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PM End of Week Market Commentary – 4/13/2018

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  • Sat, Apr 14, 2018 - 03:37pm

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    davefairtex

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    PM End of Week Market Commentary – 4/13/2018

On Friday, gold rose +11.10 [+0.83%] to 1348.60 on moderate volume, while silver climbed +0.20 [+1.22%] to 16.64 on moderate volume also. The buck was mostly unchanged. Today’s rally wasn’t about currency, it felt more as though it was safe haven buying prior to the weekend, although its hard to know for sure.

It was a bullish-looking sector map this week for the metals; miners led the metal, and silver led gold. All except copper moved above the 9 MA lines, and much of the group is also above the 50. Palladium led – perhaps because Russia is a big palladium producer, and the new sanctions on Russia might eventually affect supply. To me, the positive signs from the miners are the real bullish sign here for the group.

Name Chart Chg (W) 52w ch MA9 MA50 MA200 50/200 Last Crossing last
Palladium $PALL 9.22% 23.36% rising falling rising falling ma200 on 2018-04-13 2018-04-13
Senior Miners GDX 3.72% -6.72% rising falling rising falling ma200 on 2018-04-13 2018-04-13
Junior Miners GDXJ 3.40% -8.75% rising falling falling falling ma200 on 2018-04-13 2018-04-13
Silver Miners SIL 2.70% -18.17% rising falling falling falling ema9 on 2018-04-11 2018-04-13
Silver $SILVER 1.71% -10.25% rising falling rising falling ema9 on 2018-04-13 2018-04-13
Platinum $PLAT 1.49% -4.32% falling falling rising falling ema9 on 2018-04-09 2018-04-13
Gold $GOLD 0.84% 4.53% rising rising rising falling ema9 on 2018-04-13 2018-04-13
Copper $COPPER 0.82% 19.16% rising falling rising falling ema9 on 2018-04-12 2018-04-13

Gold rose +11.30 [+0.84%] this week, breaking briefly above the previous high of 1365.40 on Wednesday. Gold was very choppy this week – Wednesday’s strong rally was followed by Thursday’s stronger decline, and then on Friday gold rallied once more. Gold forecaster ended up at +0.02, which is a buy signal for gold – just barely. Weekly gold is in an uptrend, while monthly is in a downtrend. Gold in Euros remains bearish in all 3 timeframes. It is possible that the Europeans need to become buyers for gold in order for it to break above 1377 resistance – but you can see in the weekly chart below that we aren’t far away from that breakout.

The June rate-increase chances remains at 79%.

COMEX GC open interest rose by 13,411 contracts this week.

Silver rose +0.28 [+1.71%] this week. Silver moved higher for 4 days out of 5, which is a reasonably strong performance. However, it was not enough to move silver into an uptrend; daily forecaster ended the week at -0.11, which is a slight downtrend. While the weekly forecaster remains in a downtrend too, the monthly turned positive this week; if we close at these levels at end of month, monthly forecaster will issue a buy signal. And looking at the weekly chart with the Mk 1 eyeball, it sure looks as though the volatility has died away, there is a relatively strong bid at 16.10, and a move higher might just be in the cards. Adding the still-incredibly-bullish COT report into the mix, I’m positive about where silver probably goes next.

The gold/silver ratio fell -0.70 to 81.02, which is bullish.

COMEX SI open interest plunged -25,425 contracts, or 3953 tons of paper silver. That’s a massive change – the paper equivalent of 16% of global silver production vanished in just one week. I think that’s bullish too.

The miners had a good week, with XAU rallying +3.12%. This week saw a mini-breakout above a previous high, a retreat back to the breakout point, and then a strong rally on Friday to a new high. This is a bullish pattern. Although the miners aren’t closing at their day highs, and the daily forecaster remains weak at +0.06, both the weekly and monthly forecasters remain in uptrends. XAU is now above both the 50 and 200 MA lines. That’s also bullish.

The GDX:$GOLD ratio rose +2.85%, while the GDXJ:GDX ratio fell -0.31%. That’s bullish.

USD

The buck fell -0.32 [-0.36%] to 89.42. The buck is slowly moving back down to the middle of its recent trading range, dropping back below its 9 and 50 MA lines – that’s bearish. Daily forecaster moved lower, down to -0.56, which is a fairly strong downtrend. Weekly forecaster issued a strong sell signal this week (-0.58 to -0.42), and the monthly moved back into a weak downtrend.  This all suggests the bias for the buck is to the downside.

US Equities/SPX

SPX rose +51.83 [+1.99%] to 2656.30. It was relatively slow progress this week – at least compared with the recent past anyway – but SPX did manage to close back above its 9 MA, which is bullish. It also issued a buy signal on Tuesday, with the forecaster ending the week at +0.36, which is a reasonably strong uptrend. Weekly forecaster also issued a buy signal, up +0.62 to +0.35. Monthly remains slightly bearish, at -0.03.

Sector map was mixed; energy was incredibly strong, tech did fairly well, and utilities retreated – which looks relatively bullish – but homebuilders also fell, which is not a great sign. Homebuilders are showing a very distinct lower-high lower-low pattern, which is bearish. A death cross approaches too. Its hard to see how the economy does well when the homebuilders are falling. Financials have a similar look to them, although they aren’t quite as bearish, but the sharp drop on Friday for XLF (bearish engulfing: 40% reversal) suggests lower prices ahead.

VIX fell -4.08 to 17.41.

Name Chart Chg (W) 52w ch MA9 MA50 MA200 50/200 Last Crossing last
Energy XLE 6.03% 3.03% rising falling rising falling ma50 on 2018-04-10 2018-04-13
Telecom XTL 3.94% 3.45% rising rising rising rising ma50 on 2018-04-10 2018-04-13
Gold Miners GDX 3.72% -6.72% rising falling rising falling ma200 on 2018-04-13 2018-04-13
Technology XLK 3.54% 26.64% rising falling rising falling ema9 on 2018-04-10 2018-04-13
Materials XLB 2.83% 13.25% rising falling rising falling ma200 on 2018-04-12 2018-04-13
Healthcare XLV 2.49% 10.67% rising falling rising falling ema9 on 2018-04-10 2018-04-13
Industrials XLI 1.68% 15.57% rising falling rising falling ema9 on 2018-04-12 2018-04-13
Defense ITA 1.50% 35.12% rising falling rising falling ma50 on 2018-04-12 2018-04-13
Financials XLF 1.07% 19.91% rising falling rising falling ema9 on 2018-04-13 2018-04-13
Cons Discretionary XLY 0.54% 16.95% rising falling rising falling ema9 on 2018-04-13 2018-04-13
Cons Staples XLP 0.32% -4.10% rising falling falling falling ema9 on 2018-04-13 2018-04-13
REIT RWR -0.52% -9.20% rising falling falling falling ma50 on 2018-04-13 2018-04-13
Utilities XLU -1.25% -3.66% falling falling falling falling ma50 on 2018-04-13 2018-04-13
Homebuilders XHB -2.01% 8.96% rising falling rising falling ema9 on 2018-04-11 2018-04-13

Gold in Other Currencies

Gold rallied in all currencies this week except GBP; gold in XDR climbed +7.50.

Rates & Commodities

Bonds moved slightly lower, with TLT off -0.17% on the week. TY did substantially worse, falling -0.45%, making a lower low on Thursday. Friday’s doji was a bearish continuation, and TY forecaster ended the week at -0.20, which is a mild downtrend. The weekly TY forecaster also issued a tentative sell signal this week, dropping -0.24 to -0.04, but the monthly forecaster remains in an uptrend. When I see how bonds did during the recent concern over Syria, it sure looks as though US treasury bonds aren’t acting like the safe haven they once were.

JNK rallied +1.18% this week, which is a strong move for junk. The move this week in JNK could be a relatively strong risk on sentiment – or it could be a result of the large move higher in crude. Forecaster ended the week at +0.75, which is a strong uptrend. BAA rates also appear to be on the cusp of heading lower, which would be bullish for junk debt as well.

Crude shot up +5.40 [+8.72%] to 67.33, a very large move in the price of the master resource. Crude rallied 5 days out of 5, breaking above the previous multi-year high of 66.66. The combination of reduced concerns over the US-China trade war, plus the geopolitical uncertainty in Syria seemed to be the cause for the rally in crude. I also believe that the rising crude price is – for now – supporting equities, since it is the energy-equity subsector that is rallying the hardest at the moment.  Still, the forecaster ended the week at +0.30, which suggests that the uptrend is slowing. Crude has this pattern of moving up, and then retracing, and that may be what it is preparing to do right now.

Crude remains in an uptrend in all 3 timeframes.

Physical Supply Indicators

* The GLD ETF tonnage on hand rose +5.90 tons, with 866 tons in inventory.

* ETF Discount to NAV:

 PHYS 10.92 -0.63% to NAV [down]
 PSLV 6.15 -2.17% to NAV [down]
 CEF 13.53 -2.39% to NAV [down]

* Bullion Vault gold (https://www.bullionvault.com/gold_market.do#!/orderboard) shows no premium for gold and a 2-3% premium for silver.

* Big bars premiums were: gold [1kg] 1.08% and silver [1000oz] 3.40%.

Futures Positioning/COT

In gold, the commercial net position rose by 13k, mostly closed shorts (-9k) but also some new longs (+4k). Managed money net position fell by 1k, mostly long liquidation (-1.5k) but also new shorts (+466). These were very minor changes. Gold remains in limbo from a COT perspective, neither bullish nor bearish.

In silver, the commercial net fell by -1.9k, mostly long liquidation (-3.1k) but also some short covering (-1.1k). The managed money net rose by 3.2k, mostly short-covering (-2.9k) and a small number of new longs (+292). These are minor changes, and we remain at near-record levels for managed money short interest – a COT low for silver.  This week, I’m going to show you the big picture for silver – and the COT.

Grey Swan Status

  • Italian Elections – No progress forming a government in Italy. A succinct description from (http://the-view-from-rome.blogautore.repubblica.it/?refresh_ce) follows: “…5-Star’s 33% of the vote makes it the country’s largest party but still lacking a majority, Di Maio has said he could govern with the League, but has categorically ruled out participating in a government that includes Berlusconi, while Salvini has so far ruled out abandoning his partner in the right-wing coalition, Berlusconi. Di Maio has been clear and consistent: “We see only one way to resolve this stalemate: Silvio Berlusconi should step aside and allow the creation of a government of change.” Berlusconi is famous for many things: putting aside personal ambition for the good of the country is not one of them.”

  • US Congressional Elections, 2018. The generic ballot shows Democrats 46.5% [+6.8%] vs Republicans 39.7%, a decrease of -1.8% in the spread vs last week. https://projects.fivethirtyeight.com/congress-generic-ballot-polls/

  • German refugee reunification restrictions: anecdotal evidence suggests some number of migrants & refugees who are denied reunification (i.e. the ability to fetch their relatives into the country) are returning to their country of origin. The Greens are very unhappy, calling this a catastrophic error, but I suspect AfD and CDU feel differently. Might the Germans be starting on the slow path towards recovery from the migrant/refugee situation? http://www.dw.com/en/syrian-refugees-leaving-germany-over-family-reunification-policy/a-43358055

  • Mueller Investigation: FBI investigators raided the offices of Trump’s personal attorney, Michael Cohen, allegedly looking for evidence about payoffs to Stormy Daniels; perhaps they are hoping to flip Cohen by threatening him with a charge of making an illegal campaign contribution. In the meantime, the FBI will now presumably dig through all that attorney-client-privileged communication looking for new avenues for their investigation; they can always use parallel construction to sidestep the pesky rules about violating privilege. Republican Lindsey Graham has previously said that if Trump fires Mueller, its an impeachable offense – impeachment being a political process rather than a legal one. Trump pardoned Scooter Libby this week, perhaps signaling his willingness to use pardons to help those he believes have been victimized by Mueller’s prosecutorial enthusiasm.

Summary

While the concerns over a trade war with China appear to have ebbed, it was replaced with concerns over a war with Russia over Syria’s alleged use of chemical weapons on civilians – although it was unclear why Syria would want to do this, given they are winning the war at the moment and apparently are not in need of any “edge” that such weapons might provide. Economic reports have taken a back seat to geopolitics in terms of the forces affecting the markets.

Silver remains at a COT low, with near-record short positions for managed money, and near-record long positions for the commercials. Gold remains in a no-mans-land, neither bullish nor bearish.

Big bar gold and silver premiums remain relatively unchanged; supply indicators suggest there is no current shortage of physical gold.

Miners are increasingly positive, gold is hovering not far below a major breakout point, with silver also managing to move higher. All this, while the buck may have turned back down again.  If the buck does break lower, gold probably breaks out through 1377.

I leave you with the following long term gold chart. It shows an ascending triangle pattern, which is generally a bullish pattern, along with rising volume. It is always good to have rising volume along with rising price – it is showing increased interest as price rises. The more shots gold takes at breaking out, the higher the likelihood it will do so.  As long as the buck keeps falling, I see two basic scenarios: #1 where it breaks out immediately, and #2 where it head-fakes lower, and then breaks out.  I know that seems like fantasy to the long-suffering goldbugs here, but this looks like a bullish chart to me.

Now we just need Europe to jump in and start buying gold, and we’ll be all set.

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