definitely saw signs that “someone” was deliberately pounding price lower for both metals. (Pound silver, and that helps gold to drop also, since the correlation between the two is so strong, and silver is the smaller market.)

Curiously though, by end of day, there was no net gain in shorts. In fact, there was a decline in open interest, for both gold and silver. It seemed that after pounding price lower, “they” covered all the new shorts they created, and – possibly – that’s why price rebounded so nicely. It seems as though whoever it was that pounded gold wanted to be flat by end of day.

Possibly related: GCQ20, today’s front-month contract, is now approaching its First Notice Day: arriving on Friday, 7/31. So what is First Notice Day? It is the date on which the owner of an expired futures contract can take physical delivery of the underlying commodity.

If a bankster remains short going into First Notice Day, this just increases delivery liability. Normally, that’s not a problem, but with the rash of people standing for physical delivery, it may now be more of an issue. Perhaps our bankster friends don’t want to lever up short ahead of a delivery date, which is why there was actually a drop in open interest by end of day.

Perhaps the bankster risk managers were telling the traders: “you can play all you want intraday, but don’t increase your net short position by end of day.”

We also have that FOMC statement coming out tomorrow at 2:30 EDT. Who knows what Powell will say. Being short ahead of that statement could be…problematic.

Is the dollar bottoming out? Not yet. Maybe the Fed will say something that causes it to reverse; certainly too the Euro may be running into resistance at 1.18.

Meanwhile, risk assets are starting to look a tiny bit more iffy right now; while copper is hanging in there, crude is drifting lower, as are equities, as is crappy debt. It is more of a trickle than a flood though; we will see how they react to the Fed’s meeting announcement tomorrow.

In Arizona, the leading indicator, deaths have finally started to drop – almost exactly two weeks after cases broke lower. We will see if this pattern holds for the other states also. Other states are seeing dropping cases, including even California, for the first time. Nationwide, cases are starting to drop, while deaths continue to move higher.

I noticed something interesting over in Europe. In Spain, and in many other “hard lockdown countries”, cases are starting to rise again, while in Sweden, cases continue to fall. This is some evidence that lockdowns don’t actually prevent infections – instead, they push off infections into the future, and prevent the formation of herd immunity, while imposing a huge economic and human toll on the country: suicide, drug overdoses, depression, dependency relapses, divorces, reduced health due to inactivity, etc. Most Red states are taking Sweden’s approach; some Blue states are not.

I think the US is on track for a Sweden experience. Hopefully by September – except perhaps in California, where they continue to be focused on pushing infections into the future.  Turns out if you scare people enough, they’ll even demand you do this to them.

Now we just need to hope that natural immunity lasts; that T-cells that stick around for years are the decisive item, vs antibodies that tend to fade over time.

  • Wed, Jul 29, 2020 - 05:33am

    #2

    JAG

    Status Gold Member (Offline)

    Joined: Oct 26 2008

    Posts: 485

    count placeholder

    Gold Miner Bull move over?

Df: What’s the latest from sentiment trader?  Any sense on the put call ratio?

Unfortunately, I took the month of July off from my subscription at sentimentrader. Nothing happens in the markets in July, right? LOL

I do have access to some free content there, however, and I don’t like what I see. The breadth on the gold miners (GDX) has been so good lately that it’s probably indicating a top is close or in already.

It looks like it might be a prudent time to sell most of my GDX, GDXJ, and SILJ call options.

That move was so strong that it’s hard for me to believe that it is over just like that. My lizard brain says stick around and see what happens but my cortex says take the profits and run.

What do you think DF?

 

  • Wed, Jul 29, 2020 - 05:59am

    #3

    JAG

    Status Gold Member (Offline)

    Joined: Oct 26 2008

    Posts: 485

    count placeholder

    Silver is a brain buster.

Yeah, unfortunately I found some more depressing data at sentimentrader.com

You’ve been warning about Gold’s RSI and here is some backtesting:

These silver numbers suck, except for 2010. This time period really does resemble 2010 to me. I’m so confused, lol.

Usually the morning for a FUD meeting is pretty calm so I may have some time to decide what to do.

If there ever was a FUD meeting that wasn’t going to signal a print fest to the market, it might be this one. They might not want to “appear” to be trying to influence the upcoming election and project neutrality.

The real question: Is the second round of stimulus checks already baked in to the price of gold?

Anyone have any thoughts?

  • Wed, Jul 29, 2020 - 06:51am

    #4

    davefairtex

    Status Member (Offline)

    Joined: Sep 03 2008

    Posts: 2134

    count placeholder1+

    gold today

First hour, always dangerous to make a move.  Often they are headfakes.

FOMC day, gold usually isn’t happy on days like this.

Until the press conference, of course.

And there’s that first notice day too.

I totally think we could correct.  But go review the chart in 2011.  That’s the only reason I hesitate to trade based on the RSI.

 

  • Wed, Jul 29, 2020 - 08:33am

    #5

    JAG

    Status Gold Member (Offline)

    Joined: Oct 26 2008

    Posts: 485

    count placeholder

    PM Daily Market Commentary – 07/28/2020

Warning: I’m about to write something really stupid….this time is different!

I think I will just hold my positions and hope the pain is temporary. The TA guy I follow said that silver would bang its head on resistance at $26 and pull back. It did just that. That was going to be my exit for half of my positions but it happened overnight.

Is there anyway you could produce a chart of the GDX in 2010 with RSI?

Thanks in advance.

  • Wed, Jul 29, 2020 - 08:50am

    #6
    Nate

    Nate

    Status Silver Member (Offline)

    Joined: May 05 2009

    Posts: 456

    count placeholder

    from yesterday

 

If gold outperforms silver, it’s a “safe haven” move and they tend not to last too long.

If silver outperforms gold, that’s an overall PM bull market, and those can last for quite a while.

Just one lens to view things.  If you are looking for an overall PM bull market, you want miners > silver > gold.

Dave, 2 really basic questions:

1) What inning is the PM bull market in?  Won’t hold you accountable for your best guess,  but I sense we are still early in this game.

2) For simple folks like me, buy and hold?  I’m not smart enough to catch the weekly or monthly moves.

 

 

  • Wed, Jul 29, 2020 - 09:10am

    #7

    JAG

    Status Gold Member (Offline)

    Joined: Oct 26 2008

    Posts: 485

    count placeholder1+

    Gold Market

I think this chart shows what you have been saying about investors taking physical delivery of gold being at a record high.

I don’t really understand all this, but it seems as though this bull run has not been about speculation in the futures market (lack of open interest) but more about a run on the physical metal. Is that correct?

If so, would that mean that the bullion banks will have to be covering their shorts soon? That should be very bullish for gold since they have a huge short position.

Does this jive with what you have been writing about? Sorry, but all the gold market nomenclature can be a bit confusing.

 

  • Wed, Jul 29, 2020 - 09:36am

    #8

    davefairtex

    Status Member (Offline)

    Joined: Sep 03 2008

    Posts: 2134

    count placeholder5+

    silver 2011

Here’s the silver 2010-2011 chart complete with RSI7.

RSI kinda bounced off 80 and 90 a number of times, but the uptrend lasted for 18 months.

I think we are, once again, approaching 25.  So you could bail out, and it might well reverse.  But there’s probably more upside.  And getting back in is pretty difficult, emotionally.  Picking an entry point in a bull market is…not easy…because your emotional set point is back at 17 or so.

Nate: I’m just guessing we are back in (maybe) Oct 2010 again.  We are now approaching 25.  You probably want to hold.  🙂

  • Wed, Jul 29, 2020 - 09:45am

    #9

    davefairtex

    Status Member (Offline)

    Joined: Sep 03 2008

    Posts: 2134

    count placeholder2+

    huge short position

Here’s the commercial short position.  Its a lot smaller than it was at the start of 2020.

If this all is driven by deliveries at COMEX, then we will see a brisk move lower in commercial shorts (and probably, open interest) during this delivery month.

Here’s open interest; how many contracts are outstanding.  1 long + 1 short = 1 OI.  If managed money runs out to buy a GC contract, the commercials can add an extra short, and price remains the same, or they can stand aside, and the managed money actor has to buy it from an existing holder, which pulls price higher.

Note how OI is elevated, but far below the highs in Jan 2020.  If there are a lot of deliveries, OI should drop.

  • Wed, Jul 29, 2020 - 11:41am

    #10

    JAG

    Status Gold Member (Offline)

    Joined: Oct 26 2008

    Posts: 485

    count placeholder1+

    PM Daily Market Commentary – 07/28/2020

Thank you Sir. Your explanation helped a lot.

I don’t know what Uncle Jerome said but the miners seem to be bouncing back.

Viewing 10 posts - 1 through 10 (of 13 total)

Login or Register to post comments