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PM End of Week Market Commentary – 4/6/2018

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  • Sat, Apr 07, 2018 - 08:27pm

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    davefairtex

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    PM End of Week Market Commentary – 4/6/2018

On Friday, gold rose +7.40 [+0.56%] to 1337.30 on heavy volume, while silver was unchanged at 16.36 on heavy volume also. While the buck fell -0.42%, driven mostly by a surprisingly weak Nonfarm Payrolls report, the excitement was provided by equities, which had a wide trading range and ended the day down -2.19%, driven lower by the news that Trump had announced another $100 billion in potential tariffs against Chinese products.

It was a mixed week for the metals; while most of the miners, gold, and silver were all in positive territory, both platinum and palladium did poorly, with palladium down another 5% this week. While gold ranked near the top, the difference in performance between the various items was small enough that it is difficult to draw any solid conclusions from the map this week, except to say that palladium has had a bad two months after its 2-year rally.

Name Chart Chg (W) 52w ch MA9 MA50 MA200 50/200 Last Crossing last
Junior Miners GDXJ 0.75% -11.77% falling falling falling falling ema9 on 2018-04-06 2018-04-06
Gold $GOLD 0.58% 6.68% falling falling rising falling ma50 on 2018-04-06 2018-04-06
Copper $COPPER 0.51% 14.29% rising falling rising falling ma200 on 2018-04-06 2018-04-06
Senior Miners GDX 0.41% -6.13% falling falling rising falling ema9 on 2018-04-06 2018-04-06
Silver $SILVER 0.15% -10.43% falling falling falling falling ema9 on 2018-04-03 2018-04-06
Silver Miners SIL -1.20% -17.73% falling falling falling falling ema9 on 2018-04-06 2018-04-06
Platinum $PLAT -1.71% -4.19% falling falling falling falling ma200 on 2018-03-27 2018-04-06
Palladium $PALL -5.26% 11.59% falling falling rising falling ma200 on 2018-03-29 2018-04-06

Gold rose +7.70 [+0.58%] this week, trading mostly sideways. Friday’s candle print was a bullish engulfing (40% bullish reversal), and gold’s forecaster ended the week +0.23 to +0.07, which was a buy signal for gold. Weekly is in a mild uptrend, while monthly remains in a downtrend.

Gold in Euros is in a downtrend in all 3 timeframes.

The June rate-increase chances remains at 79%.

COMEX GC open interest fell by -789 contracts this week.

Silver rose +0.02 [+0.15%] this week. Silver rallied strongly on Monday, but then spent most of the rest of the week selling off. Friday’s candle print was neutral, and the forecaster closed at -0.23, which is a downtrend. Silver weekly and monthly are in downtrends as well.

The gold/silver ratio rose +0.35 to 81.72, which is bearish.

COMEX SI open interest rose 14,666 contracts this week, or 2280 tons of paper silver, or about 33 days of production. That’s a big increase, and I suspect most of it came from managed money loading up short.

The miners ended up higher on the week, with XAU rallying +0.52%. The miners are moving slowly higher, three steps forward, two steps back. Forecasters in all 3 timeframes are in mild uptrends. XAU closed the week above the 50 MA for the first time since early February. From a trend standpoint, the miners are doing the best in the metals group.

The GDX:$GOLD ratio fell -0.17%, while the GDXJ:GDX ratio rose +0.34%. That’s slightly bullish

USD

The buck fell -0.07 [-0.08%] to 89.74. The buck staged one strong rally this week – on Thursday – but Friday’s plunge erased most of those gains. While the daily forecaster ended the week at -0.12, a mild downtrend, both the weekly and monthly forecasters are in mild uptrends. Currently, that suggests the bias in the buck is to the upside. The buck ended the week above both the 9 and 50 MA lines, but the buck remains within its multi-month trading range.

US Equities/SPX

SPX fell -36.40 [-1.38%] to 2604.47. This week saw some large moves in both directions, with SPX breaking below the 200 MA on Monday, then bouncing back through mid-week, but ultimately worries over tariffs pulled prices back down on Friday. Daily forecaster ended the week at -0.34, while weekly and monthly both remain in downtrends. SPX did manage to avoid making a new low, but that close below the 200 was a bearish sign.

Sector map looks mostly bearish, with tech and industrials leading lower. Our friends the gold miners did best.  Most of the sector map is below the 50 MA except the high-yielding utilities and REITs.

VIX rose +1.52 to 21.49.

Name Chart Chg (W) 52w ch MA9 MA50 MA200 50/200 Last Crossing last
Gold Miners GDX 0.41% -6.13% falling falling rising falling ema9 on 2018-04-06 2018-04-06
Homebuilders XHB 0.05% 10.81% rising falling rising falling ma200 on 2018-04-06 2018-04-06
Energy XLE -0.09% -4.64% rising falling rising falling ma200 on 2018-04-06 2018-04-06
Utilities XLU -0.22% -2.32% rising rising falling rising ema9 on 2018-03-27 2018-04-06
Telecom XTL -0.24% -1.64% falling falling falling falling ema9 on 2018-04-06 2018-04-06
REIT RWR -0.29% -7.79% rising falling falling falling ma50 on 2018-04-03 2018-04-06
Cons Staples XLP -0.40% -3.90% rising falling falling falling ema9 on 2018-04-03 2018-04-06
Cons Discretionary XLY -0.60% 15.04% rising falling rising falling ema9 on 2018-04-06 2018-04-06
Defense ITA -0.67% 32.49% rising falling rising falling ema9 on 2018-04-06 2018-04-06
Materials XLB -0.76% 7.35% rising falling rising falling ema9 on 2018-04-06 2018-04-06
Financials XLF -1.45% 15.03% rising falling rising falling ema9 on 2018-04-06 2018-04-06
Healthcare XLV -1.87% 7.54% rising falling rising falling ema9 on 2018-04-06 2018-04-06
Industrials XLI -2.05% 11.85% rising falling rising falling ema9 on 2018-04-06 2018-04-06
Technology XLK -2.09% 20.64% falling falling rising falling ema9 on 2018-04-06 2018-04-06

Gold in Other Currencies

Gold rallied in all currencies this week; gold in XDR climbed +9.34.

Rates & Commodities

Bonds fell; TLT dropped -0.66% on the week; Thursday marked the low, with TLT off more than 1.7%, but Friday saw a big rebound alongside the tariff-related selling in equities. Perhaps bonds are dead after all. TY was mostly flat, off just -0.03%. TY daily forecaster issued a sell signal on Wednesday, and Friday’s rally didn’t change that very much, with the forecaster at -0.16. Weekly and monthly forecasters are both in uptrends. If equities continue to sell off, bonds may well stage a more substantial rally in spite of the looming supply issues from the Fed balance sheet roll-off and the large federal government deficit.

JNK fell -0.31% on the week. While junky credit is slowly moving lower, it does not seem to be in any hurry to collapse. There is still a lot of dip-buying going on. Longer term, the weekly and monthly BAA (yield) forecasters remain in an uptrend – this says that the bias for JNK remains down.

Crude plunged -2.98 [-4.59%] to 61.93, with the big moves coming on Monday and Friday – in concert with the big moves lower in equities. Crude’s chart looks a whole lot worse, however, since the rallies were modest, and the down-days were relatively severe. Crude forecaster issued a sell signal on Monday, and it closed on Friday at -0.46, which is a fairly strong downtrend. It appears to me that the selling starts in crude whenever the tariff concerns become stronger. While the monthly forecaster remains in an uptrend, the weekly is currently showing a strong downtrend. Until the tariff matter is cleared up, it seems that crude will remain under pressure. Not even an unexpectedly bullish EIA report [crude: -4.6m, gasoline: -1.1m, distillates: +0.5m] was enough to lift prices for more than a day.

Physical Supply Indicators

* The GLD ETF tonnage on hand rose +13.87 tons, with 860 tons in inventory.

* ETF Discount to NAV:

 PHYS 10.79 -0.78% to NAV
 PSLV 6.03 -2.48% to NAV
 CEF 13.29 -2.57% to NAV

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

* Big bars premiums were: gold [1kg] 0.96% and silver [1000oz] 3.49%.

Futures Positioning/COT

In gold, the commercial net position rose by 37k, mostly closed shorts (-32k) but also some new longs (+5k). Managed money net position fell by 35k, mostly long liquidation (-27k) but also new shorts (+8k).

In silver, the commercial net rose by 4.7k, mostly new longs (+4.3k) but a few closed shorts (-386). The managed money net fell by 6k, with a bunch of new shorts (+7.6k) offset by some new longs (+1.5k). Once again, we are at a new record for managed money shorts, and also for commercial longs. As with last week, we should be a COT low for silver.

Grey Swan Status

Summary

This week mostly seemed to be about the prospects of a trade war with China, with concern ramping up on Friday because of Trump’s announcement of the $100 billion in additional tariffs he was seeking to impose in response to China’s response. The weak Nonfarm Payrolls report didn’t help, but it primarily seemed to have an effect on gold and currency rather than equities.

Silver remains at a COT low, with record short positions for managed money, and record long positions for the commercials. Gold COT 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.

Equities and crude seem linked, with crude looking to be the weaker of the two.

Miners continue to look mildly positive – probably best in the PM space, with gold coming in second. Silver is weakest, with managed money continuing to pile in short.  We did see hints this week of a safe haven bid for gold – that was on Monday.  We really need to see more of that if gold is to break out.

I’m not sure we are there yet.

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