PM End of Week Market Commentary – 10/20/2017

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  • Sun, Oct 22, 2017 - 12:23am

    #1

    davefairtex

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    PM End of Week Market Commentary – 10/20/2017

 

On Friday gold fell -10.10 [-0.78%] to 1281.80 on heavy volume, and silver dropped -0.23 [-1.33%] to 17.05 on heavy volume also. A strong move in the buck [+0.49%] caused problems for PM all day long.

Market-moving news this week involved the first steps in the passage of tax reform by the Senate and the House, the upcoming elections in Japan where Abe may not win a super majority (which is needed by him to revise the constitution), and in Catalonia where Spain is preparing to impose direct rule on the province. The Yen was hit hard, the buck rallied, and the Euro was flat.

Last week, the miners were quite weak; it appears as though this was the tell. This week, most of the metals tipped over and sank, with junior miners leading the seniors, and silver leading gold. Only copper managed to stay in the green. Most items have dropped back through their 9 MA lines, and half are below all 3 moving averages. From the metals sector map, it sure looks like PM is re-entering its downtrend.

Name Chart Chg (W) 52w ch EMA9 MA50 MA200 50/200 Last Crossing last
Copper $COPPER 1.16% 51.31% rising rising rising rising ma50 on 2017-10-05 2017-10-20
Palladium $PALL -1.62% 53.52% rising rising rising rising ema9 on 2017-10-20 2017-10-20
Gold $GOLD -1.86% 1.22% falling falling rising falling ema9 on 2017-10-20 2017-10-20
Silver $SILVER -2.29% -2.74% falling falling rising falling ema9 on 2017-10-20 2017-10-20
Platinum $PLAT -2.47% -1.15% falling falling falling falling ema9 on 2017-10-18 2017-10-20
Senior Miners GDX -2.56% -6.37% falling rising rising rising ema9 on 2017-10-16 2017-10-20
Silver Miners SIL -3.00% -20.24% falling falling falling rising ema9 on 2017-10-16 2017-10-20
Junior Miners GDXJ -3.90% -20.29% falling falling falling rising ema9 on 2017-10-16 2017-10-20

Gold fell -24.30 [-1.86%], dropping 4 days out of 5. The first part of the week saw some fairly brisk selling, while gold ended up chopping sideways from Wednesday through Friday. While gold did print a bearish engulfing pattern on Friday, the code didn’t feel it was particularly bearish. Forecaster ended the week at -0.23, which is a downtrend, but not a very severe one.

On the weekly chart, we can see that gold unwound almost all of its gains from last week; the weekly forecaster has dropped back into downtrend territory.

The December rate-increase chances rose to 92%.

COMEX GC open interest rose +2,261 contracts this week.

Silver fell -0.40 [-2.29%] this week. While silver fell more than gold, it still managed to keep some of the gains from last week. Candle print was a long black, which the code had no comment on, and the forecaster ended the week at +0.09, just barely in uptrend territory. Silver’s chart is a bit of a mess right now – it seems to be chopping sideways, moving back and forth across its 3 moving averages. Silver seems to have a fairly strong bid at round number 17.

The gold/silver ratio rose +0.33 to 75.20, which is bearish.

COMEX SI open interest rose by +1,104 contracts.

Miners sold off hard on Monday, and then spent the rest of the week meandering lower. On Friday, both ETFs printed candles that were bearish continuations. Forecasters: GDX -0.24, GDXJ -0.32. The charts bear this out – GDXJ made a new multi-month low to end the week, while GDX did not, and remains above its 200 MA. It looks like senior miners are preferred right now to the juniors. That’s generally bearish.

The GDX:$GOLD ratio fell -0.79% on the week, and the GDXJ:GDX ratio lost -1.38%. That’s bearish.

USD

The buck printed a swing low on Monday, a disagreeable-looking shooting star on Wednesday, but then it rallied strongly on Friday making a new high. Buck ended the week in an uptrend, with the forecaster closing at +0.14. That’s not a very strong uptrend, but the buck does remain above both the 9 and 50 MA lines. The weekly chart shows that the buck moved into an uptrend 4 weeks ago, and has since mostly chopped sideways. Progress in the Congress towards passing that tax reform bill has helped the buck this week, as has the issues in Catalonia. JPY was hit hardest this week, dropping -1.43%. Most of that loss came on Friday, the day before the election this weekend in Japan.

Martin Armstrong reports that capital flight out of Europe into the US has intensified as the result of the crisis in Catalonia. Confidence in the EU project is having problems because – according to his EU clients – they wonder how the EU government can be so caring about human rights with respect to the migrants & refugees, but seem to care very little about their own citizens in Spain. That’s dollar positive over the longer term.

If Trump gets his tax reform, and there is every indication that it will happen as the Republicans in Congress see this as a do-or-die issue for 2018, and the Catalonia situation worsens, we could see a significant dollar rally. Where does the capital go when it moves into the US? Treasury bonds, and equities. Especially equities.

ECB meets next week, and the market expects Draghi to explain just when the taper will start.  If he decides not to taper after all, that would probably be quite dollar positive.

US Equities/SPX

SPX rose 22.04 [+0.86%] on the week, making a new all time high on Friday’s medium-sized rally. Friday’s white marubozu candle has a relatively poor chance of being a reversal (34%). While SPX seems as though its relentlessly making new highs, viewed in Euros it has yet to return to the high made in February. Armstrong makes the case that its the Europeans who are doing most of the buying, using equities as a place to park their money outside the continent.

Sector map shows homebuilders and financials in the lead, while staples and REITs did worst. I’m not sure if there is any sort of future-prognostication in this collection of tea leaves this week. I don’t see an obvious pattern.

VIX rose +0.36 to 9.97.

Name Chart Chg (W) 52w ch EMA9 MA50 MA200 50/200 Last Crossing last
Homebuilders XHB 2.21% 26.19% rising rising rising rising ema9 on 2017-09-25 2017-10-20
Financials XLF 1.95% 35.50% rising rising rising rising ema9 on 2017-10-18 2017-10-20
Healthcare XLV 1.77% 19.33% rising rising rising rising ema9 on 2017-10-17 2017-10-20
Utilities XLU 1.31% 13.63% rising rising rising falling ma50 on 2017-10-19 2017-10-20
Industrials XLI 1.25% 27.84% rising rising rising rising ma50 on 2017-09-11 2017-10-20
Technology XLK 0.99% 28.90% rising rising rising rising ema9 on 2017-09-27 2017-10-20
Materials XLB 0.67% 24.77% rising rising rising rising ema9 on 2017-09-28 2017-10-20
Cons Discretionary XLY 0.15% 15.70% rising rising rising falling ema9 on 2017-10-20 2017-10-20
Telecom XTL -0.50% 9.10% falling rising falling rising ma50 on 2017-10-16 2017-10-20
Energy XLE -0.54% -4.08% falling rising falling rising ema9 on 2017-10-18 2017-10-20
Cons Staples XLP -1.23% 3.75% falling falling rising falling ema9 on 2017-10-18 2017-10-20
REIT RWR -1.60% -0.88% falling rising falling rising ma50 on 2017-10-20 2017-10-20
Gold Miners GDX -2.56% -6.37% falling rising rising rising ema9 on 2017-10-16 2017-10-20

Gold in Other Currencies

Gold fell in all currencies, and was down in XDR by -22.24.

Rates & Commodities

TLT plunged -1.49%, with most of that loss happening on Friday. TLT has mostly unwound last week’s big rally. Forecaster ended the week at -0.46, which is a strong downtrend. It looks as though bonds are very news-driven right now, with no trend lasting more than a week. The weekly chart has flipped back into a downtrend.

JNK rose +0.38% on the week, a nice move higher. This brings JNK to a multi-month high. Forecaster ended the week at +0.37, which is a decently strong uptrend. JNK is above all 3 moving averages. It feels like risk on, at least in the near term anyway.

CRB fell -0.39% on the week; agriculture led lower (-2.37%), followed by PM (-1.85%). CRB is still slowly moving higher off its lows, but by no means has it recovered.

Crude rose +0.48 [+0.93%] to 52.07. Crude tried 3 times to move significantly through 52, but failed each time, and finally sold off on Thursday. It tried to follow through on Friday, dropping to 50.87, but buyers appeared ripping prices right back up to 52. In spite of the rally, crude’s forecaster closed the week at -0.20, which suggests crude could still be heading lower. North American rig counts this week dropped by 25, which is a fairly sizable number. Is it cold weather? The hurricanes? That’s what econoday says. EIA report showed a crude draw (-5.7m), gas build (+0.9m), distillates build (+0.5m). Market wasn’t particularly impressed with the EIA report. My sense is that 52 resistance is quite strong. Most likely, shale drillers and speculators are going short here, and that’s capping any rally.

My sense, from a bunch of different indicators, is telling me that the ponzi phase of shale is nearing an end.  This should help the oil market normalize a bit more quickly than anticipated.  At some point the market will become convinced, and the 52-54 resistance will fall. 

Physical Supply Indicators

* SGE premiums over COMEX are at +8.41.

* The GLD ETF tonnage on hand was unchanged, with 853 tons in inventory.

* ETF Premium/Discount to NAV:

 PHYS 10.44 -0.59% to NAV [up]
 PSLV 6.39 -0.73% to NAV [down]
 CEF 13.30 -2.2% to NAV [down]

* Bullion Vault gold (https://www.bullionvault.com/gold_market.do#!/orderboard) no premiums for gold or silver.

* Big bars premiums were: gold [1kg] 1.21% and silver [1000oz] 3.08%.

Futures Positioning/COT

The COT report was as of October 17th, when gold closed at 1287.00 and silver at 17.04.

In gold, the commercial net position rose by +1.4k contracts; 2.5k shorts were covered, and 1.1k longs were also sold. Managed money net fell by -1.8k contracts; 3.4k longs were bought, and 5.2k shorts were sold. These were very minor changes. We remain in COT limbo for gold.

In silver, the commercial net fell by -4.3k contracts; 4.8k shorts were added, and 502 longs were also bought. Managed money net rose by 6.8k contracts; 3.5k longs were added, and 3.3k shorts were closed. These were minor changes in position. COT for silver could be showing a low – from the managed money short perspective – but its not a clear signal.

Gold Manipulation Report

There were no after-hours spikes this week.

Eurozone Status

Summary

The metals have unwound most of last week’s rally; only silver is still above-water in terms of a trend forecast, and it is right at the cusp of breaking down. A dollar rally appears to have played its usual role in the retreat. Last week’s poor performance in the mining shares might have been the tell.

Gold and silver big bar shortage indicators shows no signs of shortage; premiums on big-bar gold and silver remain normal. GLD tonnage was unchanged, while ETF premiums were mixed but mostly lower. Shanghai premiums are rising.

COT report shows only small changes in commercial short positions for gold and silver. Gold is still out of balance, but we could be at a low for silver.  Maybe.

Last week’s uptrend didn’t last very long – the fading dollar reversed and started moving back up again. Still, I’m not certain this is some grand shorting opportunity. It looks as though the PM market is mostly chopping sideways alongside the currencies which seem to be doing much the same thing. Even pulling back to the weekly chart, I don’t see any consistent pattern in where the currencies are going. Monthly chart shows the Euro topping out, although this month has yet to complete.

Armstrong is convinced that the melt-up in US equities is driven by capital flight from the EU. The ECB is about to taper, or so the market thinks, and there’s the crisis in Catalonia; why hold euro-nation bonds right now? But if you sell your euro bonds to the ECB, where do you put the money? Cash? In an EU bank? You’ll end up paying them – and that’s no fun. To us, the US market looks crazy high, but the Euro has seen a strong currency rally recently, and that makes the US market look more reasonably priced to them.

Next week we have an ECB meeting and press conference on Thursday (Oct 26). The day after, the Spanish Senate will approve imposing central government rule on Catalonia – in response to which, Catalonia has threatened to actually declare independence; “we really mean it this time.”

And to top it off, the Republicans in the Congress appear as though they have sufficient discipline to pass tax reform, thus Making America Great Again.

We should probably take our cue from the mining shares, which continue to look weak.  Momentum for PM remains to the downside.

Trend-following code says:

Uptrend: crude, USD, SPX.

Downtrend: gold, silver, copper, platinum, natgas, treasurys, miners.

Note: If you’re reading this and are not yet a member of Peak Prosperity’s Gold & Silver Group, please consider joining it now. It’s where our active community of precious metals enthusiasts have focused discussions on the developments most likely to impact gold & silver. Simply go here and click the “Join Today” button.

  • Sun, Oct 22, 2017 - 09:53am

    #2
    phusg

    phusg

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    > Confidence in the EU

> Confidence in the EU project is having problems because – according to his EU clients – they wonder how the EU government can be so caring about human rights with respect to the migrants & refugees, but seem to care very little about their own citizens in Spain.

Strange interpretation; would they have the EU openly step into a domestic Spanish issue? I'm sure the EU cares about all Spanish citizens and would like to see a legally valid referendum held ASAP.

  • Sun, Oct 22, 2017 - 01:29pm

    #3

    davefairtex

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    legally valid

Well, lets see.  From my perspective, Catalonia tried to have a referendum, and Madrid sent in the Federal police to disrupt it.  And now Madrid is suggesting the referendum is illegal – because it was disrupted?  Because they don't like referendums?  Because its illegal to vote on matters that the central authority finds disagreeable?

Case 1) Spanish federal police beat up their own people for voting.  EU says nothing.

Case 2) Eastern Europe refuses to accept migrants & refugees.  EU threatens to fine them for wanting to control who lives in their own country.

I suppose case 1 is a strictly domestic matter, while case 2 is…is…a strictly domestic matter too?

I think they call this "cognitive dissonance"

  • Sun, Oct 22, 2017 - 06:03pm

    #4

    lambertad

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    Logic > feelings

Dave, I have to say I totally agree with your interpretation of events. 

From my perspective you are analyzing the situation logically, devoid of how you may "feel" about the situation, which, is one reason I come here daily to read your PM commentary. 

As Chris has said before, morals aren't relative. You either believe in human rights and hold those beliefs equally and in all circumstances, or you don't. 

Here's an example – Everyone with a brain understands that women have the same rights as men. So how is it that the U.S. Government, especially under a liberal president, is so hush hush on Saudi Arabia allowing men to beat women in public? How does the U.S. Government allow gays to be murdered by the government of that country and we don't stand up and scream? Also, how does the U.S. allow the SA regime to be elected to the UN human rights council? The answer is simple, the U.S. Government doesn't actually care about human rights except when it meets their goals. I could come up with example after example and people in general are starting to catch on to this type of behavior. Do as I say, not as I do. Hence, Trump's election. 

The EU is therefore in the same boat as the USG. They don't actually care about human rights unless it meets their goals. If they did care, they would at least have criticized the Madrid regime about the public beatings. They wouldn't have to actually do anything, they'd just have to act outraged, but they couldn't even bring themselves to do that. Another nail in the coffin of the EU. Enough of them will seal the deal. 

 

 

  • Sun, Oct 22, 2017 - 07:43pm

    #5
    Edwardelinski

    Edwardelinski

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    Why not ask yourself?

Why 5 million women from around the world stood up on January 21st and said no more.Why not ask yourself why a man who publically admitted to assaulting any women of his choosing because he was rich and famous.Why not ask yourself why a nation voted for a man who slut-shamed 13 women who came forward from around the world with the same story……White,rich,entitled men have run this into the ditch,That,s why….

  • Sun, Oct 22, 2017 - 08:30pm

    #6

    davefairtex

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    human rights as a tool

Thanks.  🙂

Yeah.  Totally agree about Saudi Arabia example.  In the "small victory" department, I read that women are now allowed to drive in the Kingdom.

Human rights these days is just an emotional trigger used to rally the people when its convenient.  Say, if you don't like something Russia is doing, and you want a chunk of people behind you, you trot out the human rights thing.  "Russia is bad to gays."  The SJ crew immediately piles on Russia, and you aren't signaling the proper virtue when you point out its all just a big game.

While Russia is unpleasant to their gay population, "for some reason" we choose not to beat Saudi Arabia for doing much worse.  Acting out on your gay impulses, second offense = death penalty over in dear Saudi Arabia.  Most of the Arab world tosses gays in jail for being gay, and women appear to be more or less property.  But – by all means, let's open the doors to a million migrants and refugees, most of whom have very similar cultural programming.  What could possibly go wrong?

Oh well.  At least the women can drive now in Saudi Arabia.  There is that.

  • Tue, Oct 24, 2017 - 12:57am

    #7

    davefairtex

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    btc update

Not to put too fine a point on it – today was a sell signal.  Not by much, but there it is.  Also, today was a 3-candle swing high as well.  Today's "hammer" print was not a (bullish) reversal bar, in spite of the long lower shadow.  RSI7 reveals a bearish divergence (not shown) which suggests that the longer term BTC momentum is slowing.

That bearish divergence is a confirmation that this correction could be significant.

ETH has been in "sell mode" for 7 trading days now.  Today's print was a spinning top with a long lower shadow (57% reversal) but the downtrend in ETH remains fairly intense.  It will be hard for ETH to rally if BTC sells off.

  • Tue, Oct 24, 2017 - 07:42am

    #8
    phusg

    phusg

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    Dave, I respect your usual

Dave, I respect your usual rational and objective analyses, but I think your missing some of the facts on this one…

> And now Madrid is suggesting the referendum is illegal – because it was disrupted?

Not at all, they are rightly pointing out that Spain’s democratic constitution of 1978, which was approved by more than 90% of Catalan voters, gave wide autonomy to the regions but affirmed “the indissoluble unity of the Spanish nation”. Only the Spanish parliament can change the constitution.

> Because they don't like referendums?

Well they certainly don't like secession referendums for the constitutional reason above. But I think it's unavoidable now that Madrid accepts a petition from the new Catalan government to get the constitution changed so that they can have a legal vote.

> Case 1) Spanish federal police beat up their own people for voting.  EU says nothing.

Police do what they do to maintain law and order and although I don't condone beatings to achieve this, it's still not something the EU should or normally does intervene in publicly.

> Case 2) Eastern Europe refuses to accept migrants & refugees.  EU threatens to fine them for wanting to control who lives in their own country.

This is too simplistic a take on it. These eastern european countries also committed to take their share of the refugees and then didn't stick to the agreement, that's why they got fined.

> I suppose case 1 is a strictly domestic matter, while case 2 is…is…a strictly domestic matter too?

Case 1 was domestic because the police were upholding Spain's own constitution and case 2 isn't because the courts were upholding an EU agreement.

  • Tue, Oct 24, 2017 - 11:04am

    #9

    davefairtex

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    legal vs moral

From a legal-theoretical standpoint, modern Western Civilization is based on the principle that "the people" should be sovereign, and the way they express their sovereignty is by voting.  Therefore, any law on the books that results in federal police beating grandmothers who are just trying to peacefully exercise their sovereign rights by voting must be an immoral law.  Put more strongly, such a law flies in the face of the underpinnings of Western Civ itself, and is a gross violation of the most basic human right of peaceful self-determination.

While "the people" may not be able to articulate this, they know it in their hearts to be true.  Voting = human rights.  Police beating voters = NOT human rights.  If the law says differently, then the law is an ass.  So when the EU bureaucrats support the central government police voter-beaters over "the people" trying to vote, it doesn't go over well.

From a practical standpoint, given that Catalonia is more or less the milk cow for the rest of Spain, I suspect it is very unlikely there will be be an amendment to the Spanish constitution because the majority of the milk-drinkers don't want their cow to leave.  So what "legal" options are open to Catalonia?  There are none.  Hence, we see the vote.

Same thing in Eastern Europe.  Again, from a practical standpoint, Eastern Europe doesn't want the refugees – at least partially due to the "challenges" (i.e. invasions) they have faced in the past from the Muslim world.  The result of the EU trying to override the will of the locals and force-feed refugees into Eastern Europe has led directly to the election results in the Czech Republic, Poland, Austria, and of course Hungary.

The good news is, this all has a historical inevitability to it.  It doesn't matter which one of us "wins" this argument.  The people of Europe clearly have a very strong belief in their human rights, even if the bureaucrats in Brussels do not share this belief, and at the end of the day, they will not be denied.

"Those who make peaceful revolution impossible will make violent revolution inevitable." — JFK

"Its all fun and games until someone loses an eye." — Mom

  • Tue, Oct 24, 2017 - 11:37am

    #10
    phusg

    phusg

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    > It doesn’t matter which one

> It doesn't matter which one of us "wins" this argument.

Dave, I thought you were above this and sought rational enlightening debate, maybe I was wrong.

Your last post is full of things I agree with and never said I disagreed with, i.e. all straw man arguments I can now only assume are designed to 'win' the argument.

My original point was only that the EU naturally doesn't like to meddle in members domestic/constitutional issues and that this shouldn't be misinterpreted as a lack of care or belief in the human rights of Catalans.

> "Those who make peaceful revolution impossible will make violent revolution inevitable." — JFK

Nice quote and exactly why I said that I see it as inevitable that a legal Catalan secession referendum will be forthcoming.

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