PM Daily Market Commentary – 09/18/2020

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  • Sat, Sep 19, 2020 - 04:29pm

    #1

    davefairtex

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    PM Daily Market Commentary – 09/18/2020

On Friday, gold climbed +5.34 [+0.27%] to 1960.45 on moderately light volume, while silver fell -0.30 [-1.10%] to 27.00 on light volume. The buck was mostly unchanged [-0.02%], SPX fell [-1.12%], crude inched lower [-0.15%], and bonds were mostly unchanged [the 10-Year yield rose +1.0 bp].

For the week, gold climbed +9.06 [+0.46%] to 1960.45 on moderately light volume. The spinning top candle was a reasonably strong bearish reversal (42%), forecaster climbed. Gold is in an uptrend in the monthly timeframe.

Gold/euros climbed +3.76 [+0.23%] to 1653.15 on moderately light volume. The spinning top candle was a possible bearish reversal (35%), forecaster climbed, moving higher into its uptrend. Gold/euros is in a downtrend in both the daily and monthly timeframes.

COMEX GC open interest rose +3.0K contracts on Friday, and rose +10K contracts this week. That was 3 days of global annual production in new paper added to the market. Current open interest for GC: 54% of global annual production, up +0.94% this week. 193 GC contracts stood for delivery at COMEX this week.

Gold rallied going into the FOMC meeting, but then fell immediately afterwards. Was this about the Fed being out of ammo? Certainly Powell didn’t suggest anything new and inflationary. Gold did manage to end the week just above the 9 MA, but the candle print suggested lower prices ahead. Weekly forecaster has moved up into a state of no-trend, while daily is slightly bearish. Gold could go either way here, I think. The banksters seem to be adding to their short positions, but not in any large way.

Silver climbed +0.05 [+0.19%] to 27.00 on light volume. The doji candle was a bullish continuation, forecaster climbed, but remains in a downtrend. Silver is in an uptrend in the monthly timeframe.

COMEX SI open interest rose +570 contracts on Friday, and rose +3.0K contracts this week. That was 6 days of global annual production in new paper added to the market. Current open interest for SI: 94% of global annual production, up +1.72% this week. 937 SI contracts stood for delivery at COMEX this week.

Silver commercial net fell -6.9K contracts, which was +4.6K new shorts and -2.3K fewer longs. Silver managed money net rose +3.4K contracts, which was -145 fewer shorts, and +3.3K new longs.

The gold/silver ratio climbed +0.20 to 72.61.

There was a fair amount of shorting that happened this week. Weekly forecaster did recover, but it wasn’t enough to pull silver back into an uptrend, and the daily ended the week on a bit of a sour note – possibly because silver closed below the 9 MA. Silver feels a bit more bearish than gold.

GDX rose +0.49% on moderate volume, and GDXJ shot up +4.21% on moderate volume. XAU climbed +0.78%, the northern doji candle was a low-percentage bearish reversal (28%), forecaster climbed, moving higher into its uptrend. XAU is in an uptrend in the weekly and monthly timeframes.

The GDX:gold ratio climbed +0.02%, and the GDXJ:GDX ratio climbed +3.58%. Thats bullish.

Overall, the miners staged a mostly-failed rally this week, but they remain in a mild uptrend. Miners ended the week below the 9 MA, which is bearish, however the juniors did outperform the seniors, which is bullish. Net result: mixed signals for the miners. Call it mildly positive.

Platinum rose +1.58 [+0.17%], while palladium rose +47.21 [+1.98%]. Platinum staged a massive failed rally this week, ending the week below the 9 MA. Palladium looked a little bit better.

Copper climbed +0.07 [+2.31%] to 3.10 on moderately heavy volume. The confirmed bullish high wave candle was a possible bullish reversal (37%), forecaster dropped, but remains in an uptrend. Copper is in an uptrend in all three timeframes.

Copper broke out to a new multi-year high on Friday; in spite of all the big daily downspikes that periodically pull prices lower (and whipsaw my poor model), copper continues to move higher, and it remains in an uptrend.

I think part of the problem with the model is the recent move in lumber, which normally moves in sync with copper, but has now started to correct.

The buck dropped -0.39 [-0.42%] to 92.94 on moderately light volume. The short black/NR7 candle was unrated, forecaster dropped, moving deeper into its downtrend. The buck is in a downtrend in both the daily and weekly timeframes.

Major currency moves included: GBP [+1.14%], JPY [+1.62%], AUD [+0.35%].

The dollar rebound looks to be in trouble in the short and medium term; the monthly still looks mildly positive.

Crude screamed higher, up +3.55 [+9.44%] to 41.15 on moderate volume. The swing low2 candle was a likely bullish reversal (73%), forecaster climbed, rising into an uptrend. Crude is in an uptrend in the daily and weekly timeframes.

EIA report: crude -4.4m, gasoline -0.4m, distillates +3.5m. The mildly bullish report didn’t seem to move prices.

Crude rallied strongly 3 days out of 5 this week; the weekly print was strongly bullish, and forecaster really liked the move too. Crude ended the week back above both the 9 and 200 MA lines. The monthly still looks iffy, however; it is a bit of a warning sign.

SPX fell -21.50 [-0.64%] to 3319.47 on very heavy volume. The spinning top candle was a reasonably strong bearish reversal (42%), forecaster climbed, rising into an uptrend. SPX is in an uptrend in the weekly and monthly timeframes.

Communication services [-1.77%] led the market lower, along with discretionary [-1.52%], while energy [+2.95%] and industrials [+1.49%] did best. This was a mildly bearish sector map.

The VIX fell -1.04 to 25.83.

The Monday/Tuesday rally was wiped out by end of week – SPX made a new low, and closed below the 50 MA for the first time since April. On Friday, NYSE advance ratio was 34%, which was reasonably bearish – indicating that most stocks fell, not just a few big companies. The candle print was bearish, but forecaster actually thought this week was positive. Certainly the downside move doesn’t seem to be accelerating.

The 10-Year yield rose +3.0 bp to +0.70%. The short white/NR7 candle was unrated, forecaster dropped, but remains in an uptrend. The 10-Year yield is in an uptrend in the weekly and monthly timeframes.

Bonds are still going mostly nowhere.

JNK dropped -0.20%. The short black candle was a bullish continuation, forecaster climbed, moving higher into its uptrend. JNK is in an uptrend in the weekly timeframe.

Crappy debt didn’t look all that great, but it outperformed equities. I keep thinking that’s about the crude rally, which might rescue some of the shale drillers from their plight. At least some of them anyway.

Physical Supply

The GLD ETF tonnage on hand dropped -1.02 tons, with 1247 tons remaining in inventory.

ETF Discount to NAV:
* CEF -2.09%
* PHYS -0.28%
* PSLV -1.99%
Gold dealer big bar premiums:
* gold [1kg]: +1.31%
* silver [100 oz]: +6.66%

Physical ETF discounts are moderate, physical gold premiums remain relatively unchanged, while physical silver premiums seem to be steadily shrinking. Remember back when they were 11% for weeks on end? Not anymore.

Economic Reports

Fed Balance Sheet: 7064.5B, +53.9B, Liquidity Swaps: 52.3B, -19.8B, Reverse Repos: 200.2B, -7.7B, Treasury Securities: 4407.0B, +13.4B, MBS: 2005.0B, +55.4B. Balance sheet is growing again.

Retail Sales: headline +0.11% m/m retail sales (ex-autos): +0.65% m/m. Retail sales are higher (+4%) post-pandemic than they were pre-pandemic. That’s a stimulus artifact.

Industrial Production: headline +0.36% m/m, manufacturing: +0.95% m/m. This was a tiny increase; industrial production has only recovered about half of the (17.7%) pandemic drop.

Summary

In the short term, gold, silver, and the miners all appear to be heading lower. I suspect this is fallout from the FOMC meeting, where nothing happened – at least nothing good for gold anyway. The Fed is out of ammo; we know this because Powell came out and explicitly denied this was the case. Twice. Any student of human nature knows that lies need constant support, while the truth needs no defense. The Fed itself sees government-measured inflation remaining below 2% for the next two years.

Will there be more stimulus to help feed gold and silver prices? The bipartisan “Problem Solvers Caucus” came up with a split-the-difference proposal, that (perhaps predictably) nobody liked. That’s probably a Sign of the Times. No compromise in sight.

https://www.forbes.com/sites/ryanderousseau/2020/09/18/the-five-most-surprising-facts-about-the-lack-of-a-compromised-stimulus-package/#474d5f247075

Risk assets were decidedly mixed this week. Equities tried to rally this week, but the rally failed, and SPX ended up making a new low and dropping below the 50 MA on Friday. However crude staged a strong rally, as did copper – with copper making a new multi-year high. Crappy debt just drifted lower – but it did not make a new lower low.

That said, if the September risk asset correction is going to become a meaningful move, it had better start moving a bit faster. The current glacial pace isn’t pleasing to anyone. Anyone with put options, that is.

Fun fact. Next Tuesday is “Tesla Battery Day.” Will it spur another massive rally? Or will it be a sell-the-news event? It could end up moving markets, at least to some degree.

Nationwide, COVID-19 hospitalizations have fallen to the June lows. CA hospitalizations have fallen back to April lows. The “second wave” is over. Someone might want to inform public health policy officials about this situation. Especially if you own a restaurant or a bar.

Underlining this, there was a recent kerfuffle where the city of Nashville was found to be concealing statistics about where infections were occurring. Bars and restaurants were closed, even though they were responsible for only 22 cases, while construction sites and nursing homes caused thousands of cases. This just has to be true nationwide also. And yet…how are those restaurants doing in New York City? Still closed, I believe.

The Kerfuffle:

https://www.msn.com/en-us/news/us/nashville-officials-withheld-covid-numbers-for-restaurants-and-bars-because-cases-were-so-low-emails-show/ar-BB199mbj

On June 30, contact tracing found that construction and nursing homes were the cause of most Nashville coronavirus cases with thousands traced back to those specific categories. Only 22 cases were traced back to bars and restaurants.

In the series of emails obtained by FOX 17 News, a discussion between the two offices about how to conceal the number associated with restaurants and bars from the public was shown.

“This isn’t going to be publicly released, right? Just info for Mayor’s Office?” wrote Leslie Waller from the health department.

Senior Advisor Benjamin Eagles responded: “Correct, not for public consumption.”

If restaurants are closed in your area – you might ask your local officials about the contact tracing statistics. The Party of Science should be happy to provide the data to you.

If you are a local restaurant or bar owner – my sincere condolences on the loss of your lifetime of work.

“In an election year…”

  • Sat, Sep 19, 2020 - 06:06pm

    #2
    jmone

    jmone

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    PM Daily Market Commentary – 09/18/2020

From the Oz Perspective, it was another week of Equities, PM and the AUD (-0.11%) just going sideways.

Volatility also seems to be lower in the last few weeks and it kind of reminds me of the period in mid June to July prior to the jump in Silver.  It looks like the markets just are treading water waiting to see which way to go.

– The ASX200 does appear to be slowing rolling lower towards the lower part of the trading range since early June.

– The Rise of the AUD has also taken a breather for the last few weeks but remains at the post crash highs.  Most forecasters seem to think it will still go higher (the ones that include Iron Ore in their models), yet others (more copper focused) seem to think this is now at fair value.

– Gold is really in a tight range for us and has been for weeks.  I still don’t trust that the air under Silver will not deflate.

It also looks like the supply constraints for PM at the Retail level in Oz is over.  There is plenty of choice now for formats, and sizes in both Gold and Silver products  (and margins fell).

– Silver 1oz Coin Premiums: 15.5% Retail / 15.4% Mint

– Silver 1KG Bar Premiums: 13.7% Retail / 15.4% Mint (oddly higher than retail!)

– Gold 1oz Coin Premiums: 4% Retail / 5.1% Mint (oddly higher than retail!)

– Gold 1KG Bar Premiums:  2% Retail / 0.6% Mint

  • Sat, Sep 19, 2020 - 08:02pm

    #3
    nhuvelle

    nhuvelle

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    PM Daily Market Commentary – 09/18/2020

What are the properties of gold that have made it a good money/store of value? How is Bitcoin not better than gold across all of those properties? Except established history of course, but that is easy to overcome when it is more durable, divisible, portable, recognizable, and most importantly SCARCE. Just something to think about. I believe all the goldbugs are going to be in for a rude awakening over the next 2-5 years as Bitcoin eats up Gold’s entire market cap.

  • Sat, Sep 19, 2020 - 08:22pm

    #4
    ao

    ao

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    chief advantage of gold over Bitcoin

Simplicity over complexity.

  • Sat, Sep 19, 2020 - 08:49pm

    #5
    nhuvelle

    nhuvelle

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    PM Daily Market Commentary – 09/18/2020

What is complex about bitcoin? That it is difficult to understand? I posit to you that the underlying system is not overly complex, although it is brilliant. There are layers of complexity being added on top but a normal investor doesn’t need to worry about any of that. The White Paper is only 8 pages long. I encourage you to read it.

Or you can read my favorite Bitcoin article: The Bullish Case for Bitcoin by Vijay Boyapati.

  • Sat, Sep 19, 2020 - 10:05pm

    #6
    Ihrtmetal

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    PM Daily Market Commentary – 09/18/2020

May I posit to you; that one’s reticence towards cryptocurrency speculation isn’t always in inverse proportion to their technical grasp on its mechanics?

  • Sat, Sep 19, 2020 - 11:49pm

    #7

    davefairtex

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    technical grasp – more chaos

I’d venture to say my technical grasp on the mechanics of bitcoin exceeds most people on the globe that own bitcoin.  I’ve written plenty of code to extract information from the blockchain, to optimize the mining algorithm of one particular bitcoin-clone.

Functionally, bitcoin is basically a public transaction log stored on a bunch of servers around the world.

Last I heard, they hadn’t fixed the issues with network partitioning.  Did they fix that yet?  Just curious.

I think ao is right about complexity.  Bitcoin requires everything to be working properly to in order to function.  Pull the plug on the internet – even pull the plug on international connectivity between nations – and – would you trust a transaction?  I sure wouldn’t.  Happy to provide chapter and verse if you would like.

Right when chaos gets most extreme, that’s when you want your go-to-hell currency to function.  And that’s when bitcoin will fail.  And it will fail in surprising ways.  Surprising to those of us that don’t really understand the architecture of the underlying system anyway.

Little gold bars – not much can go wrong with them.  They’ll do fine when the US internet gets disconnected from the rest of the world.

How could that happen?  A hot war with China.  Their hackers attack our infrastructure.  We pull the plug in response.  Internet fragments – resulting in bitcoin fragmenting.  Receive a coin in a fragment bitcoin network.  It appears to work.  When global connectivity is re-established, do you still have your coin?  Maybe you do, and maybe you don’t.  That’s one scenario among many.

Again.  If everything remains steady-state and largely well-connected, bitcoin is fine.

I prefer molecules to entries in a transaction log.  But that’s just me.  I’m planning for more chaos, probably, than you are.

[If you say: “a network partition would never happen”, I say: I didn’t think the US would cut off air travel to China.  And then to Europe.  But then it happened.  Just this year.  You Just Never Know.]

  • Sun, Sep 20, 2020 - 12:50am

    #8
    jmone

    jmone

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    PM Daily Market Commentary – 09/18/2020

Each to their own but I’m no fan of Bitcoin for a few reasons:

– Counterparty Risk:  65% of Hash Rate is controlled by China, opening up the potential to a 51% Attack by a State Based actor.  https://cbeci.org/mining_map

– Poor Efficiency as a Payment System:  Visa can process 700,000 transactions for the same cost as 1 BT.  https://digiconomist.net/bitcoin-energy-consumption/  The energy consumption for Bitcoin is staggering (on same link)

– Poor Transaction Time as a Payment System:  It takes between 10 min to 1 hour for a transaction to be confirmed.  https://www.exodus.io/blog/how-long-does-a-bitcoin-transaction-take/#:~:text=Before%20going%20into%20different%20scenarios,10%20minutes)%20for%20a%20transaction.

– High Transaction Costs as a Payment System:  It varies but it can be several US$ per transaction https://news.bitcoin.com/bitcoin-transaction-fees-soar-550-in-a-month-as-price-surges-bch-dash-cheapest-networks/#:~:text=The%20cost%20of%20sending%20a,from%20just%20%241%20to%20%246.47.

– Volatile and Speculative:  To the Mooooon!  US$203 Billion in current Market Cap and daily market trading is 12% of that.  https://coinmarketcap.com/currencies/bitcoin/

Overall, I think some players will continue to make and many will lose money…. but to me it is a speculative investment as I see little practical utility in Bitcoin as a payment system.  I’m happy to watch from the side-lines.

  • Sun, Sep 20, 2020 - 02:39am

    #9

    Oliveoilguy

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    Silver and Soil are the best bet for building wealth.

Although wealth can be measured in Bitcoin, Dollars, Silver and Gold, maybe soil is the ultimate store of wealth? Every load of mulch and compost added to the garden is like a deposit in the bank. Bitcoin and Dollars are the most dangerous currencies, because they can be stolen by one keystroke on a computer. Silver and Soil make sense in my simple mind.

  • Sun, Sep 20, 2020 - 06:51am

    #10

    JAG

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    BitBug Psychology

I actually sold 2/3rds of my bitcoin this week. I bought one bitcoin during the Spring crash at 5.5K so I will hold on to that one.

For me, the speculation in the de-fi market makes the tech stocks look lame. I used to make fun of the goldbugs for their baggage but the bitbugs have taken it to a whole new level.

I believe Bitcoin is going 10x or even 100x but I think it will take a lot longer than most bitbugs are expecting.

The problem with bitcoin is the psychology of the current trade. It’s all FOMO. You can’t FOMO-buy and be able to hold through the dips. If you buy high from fear then you will sell low from fear. You have to buy against the herd to be able to sell against the herd.

Maybe an opportunity to buy will happen again, but if not, no big deal. I’ll take my 39% profits now and wait.

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