PM End of Week Market Commentary – 9/11/2015
On Friday, gold fell -2.20 to 1107.90 on moderate volume, while silver dropped -0.09 to 14.59 on moderate volume as well. Gold and silver started dropping in Asia and didn't stop until mid-morning in NY, with gold touching a low of 1097.70 and silver hitting 14.25. Buyers did show up, however, pushing prices back up substantially back towards even; both gold and silver printed bullish-looking hammer candles on the day.
On the week, gold fell -14.40 [-1.28%], silver rose +0.03 [+0.24%], GDX fell -1.34% and GDXJ dropped -1.34%. Platinum was off -2.18%, palladium climbed +3.19%, and copper rose a massive +6.06%.
Gold broke down from last week's descending triangle pattern, and then managed to find some buyers around the 1100 price level. Since gold made a new low just on Friday, it is possible that we could print a swing low on Monday if the buyers continue to appear and price can close above 1112.
Silver along with a number of other commodities sold off relatively hard, only to find some strong buying support at 14.25. Intraday, you could see the buyers continually push prices back up, with repeated cup & handle breakout patterns until price was back in the 14.50 range. I feel this was a good day for silver, even though it declined overall.
Miners broke to new lows on Friday, selling off hard on gold's move through 1100, driving below the previous low at 13 and breaking support. But when gold and silver started to rally, the miners followed, with GDX moving back up into the green and eventually closing up +0.69% on moderate volume. The strong recovery after breaking to new lows feels quite positive to me. We are not out of the woods yet with gold or the miners, but this is really the best outcome I could have asked for given the chart formation we were seeing this week. GDXJ behaved similarly to GDX, rising +1.16% on moderately light volume.
The dollar continued falling this week, losing -1.05 [-1.09%] to 95.19. Last week the buck pushed up to touch the 50 MA, but it failed to rise above it, and has fallen since then. It looks like a classic pattern of lower highs is forming, and this defines a downtrend. We do have an FOMC meeting coming up on Wednesday and Thursday next week; the buck seems to be suggesting there will be no rate hike. If there is no rate hike, the buck might well sell off even more.
SPX rose on the week, climbing +39.83 [+2.07%], regaining more than half of last week's losses. After selling off hard and then rallying hard, the market has been chopping sideways for the past 8 trading sessions. We don't really have a direction for this market yet, but my guess is, we won't have to wait too much longer for the latest installment on the action. Which way will it go? Longer term I think we go lower, but we could easily rally in the short term, and that's probably the direction I'd be leaning in.
VIX dropped -4.60 to 23.20.
Gold in Other Currencies
Gold dropped in every currency this week, losing -27.40 in XDR which probably reflects the true price action net of currency effects.
Rates & Commodities
Bonds (TLT) fell on the week, dropping -1.05%. Bonds continue to meander slowly lower; perhaps the weakening dollar has something to do with that.
Junk bonds (JNK) rose +0.62%; from a longer term perspective, JNK remains in a downtrend.
The CRB (commodity index) was flat this week, rising just +0.01%. The big rally in commodities two weeks ago seems to have run out of steam. I can't tell if we continue moving higher, or drop back down to test new lows. Perhaps it will depend on China and if the market starts to believe that the stimulus China is deploying will have any material effect on China's commodity purchases.
WTIC fell -0.99 [-2.16%] to 44.78 this week; it too is looking for direction. So far oil has found support on moves below 44, but it has been unable to rise above its 50 MA. One possible clue was how it performed on Friday: silver's rally off its lows was strong, while oil's rally was much weaker. This suggests oil is more likely to drop rather than rise. A close below 44 would be a bad sign and lead to a fair amount of selling, in my opinion.
Physical Supply Indicators
* Premiums in Shanghai over spot are now at +4.81 over COMEX, down vs last week.
* The GLD ETF lost -4.17 tons, with 678.18 tons remaining.
* GC futures are not in backwardation, but the current two-front-month spread has moved to flat at +0.00.
* ETF Premium/Discount to NAV; gold closing (15:59 close price on Sept 11th) of 1107.00 and silver 14.58:
PHYS 9.13 -0.33% to NAV [down]
PSLV 5.67 +0.85% to NAV [up]
CEF 10.60 -10.30% to NAV [down]
GTU 38.10 -6.26% to NAV [down]
ETF premiums were mostly down with the exception of PSLV.
* Bullion Vault gold (https://www.bullionvault.com/gold_market.do#!/orderboard) shows no significant premium for gold, and a 2-3% premium for silver [14.87-14.99] in Zurich, Toronto, and Singapore.
* HAA big bar premiums are slightly lower for gold [2.17% for 100 oz bars in NYC], and also slightly lower for silver [3.81% for 1000 oz bars in NYC].
The COT report covered trading through Sep 8th, when gold closed at 1120.70 and silver 14.75.
Gold commercials reduced shorts by -4.3k this week. They're smart money, and they appear to be buying the dip. Note this move took place prior to Wednesday's big gold sell-off. I suspect they've covered even more at this point. Managed Money increased shorts by +13.7k, a fairly large increase. Positioning for gold continues to look bullish – as it has now for several months.
In silver, commercials covered -1k shorts, and so did Managed Money. Over the past week, silver has been slowly climbing, so these changes make sense. Silver commercial short positions are still quite low, and since they usually close out their positions near the bottoms, that is bullish, and continues to get more bullish.
Moving Average Trends [9 EMA, 50 MA, 200 MA]
Everything red once again this week. Things got worse, from a moving average perspective.
|Name||Chart||Change||52w ch||EMA9||MA50||MA200||50/200||Last Crossing||last|
|Silver Miners||SIL||1.61%||-48.66%||falling||falling||falling||falling||ema9 on 2015-08-31||2015-09-11|
|Junior Miners||GDXJ||1.16%||-49.78%||falling||falling||falling||falling||ema9 on 2015-09-09||2015-09-11|
|Senior Miners||GDX||0.69%||-45.21%||falling||falling||falling||falling||ema9 on 2015-08-31||2015-09-11|
|Gold||COMEX.Gold||-0.54%||-10.87%||falling||falling||falling||falling||ema9 on 2015-09-03||2015-09-11|
|Silver||COMEX.Silver||-0.96%||-22.01%||falling||falling||falling||falling||ema9 on 2015-09-09||2015-09-11|
|Platinum||COMEX.Platinum||-1.66%||-29.61%||falling||falling||falling||falling||ema9 on 2015-09-04||2015-09-11|
Gold broke down out of its descending triangle pattern, but it ended Friday with a possible reversal bar. Silver climbed on the week, and it printed an even more solid reversal bar on Friday. Miners added their voice, making a new low and crashing through support only to rally back, to print their own reversal bar. We still require confirmation on Monday of the low, but it is just possible momentum will reverse here after the three week decline.
The gold/silver ratio fell -1.17 to 75.96, and is now moving back into the 68-76 trading range it has been in for the past 12 months. The GDX:$GOLD was unchanged this week, as was GDXJ:GDX. The first ratio looks quite bearish, while the juniors continue to show relative strength.
The COT reports show an increase in Managed Money shorts for gold, and a slight decline for silver. The potential remains for quite a bit of short covering, but as of yet its just still potential, as it has been for months now.
Gold big-bar physical shortage indicators are unchanged; in the west, ETF premiums were down, GLD tonnage fell, but futures moved closer to backwardation at COMEX. In the east, premiums in Shanghai declined. Retail shortages in silver remain elevated, with silver eagles selling at a 30-35% premium to spot.
Copper rallied quite strongly, while oil declined. As a reflection of that bifurcation, commodity prices are more or less moving sideways. Copper's strength hints at possible stimulus from China.
The computer this week is showing a short-term (daily) bullish reversal for gold, as well as a positive near term outlook for both gold and silver. That's something I haven't seen in a while. Its also positive on oil and now for copper too, at least near term. Longer term, crude is still at risk for a continued move lower.
The reversal indicator is what I believe most; it is correct relatively often. Let's hope it is right.
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My sense is, this could well be a black swan that will take Europe down. I certainly didn't see it coming.
I have some experience of emerging nation life, and a persistent dream of the people in these countries is to move to a place with greater economic opportunity. If they thought, for just a moment, they could appear in Europe and be able to work and live there, a vast number of them would jump at the chance.
Given that in the current case, you just have to be Syrian (or claim to be Syrian) and the welcome mat is laid out, the outcome is predictable.
"Germany expects 40,000 new migrants from the south at the weekend, despite the willingness of German people our possibilities are smaller and smaller," Steinmeier told counterparts from the Czech Republic, Hungary, Slovakia and Poland.
So that's 40k new people … per weekend?
I have to admit, during the summer I ignored much of this story, as it was at first isolated and the stories were limited in scope. It appears any of the refugees that came in June and July got a head start, because any news that makes it back to Syria that some areas of Europe are trying to help those fleeing might actually make the situation worse. I've watched quite a few of the news reports and through late August into September, the numbers have been staggering. And the truth is, many of these people may have originally have been refugees from all of the conflict in Iraq over the last decade and a half. 40,000 in one weekend, on top of those already there…wow. And who knows how many will be behind them.
I'm trying to visualize what it would be like, living in an area where there constantly are people moving through the woods, hugging tree lines, trying to get away from a homeland they have given up on. In some respects, this amplifies stories from the southern U.S., where people have been dealing with immigrants for years. The numbers in Europe are different though.
I'd like to think the west could set up a system of relief and help for these people, because right now the problem is only pushing people to desperate measures. Are some of these refugees stealing from people's gardens? Stores? Perhaps breaking into empty homes to get food? Probably. However, would any of us do any differently? If our family had already crossed large bodies of water, walked for days and weeks….and we had no food….wouldn't we try to feed our kids any way we could? My heart goes out to the situation, and I sincerely the humanity in all of us trumps any nationalistic fears.
A refugee crisis can provide a ton a stress for an already weakened system and it lends itself to disappointment and other hard feelings among both the refugees and 'the system'. I'll give you an example. Over the weekend I saw a clip of a an interview with a clearly intelligent 18 year old Syrian woman who was a refugee. She was an electrical engineering student at a Syrian university and her father had fled 6 months earlier to set up a place for them in Germany, and now it was her turn. She spoke decent English, but I doubt she spoke any German, yet she was beside herself (and rightly so) that she was finally out of Syria and on her way to Germany. She went on about how she is going to go to college in Germany, get a great job, and life is just going to be great. Well, if anyone knows the German system, throughout school they are essentially screened for intelligence and they tell you if you can go to med school, engineering, or have to learn a trade. It's a system that works when you grow up in it, but how about a foreigner stepping in at 18 years of age with preconceived ideas of how it's all going to go down? What if they don't teach in her language? What if they won't pay for her to get a 4-year education and instead tell her to learn a trade or tell her they won't give her any education at all? Do you suppose that someone who cannot speak the language, cannot find a job, and is given little opportunity to do so will feel a little bit of resentment?
Do you suppose a situation such as above could lend itself to radicalization, especially once the Syrian's figure out that the U.S. was giving weapons to the 'moderate' rebels a.k.a ISIS and Al Qaeda, and therefore perpetuating the civil war in that country? At last, imagine a German John McCain or Lyndsey Graham's (hopefully German legislators aren't as stupid as those 2, but who knows) view on this refugee crisis? I'll give you a little example – Let's just assume that ISIS and Al Qaeda have noticed that Western Europe is allowing anyone in, no background checks, no nothing. Being the intelligent people they are, they put a few jihadists on the next boat from syria to greece and then on to Europe. Let's assume they manage to sneak 1 jihadist/1000 refugees. That's 40 per weekend, 2080/year. So, how would a European country know that they were jihadists? They wouldn't, and so I can only imagine that they will set them up with some sort of visa, put them on the government dole, and then they're off to the races. The situation is so great that it doesn't even cost Al Qaeda and ISIS any money to support their sleeper cells in Europe! Woopie! So, how would a German McCain or Graham deal with the situation? No doubt they would be behind closed doors arguing for more government surveillance of the population, more spying on their own people, perhaps more collaboration with the NSA – you spy on us, we spy on you, and we swap data, etc.
I'll be the first to admit that the West has been heavily participating in the civil war in Syria through proxies. We've (citizens) been so stupid as to let them (government) get away with it, and now we will reap the rewards of our indifference to what our government is doing. Whether that is in the form of higher taxes to support welfare payments to the refugees, whether that is an isolated portion of the population secluded from integration with the public due to economic, language, cultural barriers, etc., or whether this means a growing budget deficit, more money printing, more economic instability, or the rise of a xenophobic (Trump) candidate for president, who the hell knows. But this will destabilize the system as Dave has rightly pointed out.
An interesting side note, could this crisis stress the relationship between Europe and the U.S. mainly because we're doing what we want in Syria and Europe is paying the price for it (40,000 refugees/ week and the U.S. is taking 10,000!! in 2016?). Imagine if Europe were bombing Mexico and we were seeing 40,000 refugees per week and Germany said they would take 10,000 all of next year. Who wouldn't be screaming foul in this country?
The numbers I've recently read are that there are about 500 million people in Europe. There are currently about 1 million refugees trying to get into Europe. That's one refugee for every 500 Europeans. Absorbing that many refugees doesn't sound like a big stretch. Particularly on a continent where the population is aging and needs an infusion of young people, especially those who have education and skills, which many of the refugees are purported to have.
Plus, the US has about 320 million people and can also use some young blood with skills and education. The much ballyhooed "invasion" of immigrants across the Mexican border has reached stasis with about as many leaving as entering the US from Mexico and Central America.
Of course if the current relative trickle trying to enter Europe evolves into a flood because conditions continue to deteriorate in the ME and Africa, all bets are off. Given the ongoing political, economic and climate deterioration things could get very ugly very fast in the event of a black swan.
Yesterday while browsing books in Barnes and Noble I came across Glenn Beck's newest book: It IS About Islam.
It IS About Islam: Exposing the Truth About ISIS, Al Qaeda, Iran, and the Caliphate (The Control Series)
Aug 18, 2015by Glenn Beck$8.81$14.99PrimeGet it by Tuesday, Sep 15More Buying Choices
Other Formats:Audible Audio Edition, Audio CDFREE Shipping on orders over $35
Sooooooooooo, should we be careful with possible "embedded" terrorists who may be taking advantage of our "compassion?" Nothing is ever easy, right? Ken
Did you overlook this discussion? Any libertarian worth his or her salt know that a state designates internal and external enemies as a way to justify expanding its own power and repression. The not-so-great thing about emotion is that even when we have evidence of one thing, we can keep fearing or hating something else that is not the cause.
It's true that the Koran has many references to war and violence. So does the Old Testament. My reading of the New Testament is that Jesus taught his followers not to kill others no matter what, but others interpret it differently.
The bottom line is, so what? There are clearly big gaps of all sorts when it comes to how we actually live versus how our holy books tell us to live. Hence many Christian, Muslim, and even Buddhist regimes have waged war. Some argue that Western culture is also inherently warlike, and 500 years of conquest does provide some support for that hypothesis. But, it would be just as silly to assume that Americans or Spanish are inherently violent because of our history of conquest as to assume that Muslims are inherently warlike because of certain passages found in the Koran. Indeed, it seems that a propensity for violence is part (not all) of being human much more than it is the bailiwick of any particular religion.
I have met and worked with a lot of Muslims. They're pretty much just like everybody else: individual humans with positive qualities and flaws, who spend most of their time doing everyday things that you and I do. Yes, there are some cultural generalizations, but I have not observed them to be more violent than other people.
At least 99.999% of Turks, Egyptians, Algerians and Iraqis here in Europe are not committing acts of terror. They're mostly running kebab shops, attending university, driving taxis, and otherwise trying to provide for themselves and their families. In my town in Switzerland, there is one Iranian doctor and one American doctor. Neither is taking over anything; they're just doing their jobs and living their lives.
I'm not saying that rapid influxes of migrants present no problems; they present many. But let's focus on real problems instead of bogeymen conjured by demagogues.
I haven't read the Koran, but I'm not inclined to trust Glen Beck as my Koran interpreter, any more than I'd pick Bill Maher to teach me about spirituality.
Something tells me Mr Beck is not likely to pick the nice bits.
I did a brief search looking for the the Hadith that talks about all those virgins – from source material, mind you so I could read it in context – but I was unable to locate anything searchable. It does seem a little bit odd that a searchable english version isn't online. One would expect if the book was so horrible, it would be a prime resource so that everyone could see just how terrible it was.
The only copy I could find was a non-searchable PDF that was basically photocopied from a translation published back in 1940. And frankly, it didn't seem horrible. I only read 30 pages before I gave up searching for my virgins…
I have this thing about source material. I never trust someone else's snippets. They often leave out some really important parts.
Something to make you go, "hmmmmmmm."
The US is a celebrated country of immigrants, but we're also well known for hosing the latest crop to make it here. No Irish Need Apply signs in the 1800s come to mind. In my own lifetime, the Vietnamese boat people were initially eyed nervously because of a supposed desire to consume any nearby cats. These days, nobody really remembers this.
If the influx is small enough, its no big deal. They acculturate and help move things forward. There's nothing like an immigrant from an emerging market country to appreciate just how easy it is to make it here in the states. Just takes a lot of really hard work, and living three families to a house. Stuff that's no big deal in the old country, but unheard of here in the US.
If the influx is rapid, large, and the cultures are very different – lets say the immigrants come from a culture on the other side of a fault line war – it may be a very different story entirely. Immigrants tend to naturally group together when they arrive; they "take over" sections of town. This may prove disagreeable to the locals, especially if there are a few jihadis mixed into the bunch that end up Doing Bad Things a year or two later.
Read this snippet from a book I read on the subject a few years back. Written back in 1993, I found the book compelling:
It is my hypothesis that the fundamental source of conflict in this new world will not be primarily ideological or primarily economic. The great divisions among humankind and the dominating source of conflict will be cultural. Nation states will remain the most powerful actors in world affairs, but the principal conflicts of global politics will occur between nations and groups of different civilizations. The clash of civilizations will dominate global politics. The fault lines between civilizations will be the battle lines of the future.
This is not to advocate the desirability of conflicts between civilizations. It is to set forth descriptive hypothesis as to what the future may be like.
Small number of immigrants that arrive slowly: no problem. Large numbers that descend on a country in a short period of time? That's just asking for trouble, especially for nations that are right on the border of the civilizational fault line, and are historically more concerned than the nations at the core. When your history includes invasions and occupations by the other civilization, and then you have a deluge of immigrants from across that border…its just problematic.
That's why Slovakia is not so happy about all these people arriving from Syria. Unlike Germany, they have actually been invaded by armies from across the fault line. Do they have a right to be concerned? And if Germany overrules them, it just might end the Shengen area; that, or Slovakia will be the first nation that exits the Eurozone. Like I said: big potential for Black Swan here.
First, some history:
By Turkish invasion, Slovakia became, for almost two centuries, the principal battleground of Turkish wars and Slovakia paid dearly for the defense of the Hapsburg Monarchy and, moreover, the rest of Europe, against Turkish expansion, not only by the blood and the goods of its population, but also by losing practically all of its natural riches, especially gold and silver, which were used to pay for the costly and difficult combats of an unending war.
Now, current events. Gee, I wonder why there aren't any mosques in Slovakia and why there is just a tiny muslim community.
As Europe grapples with an unprecedented wave of migrants, many fleeing the brutal conflict in Syria, Slovakia announced Thursday that it only wanted to take in Christians.
Slovakian Interior Ministry spokesman Ivan Netik told CNN his country's approach did not result from discrimination.
Instead, he said, it stemmed from concern over whether the migrants would stay in Slovakia for the long term.
Slovakia has only a tiny Muslim community, Netik said, and there are no mosques, making it hard for Muslims to integrate.
"That's the reason we want to mostly choose people who really want to start a new life in Slovakia," he said. "And Slovakia as a Christian country can really help Christians from Syria to find a new home in Slovakia."
While all world religions seem to be fraught with problems, hypocrisy, and potential violence, Islam seems to take it to a higher level, in my opinion.
Don't believe me? Try this experiment.
Stand on a street corner in any traditionally Christian or Buddhist nation and repeatedly yell "Allah Akbar." Then stand on a street corner in any Islamic nation (or even in the Muslim-controlled areas of Europe) and repeatedly yell "Jesus is Lord."
I believe you'll find the violence inherent in Islam to make itself apparent quite quickly.