PM Weekly Market Commentary – 01/15/2021

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  • Sat, Jan 16, 2021 - 08:53am

    #1

    davefairtex

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    PM Weekly Market Commentary – 01/15/2021

On Friday, gold fell -18.55 [-1.00%] to 1830.72 on moderately heavy volume, and silver dropped -0.74 [-2.89%] to 24.86 on moderately heavy volume. The buck shot higher [+0.60%], while SPX fell [-0.72%], crude plunged too [-3.00%], and bonds rallied sharply [the 10-Year yield fell -6.0 bp].

The metals sector map shows silver leading gold lower, the miners leading metal lower, and juniors leading the seniors lower. This is a classic PM downtrend. Many items are now below all 3 moving averages – that’s more downtrend evidence. Both gold/Euros and the senior miners have executed “death crosses” – the 50 MA is below the 200. Curiously, palladium, platinum, and copper are all above both the 50 and 200 MA lines. In sum – the industrial components are doing well; the “precious” components, not well at all.

This week, gold fell -20.87 [-1.13%] to 1830.72 on moderately heavy volume. The short black candle was a bearish continuation, forecaster climbed, but remains in a downtrend. Gold is in a downtrend in both the daily and weekly timeframes.

Gold/euros climbed +2.50 [+0.17%] to 1513.75 on moderately heavy volume. The spinning top candle was unrated, forecaster climbed, moving higher into its uptrend. Gold/euros is in an uptrend in the weekly and monthly timeframes.

COMEX GC open interest fell -4.0K contracts on Friday, and fell -21K contracts this week. That was -7 days of global annual production in paper removed from the market. Current open interest for GC: 51% of global annual production, down -1.93% this week. 538 GC contracts stood for delivery at COMEX this week.

Gold commercial net rose +31K contracts, which was -22K fewer shorts and +8.6K new longs. Gold managed money net fell -38K contracts, which was +2.3K new shorts, and -36K fewer longs.

Silver plunged -0.65 [-2.55%] to 24.86 on moderately heavy volume. The long black candle was a bearish continuation, forecaster dropped, moving deeper into its downtrend. Silver is in an uptrend in the daily and monthly timeframes.

COMEX SI open interest fell -1.3K contracts on Friday, and fell -7.8K contracts this week. That was -16 days of global annual production in paper removed from the market. Current open interest for SI: 96% of global annual production, down -4.51% this week. 421 SI contracts stood for delivery at COMEX this week.

Silver commercial net fell -356 contracts, which was +590 new shorts and +234 new longs. Silver managed money net fell -1.4K contracts, which was +3.1K new shorts, and +1.7K new longs.

The gold/silver ratio climbed +1.06 to 73.64. That’s bearish.

Last week, silver seemed to find support at its 50 MA, but that support was broken during Friday’s decline. There was a relatively large amount of short-covering this week, but not enough to mark a low. Most of the short-covering happened on Monday’s decline – which marked the low for the week. Silver ended the week in a daily and weekly downtrend – Friday’s swing high print was disagreeably bearish (45%).

Monthly still points higher, however.

GDX dropped -5.50% on moderate volume, and GDXJ plunged -8.03% on heavy volume. XAU fell -6.61%, the swing high candle was a probable bearish reversal (54%), forecaster fell, dropping into a downtrend. XAU is in a downtrend in all three timeframes.

The GDX:gold ratio dropped -4.63%, and the GDXJ:GDX ratio dropped -2.75%. That’s quite bearish.

More than half of the damage this week happened on Friday: -3.89%. Friday’s black marubozu looked ugly; it was in no way any sort of bullish reversal. The miners closed at the dead lows of the day on Friday. That’s not a good sign. The miners ended the week in a downtrend in all 3 timeframes.

Platinum rose +5.16 [+0.48%], while palladium rose +65.66 [+2.69%]. Platinum looked quite strong this week – right up until Friday’s big smash [-4.19%]. Palladium looked a bit better – although Friday saw a big failed rally for palladium too. Still – the platinum monthly chart looks very strong, and even on the weekly chart, platinum just chopped sideways.

Copper fell -0.09 [-2.44%] to 3.60 on moderate volume. The bearish harami candle was a possible bearish reversal (33%), forecaster dropped, but remains in an uptrend. Copper remains in an uptrend in the weekly and monthly timeframes.

The weekly bearish harami print was weak; that is to say, not very bearish. Copper may be running out of steam here at 8-year highs, but I’ve been saying that for a while. The monthly trend still remains strong.

Is copper hinting at an end to the pandemic? Governor Cuomo has done a WHO-like U-turn on lockdowns. Is that a sign? Now that the Bad Orange Man has been chased out of office, will the Blue state governors actually start doing what he suggested 9 months ago?

“Hey, we just noticed – lockdowns don’t work!”

The professionals in the Great Barrington Declaration said this six months ago, of course.

The buck climbed +0.68 [+0.76%] to 90.74 on moderately heavy volume. The confirmed takuri line candle was a likely bullish reversal (74%), forecaster climbed, rising into an uptrend. The buck is in an uptrend in the daily timeframe.

Major currency moves included: EUR [-1.31%], AUD [-0.74%].

This week’s pattern was very strong – almost all of this week’s gain came from Friday’s big [+0.60%] rally. The weekly candle print was very highly rated, but weekly forecaster is just barely positive, and monthly remains in a downtrend, at least for now.

Is this a low for the buck? It sure might be. Does this represent money flooding back into the US? Or the shorts, covering their downside bets? I don’t know. Let’s see what the other items look like.

Crude fell -0.58 [-1.10%] to 52.13 on moderately heavy volume. The bearish harami candle was a reasonably strong bearish reversal (41%), forecaster dropped, but remains in an uptrend. Crude is in an uptrend in the weekly and monthly timeframes.

EIA report: Crude -3.2m, gasoline +4.4m, distillates +4.4m.

WCRFPUS2: Still no change for US Crude (Field Production): 11 mbpd. Total production is where it was six months ago.

The drop in crude all happened on Friday – it was a big down day, and it was enough to yank daily forecaster into a downtrend. The weekly harami print was also moderately bearish too, but crude remains in an weekly uptrend; Friday’s big drop [-3.00%] didn’t really make a dent on the weekly chart. Crude remains above all 3 moving averages.

SPX plunged -56.43 [-1.48%] to 3768.25 on moderately heavy volume. The short black candle was unrated, forecaster dropped, but remains in an uptrend. SPX is in an uptrend in the weekly and monthly timeframes.

Communication services [-3.37%] led the market lower, along with tech [-2.62%], while energy [+3.11%] and REITs [+1.87%] did best. This was a bearish [8] sector map.

The VIX jumped higher, up +2.78 to 24.34.

All of the SPX losses came on Thursday and Friday; Friday’s swing high print was as bearish as it gets (63%), and it was enough to yank SPX into a downtrend. Friday’s sector map was also bearish, as was the weekly sector map.

SPX ended Friday below its 9 MA, which is a bearish sign. Could this be a top for SPX? Yes. Maybe. It doesn’t line up with gold’s decline, however – usually these two assets move in opposite directions.

The 10-Year yield fell -4.0 bp to +1.09%. The bearish harami candle was a bullish continuation, forecaster climbed, moving higher into its uptrend. The 10-Year yield is in an uptrend in the weekly timeframe.

Bonds appeared to put in a bullish reversal this week – at least on the daily chart. The monthly appears to agree; it looks about to reverse as well. The weekly is still strongly signaling that there are higher rates ahead.

Have bonds put in a low? If so, that would be an interesting signal, since it goes against the prevailing sentiment (mine included) that “inflation is just around the corner” – from all the stimulus. But the drop in gold is suggesting that same thing. For now, the DGS10 weekly is still projecting higher rates ahead.

JNK fell -0.30%. The doji candle was a bearish continuation, forecaster dropped, but remains in an uptrend. JNK is in an uptrend in the daily and weekly timeframes.

Unlike SPX, Ccappy debt has yet to reverse, and remains near the highs – although its uptrend looks a bit feeble at this point.

Physical Supply

The GLD ETF tonnage on hand dropped -4.48 tons, with 1178 tons remaining in inventory.

ETF Discount to NAV:
* CEF -3.90%
* PHYS -2.06%
* PSLV -2.95%
Gold dealer big bar premiums:
* gold [1kg]: +1.50%
* silver [100 oz]: +3.65%

Physical ETF discounts are fairly wide; big bar gold premiums remain strong, whi

Economic Reports

Fed Balance Sheet: 7334.0B, -841M Liquidity Swaps: 11.2B, -5.8B Reverse Repos: 202.9B, -9.9B Treasury Securities: 4723.7B, +24.3B MBS: 2039.5B, +73M. It was an above-average week for Fed treasury purchases.

Retail Sales: headline -0.27% m/m, retail sales (ex-autos): -1.38% m/m. RSXFS is inching lower, but remains substantially above pre-pandemic levels.

Industrial Production: headline +1.55% m/m, manufacturing: +0.94% m/m. INDPRO has recovered about 80% of its pandemic losses.

Producer Prices: headline +1.20% m/m (prior +1.16% m/m) +0.80% y/y. That’s a big move – PPIACO has now shot back above pre-pandemic levels. [producer price inflation!]

CPI All Urban: headline +0.37% m/m, CPI less-food/energy: +0.09% m/m. Thats an annual run rate of 4.4%, at least for headline inflation. CPIAUCSL is far above the pre-pandemic highs – and is seemingly accelerating.

Summary

It was a big week for economic reports; the overall picture is one of price increases – both for producers and consumers. Industrial production is slowly recovering, while retail sales are slowly declining. There is clear inflation in prices paid – but is there monetary inflation? I don’t know – I won’t see M2V until GDP updates.

With that as backdrop, gold, silver and the miners all fell this week – although gold/Euros actually managed to stay flat. This suggests that (at least) gold’s decline was just a currency effect. Still, the miners were hit pretty hard, and they are now starting to look fairly ugly.

Risk assets remain near the highs; while they too are starting to hint at a reversal, right now, it is just in the daily timeframes. Both crude and copper also fell, although they too remain quite near their recent highs. It feels as though industrial input prices are still seeing relative strength, as are large company equity prices, while PM is getting hit.

Bonds appear to have stopped their recent plunge, at least for now. Last week we saw a +22 bp increase – very large – while this week, a -4 bp decline. Perhaps – just that the bleeding has stopped, maybe? For the moment?

The buck put in a strong reversal this week; the big move in the buck seemed to cause problems for PM. In spite of the $1.9 trillion Biden Donor Stimulus announced on Thursday, it doesn’t look as though the market thinks the buck is going to zero in the near future. Perhaps the printed-money-giveaway (but mostly, not to normal Americans) was smaller than expected?

Big Money is probably also happier with the Biden Donors in control. At least in the near term anyway. Big Money likes stability, and the Bad Orange Man was, at times, disagreeably destabilizing.

Here’s another thought. The move towards state-industry authoritarianism, which is becoming more apparent by the day, isn’t necessarily bad for equity market prices. The industry-state cooperation in the 1930s actually worked out fairly well for big companies in Germany. At least until the Allies started in with the bombing campaign.

So what’s the outcome? Inflation or deflation? Rickards says deflation – he believes inflation comes from money velocity, and a lockdown response is definitely velocity-deflationary. People are paying down those credit cards right and left. Renters aren’t paying rent. Small business is going bankrupt. Entire industries are on the brink of collapse due to lockdown. Other industries are doing fantastically well. While producer and consumer prices are definitely rising, that may just be to a shift in spending patterns driven by the lockdown policy from experiences to things. The drop in PM prices also suggest monetary deflation – at least near term.

Ultimately, if your plan is to blow things up so you can Build Back Better, you probably want deflation, not inflation. All those bankruptcies are also a good mechanism for wealth transfer too. The track we take depends a whole lot on what is coming up next.

Here are the current known-unknowns for the near term:
* When will all Americans “find out” about Ivermectin, Vitamin D, and other useful treatments and prophylaxis measures for COVID19?
* Will there be a national lockdown? (i.e. another small business -> big business wealth transfer)
* Will we get a “Patriot Act II”? (i.e. a new set of definitions for “domestic terrorism”)
* What exactly does Build Back Better really mean? (i.e. who wins, who loses?)
* Will (annual?!) COVID vaccination be used as a means of population movement control/papers-please?
* Will they try to Impeach Trump after he’s left office(!)
* Will they try to pack the Supreme Court?
* Will they try to confiscate firearms on a national level?
* When will the Biden Family/CPP Corruption become more widely known? “10 held by H for the big guy”
* Are those (now 25,000) National Guard troops in Washington a foretaste of things to come?

My sense: the gang in charge are probably hearing all sorts of disagreeable chatter from the NSA’s illegal Utah Server Farm. Most likely, the chatter has them terrified. There aren’t very many of them – and they are definitely not used to this. Most likely, the chatter has them identified by name. How would you feel if you knew you were “the focus” of some pretty annoyed people due to the moves you just executed?

You might feel the need to call in the army as a power demonstration, make plans to seize their guns, label them and all their friends domestic terrorists, restrict their travel unless they get “vaccinated” (hoping they’ll refuse), ensure that sure their leader can never hold political office ever again, try to ensure they can’t get jobs or insurance, threaten to send them off to camps for re-education, and while all that was spinning up, stop them from talking to one another. Or recruiting anyone else to their cause. And somehow, you have to find a way to paint *them* as the Nazis!

That’s one tall order. It is not easy being the gang in charge!

Tune in next week for another turn of our new, popular game that everyone is playing: Build Back Better.

  • Sat, Jan 16, 2021 - 09:50pm

    #2

    davefairtex

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    brazil ministry of health: censored by @Jack

@ Jack has decided, because he knows best, that the Brazilian Ministry of Health – which is urging its people to seek early treatment if they get sick with COVID-19 – was spreading “misleading and potentially harmful information.”  @ Jack is so much smarter than the rest of us.

Tweet, translated, via google translate:

“To combat Covid-19, the guideline is not to wait. The sooner treatment is started, the greater the chances of recovery. So, stay tuned! When showing symptoms of Covid-19, # Don’t Wait, go to a Health Unit and request early treatment”

The offending tweet: https://twitter.com/minsaude/status/1349159477111476225

I snapped an image in case it gets memory-holed, below:

  • Sun, Jan 17, 2021 - 03:52am

    #3

    davefairtex

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    sunday bitcoin update

This model attempts to project the “average ROI” (up + down / days) over the next 3 days.  It isn’t perfect, but – it does provide an interesting picture.

  • Sun, Jan 17, 2021 - 03:56am

    #4

    davefairtex

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    same thing for gold

This model is not predicting good things for gold in the near term.  It seems to do a decent job of picking at least some of the lows.  Friday doesn’t seem to be one of them.  But – paint still drying, etc.  Again, this is “average return over the next N days.”

  • Sun, Jan 17, 2021 - 10:41am

    #5

    JAG

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    Going Half-in on Gold and Doubling-Down on Miner, VIX, and TLT

After getting a respite from the everyday drama, I’ve decided to put half of my cash into Pax Gold (digital, tokenized gold). There probably is more downside ahead, but if there is, I will just add to my position.

Based on the historical study below from Sentimentrader.com on the GDX, I plan on adding to my gold miner call positions this coming week, especially if we see additional weakness.

I’ve been getting absolutely ‘creamed’ in my brokerage (options) account these last two weeks. Frankly, with everything else going on I’ve just been ignoring it. But after seeing these sentiment gages…

…and another record level of speculation in call options (27 million call options in the last week) and gamma exposure…

… I have decided to double down on my VIX and TLT call options.

Penny stocks have gone ballistic, with over a trillion shares traded. I guess the Robinhooders have moved into penny stocks looking for another way to “purchase their way to wealth”. Yeah, you go boy, that always works.

So far, the ‘dumb money’ is kicking my butt. Can my life get any more pathetic? Don’t answer that!

  • Sun, Jan 17, 2021 - 12:40pm

    #6
    Nate

    Nate

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    Casey

Casey research believes the US will begin to transition to a digital currency before yearend.  They place this event as significant as formation of the Federal Reserve, confiscation of gold, and Nixon slamming the gold window.  Fortunes will be made by the elite while the masses will get hosed.  Again.  That’s you and me.

Still trying to figure out the Gates’ Foundation accumulation of farmland.  The pattern I noticed is that Arkansas and Louisiana represented the states with the most land by acres, inexpensive land, and land that does not require irrigation.  And good soybean country – for those tasty veggie steaks.

 

  • Mon, Jan 18, 2021 - 08:59pm

    #7

    davefairtex

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    monday bitcoin update

Looks like we may have seen the top.  I say that because the longer term models are now pointing downhill.  Of course – paint still drying, etc.  We need a close below 30k to confirm.

  • Tue, Jan 19, 2021 - 06:26am

    #8

    JAG

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    Bitcoin and the Narrator

Yeah I think 30K is the line in the sand for the bulls.

The thing about bitcoin is that it’s like a blank canvas for any kind of narrative the herd wants to assign to it. It has no connection or ground to anything in the real world.

Price action is pure herd psychology. What else could produce such astounding bull markets? It really is fascinating to watch.

Of course, herd psychology is incredibly fragile. One little butterfly flaps its wings over here…and the narrative applied to bitcoin changes over there. Rumor has it that the new narrative with bitcoin is not about bitcoin, but the denominator of it’s price…tether, the not-so-stablecoin.

Imagine locking in all those bitcoin profits only to find out that the stablecoin that you used has no value in USD or other primary currency. But hey, you still have to pay taxes on those imaginary profits.

I’m sure bitcoin will explode higher out of this consolidation pattern like it has the last ten times, but can you really trust the Narrator?

  • Tue, Jan 19, 2021 - 08:23pm

    #9
    ao

    ao

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    the winning investment for the year

Rhodium, now up to $19,500 per ounce from $2,000 in March 2020. Wowwee!!

If I had to guess, it’ll probably drop like a stone shortly,

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