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PM Daily Market Commentary – 10/1/2015

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  • Fri, Oct 02, 2015 - 06:22am

    #1

    davefairtex

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    PM Daily Market Commentary – 10/1/2015

Gold fell -1.80 to 1112.70 on light volume, while silver rose +0.01 to 14.49 on moderately light volume.  Gold attempted a feeble rally going into the US market open which failed a few hours later; silver tried rallying at the same time too, and it too failed.

The dollar sank immediately after the Jobless Claims report at 08:30; this probably drove the mild rallies in gold and silver.  The dollar mostly recovered, however.

Really not much happened in gold today.  It avoided making a new low, but other than the brief rally between 08:30 and 10:30, not much happened.

Silver was a bit more volatile, but ended unchanged on the day.

It looks to me that the market is in a bit of a holding pattern in advance of the Nonfarm Payrolls report which is due out tomorrow at 08:30.

Mining shares ran into yet more trouble today; they rallied briefly at the open, but then sold off for the rest of the day.  GDX fell -2.40% on moderate volume, while GDXJ dropped -2.14% on light volume.  You can see in the chart that the miners have encountered selling each time they closed on the 50 MA over the last few months.  One of these days they will hold above the 50, but until then, its probably best to avoid them.

Miners are at a decision point.  They will either break above that 50 MA, or they will plunge below the 13 support level…and the odds favor a plunge.  Descending triangles usually end badly.

The USD fell -0.15 to 96.33, but it remains over its 50 MA and it still looks like it wants to rally.  Like the miners, the USD is at a decision point.  My guess is, it will make up its mind following Nonfarm Payrolls. 

SPX encountered some selling after the open today; there were a couple of bearish manufacturing reports released, along with a positive construction spending report.  By the afternoon the market shook it off and SPX rallied more or less into the close, causing SPX to close up +3.79 to 1923.82.  VIX fell -1.95 to 22.55.

JNK sold off today, losing all its gains from yesterday and a bit more, closing down -0.29%.  JNK is looking quite feeble right now; bad news ahead for the shale drillers, and many of those junk debtholders will end up with either big haircuts, or as reluctant equity holders in a dying shale drilling company.

Bond ETF TLT rose again today, climbing +0.43%, a good move considering that SPX moved higher too.  Bonds look to be lifting off, shaking off the weakness they have had for the past six weeks.  Perhaps crossing that 200 MA was the signal to buy.

The CRB (commodity index) tried rallying today but failed, dropping -0.65% and continuing their slow move downhill.

WTIC rallied strongly in the morning, and was up almost $2 at one point; the rally failed, and WTIC closed down -0.32 to 45.02.  While oil remains above its 50 MA, the failed rally looks unpleasant to my eye.  Volume on the day was quite high.

HAA has 100 oz gold bars right now in NYC at 1135.98/oz [+2.20% over spot], and 1000 oz silver bars in NYC at 15.03/oz [+3.74% over spot].   Eagles in NYC are quoted at 20.22 [+38.92% over spot].  Premiums on the big bars fell slightly, as did premiums on Silver Eagles.

Today the market felt like it was in a holding pattern waiting for the outcome of the Nonfarm Payrolls report due out tomorrow at 08:30.  This report, as I have said before, tends to really move the markets.  I suggest you ignore the fraudulent headline unemployment number – I do, and so does the Fed.  Instead, look under the covers; there are a large number of interesting data points such as changes in full time employment, part time employment, which sectors had gains and which had losses, and especially people working "part time for economic reasons."  When that goes up – or even flatten out – its not a good sign.  Relative to working age population, PTE for economic reasons has fallen steadily since 2010; it is absolutely not back to pre-2008 levels, but neither is it signaling problems ahead.  When it starts to plateau, that's a danger sign.  Sometimes this is a leading indicator, sometimes its a lagging indicator.

Employment is the key indicator for the health of the economy.  Increasing payrolls = money injected directly into the economy.  New workers are just as good as new debt creation or government spending at stimulating activity.  Payrolls isn't a leading indicator, its a coincident indicator.  Let me show you: chart below is the "change in payrolls month-to-month" vs SPX.  When it goes negative, that's a bad sign – money is being sucked out of the economy – and SPX generally falls.  But see how SPX reversed in May 2009 when the job losses started to decrease?  Last month payrolls grew by +217k.  If PAYEMS stays at +200k per month, I don't think SPX is going to collapse.  Payrolls is one of the inputs into my computer model – I actually use several of the more detailed timeseries rather than the main series itself, since they correlate better with SPX.

So that's why Nonfarm Payrolls is important.  Let's see what the BLS gives us tomorrow.  At some point, PAYEMS and/or its components will turn down – and that's when it will be time to look out below.

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  • Fri, Oct 02, 2015 - 01:42pm

    #2

    davefairtex

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    Nonfarm Payrolls: +142k

A very bearish nonfarm payrolls report caused the buck to drop a full point, and gold to rally from a low of 1103 to 1136.60.  SPX is off -28 points.  Bonds are up huge, TLT +1.66%.  Previous months were revised lower too, so the overall payroll picture has dimmed.  It will be interesting to see what my computer sees once it gets the new update after market close.

Earnings were unchanged, work week was unchanged, civilian participation actually shrank, and manufacturing payrolls shrank too – which bodes ill for industrial production.

The tea leaves say, "no rate hike", and if this is the start of a general payroll contraction – we could see significantly lower equity prices…

 

  • Fri, Oct 02, 2015 - 02:11pm

    #3

    Chris Martenson

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    The job cuts told the tale?

I guess I am not terribly surprised by the weakness, especially given the trend in job cuts as reported by Challenger-Gray

  • Fri, Oct 02, 2015 - 04:00pm

    #4

    Mark Cochrane

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    Macroeconomists – new age astrologers?

As near as I can tell, there is nothing to this 'art' of macroeconomics other than story telling, hindcasting, and self-fulfilling prophecies based on internal opinion polls. It seems akin, though less predictable, to guessing which way most of the fish will move after stones of random weights are dropped into a pond, as reported by a host of drunken fishermen observing wave heights and directions on the shore..

This is considered information:

2015 Fade

Traders see a 30 percent likelihood that the Fed raises rates by its December meeting, down from almost 60 percent a month ago, according to futures data compiled by Bloomberg. The probability for January is 37 percent, and 51 percent for March. The calculation is based on the assumption that the effective fed funds rate will average 0.375 percent after liftoff.

Who are the 'traders'? They (Bloomberg and all financial media) will report this same exact story every day from now until the next Fed meeting while only changing the numbers derived from the latest sample of traders' gut feelings. The world is run based on a betting pool made up of samples of people simply guessing what the Fed will do, while the Fed will apparently look at what the guessers are guessing to guide their decisions. How could that go wrong? There is no knowledge here, only sentiment. We've gone from betting on when QE might end (pause) to betting when 'tightening' might occur simply because gamblers need to gamble.

Similarly, every week I see a poll (a poll!) of what 120-odd economists think will be the GDP and inflation of Brazil for 2015 and 2016 (it could be any other country though). Every week it changes to being worse than the week before because these 'economists' all read the same headlines that are influenced by last week's guesses that they made. You don't actually need to know anything to do this, you just need to be in the club. When someone's unlikely guess actually turns out to be prescient then they will be trumpeted as a guru no matter how many times they were wrong before or after.

It gets worse though, since governments know which key numbers spark the interest of the macro-economists, they have an incentive to lie about them so as to shape the opinions of those whose opinions will shape the opinions of the masses who will bet their money accordingly. Of course the economists know that they are being lied to so they guess by how much….

I am appalled by this process more than I am repelled by the way that we fabricate money out of thin air through debt. The entire world economy is running based on nothing more than modern astrology. Though that is probably unfair to astrologers who actually make real observations of the stars. You can give the same information to a hundred economists and they will each tell you a different story about your financial life and future prospects. If you gave them the same 'data' a week later they'd probably give you different predictions. We haven't progressed as societies, we've simply renamed the court astrologers.

No wonder there is no tie in the modern economy between what we do and the underlying situation for energy, resources and the environment. Real data from real things would expose the system for what it is, namely self-delusional fraud.

Mark

  • Fri, Oct 02, 2015 - 04:21pm

    #5

    davefairtex

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    astrologers

Mark-

I'm with you.  No information there.  They just follow the recent trend.

When I studied economics as an undergrad, I was completely turned off.  I think some part of me knew that stuff was just made up crap.  Now that I have real data to work with, and I'm free to discover what things actually matter, I find it fascinating…too fascinating, truth be known…

I do pay more attention to the futures markets since there is money involved (and thus presumably more thought put into the price) – not as some oracle of truth, but as a measuring stick to tell me what the aggregate popular sentiment happens to be.

  • Fri, Oct 02, 2015 - 04:26pm

    #6

    Chris Martenson

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    Hey, look at those “”investors””

Hey, look at those ""investors"" just buying every moment of that weak open, I guess "bargains" and BTD and all that.

Alternatively, these are no long markets but are something different that has nothing to do with fundamentals any more and is just a momentum driven, guessing game.

They've got me trained…when I see the futures pop like this, I would never trade against whomever it is that buys like this…they have deep pockets and seemingly a very strong bias towards 'up.'

  • Fri, Oct 02, 2015 - 06:04pm

    #7

    davefairtex

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    suggestion

Chris-

They've got me trained…when I see the futures pop like this, I would never trade against whomever it is that buys like this…they have deep pockets and seemingly a very strong bias towards 'up.'

Why don't you?  Take the money you make from going with the flow, and .. I dunno, buy a new chicken coop or something.  🙂

Seriously.  Your trading log would be your proof that you were right about this.  There is nothing like putting up real money to separate the nice-sounding theories from reality.  Having myself just had a disagreeable experience trying to catch a falling knife, I know this all too well.  Thank God for stops.

 

  • Fri, Oct 02, 2015 - 06:07pm

    #8

    Mark Cochrane

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    Bad is bad…errr…no bad is good!

Bad jobs report and the markets tank

Markets fall on disappointing September US jobs figures

The US economy added just 142,000 jobs in September, lowering the chance of an interest rate rise this year.

The figure was far lower than the 205,000 increase forecast by economists.

The number of jobs created in July and August were revised down by a combined 59,000.

Wall Street opened sharply lower, with the Dow Jones and S&P 500 indexes both down about 1.3%.

No wonder with analyses like

Tom Porcelli, chief US economist at RBC Capital Markets, described Friday's non-farm payrolls report as "absolutely weak".

"Every aspect of the September jobs report was disappointing," said Michelle Girard, an economist at RBS Securities. She also believed that the Fed "will be forced to stay on hold over the remainder of the year".

All that and 350,000 people left the labor force.

So instead of going up by 205,000, 122,000 jobs didn't get created and 350,000 people quit looking. That is a net NEGATIVE 272,000 on an expectation of positive 205,000 (which should have drawn more people into the market – so worse yet). There is a description for economists being this sort wrong it is called being 'completely frickin clueless'.

But through the wonders of market levitation and Pavlovian traders who have been trained to see down as the new up and up as up too, we get the following headline on BBC right under the one above, within 2 hours.

Wall Street rebounds after jobs disappointment

Will wonders never cease? The markets are now up for the day! Absolute disaster of a jobs report that is down on every score and even requiring downward revision of the last two months reports to smear the bad news out a bit is actually a good thing on reflection. Party on.

  • Fri, Oct 02, 2015 - 08:27pm

    #9
    jbengfort

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    old floggings

this is a goldbug site to be sure, but since this (silver availability) discussion  was left on the road to see what prevails, I wonder if the chart commented on in this article bears some reflection?

 

INDIA vs COMEX: Physical Silver Demand Will Destroy Paper Rigged Markets

IMG Auteur
Published : October 02nd, 2015
1688 words – Reading time : 4 – 6 minutes
     ( 2 votes, 5/5 )  

Print article
 
 
     
 

If there’s one chart silver investors need to see, it’s the INDIA vs COMEX chart.  This chart puts into perspective just how little Registered silver remains at the Comex warehouses.  In addition, Comex Registered silver inventories continue to fall as two large transfers were reported over the past two days.

As reported by many precious metal websites, India continues to import record amounts of silver.  According to Koos Jansen’s article at Bullionstar.com, India Precious Metals Import Explosive – August Gold 126t, Silver 1,400t:

When the Indian government raised the import duty on gold in 2013, it simultaneously raised the import duty on silver to 10 %. However, the premium on silver didn’t reach 25 % like gold. Many people switched to purchase silver instead of gold. Import since 2013 has increased dramatically.

Last May India imported a record 1,542 tonnes of silver, in August an estimated 1,400 tonnes was shipped in, which would be the second highest number on record – my record goes back to 2008.

Koos states initial trade data shows that India has imported 1,400 metric tons (mt) of silver in August.  While this is lower than May’s 1,542 mt, it is the second highest on record.  Now, what Koos didn’t mention is that analysts forecasted Indian silver imports would decline in 2015 due to easing of some gold restrictions.  This was reported in the May ETF Securities Precious Metal Monthly Report:

With the election of Mr. Modi and some easing of the gold restrictions, silver use in India was generally expected to decline in 2015. But this has not been the case, as of the end of May. The latest data through April show India silver imports running about 30% above the 2014 record pace, on track for about 300 mn ounces of imports in 2015.

Now, data in that report is several months old.  In their recently released August Report, ETF Securities forecasts Indian silver imports to reach 340 million oz (Moz) or 10,500 mt.  Not only is that a lot of silver, it will consume 40% of global mine supply.  Why is this such a big deal?

India Overtakes The United States As World’s Largest Silver Importer

Well, if we look at CHART #44 from my THE SILVER CHART REPORT, we can see just how much India’s silver imports have exploded recently compared to previous years:

24hGold - INDIA vs COMEX: Phys...

This chart represents the two largest silver importers in the world.  As you can see, the United States consistently imported more silver than India.  Annual U.S. silver imports varied between 150-200 Moz, while India’s silver imports were more volatile.

During the 2008 financial crisis, India’s silver imports surged to 175 Moz compared to 80 Moz during the previous year.  After falling to a low of 41 Moz in 2009, India silver imports doubled to 83 Moz in 2010 and surged to 149 Moz as the silver price spiked to $50.

However, silver imports shrank considerably to 63 Moz in 2012 as Indian investors held back on purchases due to the lack of price direction in the silver market.  In addition, many Indian investors decided to take some profits and became net sellers of silver bullion in the market.

Well, this all turned on a dime in 2013 (during two major silver price take-downs) as Indian silver imports jumped to 197 Moz in 2013 and even higher in 2014 to 228 Moz.  If current silver import trends continue in both the U.S and India, this is will be the year-end result for 2015:

24hGold - INDIA vs COMEX: Phys...

The United States and India are on track to import a massive 533 Moz, 63% of the forecasted 850 Moz of global mine supply.  If India does import 320-340 Moz in 2015, its eight times more than their total imports in 2009 (41 Moz) and nearly five times what they imported in 2012 (68 Moz).

The reason U.S. silver imports have been the highest in the world and more consistent is due its large industrial demand base.  India’s silver imports are more volatile as silver bar investment demand is the leading factor–it rises and falls due to price and market sentiment.

INDIA vs COMEX Registered Silver Inventories

Okay, here is the chart I mentioned in the beginning of the article.  As stated above, India’s silver imports were 1,400 mt in August.  If we compare India’s silver imports for just one month, they surpassed the total remaining Registered silver inventories at the Comex:

India-Aug-Silver-Imports-vs-Registered-Silver-Inventories

If we go by the Comex Registered silver inventory update as of yesterday (Wednesday), it held 44.3 Moz in its warehouses… this translates to 1,385 mt.  Again, in just the month of August, India imported more silver (1,400 mt) than the total remaining Registered silver inventories (1,385 mt) at the Comex.

What is even more significant is the continued drain of Registered silver inventories at the Comex.  We must remember, only Registered silver inventories are available for delivery into the market.  Let’s take a look at the last two Comex silver warehouse inventory updates:

COMEX-SILVER-093015

24hGold - INDIA vs COMEX: Phys...

In the past two days, a net 2 Moz of silver were removed from total silver warehouse stocks at the Comex, while registered silver inventories declined to a low of 43.7 Moz for the year. 

Investors need to realize the continued drain of Registered silver inventories at the Comex is due to increased investment demand mainly from North America and India.  I am republishing this chart from a previous article because it shows just how fast silver is being withdrawn from the Registered silver inventories:

RATE-OF-CHANGE-Comex-Registered-Silver-Inventories

When the price of silver skyrocketed to $49 in 2011, Comex Registered inventories declined from 56 Moz in March 2010 to a low of 26.7 Moz in July 2011.  Thus, the average monthly decline of Registered silver inventories was 1.8 Moz.  Now, compare that to the present trend, but let’s update the data.

As we can see, the chart shows 50.4 Moz.  However, the Registered silver inventories are now at 43.7 Moz.  Which means, the present trend shows an average decline of 5.3 Moz a month.  This is nearly three times greater than the 2010-2011 trend.  This should wake up investors to the fact that… SOMETHING IS SERIOUSLY WRONG in the market.

Clowns & Mainstream Media Nitwits Continue To Put Out Rubbish On The Silver Market

A reader left this comment in my recent article:

”US Mint American Eagle silver coin sales in September fall 23% to 3.8 million oz”… posted 9/30/15 @ 10:09:26 FXWire Commodities

I did a Google search and found out it came from NetDania.com.  It was one of their FXWire Pro Commodity feeds.  I guess some poor uninformed slob behind a computer saw that Silver Eagle sales in September were only 3.8 Moz compared to 4.9 Moz in August.  So, in their feeble-minded way, they wanted to show that Silver Eagle sales had fallen even though there was all this hype of product shortages.

Unfortunately, the nitwit who put out that feed didn’t take the time to find out that the U.S. Mint lowered their weekly allocation of Silver Eagles to their Authorized Dealers to 750,000 for several weeks in the month.  It’s really hard for Silver Eagles sales in September to surpass August sales when the U.S. Mint puts a cap on output and deliveries.

Furthermore, several analysts continue to state that this is “Not a silver shortage… it’s a product shortage.”  While it’s true this is not a wholesale silver shortage, investors better not wait until it is.  I would imagine we will continue to see analysts say, “this is not a real silver shortage”, right up until the point the wholesale market freezes up and the mints are no longer able to acquire metal to make products.

When this occurs, analysts can slap themselves on the back bragging how they finally made the right call on the real wholesale silver shortage.  Unfortunately, this will also come at the time when more investors than ever want to buy silver.

There lies the rub.

At some point, the physical silver demand will totally overrun the highly leveraged paper (manipulated) markets.  I would imagine India could be one of the leading factors…. but so will North American investors as more and more new buyers come into the market taking an even larger piece of a shrinking silver pie.

 

  • Fri, Oct 02, 2015 - 09:04pm

    #10

    Michael_Rudmin

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    Have you considered Elliott?

Macroecon DOES seem like it’s very questionably a science. Yet some seems like it has a better foundation than others.
For myself, I try to follow Elliott forecasts; it seems to do fairly well. For example, when I bought Pd a year ago, I expected that gold was going to go through a horizontal correction, followed by another drop to the 900-1100 range. While it was undergoing a horizontal correction, I expected Pd to undergo an ABC drop, and then take off upwards again. When it hit its new peak, I expected gold to be at its low.

So far, so good. But I’m down on Pd right now, because when I intended to sell, I was prevented, and missed the opportunity, and so am just holding.

We’ll see if I’m right. Based on how far Pd corrected (an almost total correction) I expect to rise up to about 12-1300, and then undergo another horizontal wedge correction with plenty of opportunity for a buy/sell cycle. As the magnitude of the oscillations drops to be unprofitable, I think it will become a good time to hold on to Pd again for another rise of 4-500.

My only question is if it will be more profitable to be in silver by that time, because although silver is in general headed down, I’m expecting an ABC correction upwards at that time.

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