PM Monthly Market Commentary – 02/28/2021

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  • Sat, Feb 27, 2021 - 05:52am

    #1

    davefairtex

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    PM Monthly Market Commentary – 02/28/2021

On Friday, gold fell -36.11 [-2.04%] to 1734.30 on very heavy volume, and silver plunged -0.79 [-2.87%] to 26.70 on moderate volume. The buck shot higher [+0.82%], SPX fell [-0.48%], crude dropped hard [-2.87%], while bonds rallied strongly [the 10-Year yield fell -12.0 bp].

It sure looks like the Fed came to the rescue of the bond market on Friday.

For the month, gold plunged -115.73 [-6.26%] to 1734.30 on very heavy volume. The long black candle was a bearish continuation, forecaster fell, dropping into a downtrend. Gold is in a downtrend in all three timeframes.

Gold/euros plunged -88.76 [-5.82%] to 1435.78 on very heavy volume. The confirmed bearish spinning top candle was a likely bearish reversal (77%), forecaster dropped, dropping into a downtrend. Gold/euros is in a downtrend in all three timeframes.

COMEX GC open interest fell -8.8K contracts on Friday, and fell -67K contracts this month. That was -22 days of global annual production in paper removed from the market. Current open interest for GC: 43% of global annual production, down -6.26% this month. 22608 GC contracts stood for delivery at COMEX this month.

More than half of the losses in gold this month happened on Thursday and Friday of this week — the last two days of the month. Open interest has also fallen to an 8-month low too. There was a fair amount of short-covering, especially over the last week or so. This is suggestive of a medium-term low – at least at some point. Friday’s candle print was at least somewhat bullish (38%) – it had a fairly high rating for an opening black marubozu. It is hard to say if this is a low. It might be. But we still need to respect the current downtrend, which remains in place.

While we can observe that “someone” probably has a vested interest in “saving the financial system” (which means, protecting their bankster buddies from having their vaults of gold and silver emptied by ordinary people demanding delivery), this also provides us with gold and silver at artificially low prices. The “glass half full” view is, we are getting gold and silver at a discount, courtesy of the “financial system rescuers.”

Silver fell -0.38 [-1.40%] to 26.70 on moderate volume. The long black candle was a bullish continuation, forecaster was unchanged and remains in an uptrend. Silver is in an uptrend in the monthly timeframe.

COMEX SI open interest fell -10K contracts on Friday, and fell -16K contracts this month. That was -34 days of global annual production in paper removed from the market. Current open interest for SI: 92% of global annual production, down -9.50% this month. 8223 SI contracts stood for delivery at COMEX this month.

The gold/silver ratio dropped -3.36 to 64.96. That’s bullish.

Silver made a new 8-year high on the first day of the month, as a result of the Silver Squeeze, but the following day the banksters ripped the market lower, erasing the gains. The entire month of February has been a back and forth struggle between the banksters and – seemingly – ordinary people. While in the last few days silver has sold off, it remains above both the 50 and 200 MA lines.

Silver’s monthly candle print was not bearish (we call that a “bullish continuation”), and forecaster continues to point higher for silver – at least in the monthly timeframe. Near term things look a bit more bearish.

GDX plunged -9.79% on very heavy volume, and GDXJ dropped -8.63% on very heavy volume. XAU moved down -5.63%, the swing high candle was a likely bearish reversal (76%), forecaster climbed, but remains in a downtrend. XAU is in a downtrend in all three timeframes.

The GDX:gold ratio dropped -3.92%, and the GDXJ:GDX ratio climbed +1.28%. That’s mostly bearish.

Miners had a bad month, but almost all of the damage happened in the last two days. The monthly swing high print was ugly, but the miners actually didn’t make a new cycle low. Friday’s print was probably not a bullish reversal. The fate of the miners probably depends entirely on where gold goes next.

Platinum rose +118.04 [+9.85%], while palladium rose +68.12 [+2.96%]. Platinum had a great month – up until 2 days ago. Palladium – pretty much the same thing. Thursday and Friday were not kind to anything in the metals group.

Copper screamed higher, up +0.55 [+15.54%] to 4.09 on heavy volume. The strong line candle was a bullish continuation, forecaster climbed, moving higher into its uptrend. Copper is in an uptrend in all three timeframes.

February was very kind to copper, which saw a new 10-year high, prior to retreating in the last two days of the month. Copper remains in a strong uptrend.

The buck rose +0.31 [+0.34%] to 90.86 on extremely heavy volume. The spinning top candle was a low-percentage bearish reversal (19%), but forecaster climbed, rising into an uptrend. The buck is in an uptrend in all three timeframes.

Major currency moves included: CAD [+0.49%], EUR [-0.46%], GBP [+1.60%], JPY [-1.88%], AUD [+0.77%].

The buck was back and forth all month long. Friday may have been a decision point, however; on Friday, the buck printed a strong bullish swing low daily print (70% bullish reversal), as well as a big daily gain of +0.82%. This was enough to pull the back back up into an uptrend in all 3 timeframes; it also ended the month back above both the 9 and 50 MA lines.

While the buck did not cause the big 9:30 am plunge in PM on Friday, it probably did contribute to the forces pulling PM lower.

Crude screamed higher +9.48 [+18.20%] to 61.57 on moderate volume. The opening white marubozu candle was a bullish continuation, forecaster climbed, moving higher into its uptrend. Crude is in an uptrend in the weekly and monthly timeframes.

Crude staged a very strong rally this month, managing to move back up to where it was in January, 2021. On Friday, crude printed a bearish-looking swing high (50% reversal), and that was enough to drag daily forecaster into no-trend territory. Longer term, crude remains in a strong uptrend.

This past week, we did see a huge drop in FPUS – US crude production – which fell a massive -1.1 mbpd in just one week, to the lowest level seen. US crude production is now down 3.3 mbpd since the start of 2020. Is this just a temporary phenomenon? My guess is, probably yes, but its something to keep an eye on for sure.

SPX moved up +96.91 [+2.61%] to 3811.15 on moderately heavy volume. The long white candle was a bullish continuation, forecaster climbed, rising into an uptrend. SPX is in a downtrend in both the daily and weekly timeframes.

Energy [+18.34%] led, along with financials [+10.40%], while utilities [-6.49%] and sickcare [-2.15%] did worst. This was a bullish sector map.

The VIX fell -5.14 to 27.95.

From the monthly viewpoint, equities moved higher, and are in a long term uptrend. From the daily/weekly perspective, however, SPX has slipped into a downtrend, with a very ugly weekly bearish swing high print (70%). SPX ended Friday right at the 50 MA. While SPX has been back and forth all month long, most of the damage took place in the last two days.

It is hard to say if “this is it” for equities. The sector map doesn’t look particularly bad. I dunno. This SPX cat seems to have 9 lives. No doubt if I say this, SPX will promptly plunge next week. That’s just how these things go.

The 10-Year yield rose +31.0 bp to +1.42%. The long white candle was a reasonably strong bearish reversal (40%), forecaster climbed, rising into an uptrend. The 10-Year yield is in an uptrend in the weekly and monthly timeframes.

Bonds were hit pretty hard this month. The last two days were fairly eventful, as it seemed to be for every asset class. Thursday saw a massive sell-off, while Friday the 10-year managed to recover at least some of its losses. The 30-year did incredibly well on Friday, although its not clear if the swing low (70% bullish reversal) is enough to result in a durable low. Maybe.

I’m guessing the Fed jumped in with both feet after Thursday’s bond cratering. We can’t have those rates rising too fast.

Physical Supply

The GLD ETF tonnage on hand dropped -66.60 (!) tons, with 1094 tons remaining in inventory.

ETF Discount to NAV:
* CEF -3.73%
* PHYS -1.30%
* PSLV +2.01%
Gold dealer big bar premiums:
* gold [1kg]: +1.84%
* silver [100 oz]: +16.47%

The physical ETF premiums remain in divergence; PSLV is in premium, while PHYS is in discount. [FD: I bought PHYS on Friday. I like discounts.] Big bars premiums at retail have moved sharply higher.

I hate to sound like an ongoing advertisement for Sprott – but if you trust him, you can get fractional ownership of big gold bars for a discount of -1.30% [again, I’m long PHYS] vs a premium of 1.84% at retail. You do have to pay him to store it every year, however. Same thing is true for PSLV; you pay a premium of 2%, instead of a premium (best case!) of 16.47%!! You get a LOT more actual silver at Sprott for your money than at retail.

Be warned, however: if you want to take delivery of Sprott’s silver, you will need a whole lot of PSLV shares: minimum delivery quantity is 10x 1000 oz bars. And from what I remember, there are delivery costs too.

Wouldn’t that be a fun experiment to run? It would cost you $272,000, give or take, and you’d get 686 pounds of silver. Just think: every door in your home could have a $27,000 69-pound doorstop [14.58 troy oz/pound].

Economic Reports

Fed Balance Sheet: 7590.1B, +185.2B, Liquidity Swaps: 6.8B, -2.8B, Reverse Repos: 203.5B, -3.9B, Treasury Securities: 4844.6B, +78.5B, MBS: 2180.7B, +110.9B. There was a lot of MBS buying this month.

Nonfarm Payrolls: headline 142.6M, +49K (+0.03% m/m), avg hourly earnings: 30, +0.06, manufacturing: 12.2M, -10K. Basically moving sideways; payrolls are still far below pre-pandemic levels.

Auto/Light Truck Sales: headline +2.40% m/m, Auto Sales: +1.86% m/m, Heavy Truck Sales: +4.90% m/m. A good month for auto sales – now back to pre-pandemic levels.

Personal Income: headline +9.11% m/m, Consumer Spending: +2.30% m/m, Core PCE: +0.25% m/m. Monster jump in personal income this month.

Auto/Light Truck Sales: headline +2.41% m/m (prior +3.17% m/m) Auto Sales: +1.86% m/m (prior -3.99% m/m) Heavy Truck Sales: +13.51% m/m (prior -4.21% m/m)

Median new home sales price: headline 346K, -6.7K (-1.93% m/m), SF new home sales: 923K, +38K (+4.12% m/m), monthly home supply: 4.00, -0.10. Prices fell, while number of home sales increased. Home inventory remains low.

Durable Goods, new orders: headline +3.30% m/m, capital goods new orders (excl aircraft): +0.49% m/m, shipments: +1.94% m/m. All the elements moved strongly higher this month. All are now well above pre-pandemic highs.

Industrial Production: headline +0.92% m/m, manufacturing: +1.03% m/m. INDPRO is nearing pre-pandemic levels.

Producer Prices: headline +1.81% m/m. Producer prices are far above pre-pandemic levels; that’s 4.1% over the last 3 months, and – this month, annualized, is 21%.

Retail Sales: headline +4.87% m/m, retail sales (ex-autos): +5.55% m/m. Sharp jump in retail sales; still well above pre-pandemic levels.

CPI All Urban: headline +0.26% m/m, CPI less-food/energy: +0.03% m/m. Inflation in food & energy.

Summary

Gold, silver, and the miners all moved lower this month, and more than half of the damage happened in the last two days leading up to First Notice Day at COMEX. Coincidence? Yeah I don’t think so either. Somebody doesn’t want those pesky longs standing for delivery. The banksters want to keep their molecules in their vaults, so they can continue to run their wash & rinse scams.

The buck appears to have put in a low. While the dollar’s move didn’t specifically cause the trouble for the metals in the last two days of February, it probably didn’t help very much either.

Risk assets mostly moved higher; equities, crude, and copper all closed higher on the month. That said, they all fell during the last two days of the month. Does that foreshadow what happens moving into March? I’m not entirely sure.  Maybe.

Bonds had a very bad month, with just Thursday seeing a +16 bp move higher in the 10-year. That was mostly-reversed on Friday, but it was the capper to a fairly unpleasant month for anyone owning the longer-dated Treasury bonds: [IEF: -2.43%, TLT: -5.84%]. Rates do seem to be headed higher.

This month’s economic reports paint a picture of massively rising personal income, with anemic job growth. While jobs have yet to recover half of their losses from the lockdowns and industrial production is also lower, both incomes and retail sales are well above where they were at the start of 2020. Unfortunately, I don’t have a timeseries on “small business operations” – I believe Payrolls is a decent proxy for it, however. I conclude: small business has been crushed – by policy, not by the pandemic itself.

Takeaway #1: when you give the power to politicians to say what is “essential”, if you aren’t part of the Donor Class, you will rapidly find your livelihood declared as non-essential. This has been true for the past year in America. “The business you built over the course of a lifetime? Sorry. It’s non-essential. Because, pandemic. “Wear two masks, plebe.” And: “No treatments for you!” And: “Don’t spend it all in one place, Bezos!”

“Its a big club, and you ain’t in it.”

Right. So compared with the start of 2020, the US economy is producing substantially less (INDPRO is lower, as is Nonfarm Payrolls => fewer goods & services), while retail sales and personal income have skyrocketed. M2 money supply is also much, much higher, however the velocity of M2 has just cratered – as you can see in the chart below.

Takeaway #2: There is a lot of money floating around out there looking for something to do. Maybe $4 trillion dollars?

Maybe this explains the SPX rally, Gamestop, the Silver Squeeze, and perhaps even Holy Bitcoin (may blessings be upon it).

Can equities correct with all that extra cash lying around? And even more on the way? I don’t honestly know. Certainly if this chunk of money gets dropped into the real economy, inflation could accelerate even faster than it is already doing now. M2V is certainly worth watching.

And it appears that the banksters are terrified that some of this M2 money will find its way into the silver market. If just a fraction of Holy Bitcoin shifted to silver molecules, the bankster world would be upended. Perhaps this is why the gang in charge leave Holy Bitcoin alone, at least for now. Its a thought anyway.

And for the stories I am watching right now:

Evidence increases favoring a near-term Biden => Harris transition:
1) Request made by House Democrats asking that Old White Joe no longer have complete control over the US nuclear arsenal; this is a request that has not been made during the last 76 years.
2) Kamala is calling foreign leaders. This is rare for a VP to do.
3) It has been decided that Old White Joe will not be giving a SOTU address in 2021. In the tradition of Orwell NewSpeak, we now learn that Joe “was never going to give a SOTU address.”

An apparent last-ditch effort to tank Ivermectin by You Know Who:
1) None of the due-to-be-published-in-February ivermectin trials (from Brazil, Columbia, Argentina, and Bulgaria) have been published.
https://twitter.com/Covid19Crusher/status/1365278107259838464
2) The FLCCC paper, “Review of the Emerging Evidence Demonstrating the Efficacy of Ivermectin in the Prophylaxis and Treatment of COVID-19”, having passed peer review 6 weeks ago and provisionally accepted, still hasn’t been published. “For some reason.” https://www.frontiersin.org/articles/10.3389/fphar.2021.643369/abstract
3) the apparently-designed-to-fail You-Know-Who’s Ivermectin trial is looking to produce rapid results – as in, within 4 weeeks. [It gives a single dose only, with patients selected from – at least – the already-vaccinated population; “no benefit” appears to be the hoped-for result. Presumably if this is the result, it will get published instantly].
https://twitter.com/Covid19Crusher/status/1365442095981469702

The pandemic still appears as though it is moving towards the inevitable “Farr’s Law” conclusion, although there was a bit of a blip due to issues in Texas.

That’s it for February.

  • Sat, Feb 27, 2021 - 07:18am

    #2

    sand_puppy

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    No COVID cases today

COVID cases are winding down in the Richmond Virginia area where I work.  One or two cases per day this week.

And yesterday, none at all in the ED where I work.

I will confirm general trend of the pandemic passing.

This is in sharp contrast to the “scary new dangerous variant” talk that is still so prominent from experts, on my newsfeeds and friends facebook pages.

  • Sat, Feb 27, 2021 - 08:53am

    #3

    davefairtex

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    scary new variants

Perhaps post a “positive tests” page on your facebook from the “scary new variant” locations.  I know.  It will make you seem like a cranky, science-driven, “covid-denier.”

https://91-divoc.com/pages/covid-visualization

They will say: “wait two weeks!”

Do what they say.  Wait two weeks.  And then post an update.  And copy & paste their post that told you to wait two weeks.

🙂

  • Sat, Feb 27, 2021 - 03:20pm

    #4

    lambertad

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    Agree with SP

Across the country in MT, cases are way down as well. I don’t work in the ED, but I round throughout the hospital and on Friday when I was rounding I don’t recall seeing a single door marked with standard COVID precaution sign. Our peak was Nov when 25% of patients admitted to the hospital were COVID-19 positive.

I’m sure the huge drop was all the vaccines and all the people wearing 2 masks (I haven’t seen a single one), thanks 2 mask Fauci!

  • Sat, Feb 27, 2021 - 03:39pm

    #5
    hail

    hail

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    PM Monthly Market Commentary – 02/28/2021

“8223 SI contracts stood for delivery at COMEX this month”. 

Adding this data to the chart you previously offered this physical draw is the largest since the 12k draw in June 2020.  While not as large as silverbacks would have liked it still “could” make a difference this next month.

 

  • Sun, Feb 28, 2021 - 10:32pm

    #6
    Grover

    Grover

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    Mortgage Rates

A few weeks ago, I asked why the relationship between mortgage rates and the 10 Year Treasury Bill no longer worked. At the time, MarketWatch showed 30 year mortgage rates (headline rate for great credit) at 2.82% – at or near all time lows. They also showed the US 10 YR yield increasing. DaveF replied that the Fed’s MBS (mortgage backed securities) was buying; therefore, the banksters were just processing the paperwork for a nominal fee and passing off the paper.

Now, 2 whole weeks later, MarketWatch is reporting 30 year mortgage rates at 3.25%. That’s 43 basis points higher than the low ~2 weeks earlier. The rule-of-thumb is that each percentage point increase in mortgage rates makes a purchase 9% more expensive. Houses purchased using current mortgage rates are almost 4% more expensive than the same house purchased a few weeks ago at the bottom of interest rates.

It’s understandable that those who were on the fence about buying a house are now motivated to purchase before rates increase more. At what point (interest rate %) do potential buyers reassess their purchases and conclude that the ship passed them by? What downstream ramifications does that imply?

Grover

  • Mon, Mar 01, 2021 - 02:13am

    #7

    davefairtex

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    10y, 30y mortgage, Fed MBS holdings

Sure looks like the spike in Fed MBS holdings caused a delayed reaction in the 30-year mortgage rate rebound.  I guess “only” 10B in purchases wasn’t enough this week.

Fed is blowing a new real estate asset bubble.  Again.  Savers pay, as always.

  • Mon, Mar 01, 2021 - 10:00am

    #8

    Eannao

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    Mortgage Timebomb in the US?

In the US, everyone and anyone has been refinancing their mortgages to fix for 30 years at the sub-3% levels. This is a completely sensible thing to do.

In Europe (Ireland specifically) the max you can fix your mortgage for is 10 years, and at much higher rates (typically 4 to 5%).

IMO, someone in the US is going to get badly burned with these fixed low rates. Not sure if it will be the banks, or Fannie/Freddie, but ultimately it will be the taxpayer.

Just another future problem for the US. Add it to the list.

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