PM Monthly Market Commentary – 12/31/2019

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  • Wed, Jan 01, 2020 - 12:28am

    #1

    davefairtex

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    PM Monthly Market Commentary – 12/31/2019

I’m going to do a quick monthly report today to summarize where we are; I want to actually have a holiday too so I’m not going to do too much commentary. Maybe for some of you that’s a good thing. 🙂

On the last day of 2019, gold moved up +2.16 [+0.14%] to 1523.37 on moderate volume, while silver dropped -0.07 [-0.39%] to 17.93 on moderate volume. The buck fell again [-0.36%], along with crude [-0.75%] and SPX [-0.58%]. Bonds moved lower too: the 10-Year Yield rose +3.0 bp to +1.92%.

The monthly metals sector map has silver leading gold higher, the miners leading the metals higher, and the juniors doing best. That’s a bullish sector map. All PM prices are above all 3 moving averages, which marks an uptrend. Notice the 52-week changes: gold +18%, silver +15%, and GDX +40%. That’s a pretty good year. Strike that – it was an excellent year.

Name Chart Chg (M) 52w ch MA9 MA50 MA200 50/200 Last Crossing last
Silver Miners SIL 11.78% 32.69% rising rising rising rising ema9 on 2019-12-23 2019-12-31
Junior Miners GDXJ 11.06% 40.21% rising rising rising rising ema9 on 2019-12-23 2019-12-31
Senior Miners GDX 8.90% 39.83% rising rising rising rising ema9 on 2019-12-23 2019-12-31
Platinum $PLAT 8.24% 21.29% rising rising rising rising ema9 on 2019-12-23 2019-12-31
Copper $COPPER 5.59% 6.19% falling rising falling rising ema9 on 2019-12-31 2019-12-31
Palladium $PALL 5.44% 59.70% falling rising rising rising ema9 on 2019-12-30 2019-12-31
Silver $SILVER 4.65% 15.04% rising rising rising falling ma50 on 2019-12-23 2019-12-31
Gold $GOLD 3.58% 18.26% rising rising rising falling ma50 on 2019-12-23 2019-12-31
Gold/Euro $GOLD:$XEU 1.66% 20.67% rising rising rising falling ma50 on 2019-12-20 2019-12-31

In December, gold rallied +52.66 [+3.58%] to 1523.37 on moderate volume. The long white candle was a bullish continuation, and forecaster climbed, moving back into an uptrend. Gold ended the month in an uptrend in all 3 timeframes.

COMEX GC open interest rose +14K contracts on Friday, and rose +119K contracts this month. That was 54 days of global annual production in new paper added to the market. Current open interest for GC: 98% of global annual production, up +14.85% this month. That’s a new all time high – a huge amount of new paper. And gold still jumped $53 this month. Things are getting interesting.

Talk of a COMEX default is starting to crop up once more.

Silver rose +0.83 [+4.85%] to 17.93 on moderate volume. The long white candle was a reasonably strong bullish reversal (43%), and forecaster dropped, and is now in a state of no-trend. Silver ended the month in an uptrend on the weekly timeframe.

COMEX SI open interest rose +2.9K contracts on Friday, and rose +23K contracts this month. This month saw 47 days of global annual production in new paper added to the market. Current open interest for SI: 130% of global annual production, up +12.96% this month. While this is a lot of new paper, it does not represent an all time high. Not yet anyway.

The gold/silver ratio dropped -1.04 to 84.96. That’s bullish.

The miners had a great month. GDX jumped +8.90% on moderately heavy volume, and GDXJ climbed +11.06% on moderate volume. XAU rallied hard [+12.20%], the white marubozu was a bullish continuation, and forecaster climbed, moving higher into its uptrend. XAU ended the month in a strong uptrend in all 3 timeframes. XAU closed out the year at a 3-year high.

The GDX:gold ratio climbed +5.02%, and the GDXJ:GDXJ ratio climbed +1.95%. That’s quite bullish.

USD

The buck fell -1.85 [-1.89%] to 95.98 on moderately light volume. The black marubozu was a bearish continuation, and forecaster dropped, falling back into a downtrend. The buck ended the month in a downtrend in all 3 timeframes.

Is the dollar plunge about money printing? I think probably yes. First Brexit, then money printing. That’s just a guess though.

Major currency moves included: CAD [-2.42%], EUR [+1.86%], GBP [+2.49%], JPY [-0.80%], AUD [+3.75%]

SPX climbed +80.31 [+2.56%] to 3221.29 on moderately light volume. The long white candle was a bullish continuation, and forecaster dropped, but remains in an uptrend. SPX ended the month in an uptrend in both weekly and monthly timeframes, and in a no-trend on the daily.

Energy [+5.12%] led, along with tech [+3.65%] while Defense [-3.67%] and REITs [-2.84%] did worst. This was a mostly bullish sector map.

Name Chart Chg (M) 52w ch MA9 MA50 MA200 50/200 Last Crossing last
Gold Miners GDX 8.90% 39.83% rising rising rising rising ema9 on 2019-12-23 2019-12-31
Energy XLE 5.12% 7.95% rising rising falling rising ma200 on 2019-12-23 2019-12-31
Technology XLK 3.65% 47.43% rising rising rising rising ema9 on 2019-12-10 2019-12-31
Healthcare XLV 2.98% 18.43% rising rising rising rising ema9 on 2019-12-30 2019-12-31
Cons Discretionary XLY 2.28% 26.49% rising rising rising falling ema9 on 2019-12-06 2019-12-31
Utilities XLU 2.09% 21.64% rising rising rising falling ema9 on 2019-12-27 2019-12-31
Financials XLF 1.76% 28.80% falling rising rising rising ema9 on 2019-12-27 2019-12-31
Materials XLB 1.55% 20.68% rising rising rising rising ema9 on 2019-12-30 2019-12-31
Cons Staples XLP 1.48% 23.91% falling rising rising rising ema9 on 2019-12-30 2019-12-31
Telecom XTL 0.77% 10.96% rising rising falling rising ema9 on 2019-12-30 2019-12-31
Industrials XLI -0.63% 26.56% falling rising rising rising ema9 on 2019-12-30 2019-12-31
Homebuilders XHB -1.05% 39.73% falling rising rising falling ma50 on 2019-12-27 2019-12-31
REIT RWR -2.84% 17.79% rising falling rising falling ema9 on 2019-12-26 2019-12-31
Defense ITA -3.67% 29.04% falling rising rising falling ema9 on 2019-12-30 2019-12-31

The VIX ended the month at 13.78.

Rates & Commodities

DGS10, the 10 year yield, rose +14.0 bp to +1.92%. The closing white marubozu candle was unrated, and forecaster climbed, moving higher into its uptrend. DGS10 ended the month in an uptrend in both weekly and monthly timeframes. Note: yield uptrend = bond downtrend.

Bonds are moving lower, while gold is rallying hard. This tells us that gold’s move is – probably – not safe-haven related.

The BAA.AAA differential fell -5 bp to +86 bp. My guess: money from Fed money printing is flooding into the lower quality debt sector. Why worry about credit quality when the Fed is printing hundreds of billions of dollars?

Crude rallied +5.58 [+10.08%] to 60.95 on moderate volume. The confirmed bullish nr7 candle was a likely bullish reversal (63%), and forecaster moved higher into its uptrend. Crude ended the month in an uptrend in the weekly and monthly timeframes.

Note that yesterday crude was hit for a loss, which pulled price below the 9 MA. The candle was not bearish, but forecaster was unhappy enough to drop back into a daily downtrend. This might be a top for crude.

Physical Supply

The GLD ETF tonnage on hand dropped -2.35 tons, with 893 tons remaining in inventory.

ETF Discount to NAV:

* CEF -3.50%

* PHYS -0.94%

* PSLV -1.52%

Bullion Vault Premiums:

* gold: +3.04

* silver: +0.06

Gold dealer big bar premiums:

* gold [1kg]: +1.12%

* silver [1000 oz]: +3.06%

Recession Watch

  • Nonfarm Payrolls: headline +266K (+0.17% m/m), avg hourly earnings: 28, +0.07 (+0.25% m/m), manufacturing: 12.9M, +54K (+0.42% m/m), PTW/Only PTW Work Available: 4.3M, -116K (-2.68% m/m), PTW/Slack Work: 2.6M, -121K (-4.60% m/m). Not recessionary.
  • Personal Income: headline +0.54% m/m (prior +0.12% m/m), +3.73% y/y Consumer Spending: +0.44% m/m (prior +0.35% m/m) +4.56% y/y Core PCE: +0.14% m/m (prior +0.14% m/m) +1.41% y/y. Not recessionary.
  • Durable Goods, new orders: headline -2.06% m/m (prior +0.23% m/m) capital goods new orders (excl aircraft): +0.12% m/m (prior +1.13% m/m) shipments: +0.08% m/m (prior -0.09% m/m). Recessionary.
  • Median new home sales price: +4.20% m/m (prior +1.51% m/m) SF new home sales: 719K, +9.0K (+1.25% m/m) (prior -2.82% m/m) monthly home supply: 5.40, -0.10 (-1.85% m/m) (prior +3.64% m/m). Not recessionary – positive for housing market.
  • Retail Sales: headline +0.26% m/m (prior +0.51% m/m), retail sales (ex-autos): +0.12% m/m (prior +0.31% m/m). Not recessionary.
  • Industrial Production: headline +1.08% m/m (prior -0.89% m/m) manufacturing: +1.14% m/m (prior -0.70% m/m). Not recessionary.
  • Producer Prices: headline +0.25% m/m (prior +0.15% m/m) -1.01% y/y. Not recessionary.
  • CPI All Urban: headline +0.26% m/m (prior +0.35% m/m) +2.02% y/y, CPI less-food/energy: +0.23% m/m (prior +0.16% m/m). Not recessionary.

The forward-looking Durable Goods report hints at a recession; the rest of the indicators do not.

Summary

Gold, silver, and the miners all did very well this year, with the miners being the star of the show. XAU (+52%) had its third best year in history – note the index started in 1983. That’s better than a poke in the eye, to be sure. Eyeballing history, strongly-positive years do not always lead to retracement next year – it is maybe a 50/50 proposition. It will probably depend on the overall PM trend.

The Fed’s Not-QE program was good for a cool $405 billion dollars over the 4-month period since its inception in September. Where did all this new money go? Well, it looks like: equities. And perhaps it fled the buck into overseas destinations. The buck has dropped reasonably hard since the print-fest started.

The US economic indicators ended the year relatively positively; there are hints of a downturn in durable goods/new orders, but the rest of the items look modestly positive. The US-China trade deal, assuming it gets signed in mid-January, should reduce uncertainty, although tariffs remain on a fair number of Chinese imports into the US.

There are hints of inflation – commodity inflation, as well as wage inflation. If Trump is successful in returning jobs to the US, that’s inflationary, since higher-paid US workers will mean product prices will increase, and wage-competition will also drive wages for workers higher too. That’s a good thing if you are a worker – a bad thing if you are a shareholder or a company owner.

Lastly, there is the matter of gold’s open interest. December saw a massive increase in OI – the 4th largest on record since 1975. We closed the year at an all time high in OI, and that’s a huge anomaly. Normally OI peaks when price peaks, but over the last few months, OI has moved higher in a very non-characteristic way. This break in the historical pattern is probably official intervention.

Here’s a fun thought. The Democrats are looking frantically for an impeachable offense. Is using the PPT to smash gold prices – in order to help move equity prices higher – a campaign contribution for Donald Trump? Sure seems like it to me. I suggest they go and investigate the PPT. Pull on that thread and see what gets unraveled.  Do we think that will happen? I’m guessing, no, it won’t.

All the silly market-bending tools that the deep state has in place to keep the status quo going is now in the hands of The Donald. And nobody dares say anything about it.  And of course that’s why they didn’t want him in power in the first place.

item period trend strength change
$XAU.N month strong up +0.67 +0.25
PL.V month strong up +0.51 +0.70
$SPX.N month strong up +0.46 -0.05
CL.CW month strong up +0.38 +0.13
DGS10 month strong up +0.34 +0.11
GC.CW month up +0.08 +0.31
HG.V month slight up +0.04 +0.02
SI.CW month none +0.01 -0.14
TY.CW month down -0.18 -0.05
DX.CW month strong down -0.32 -0.49

And that’s how I’ll leave it. Happy New Year 2020!

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  • Wed, Jan 01, 2020 - 09:25am

    #2
    hail

    hail

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    Thanks

Thanks Dave

  • Thu, Jan 02, 2020 - 09:39am

    #3

    davefairtex

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    experimental silver model

And here’s the silver reversal model I’m working on.  It has some false signals for sure, but it has a decent hitrate.  It is showing a possible reversal right now.

[Not trading advice.  Paint still drying.]

  • Thu, Jan 02, 2020 - 06:33pm   (Reply to #3)

    #4

    JAG

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    re: experimental silver model

The silver miners underperformed the gold miners today (01/02.2020), at least within the group of miner stocks that I track. I think some of the “paint” on your model is dry.

Keep up the good work….Jeff

 

  • Fri, Jan 03, 2020 - 12:44am   (Reply to #3)

    #5

    davefairtex

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    re: re: experimental silver model

JAG-

The look-ahead period of the model is 5 days, so it is right if the silver price declines by – at least 0.65 ATR within the next 5 days.  Current ATR for silver: 0.28, so it is projecting a decline of at least 0.18.

Having said that – headlines may have overridden the possibly-predictable motions of the market.  “No code survives contact with the real world.”

 

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