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PM End of Week Market Commentary – 12/15/2017

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    PM End of Week Market Commentary – 12/15/2017

On Friday gold rose +2.80 [+0.22%] to 1258.10 on moderate volume, while silver rallied +0.18 [+1.13%] to 16.11 on moderately light volume. A strong dollar rally seemed to cause problems for gold and the miners, but not so much for silver.

On Wednesday, the FOMC increased rates by 25 bp, just as the market expected. In addition, there was a weak CPI reading on Wednesday, a surprisingly strong US Retail Sales report on Thursday, the ECB kept rates unchanged (and said that growth in the EU was good but of course stimulus will remain in place), and the Republicans in the Senate and House agreed on the details of tax reform.

Looking at the sector map, the metals recovered this week; prices of all items rose, with the best performer of all being copper, up a shocking 5% on the week. Although the gains were relatively mild, silver led gold, miners led metal, juniors led the seniors. This all says “risk on” in the metals group. Most of the items have re-crossed the 9 MA, which is the first positive step towards a rebound. Platinum continues to under-perform, but even platinum managed to put in a swing low on Friday.

Name Chart Chg (W) 52w ch EMA9 MA50 MA200 50/200 Last Crossing last
Copper $COPPER 5.32% 20.89% rising rising rising falling ma50 on 2017-12-15 2017-12-15
Silver Miners SIL 3.81% -2.48% rising falling falling falling ema9 on 2017-12-13 2017-12-15
Junior Miners GDXJ 3.73% 3.76% rising falling falling falling ema9 on 2017-12-13 2017-12-15
Palladium $PALL 1.74% 44.74% rising rising rising rising ema9 on 2017-12-07 2017-12-15
Silver $SILVER 1.48% 0.56% rising falling falling falling ema9 on 2017-12-15 2017-12-15
Senior Miners GDX 1.43% 15.80% rising falling falling falling ema9 on 2017-12-13 2017-12-15
Platinum $PLAT 0.70% -0.26% falling falling falling rising ma50 on 2017-12-04 2017-12-15
Gold $GOLD 0.61% 11.31% falling falling rising falling ma200 on 2017-12-06 2017-12-15

Gold moved up +7.60 [+0.61%], with all of the gains coming on Wednesday following the FOMC announcement. Gold printed a swing low on Wednesday also. The print on Friday was a shooting star – the failed rally was caused by the strong dollar move [+0.44%]. Candle code felt the print was a bullish continuation. GC forecaster ended the week at +0.05 – that’s still in an uptrend, but forecaster didn’t like that shooting star very much.

Gold’s weekly and monthly forecasters remain in a downtrend.

The March rate-increase chances closed the week at 56%.

COMEX GC open interest rose +2,638 contracts this week.

Silver rose +0.24 [+1.48%] to 16.11 on the week, printing a strong swing low on Wednesday along with gold. Low for the week was 15.63 which came on Tuesday. Print on Friday was a (bullish continuation) white marubozu. Forecaster closed the week at +0.15, a bit stronger than gold.

Silver’s weekly chart issued a buy signal this week, but the monthly remains in a downtrend.

The gold/silver ratio fell -0.68 to 78.12, which is bullish.

COMEX SI open interest rose +11,798 contracts – this was all about managed money going short. It was another big week for the silver COT report.

As with gold and silver, the miners had their big day on Wednesday, with some silver miners I track up more than 10%. On Thursday the buyers appeared to buy a morning sell-off, while on Friday the miners largely retreated. Still, the candle code felt that Friday’s prints were not bearish, and while the forecasters all retreated, all of the miner items ended the week in an uptrend.

On the weekly charts, GDX issued a buy signal, while HUI remained in the red. Monthly HUI remains in a downtrend.

The GDX:$GOLD ratio rose +0.70%, and the GDXJ:GDX ratio climbed +2.26%. That’s bullish. SIL:GDX rose +2.35%, which I suspect is bullish for silver.


The buck basically went nowhere, dropping -0.05 [-0.05%] to 93.48. This concealed a fair amount of movement – Wednesday the buck dropped hard, while on Friday it rallied back fairly strongly. The week ended with the daily forecaster in an uptrend, after issuing a sell signal Wednesday. Perhaps the drop on Wednesday was a headfake.

The weekly chart shows the buck remains in a downtrend, though prospects are slowly improving. Monthly chart shows the buck in an uptrend.The monthly aligns best with my macro view – we’ve probably hit Peak Euro, as long as Trump can avoid the impeachment process. Right now, EUR/USD represents the balance of political risk in both places – a Eurozone breakup driven by the upcoming Italian elections, vs. a potentially messy impeachment process that has the potential for acting as a spur to divide the US even further. The US (and the US Dollar) is only a safe haven if it doesn’t descend into civil war.

Ultimately, the Fed and the ECB can print money in an attempt to paper over economic issues, but political issues are not so easily controlled by our central bankers.

US Equities/SPX

SPX rose +24.31 [+0.92%] to 2675.81. Friday’s 23-point rally wiped out the swing high printed on Thursday, and resulted in yet another new all time high for SPX. Forecaster issued a sell signal on Thursday which still remains in place in spite of Friday’s rally.

Weekly and monthly charts both show SPX remains in an uptrend.

In spite of the move higher, the sector map was split; tech and sickcare moved higher, while utilities and energy fell. The map this week didn’t look much like a bull market move, since financials and industrials were relatively near the bottom.

VIX fell -0.46 to 9.42. After a brief flirtation with double digits, VIX is back below 10.

Name Chart Chg (W) 52w ch EMA9 MA50 MA200 50/200 Last Crossing last
Technology XLK 1.51% 31.33% rising rising rising rising ema9 on 2017-12-07 2017-12-15
Gold Miners GDX 1.43% 15.80% rising falling falling falling ema9 on 2017-12-13 2017-12-15
Healthcare XLV 0.84% 19.88% rising rising rising falling ema9 on 2017-12-08 2017-12-15
Cons Discretionary XLY 0.74% 17.20% rising rising rising rising ema9 on 2017-11-03 2017-12-15
REIT RWR 0.56% 2.83% rising rising rising rising ema9 on 2017-12-08 2017-12-15
Cons Staples XLP 0.51% 9.09% rising rising rising rising ma200 on 2017-11-28 2017-12-15
Telecom XTL 0.10% -2.47% falling falling falling falling ma50 on 2017-12-15 2017-12-15
Industrials XLI -0.23% 18.12% rising rising rising rising ma50 on 2017-11-27 2017-12-15
Materials XLB -0.59% 16.05% falling rising rising falling ema9 on 2017-12-14 2017-12-15
Financials XLF -0.71% 17.49% rising rising rising rising ema9 on 2017-12-15 2017-12-15
Homebuilders XHB -0.76% 25.16% rising rising rising rising ema9 on 2017-12-15 2017-12-15
Energy XLE -0.81% -10.10% falling rising falling rising ema9 on 2017-12-15 2017-12-15
Utilities XLU -1.52% 13.94% falling rising rising rising ma50 on 2017-12-15 2017-12-15

Gold in Other Currencies

Gold rallied weakly in most of the currencies, rising +8.27 in XDR.

Rates & Commodities

TLT rallied strongly this week, up +1.31%, moving back into an uptrend – Friday saw TLT close at a multi-month high. In fits and starts, money continues to pour into the long-dated treasury bonds. TY isn’t doing as well, with the 10-year up just +0.10% on the week. TY weekly remains in a downtrend, as does the TY monthly. I wish I had a longer-dated US treasury issue I could track; TLT is just an ETF and goes back to 2002, which really isn’t long enough for a weekly analysis.

JNK fell -0.16%, edging lower without making a new low. JNK flirted with a buy signal mid-week, but reversed on Thursday. JNK remains in a downtrend. As with TLT, JNK doesn’t have a long enough history to provide a proper weekly analysis, so I use the long-dated (but less-junky) BAA series instead: both weekly and monthly BAA charts remain in yield-downtrends, which says that lower-grade corporate bonds prices continue to move higher. My sense: whatever malady that the really crappy (JNK) bonds are suffering from, it hasn’t yet started to affect the lower grade corporate debt.

CRB fell -0.27%, making a new low but then recovering somewhat. 3 of 5 sectors rose, led by industrial metals (hello copper!) which were up a big +4.10%. Copper’s drop two weeks ago was massive, but after that one-day plunge, copper has rallied for 8 straight days, and price has more than reclaimed the losses from that event. I remember being surprised to see the candle code suggesting that this massive red candle in copper might be a bullish reversal and sure enough, it was. Copper is now back in a weekly uptrend, and remains in a monthly uptrend.  COT report suggests that a bunch of managed money longs have been rinsed out by the latest downtick.  That’s probably good news if you own copper.

Crude ended the week almost unchanged, up +0.03 [+0.05%] to 57.38. The API/EIA reports were not helpful for price (EIA: crude -5.1m, gasoline +5.7m, distillates -1.4m) and North American rig counts increased by 18 (US -1, Canada +19). Perhaps as a result, crude ended the week in a downtrend, with the forecaster at -0.17.

The crude weekly chart is still in an uptrend, but not by much – momentum is clearly declining, and the weekly forecaster is at +0.05. Monthly chart issued a sell signal last month, but currently it looks as though it could go either way. My sense: we might get a sharp correction in oil next week, but I’ve been concerned about that for a while now.

Physical Supply Indicators

* SGE premiums over COMEX are at +10.26.

* The GLD ETF tonnage on hand rose +1.48 tons, with 844 tons in inventory.

* ETF Premium/Discount to NAV:

 PHYS 10.20 -0.68% to NAV [down]
 PSLV 6.01 -1.09% to NAV [down]
 CEF 12.81 -2.1% to NAV [up]

* Bullion Vault gold (!/orderboard) is at no premium for gold and a slight for silver.

* Big bars premiums were: gold [1kg] 1.1% and silver [1000oz] 3.10%.

Futures Positioning/COT

It was another week of big changes in the COT report.

In gold, the commercial net position screamed higher, up 70k contracts. Mostly that was short-covering (-47k) but also some long-buying (+23k) mixed in there as well. This was stronger than last week’s change by 22%. Managed money net plunged by 58k contracts, mostly by selling longs (-44k) and a little by going short (+14k). On a relative basis, enough managed money longs have been rinsed out, but there are a fairly large number of commercial shorts that still need to be closed for this to be an unequivocal low for gold.

Silver’s change was a little smaller than last week, but still impressive. Commercial net rose by 22k contracts, mostly going long (+13.5k) but also by covering short (-7.9k). (Commercials, going long paper silver? That’s a new thing.) Managed money net fell by a huge 27k contracts, mostly by adding shorts (+17k) with some long liquidation also (-10k). Managed money longs for silver are the lowest since early 2016, and the commercials have the largest long exposure since mid-2015. Overall, the net position probably qualifies for a COT low.  Here’s what that looks like.

Gold Manipulation Report

There were no after-hours spikes in PM this week.

Political Grey Swan Status

  • Italian Elections: anti-Euro M5S (27.4%) is leading vs the PD (24.28%). A combination of FI + LN (both semi-anti-Euro parties) are at 29.9%. FI was the beneficiary this week. FT reported that a PD official suggested the date for the elections will “probably” be March 4, but an FI official countered that the PD was rushing the election to avoid debate on a controversial law for immigrant children born in Italy. So who knows what the exact date will be.

  • I thought last week the SPD had agreed to engage in talks with Merkel’s CDU to form a government, but apparently not – a very recent news article says the SPD has just now agreed to this. Perhaps there was a “talking-about-talking” stage I didn’t understand. SPD wants more Europe (a “United States of Europe” by 2025), more spending on education, child care, and healthcare reform, as well as a “soft” policy on refugee family reunification. The SPD also suffered their worst electoral defeat since the 1950s this past election.  Most likely, the worst thing they could do longer term would be joining the CDU in a government.

  • Catalonia regional elections are scheduled for Dec 21 – next Thursday. Current polls have the separatists 46.9% to the unionist 43.7%. The separatists continue to slowly widen their lead. If the separatists win – what then? Another election?

  • Mueller Investigation. Evidence has emerged of a strong anti-Trump bias from the lead investigator of the FBI’s HRC/Server investigation Peter Strzok, which potentially taints the conclusions of that investigation, as well as casting a shadow over the Muller investigation as well, where Strzok was also involved. A few texts caught my eye: “I can protect our country at many levels, not sure if that helps”  Perhaps that’s why HRC got a pass on her server from lead investigator Strzok – with Strzok also saying “she just has to win” in another text.  Reading between the lines, he appeared to be trying to save the country from a Trump presidency.  You can read the texts here and judge for yourself:

  • Related: the story of the (last) weekend was CNN’s colossal gaffe that erroneously accused the Trump campaign of getting early access to the Wikileaks/DNC email release. An appalled Glen Greenwald has the takedown:  Why do we care about all this fuss? Each time the media gets it wrong, it makes it more difficult to impeach Trump. Weak Trump is dollar negative, since (I believe) traders worry an impeachment process would bring substantial chaos to Washington. But ultimately, if Mueller cannot find any actual collusion, Trump (seen as the victim of repeated – and erroneous – attacks by the media, along with a key, heavily biased HRC supporter/lead investigator at the FBI) will be able to walk away from an obstruction of justice charge. Selling “obstruction of justice” if there was no collusion was tough to begin with, and the more the media engages in attempted wish-fulfillment rather than reporting, the harder that story is to sell. Impeachment is ultimately a political process, and the more it looks like Trump is being attacked just for naked political reasons, the less likely impeachment will take place. Ultimately, I believe the only reason the buck is so low is because of Mueller, so eliminating the Mueller uncertainty factor in Washington sets us up for an even stronger dollar rally as the Italian elections move closer in time.


PM rebounded this week, with the bulk of the move taking place immediately after the FOMC announcement on Wednesday. Silver and silver miners did especially well. Even platinum managed to generate a buy signal – after first dropping to multi-decade lows vs gold. Bonds did well, equities did well, and copper did especially well. Can you imagine having big bars of copper in the basement? Silver is bulky enough. Gold/silver: 78:1, gold/copper: 400:1.

Gold and silver big bar shortage indicators are showing no sign of shortage; premiums on big-bar gold and silver are normal, GLD tonnage fell slightly, and ETF discounts increased. Shanghai premiums are slowly increasing; at $10/oz, that’s moderately bullish for gold.

COT report shows a probable low for silver, and perhaps bit more time required for gold.

Next week should be fairly quiet.  Will gold and silver rally through end of year?  That is hard to know.  During the light volume trading periods, gold and silver can become the plaything of big players that like to move prices around in order to run stops.  They can get away with more during this period, since the bids underneath the market aren’t as substantial.  That’s not a guarantee that these games will happen, but it means taking on large positions right now means you might end up having to endure some disagreeable price action.

Alternatively, you could use any sort of assault that might occur as a chance to buy low.  I have a trader friend that sometimes puts “stink bids” for stuff that he wants to accumulate well below the current market price, hoping for just such a thing to happen.  So a previously-annoying assault that drops silver 30 cents now becomes “silver on sale.”  But the sale typically only lasts a few seconds, which is why the order is required.

Just a thought.  Its not a tactic I would use in a downtrend, but given the COT report, I think we are at or near a fairly important reversal point for the metals.

Forecasting code – weekly – says:

Uptrend: crude, silver, copper, BAA bond prices, SPX.

Downtrend: gold, miners, 10-year treasuries, USD.

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