PM End of Week Market Commentary – 9/14/2018
On Friday, gold fell -7.78 [-0.64%] to 1200.61 on heavy volume, while silver dropped -0.12 [-0.85%] to 14.08 on moderate volume. The buck was up sharply: +0.43%, which took a toll on the metals today. Both copper (-1.99%) and platinum (-1.03%) both did worse than gold and silver.
The weekly metals sector map is flirting with a bullish reversal, but has yet to make up its mind. Miners are leading metal, which is bullish, but gold is doing better than silver, which is bearish. A number of items tentatively crossed above the 9 earlier in the week, but moved back down again on Thursday and Friday. The primary drivers for the metals this week involved the back-and-forth surrounding China and tariffs.
|Name||Chart||Chg (W)||52w ch||MA9||MA50||MA200||50/200||Last Crossing||last|
|Platinum||$PLAT||1.64%||-19.46%||rising||falling||falling||falling||ema9 on 2018-09-11||2018-09-14|
|Senior Miners||GDX||0.56%||-26.22%||falling||falling||falling||falling||ema9 on 2018-09-12||2018-09-14|
|Palladium||$PALL||0.26%||5.10%||falling||rising||falling||rising||ma50 on 2018-08-24||2018-09-14|
|Silver Miners||SIL||0.13%||-31.32%||falling||falling||falling||falling||ema9 on 2018-09-13||2018-09-14|
|Copper||$COPPER||0.06%||-11.64%||falling||falling||falling||falling||ema9 on 2018-09-14||2018-09-14|
|Junior Miners||GDXJ||-0.15%||-25.28%||falling||falling||falling||falling||ema9 on 2018-09-14||2018-09-14|
|Gold||$GOLD||-0.29%||-10.15%||falling||falling||falling||falling||ema9 on 2018-09-14||2018-09-14|
|Gold/Euro||$GOLD:$XEU||-0.67%||-8.23%||falling||falling||falling||falling||ema9 on 2018-09-13||2018-09-14|
|Silver||$SILVER||-0.95%||-21.14%||falling||falling||falling||falling||ema9 on 2018-08-30||2018-09-14|
Gold fell -2.96 [-0.25%] this week; trading range was fairly wide, with a an attempted rally on Wednesday, but a reversal on Thursday and Friday. The weekly doji/high wave candle was somewhat bearish (43%), and the daily forecaster flipped back to a downtrend on Friday. Gold is back below all 3 moving averages, and is in a downtrend in all 3 timeframes.
The September rate-increase chances fell 97%.
COMEX GC open interest rose +10,081 contracts this month.
COT report shows the commercial net position fell -6,512 contracts, mostly due to +7k new shorts but also 460 new longs. Commercials remain net long gold. Managed money net rose +7,503 contracts, with 8.6k shorts covered, and 1k longs sold. Even with the relatively modest short covering this week, managed money remains net short gold, which is both unusual and bullish. Note this report only covers through Tuesday, which is before all of the action occurred this week in PM.
Silver fell -0.13 [-0.95%], with the big move coming on Friday, when silver made a new multi-year closing low to 14.08. The drop on Friday caused forecaster to issue a sell signal, pushing silver back into a downtrend in all 3 timeframes. Silver is also below all 3 moving averages. The gold/silver ratio rose +0.51 to 85.15, which is generally bearish, although this level for the ratio is a rare event, and in the past has coincided with multi-year lows for PM overall.
COMEX SI open interest fell -5,820 contracts this week.
COT report shows commercial net fell -2.2k this week, with 3.2k longs sold, and 1k shorts covered. That is a relatively minor decline, and still leaves the commercials net long silver, which is both rare and bullish. Managed money net rose 848 contracts, which was 3.3k shorts covered, and 2.5k longs sold. Managed money remains exceedingly net short silver.
Miners actually managed to move higher this week, with XAU up +0.51% on the week; the big move for the miners came on Wednesday, triggered by the news that Mnuchin would meet with his Chinese counterpart to negotiate about trade. The Wednesday reversal resulted in a weekly high wave candle that was mildly bullish (34%), and daily forecaster ended the week in strongly positive territory. XAU remains above its 9 MA, but is also in a downtrend in both weekly and monthly timeframes.
GDX:$GOLD rose +0.81%, while the GDXJ:GDX ratio fell -0.70%. That’s mostly neutral.
The buck fell -0.09 [-0.09%] to 94.90. Mostly the buck just chopped sideways, but managed to end the week back above all 3 moving averages. The buck is in an uptrend on the daily and monthly timeframes, but is in a downtrend on the weekly. From what I observed, the buck rises whenever tariff concerns increase, and falls whenever it appears as though there is movement towards a settlement.
SPX rose +33.30 [+1.16%] to 2904.98, closing within 10 points of the all time high, erasing last week’s sell signal, and moving back into an uptrend. SPX ended the week above all 3 moving averages, and is apparently on track to re-test the highs set 2 weeks ago.
The sector map shows defense and energy in the lead, with REITs and financials trailing. That’s a bit confused; let’s call it a neutral sector map. It is bearish when financials don’t do well.
Globally, developed asia did best, along with the Eurozone. The Shanghai composite made new lows.
VIX fell -2.81 to 12.07.
|Name||Chart||Chg (W)||52w ch||MA9||MA50||MA200||50/200||Last Crossing||last|
|Defense||ITA||2.65%||26.49%||rising||rising||rising||rising||ema9 on 2018-08-31||2018-09-14|
|Energy||XLE||2.01%||11.59%||falling||falling||rising||falling||ema9 on 2018-09-12||2018-09-14|
|Industrials||XLI||1.91%||13.90%||rising||rising||rising||rising||ema9 on 2018-09-05||2018-09-14|
|Technology||XLK||1.85%||27.64%||falling||rising||rising||rising||ema9 on 2018-09-13||2018-09-14|
|Telecom||XTL||1.62%||11.74%||falling||rising||rising||rising||ema9 on 2018-09-12||2018-09-14|
|Cons Discretionary||XLY||1.16%||29.62%||falling||rising||rising||rising||ema9 on 2018-09-11||2018-09-14|
|Healthcare||XLV||1.06%||12.47%||rising||rising||rising||rising||ema9 on 2018-09-12||2018-09-14|
|Homebuilders||XHB||0.92%||3.81%||rising||rising||falling||rising||ema9 on 2018-09-14||2018-09-14|
|Materials||XLB||0.73%||5.39%||rising||rising||rising||rising||ma200 on 2018-09-14||2018-09-14|
|Cons Staples||XLP||0.72%||-1.28%||rising||rising||falling||rising||ema9 on 2018-09-05||2018-09-14|
|Gold Miners||GDX||0.56%||-26.22%||falling||falling||falling||falling||ema9 on 2018-09-12||2018-09-14|
|Utilities||XLU||0.37%||-1.43%||rising||rising||falling||rising||ema9 on 2018-09-14||2018-09-14|
|REIT||RWR||-0.11%||1.21%||falling||rising||rising||rising||ema9 on 2018-09-14||2018-09-14|
|Financials||XLF||-0.35%||13.83%||falling||rising||rising||rising||ma200 on 2018-09-14||2018-09-14|
Gold in Other Currencies
Gold fell in most currencies – except the CNY and JPY.
Rates & Commodities
TLT plunged -0.49%, dropping in fits and starts, making a new low on Friday. TY confirms, plunging -0.40%, moving down to retest the low from 6 weeks ago. TY remains in a downtrend in the daily and weekly timeframes, and the monthly forecaster is showing signs of turning lower as well. , losing -1.54% on the week, making a new low on Friday. TY also did quite poorly, dropping -0.50%, printing a variety of bearish-looking candles on Friday. TY is in a downtrend in both daily and weekly timeframes. The 10-year yield rose +5.2 bp to 2.99%. We are rapidly approaching the 3.0% line once more – this, with an equity market near all time highs, and distinct signs of risk on elsewhere.
JNK rose +0.73%, a very strong move higher. Forecaster issued a buy signal on Monday and never really looked back, moving towards a re-test of last month’s highs. This is a strong sign of risk on.
Crude rose +1.11 [+1.64%] this week, with most of the gains coming on Tuesday. The weekly bearish harami was strongly bullish (59%), but the daily forecaster issued a sell signal on Friday. Weekly and monthly remain in uptrends. Crude was only helped temporarily by a somewhat bullish EIA report (crude: -5.3m, gasoline: 1.3m, distillates: 6.2m) which drove crude to new highs, but that ultimately weren’t retained by end of week.
Physical Supply Indicators
* The GLD ETF tonnage on hand fell -2.91 tons, with 743 tons in inventory.
* ETF Discount to NAV:
PHYS 9.59 -1.46% to NAV [increase]
PSLV 5.11 -3.44% to NAV [decrease]
CEF 11.61 -3.61% to NAV [decrease]
* Big bars premiums were: gold [1kg] 0.84% and silver [1000oz] 3.62%.
Grey Swans & Geopolitics
Ebola: total cases 137, with 92 deaths. Mostly, things seem to be going well, although there remain concerns over “bad behavior” (my interpretation) from some groups: hiding patients, community resistance, etc. http://www.who.int/csr/don/14-september-2018-ebola-drc/en/
Turkey: The Turkish central bank raised rates +650 bp to 24%, a massive increase that surprised both me, and the markets too. Erdogan managed to solve the problem of how to raise rates and yet avoid blame for what must follow: he immediately criticized the “independent” central bank’s action, thus pretending that he didn’t do it, distancing himself from the recession that will come next. Good Job Erdogan! Will the rate increase work? It all depends on confidence, and that’s an imponderable. So far, the 10-year bond yield is down to 17.91%, and USD/TRY is at 6.17, down from 6.44 prior to the rate increase. Those are both positive signs.
German Government/Migration: INSA/YouGov poll has AfD at 17.5%, with SPD at 17%, and CDU/CSU at 28%. This makes AfD the second-largest party in Germany. To my mind, that’s entirely driven by migration. https://www.wahlrecht.de/umfragen/insa.htm
Italy – Migration: Salvini promised to eject 100,000 migrants during his first year in office, but has since retreated on his pledge, saying “the way things are today we’ll need 80 years to expel them all.” That’s because when you eject a migrant, you have to eject him back to his country of origin, and Italy doesn’t have a repatriation deal with the various countries of origin. That’s probably why only 4,269 migrants have been returned to their countries of origin this year.
China – Tariffs: Sec Treas Mnuchin has invited his Chinese counterpart to engage in trade talks, and the Chinese have accepted. “Anonymous sources” have said that Trump wants to proceed with tariffs on $200 billion in goods anyway. In the current media environment, its hard to separate truth from propaganda. Certainly there are strong (corporate) vested interests in sabotaging any substantive agreement with China that reduces the ability of companies to off-shore their labor costs.
China – Debt: no news this week.
Yield Curve Inversion: the 1-10 spread is unchanged at 41 bp.
US Congressional Elections, 2018. The generic ballot shows Democrats 48.9% [+9.1%] vs Republicans 39.8%. Democrat win → impeachment attempt. https://projects.fivethirtyeight.com/congress-generic-ballot-polls/
North Korea: KJU asked Trump for a second meeting, and Trump has accepted. Morton Halperin (https://en.wikipedia.org/wiki/Morton_Halperin) – not someone you’d expect to be a “Trump supporter” – wrote a positive piece on Trump’s progress to date, including the successful “freeze-for-freeze” agreement (no US-SK military exercises in exchange for no NK ballistic missile & nuclear tests), and has some suggestions on how to make future progress. This includes ignoring the skeptics on both sides of the aisle, and within the White House as well. https://www.38north.org/2018/09/mhalperin091118/
Mueller Investigation: Manafort has agreed to cooperate with the Mueller investigation. This has led (once more) to claims of “walls closing in”, “bombshells”, and “major turning points”. Will this “bombshell’ be different? The Nation has a pretty good summary of all the former “bombshells” which ended up to be utterly unrelated to “collusion” with Russia. The article concludes with a suggestion that “the resistance” focus on – gasp – substantive disagreements with Trump’s policies, rather than on the Mueller investigation. Imagine that. https://www.thenation.com/article/the-mueller-investigation-is-sending-p…
Still no new tariffs on China, and the re-starting of negotiations between the US and China on the trade issue appeared to provide an initial boost to the metals prices. Turkey’s central bank over-delivered on a rate increase, which seemed to calm the waters. The ECB changed nothing, which encouraged the Euro to sell off. Manafort agreed to cooperate with the Mueller investigation; that didn’t seem to move the needle on prices.
Big bar gold premiums on gold remain low, silver’s premium is slowly moving higher, and ETF discounts were mixed. There is no shortage of gold at these prices.
The gold and silver COT reports show little change from last week. Both are very bullish.
Resolution to the tariff issue seems to be what the gold and silver markets need to cause a rebound. So far, only the miners managed to keep their Wednesday reversal by end of week.
The risk remains: if Trump does decide to impose tariffs on $200 billion in Chinese imports, the metals – probably – make new lows. It’s hard to predict how that will play out – especially with “anonymous” allegedly senior adminstration officials snatching papers from Trump’s desk to prevent heaven only knows what, and for whose benefit.
Meanwhile, the COT report remains incredibly bullish, the gold/silver ratio is at multi-year highs which is also bullish, and so I believe the stars and moons are aligned for a rebound in the metals. I just can’t tell you when it will happen. Perhaps we need Goldman to predict a decline to $1000. Maybe that would do it.
Weekly trends (in order of strength):
Uptrend: SPX, Gold/Euros, BAA corporates, crude, bitcoin.
Downtrend: 10-year treasury, copper, USD, silver, gold, miners, platinum.
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