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PM Daily Market Commentary – 11/15/2019

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  • Sun, Nov 17, 2019 - 03:37am

    #1

    davefairtex

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    PM Daily Market Commentary – 11/15/2019

On Friday, gold fell -3.16 [-0.21%] to 1474.92 on moderate volume, while silver dropped -0.07 [-0.41%] to 17.05 on moderate volume also. The buck moved down again [-0.14%], bonds edged lower [10y yield +1.9 bp] while crude rallied [+1.76%] along with SPX [+0.77%].

The PM sector map shows that silver led gold higher, and the miners did best overall, but PM has yet to show a real reversal for PM. Almost every item remains below the 9 MA, and most also are below the 50. According to the sector map, the multi-month PM correction remains in place.

Name Chart Chg (W) 52w ch MA9 MA50 MA200 50/200 Last Crossing last
Junior Miners GDXJ 1.70% 37.41% falling falling rising falling ema9 on 2019-10-04 2019-10-04
Senior Miners GDX 1.53% 48.64% falling rising rising falling ema9 on 2019-10-04 2019-10-04
Gold $GOLD 0.47% 25.47% falling rising rising rising ema9 on 2019-10-03 2019-10-04
Gold/Euro $GOLD:$XEU 0.09% 31.46% falling rising rising rising ema9 on 2019-10-04 2019-10-04
Silver $SILVER 0.06% 20.38% falling rising rising rising ma50 on 2019-10-02 2019-10-04
Silver Miners SIL -0.79% 20.24% falling rising rising falling ma50 on 2019-09-27 2019-10-04
Palladium $PALL -0.80% 56.66% rising rising rising falling ema9 on 2019-10-03 2019-10-04
Copper $COPPER -1.29% -7.91% falling falling falling falling ema9 on 2019-09-17 2019-10-04
Platinum $PLAT -5.39% 7.16% falling rising rising falling ma50 on 2019-09-30 2019-10-04

Gold climbed +9.04 [+0.62%] to 1474.92. The bullish harami candle was a bearish continuation, and forecaster moved lower into its reasonably strong downtrend. While gold did managed to stage a bullish reversal on the daily chart, gold remains in a downtrend in the weekly and monthly timeframes. Gold/Euros looks quite similar.

The Dec 2019 rate-cut chance is 0%. Powell told Congress that there will be no more rate cuts, and that rates are unlikely to change unless the economy slows enough to cause the Fed to make a “material reassessment.”

COMEX GC open interest fell -5,475 contracts on Friday, but rose +6,469 contracts this week. While that is yet another new all time high for gold’s OI, it was a relatively small change. Current open interest for gold: 88% of global annual production, an increase of 1%.

Commercial net rose +16k contracts, which was +13k new shorts but also +28k new longs. That’s a 6-year high for commercial longs and a large change in one week; last time we saw this level of commercial longs was back in June 2013, after gold had fallen $600 over a 9 month period. That’s interesting. Commercial shorts are at an all time high – right along with open interest. Managed money net fell -22k, with -24k fewer longs, and -2k fewer shorts.

Silver climbed +0.17 [+1.04%] to 16.93. The short white/NR7 candle was a bearish continuation, and forecaster inched lower into the current downtrend. While silver staged a three-day reversal on the daily chart earlier in the week, it dropped back into a downtrend on Friday. Silver ended the week in a downtrend in both the daily and weekly timeframes.

The gold/silver ratio fell -0.34 to 86.51. That’s mildly bullish.

COMEX SI open interest rose +529 contracts on Friday, but fell -2,163 contracts on the week. That’s 4 days of global production in paper removed. Current open interest for silver: 125% of global annual silver production, down -2% this week.

Commercial net rose +13k contracts, which was +6k new longs and -7k fewer shorts. Managed money net fell -9k contracts, which -6k fewer longs, and +4k new shorts. Nothing definitive yet about a COT low for silver.

Miners rallied +2.09% this week, the long white candle was neutral, while forecaster dropped into a slight downtrend. Miner daily executed a bullish reversal this week; this left XAU in an uptrend in both daily and monthly timeframes. XAU ended the week above all 3 moving averages – and that daily forecaster looks reasonably strong. The miners continue to outperform the rest of the PM sector, and since they tend to lead – I sound like a broken record here – that’s positive.

GDX:$GOLD rose +1.32%, while GDXJ:GDX ratio climbed +0.28%. That’s somewhat bullish.

USD

The buck fell -0.36 [-0.37%] to 97.58. The black marubozu candle was a bearish continuation, and forecaster moved deeper into a moderate downtrend. The buck executed a bearish reversal on the daily chart on Friday too, which means the buck ended the week in a downtrend in all 3 timeframes.

The big currency moves: GBP [+0.92%], EUR [+0.32%], AUD [-0.59], JPY [-0.33%].

SPX moved up +27.38 [+0.89%] to 3120.46, another new all time high. The vast bulk of that move happened on Friday. The short white candle was a bullish continuation, and forecaster moved lower but remains in an uptrend. SPX ended the week in an uptrend in all 3 timeframes.

This week, defense and sickcare did best, while energy and financials brought up the rear. This was a neutral sector map.

Name Chart Chg (W) 52w ch MA9 MA50 MA200 50/200 Last Crossing last
Gold Miners GDX 1.53% 48.64% falling rising rising falling ema9 on 2019-10-04 2019-10-04
Technology XLK 1.08% 8.03% rising falling rising falling ema9 on 2019-10-04 2019-10-04
Healthcare XLV 0.90% -4.52% falling falling rising falling ema9 on 2019-10-04 2019-10-04
Cons Staples XLP 0.46% 14.79% rising rising rising falling ema9 on 2019-10-04 2019-10-04
REIT RWR 0.15% 15.86% rising rising rising rising ema9 on 2019-10-03 2019-10-04
Homebuilders XHB 0.11% 16.36% rising rising rising falling ema9 on 2019-10-04 2019-10-04
Utilities XLU 0.11% 22.62% rising rising rising rising ema9 on 2019-10-04 2019-10-04
Cons Discretionary XLY -0.38% 5.42% falling falling rising falling ma50 on 2019-10-01 2019-10-04
Defense ITA -2.12% 1.69% falling rising rising falling ma50 on 2019-10-04 2019-10-04
Financials XLF -2.17% -2.42% falling falling rising falling ma50 on 2019-10-04 2019-10-04
Materials XLB -2.43% -3.03% falling falling rising falling ema9 on 2019-10-01 2019-10-04
Industrials XLI -2.46% -4.70% falling falling rising falling ma200 on 2019-10-03 2019-10-04
Telecom XTL -2.62% -13.29% falling falling rising falling ma50 on 2019-09-26 2019-10-04
Energy XLE -3.77% -25.64% falling falling falling falling ma50 on 2019-09-26 2019-10-04

The US equity market was at the top of the list this week.

VIX inched down -0.02 to 12.05. Puts are cheap right now – as they were last week.

Rates & Commodities

TLT jumped +2.11%, the bullish harami was somewhat bullish (30%), and forecaster ended the week in an uptrend. The 30-year yield plunged -12 bp to 2.31%.

TY rose +0.73%, the bullish harami was a bearish continuation, and forecaster moved higher but remains in a slight downtrend. TY daily executed a bullish reversal late in the week; TY is still in a downtrend in both weekly and monthly timeframes, but that weekly may be about to reverse back up.

DGS10, the 10 year yield, fell -9.9 bp to 1.83%. The bearish harami was definitely bearish (49%), and forecaster was unchanged, remaining in a strong uptrend. DGS10 remains in an uptrend in both weekly and monthly timeframes. Reminder: yield uptrend = bond downtrend.

It doesn’t look as though bonds have reversed just yet on the weekly timeframe – this is quite similar to gold.

JNK inched down -0.01%, the short white candle was a bearish continuation, and forecaster moved higher but remains in a slight downtrend. JNK remains lackluster even though SPX is making new all time highs. BAA.AAA differential fell -1 bp to +87 bp. There are still no real worries about debt quality right now.

Crude rose +0.53 [+0.92%] to 57.93. The spinning top candle was mildly bearish (30%), and forecaster inched lower but remains in an uptrend. On Friday, crude closed above the 200 MA for the first time in several months. Crude ended the week in an uptrend in all 3 timeframes.

The EIA report on Thursday was mildly bearish: crude: +2.2m, gasoline: +1.9m, distillates: -2.5m. Crude sold off hard following the report (about a $1 drop), but the strong rally on Friday erased that drop and then some, closing at the high for the week. I’m not sure what caused Friday’s rally, which was about $1.50, trough to peak.

Physical Supply Indicators

* The GLD ETF tonnage on hand fell -4.42 tons, with 897 tons remaining in inventory.

* ETF Discount to NAV:

PHYS 11.78 -1.07% to NAV [increase]
PSLV 6.20 -1.85% to NAV [increase]
CEF 14.05 -3.89 to NAV [increase]

* Premium for physical (via Bullion Vault:https://www.bullionvault.com/gold_market.do#!/orderboard) vs spot gold (loco New York, via Kitco: https://www.kitco.com/charts/livegoldnewyork.html) shows no premium for gold, and a 1 cent discount for silver.

* Gold dealer big bars premiums were: gold [1kg] 1.16% and silver [1000oz] 3.28%.

Grey Swans & Geopolitics

  • Ebola: there were just 6 new cases this week, which is a decrease over last week. To date, there have been 3291 total cases, with 2193 deaths (CFR 67). All of the new cases were known contacts of a confirmed case. It might be a few weeks premature – but I think we’re probably done with Ebola. Until next time. https://www.who.int/csr/don/14-november-2019-ebola-drc/en/
  • US-China trade: still no agreement on just which tariffs will be rolled back on signing, if the theft of US IP theft will stop, if forced tech transfers will stop, and just how much ag products will be purchased. There was a “constructive” phone call on Saturday, but for a deal which had an “agreement in principle” a few weeks ago, there sure seems to be a lot left to discuss. https://www.reuters.com/article/us-usa-trade-china/china-u-s-had-constructive-phone-call-on-trade-xinhua-idUSKBN1XR01N
  • Fed Not-QE: the Fed balance sheet rose $8 billion this week, up $287 billion from the lows of August 30, 12 weeks ago. That’s $24 billion per week. The recent pace of printing has slowed. Armstrong thinks this is all about DB and the refusal of US bankers to lend to the ailing German monsterbank. https://www.armstrongeconomics.com/world-news/banking-crisis/understanding-the-repo-crisis/
  • Hong Kong: the police shooting of an unarmed protester unleashed a full week of protests; the US Senate is on the verge of passing the Hong Kong Human Rights and Democracy Act which will require an annual assessment as to whether the city is “sufficiently autonomous” to keep its free trade exception. Once the protests ended on Saturday, Beijing ordered the PLA onto the streets of Hong Kong to assist in the clean up. According to Hong Kong basic law, the PLA can only be deployed if requested by the local government.
  • Iran: No news.
  • Italy – migration: No news.
  • BRExit: election in 3 weeks. Mish’s poll analysis suggests the Tories remain in the lead, and he is sticking with his 351 seat projection.
  • Yield Curve Inversion: the 1-10 spread fell to +29 bp, due to the rally in the 10-year this week. 1Y: 1.54% (-4 bp), 10Y: 1.83% (-9 bp).
  • North Korea: No news. Well, unless you count the official news agency of the DPRK calling Joe Biden a “rabid dog” that “must be beaten to death with a stick.”

Recession Watch

  • Retail Sales: headline +0.3% m/m (prior -0.3% m/m), less-autos-and-gas +0.1% m/m (prior +0%). This wasn’t a great number, but neither was it contractionary.
  • Industrial Production: -0.8% m/m (prior -0.4% m/m), manufacturing -0.6% m/m (prior -0.5% m/m), business equipment -0.6% m/m, consumer goods -0.8% m/m. This is definitely a recessionary number; some of this was due to the GM strike, but certainly not all of it.
  • CPI: headline +0.4% m/m (prior +0.0%), less-food-and-gas +0.2% m/m (prior +0.1%). Econoday said that this 2.4% annualized “core” inflation rate “offers at least some justification for stimulative monetary policy.” I thought 2% was the target rate, and 2.4% is above that. The health insurance component rose +2.2% m/m, and +20% y/y. Holy crap that’s a big move. Thank heavens for Obamacare/Trumpcare/bipartisan-hose-the-American-people care. The harvesting is moving into high gear. Someone is getting rich here, but it sure isn’t you or me.

Summary

Bonds, gold, silver, and the miners rebounded this week, while copper and industrial metals in general sold off. This pattern suggests a rising concern over the US China trade deal, which sure seems to have a lot of open discussion items for something that was allegedly agreed to in principle many weeks ago. Related: will the Senate pass the Hong Kong Act on Monday?

While the Industrial Production numbers continue to worsen, Retail Sales remain mildly positive. Not even government numbers can put lipstick on the health insurance CPI pig: a 20% increase in premiums over a year’s time is both appalling and clearly predatory. As George Carlin once observed, “it’s a big club, and you ain’t in it.”

The Fed’s Not-QE program continues to increase, although the pace has slowed this week.

Big bar premiums on gold and silver have changed little, but ETF discounts increased as PM prices rallied. That’s not so positive.

OI continues to climb in the gold market, marking yet another new all time high, even though gold has declined for 3 months now. One other oddity: a large and surprising increase in commercial longs this week – to a 6-year high. Does it mean something? It might. Even though the shorts continue to pile in, at least some of the banksters have decided to go long, and in a reasonably large way.

Perhaps the commercials know something about who is doing all the shorting, and what it signifies.  And they are also in a position to know about what the Fed repos are hiding – about who the banksters don’t want to lend to – not even overnight – for fear of losing their money the way they did at Lehman.

Weekly trends (in order of strength):

Uptrend: DJI, crude, NDX, SPX.

Downtrend: platinum, gold, silver, USD, gold/Euros, bitcoin, copper, miners, 10-year Treasury.

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  • Sun, Nov 17, 2019 - 03:08pm

    #2

    sand_puppy

    Status Platinum Member (Offline)

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    Hong Kong On Edge

DaveF, Sounds like you are pretty connected to Hong Kong.

I would love to hear your impressions and summary of what is happening.

I can’t imagine how I would be doing personally if a totalitarian state were about to swallow up my city.

  • Sun, Nov 17, 2019 - 11:48pm   (Reply to #2)

    #3

    davefairtex

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    re: Hong Kong On Edge

Well if I lived there, I’d be writing a lot more about it, that’s for sure.  Thank heavens I don’t.  I have transited through there a number of times (most recently about 2 months back) and I think the city is a unique place – “old style” Chinese culture with a British flavoring.  I went there a number of times for work, I worked with a number of Hong Kongers in one of my old jobs.  I went to a conference there maybe 2 years ago.  I have a few friends from there as well.  I have a sense of the place and the people.

My sense: Mao did his best to get rid of all the old Chinese culture in the areas he controlled; I do not think his changes were an improvement.  Just visit either Taiwan or Hong Kong, where said culture remains (although the two places are very different), and the Mainland, where the original Chinese culture appears to be largely gone.

During my visits to Hong Kong over the years I had the sense the city was eternal – and perhaps a little bit boring in places.  Everything was quite efficient.  Now, it is neither eternal, nor is it boring!  As you say, if I did live there – either as a local, or as an expat – I would not feel comfortable at all at the prospect of Beijing taking over.

Seeing the train stations destroyed made me quite sad.  How far the kids have been pushed by their fear of Beijing and the anger at their own government’s complicity for them to destroy their wonderful metro.

They have worked hard during their young lives – pushed by their parents to succeed at all costs (and nobody can push like a Chinese parent; common parent complaint if you come in #2 in your class: “why aren’t you #1??  You should work harder!”  A friend of mine used to get whipped – literally – if he didn’t get As and Bs on his report card in High School) – only to find that the road ahead is a dead end.  In essence they have been lied to: “if you study hard now, you will succeed.”  Except, of course, if Beijing takes over now, that’s a Deux Ex Machina.  “Doesn’t matter how hard you study – there is no future for you.”

Through their efforts, the protesters finally got Carrie Lam (Xi!) to, ever so reluctantly, rescind the extradition law.  [Lam, whose kids all have British passports, doesn’t have to “eat her own dog food.”  She can sell HK down the river and when her term is done, she and her family get to sail off into the west.]  Now at least the locals (and the expats!) don’t face the prospect of being whisked off to the Mainland to face “justice” if they say something Beijing doesn’t like.  Why isn’t that enough?

The demand not to be called “rioters” is a demand for a future for the protesters who made this happen.  Nobody will get a good job in the highly competitive city if they are labeled a “rioter” – presumably a felony conviction.  And then who will be there to take care of Mom & Dad?  All those years of studying tossed right into the toilet.

And with all the surveillance, once things calm down, you just need to have made one mistake and your future is toast.  You and all your friends will be arrested ex post facto, and everyone who protested gets rolled up – if that’s what Beijing wants.  [You think maybe Beijing will want that?  Round up the troublemakers, brand them as rioters, and ruin their entire future – to “encourage all of the others” so this won’t happen again?  Do you trust the police?  How about your own government, who has already sold you out once?]  This is all unspoken, but it underlies everything.  Their lives are all screwed unless they all get amnesty ahead of time.

But even in the best case, if all 5 demands are met, it is still a future with an expiration date: 2047.  If you are 20 right now, should you even make a family and put your kids through what will you know will come?  Does any of it matter?

The city and all of its culture has a long term expiration date.  It used to be impossibly far in the future (27 years!) but for some reason known only to them, Beijing has decided to accelerate the process.  Its hard to say why, but that’s where things are.

What must that be like to live under?  “If you don’t protest now, you will never be able to do so again.”

Part of me wants to go and visit before it gets taken over by the PLA.  Another part of me doesn’t want to see the city in its new state.

There’s other stuff I could say, but I’m going to engage in some self-censorship.  This is another reason I feel for the people there.

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