PM Daily Market Commentary – 08/04/2020

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  • Wed, Aug 05, 2020 - 03:37am

    #1

    davefairtex

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    PM Daily Market Commentary – 08/04/2020

Gold shot up +44.18 [+2.22%] to 2038.00 on moderate volume, and silver screamed higher, up +1.80 [+7.32%] to 26.40 on heavy volume. The buck fell [-0.14%], SPX moved higher [+0.36%], crude rallied [+1.74%], as did bonds [the 10-Year yield fell -4.0 bp] – a new all time low yield for the 10-year.

PM’s rally was driven, reportedly, by some happy noises out of the latest corona virus relief package negotiations. Who wants what? Mostly they agree, except that Team Blue wants a trillion ($1,000,000,000,000) “for the states” and $420 billion for education.

https://www.forbes.com/sites/mikepatton/2020/07/28/the-new-coronavirus-stimulus-bill-comparing-the-democrat-and-republican-plan/#2232528179e2

The happy noises:

https://abcnews.go.com/Politics/coronavirus-relief-negotiators-set-deadline-deal-weeks-end/story?id=72172525

“I would characterize the conversations as productive and a step in the right direction. Probably the most productive meeting we’ve had today,” said White House Chief of Staff Mark Meadows, who has joined Mnuchin for the week of bipartisan talks.

Gold chopped sideways until about 10 am, after which it rallied strongly through end of day, closing at the highs. The long white candle was a bullish continuation, forecaster climbed, moving higher into its uptrend. Gold is in an uptrend in all three timeframes.

Gold/euros rallied +33.22 [+1.96%] to 1729.76 on moderate volume. The long white candle was a bullish continuation, forecaster climbed, moving higher into its uptrend. Gold/euros is in an uptrend in the daily and weekly timeframes.

COMEX GC open interest rose +4.1K contracts. Current open interest for GC: 52% of global annual production, up +0.38% today.

There was only a little shorting today as gold broke out to new all time highs in both USD and Euro. Gold is back up to RSI-7=89.

3601 contracts stood for delivery today.

Silver moved alongside gold, only much more strongly in the initial phases; silver also closed at the highs. The long white candle was a bullish continuation, forecaster climbed, moving higher into its uptrend. Silver is in an uptrend in all three timeframes.

COMEX SI open interest rose +6.1K contracts. That was 12 days of global annual production in new paper added to the market. Current open interest for SI: 118% of global annual production, up +3.50% today.

The gold/silver ratio dropped -3.85 to 77.20.

It was another day of heavy shorting at COMEX for silver, which made a new multi-year closing high today. RSI-7=81 for silver. Anyone remember how people here used to say, “so Dave, when do we get to see those $1 days?”

Today. You get to see them today. $1.80, in fact. This was the 5th largest move in history, with the other 4 taking place in 2011. That should give you a sense of where we are.

The miners moved alongside the metals, moving up all day long. GDX rallied +4.56% on moderately heavy volume, and GDXJ jumped +4.92% on moderate volume. XAU moved up +4.29%, the confirmed bullish spinning top was a bullish reversal, and forecaster climbed, rising into an uptrend. XAU is in an uptrend in all three timeframes.

The GDX:gold ratio climbed +2.24%, and the GDXJ:GDX ratio climbed +0.34%.

While yesterday it looked as though the miners were going to start correcting, today we see a new 8-year closing high. They are still lagging, to be sure; my guess is that the owners of the mining shares have been so badly hosed over the past 7 years, they don’t really believe in this rally. “OMG I’m up 100%! Sell!!”

This has been the “correct” behavior for 7 years. I do not believe it is the correct behavior any longer.

RSI-7=69 for the mining shares.

Platinum rose +23.33 [+2.42%], and palladium rose +42.53 [+1.94%]. These were some fairly feeble moves from the other metals; they are lagging well behind gold and silver, especially when you look at the charts – platinum for example has yet to surpass the 2020 high. The gold/platinum ratio is still well above 2; it has never been this high prior to 2020.

Copper dropped -0.01 [-0.34%] to 2.90 on moderate volume. The long black candle was unrated, forecaster climbed, rising into an uptrend. Copper is in an uptrend in all three timeframes.

Copper fell today, but mostly recovered by end of day. Copper continues to look reasonably strong, hovering not far below the recent highs.

The buck fell -0.13 [-0.14%] to 93.38 on moderate volume. The long black candle was a probable bullish reversal (52%), forecaster climbed, moving higher into its uptrend. The buck is in a downtrend in both the weekly and monthly timeframes.

Major currency moves included: AUD [+0.52%].

It didn’t look like a reversal to me, but both the candle code and forecaster liked what happened today.

Crude rallied +0.71 [+1.74%] to 41.62 on heavy volume. The long white top candle was a bullish continuation, forecaster climbed, rising into an uptrend. Crude is in an uptrend in the daily and monthly timeframes.

Crude’s trends remain quite weak, in spite of the reversal; crude is now back above the 9 MA.

SPX moved up +11.90 [+0.36%] to 3306.51 on moderate volume. The short white candle was neutral, forecaster climbed, moving higher into its uptrend. SPX is in an uptrend in all three timeframes.

Energy [+2.38%] led, along with REITs [+1.46%], while sickcare [-0.44%] and financials [-0.42%] did worst. This was a bearish sector map.

The VIX dropped -0.52 to 23.76.

Another new 5-month high for SPX. NYSE advance ratio is looking a bit better today, but it still looks somewhat bearish.

TLT climbed +0.95%. The confirmed bullish NR7 was a bullish continuation, forecaster climbed, rising into an uptrend. TLT is in an uptrend in the daily and weekly timeframes. The 30-Year yield fell -3.0 bp to +1.20%.

TY climbed +0.27%. The long white candle was a bullish continuation, forecaster was unchanged and remains in an uptrend. TY is in an uptrend in the daily and weekly timeframes. The 10-Year yield fell -4.0 bp to +0.52%.

This marks a new all time yield low for the 10-year.

JNK rose +0.04%. The short white candle was a bearish continuation, forecaster fell, dropping into a downtrend. JNK is in an uptrend in the weekly timeframe.

Physical Supply

The GLD ETF tonnage on hand climbed +9.35 tons, with 1258 tons remaining in inventory.

ETF Discount to NAV:
* CEF -1.16%
* PHYS -1.52%
* PSLV -1.98%
Gold dealer big bar premiums:
* gold [1kg]: +1.04%
* silver [100 oz]: +8.49%

Premiums on physical bars have at last started to fall, with silver bar premiums now well below 10%. Physical ETFs have all moved into discount too.

Economic Reports

Yield Curve Inversion: the 1-10 spread fell -4 bp to +40 bp today. 1Y: 0.12% (+0 bp), 10Y: 0.52% (-4 bp).

Summary

It appears as though we are back to the 2010-2011 days in terms of price increases, and brevity of corrections. Silver is leading gold, with the miners stuck in the middle. Platinum…remains very cheap. Nobody cares about platinum. Seriously, if you missed the gold & silver train, the platinum train has yet to leave the station. Just saying.

Is the buck reversing? It looks as though it will be “a process”, meaning, probably not just yet. The Euro continues to look strong. I thought the Euro might correct a few days back, but – the Euro is charging higher once more. Apparently talk of another trillion (or three?) in money printing isn’t dollar positive. Go figure.

Risk assets appear to be mostly taking a break right now; crude is back in a gentle uptrend, copper is holding near the highs as is crappy debt, while SPX is making new highs, but slowly.

Bonds are at all time highs – all time low yields.

Here’s a chart of the unemployment rates of 7 different states; 3 run by Team Blue, and 4 run by Team Red. All have had (or are having) “a challenging time” with cases, yet the outcomes in some of the states (in terms of unemployment rate) is strikingly different. And in New York and New Jersey, there basically are no cases – herd immunity has been reached, most likely – and yet the “managers” of those states are just not interested in reopening.

Are the team in charge of the Blue States just stupid? Or is it something more? Rules for Rulers might give us a clue. Ruling is all about collecting the treasure, and handing it out to your key supporters.

It turns out, a pandemic lockdown actually allows certain Rulers to do exactly that. Assume the Key Supporters are Silicon Valley mega corporations [AMZN, AAPL, FB, GOOG, NFLX, TWTR]. Assume “the treasure” is real estate or customers controlled by local small business. If you shut down the local economy for long enough, small business will die en masse, and all that wealth will get transferred to the Key Supporters, as if by magic. And you as the Ruler can pretend it is all about “keeping your people safe from COVID-19.”

“Shelter in place! Again!!” [shut small biz]
“Close the schools!” [nobody can work – no childcare]
“Defund the police!” [maximize chaos]

What’s more, a lockdown has the helpful side effect of making everyone miserable. This typically disadvantages the incumbent during an election. “Are you better now, than you were 4 years ago?” Clearly not. I’m not working, I’m having to shelter in place, my kids can’t go to school, the thugs are ruling the streets. I’m blaming Bad Orange Man! I’ll take Basement Biden any day!

Of course this campaign of deliberate economic destruction causes a big hit to tax revenues for all those Blue State Rulers – clearly visible in the unemployment rate in the above chart. Enter Pelosi, and her demand for a $trillion for “the states” – to paper over all that self-inflicted damage. If she holds those $1200 stimulus checks hostage, just maybe she can get Team Red to write a even larger check (funded by us, naturally) to cover the cost of this destructive campaign! How cool would that be?

My favorite quote of 2020 applies: “everything that happens in an election year, regardless of how disconnected it might seem, is about the election.”

The total disfunction embedded in all of this: what we can expect during the Fourth Turning.

Got gold?

  • Wed, Aug 05, 2020 - 05:50am

    #2

    JAG

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    PM Daily Market Commentary – 08/04/2020

My favorite quote of 2020 applies: “everything that happens in an election year, regardless of how disconnected it might seem, is about the election.”

My favorite quote for 2020:

Everything we hear is an opinion, not a fact. Everything we see is a perspective, not the truth.

– Marcus Aurelius

 

 

  • Wed, Aug 05, 2020 - 05:58am

    #3
    Chris Martenson

    Chris Martenson

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    PM Daily Market Commentary – 08/04/2020

/long series of golf claps/

Here’s a chart of the unemployment rates of 7 different states; 3 run by Team Blue, and 4 run by Team Red. All have had (or are having) “a challenging time” with cases, yet the outcomes in some of the states (in terms of unemployment rate) is strikingly different. And in New York and New Jersey, there basically are no cases – herd immunity has been reached, most likely – and yet the “managers” of those states are just not interested in reopening.

Are the team in charge of the Blue States just stupid? Or is it something more? Rules for Rulers might give us a clue. Ruling is all about collecting the treasure, and handing it out to your key supporters.

It turns out, a pandemic lockdown actually allows certain Rulers to do exactly that. Assume the Key Supporters are Silicon Valley mega corporations [AMZN, AAPL, FB, GOOG, NFLX, TWTR]. Assume “the treasure” is real estate or customers controlled by local small business. If you shut down the local economy for long enough, small business will die en masse, and all that wealth will get transferred to the Key Supporters, as if by magic. And you as the Ruler can pretend it is all about “keeping your people safe from COVID-19.”

“Shelter in place! Again!!” [shut small biz]
“Close the schools!” [nobody can work – no childcare]
“Defund the police!” [maximize chaos]

What’s more, a lockdown has the helpful side effect of making everyone miserable. This typically disadvantages the incumbent during an election. “Are you better now, than you were 4 years ago?” Clearly not. I’m not working, I’m having to shelter in place, my kids can’t go to school, the thugs are ruling the streets. I’m blaming Bad Orange Man! I’ll take Basement Biden any day!

Of course this campaign of deliberate economic destruction causes a big hit to tax revenues for all those Blue State Rulers – clearly visible in the unemployment rate in the above chart. Enter Pelosi, and her demand for a $trillion for “the states” – to paper over all that self-inflicted damage. If she holds those $1200 stimulus checks hostage, just maybe she can get Team Red to write a even larger check (funded by us, naturally) to cover the cost of this destructive campaign! How cool would that be?

My favorite quote of 2020 applies: “everything that happens in an election year, regardless of how disconnected it might seem, is about the election.”

The total disfunction embedded in all of this: what we can expect during the Fourth Turning.

Got gold?

My favorite quote; “Never let a good crisis go to waste.”

I think of everything in terms of “ANDs” not “ORs”  I think SARS2 is an awful virus that is very real AND I think the usual bevy of terrible actors used it to cement their power, wealth and control.

It’s a both AND, not an either OR.

Both and.

Great observations on the state level unemployment Dave.  Makes sense.

  • Wed, Aug 05, 2020 - 07:34am

    #4

    Jim H

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    After all these years holding.. this is kinda disconcerting

It was always my expectation that the market, when it did change, would change hard and fast… but still, this is somehow surprising.

  • Wed, Aug 05, 2020 - 09:26am

    #5
    VegasJim

    VegasJim

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    PM Daily Market Commentary – 08/04/2020

Welcome to Dave’s Dollar Days………

The speed at which things happen these days is still amazing.

Ag at $26/$27…But can we hold it?  Next stop $28?

Hi-Ho Silver, away!

  • Wed, Aug 05, 2020 - 12:38pm

    #6

    davefairtex

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    look back at 2011

There were 4 days that were even more violent for silver back in 2011.

And we weren’t doing the kind of money printing then, that we were doing now.  There’s a few trillion MORE in printing in the offing.

And we didn’t have that kind of chaos either.  Obama was the President.  There was no “#NotMyPresident”, Forever Impeachment, NeverObamas, Chaz Autonomous Zones, etc.

I think Jim might speak for all goldbugs.  “This is kinda disconcerting.”  And that’s why the miners aren’t keeping up.

I calculated daily net change for silver, then sorted the list, then bolded the number of 2020 entries.

2011-09-27 1.560000
2009-03-19 1.590000
2011-08-25 1.590000
2011-04-21 1.600000
2012-02-28 1.600000
2010-11-04 1.610000
2011-05-18 1.610000
2020-07-22 1.630000
2011-10-06 1.660000
2012-01-03 1.660000
2011-08-03 1.670000
2011-07-05 1.710000
2013-09-19 1.730000
2011-08-19 1.750000
2020-07-27 1.780000
2020-08-04 1.800000
2011-10-27 1.810000
2011-05-09 1.830000
2011-11-22 1.850000
2011-07-13 2.520000

  • Wed, Aug 05, 2020 - 01:42pm

    #7

    Cold Rain

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    PM Daily Market Commentary – 08/04/2020

I know you guys have discussed this some,  but it is hard for me to understand why the miners aren’t moving.  I mean, the Robinhooders are all over bankruptcy plays and lift those turds hundreds of percent.  Yet silver explodes 7% a day and silver miners finish in the red.  Where are our Robinhood friends?!

  • Wed, Aug 05, 2020 - 02:02pm

    #8

    davefairtex

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    are they stupid – or is it something else?

JAG-

So starting again with my data:

We could assume that if it were just one or two states, this could just be an accident.  More perspective, this time from James Bond: “once is happenstance, twice is coincidence, and three times is Enemy Action.”  [Shades of: “fool me once, shame on you.  Fool me twice, shame on me.”]  The essential truth/common sense embedded in homily is why they remain in use.

And I’m going to post a link to Rules for Rulers once again.  This is more “perspective” which I have found to be have strong explanatory power.  Transcript, below:

Do you want to rule?
Do you see the problems in your country and know how to fix them?
If only you had the power to do so.
Well, you’ve come to the right place.
But, before we begin this lesson in political power, ask yourself:
“Why don’t rulers see as clearly as you?”
Instead, acting in such selfish, self-destructive, short-sighted ways.
Are they stupid, these most powerful people in the world?
Or is it something else?

https://www.youtube.com/watch?v=rStL7niR7gs

I pick: “something else.”

I strongly suspect that if it were Team Blue in power, “the party of science” would be saying the exact opposite thing than what they are saying right now.

Power is Everything.

Of course, if you have a different interpretation, I’m more than happy to listen to it.

Seriously though.  Re-watch Rules for Rulers.

  • Wed, Aug 05, 2020 - 02:34pm

    #9

    davefairtex

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    miners doing badly

CR-

My explanation is: selling pressure is coming from goldbugs who are more or less in shock as to how rapidly things have moved up, and are (perhaps) reliving 2016, semi-expecting the whole thing to vanish.

They do not want to look stupid once more, holding a bag full of semi-worthless miners “one more time.”  First in 2013 following the 2011 spike, and then once more, in 2016.

That is just my guess, having gone through both time periods myself.

Turns out, it is a really hard thing to just “sit”, but that’s how the big money gets made.  [c.f. Jesse Livermore]

Last reference: “phase transition” [c.f. Martin Armstrong]

  • Wed, Aug 05, 2020 - 03:10pm

    #10

    Cold Rain

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    PM Daily Market Commentary – 08/04/2020

Thanks, Dave.  It makes sense.

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