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PM Weekly Market Commentary – 04/03/2020

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  • Sat, Apr 04, 2020 - 04:40am

    #1

    davefairtex

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    PM Weekly Market Commentary – 04/03/2020

On Friday, gold rose +13.60 [+0.83%] to 1648.77 on light volume, while silver dropped -0.13 [-0.89%] to 14.52 on light volume. The buck moved higher once more [+0.40%], SPX fell [-1.51%], crude screamed higher [+15.62%], and bonds rallied too [10-Year yield fell -5.0 bp].

Market-moving news: Trump extended the US pandemic suppression efforts through the end of April. Fed printed more than $500 billion in an attempt to keep all sorts of market areas from seizing up. Mostly, that seems to have worked, at least for now.

The metals sector map has gold leading silver, but the seniors are leading the juniors. This is the safe haven move configuration, although the senior miners did fairly well. Gold/Euros greatly outperformed gold/USD, which tells us that gold’s decline this week was just a currency effect.  You can see the sector map in the follow-on post.

This week, gold fell -5.23 [-0.32%] to 1648.77 on light volume. The short black candle was unrated, but forecaster climbed, moving higher into its uptrend. Gold is in an uptrend in the weekly and monthly timeframes.

Gold/euros shot up +31.27 [+2.09%] to 1526.88 on light volume. The unknown candle was unrated, forecaster climbed, rising into an uptrend. Gold/euros is in an uptrend in the daily and weekly timeframes. This week marked a new weekly closing high for gold/Euros. From this, you can see that gold’s decline was just a currency effect.

COMEX GC open interest fell -6.1K contracts on Friday, and fell -43K contracts this week. That was -14 days of global annual production in paper removed from the market. Current open interest for GC: 45% of global annual production, down -4.03% this week.

Gold commercial net rose +28K contracts, which was -35K fewer shorts and -7.6K fewer longs. Gold managed money net fell -4.8K contracts, which was +2.7K new shorts, and -2.1K fewer longs. While a fair number of commercial shorts were closed out, a large number remain. Managed money longs are staying roughly even. COT report is not signaling a low for gold at this time.

Silver fell -0.12 [-0.82%] to 14.52 on light volume. The spinning top candle was unrated, forecaster climbed, but remains in a downtrend. Silver is in an uptrend in the daily timeframe, a state of no-trend on the weekly, and a downtrend on the monthly.

COMEX SI open interest fell -1.3K contracts on Friday, and fell -2.0K contracts this week. That was -4 days of global annual production in paper removed from the market. Current open interest for SI: 80% of global annual production, down -1.14% this week.  OI for silver continues to decline.

Silver commercial net rose +3.4K contracts, which was -3.5K fewer shorts and -104 fewer longs. Silver managed money net rose +4.0K contracts, which was -3.8K fewer shorts, and +168 new longs. A large numbe rof managed money longs have been rinsed out. This suggests we are at or near a low for silver. For what its worth, shorts are mostly gone too – quite unusual at the lows.

The gold/silver ratio climbed +0.57 to 113.55. That’s somewhat bearish.

GDX moved up +2.38% on light volume, while GDXJ fell -0.67% on light volume. XAU rallied +3.12%, the short white candle was unrated, forecaster climbed, moving into an uptrend. XAU now back in an uptrend in all three timeframes. The miners are – very slowly – recovering fromm the pasting they took four weeks ago.

The GDX:gold ratio climbed +2.63%, while the GDXJ:GDX ratio dropped -3.07%. That’s neutral.

Platinum fell -17.80 [-2.46%], and palladium fell -67.58 [-3.23%]. Both metals mostly just chopped sideways after the big rallies from a few weeks back.

Copper moved up +0.02 [+0.93%] to 2.18 on moderately light volume. The spinning top candle was a reasonably strong bearish reversal (42%), forecaster climbed, but remains in a downtrend. Copper is in a downtrend in both the weekly and monthly timeframes. Copper chopped slowly higher this week, but didn’t look so great on Friday.

The buck shot up +2.14 [+2.17%] to 100.67 on very light volume. The short white candle was unrated, forecaster climbed, moving higher into its uptrend. The buck remains in an uptrend in all three timeframes.

Major currency moves included: CAD [-1.48%], EUR [-3.06%], GBP [-1.51%], AUD [-2.80%].

The buck is slowly moving higher after the hammering it took last week – maybe a third of last week’s plunge has now been retraced. It is possible that the Fed’s liquidity swaps with foreign central banks [two week price tag: $349 billion] have helped to dampen the USD currency moves over the last few weeks. A hundred billion here, a hundred billion there, pretty soon you’re talking about real money.

Crude screamed higher, up +6.69 [+26.70%] to 31.75 on moderate volume. The long white candle was a bullish continuation, forecaster climbed, but remains in a downtrend. Crude is in a downtrend in both the weekly and monthly timeframes, but this week’s strong rally is hinting at a longer-term reversal for crude.

The market-moving news in crude was, of course, the Trump tweet on Thursday (paraphrased: “Had a great call with MBS; 10 MBPD cut in the works”), which ended up being the tip of the iceberg. On Friday, things became clearer: it appears that there may be an agreement forming on a three-way deal between Saudi Arabia, Russia, and the US. That’s speculation, but – both Trump met with US oil executives on Friday, and Putin held a video call with Russian oil executives Friday, and of course Trump had that apparently-positive phone call with MBS on Thursday.

To me it smells like a deal is imminent. Headline will be, of course: “Trump Saves US Oil Industry.” Its a fantastic deal, nobody ever saw anything like it before. Stereotypical, but also directionally correct. This assumes it goes through – which I am guessing it will.

https://oilprice.com/Latest-Energy-News/World-News/Russian-Oil-Firms-Ready-To-Agree-To-A-Production-Cut-Deal.html

Amusingly, back on March 26th, Goldman Sachs was telling you to prepare for a massive oil demand shock. This wasn’t quite the dead low, but it was pretty darned close. I’d give a lot to know what the positions of their trading desk looked like after that warning was released. This is why I don’t normally treat the pronouncements of Goldman as newsworthy events. Except after the fact, of course, as an example of “what not to listen to.” Or maybe even “to take the other side of.”

https://oilprice.com/Energy/Energy-General/Goldman-Sachs-Prepare-For-A-Massive-Oil-Demand-Shock.html

SPX fell -52.82 [-2.08%] to 2488.65 on moderate volume. The spinning top candle was a reasonably strong bearish reversal (42%), and forecaster climbed, but remains in a downtrend. SPX is back in a downtrend in all three timeframes. Daily forecaster dropped into a downtrend on Friday also.

Utilities [-7.51%] led the market lower, along with financials [-6.98%], while energy [+5.03%] and staples [+3.32%] did best. This was a neutral sector map.

The VIX fell -18.74 to 46.80. Fear falls, while market reverses lower? It feels to me that “someone” is back to shorting volatility. This was a huge drop in the VIX.  But who knows? Maybe traders are reluctant to buy more puts with the Fed spending half a trillion a week on behind-the-scenes interventions.

TLT rose +0.48%. The doji candle was a possible bearish reversal (39%), forecaster climbed, moving higher into its uptrend. TLT is in an uptrend in the daily and weekly timeframes. The 30-Year yield fell -8.0 bp to +1.21%.

I’m guessing the $330 billion the Fed spent just this week alone helped move bond prices higher.

TY moved up +0.14%. The opening white marubozu candle was a bullish continuation, forecaster climbed, moving higher into its uptrend. TY is in an uptrend in all three timeframes. The 10-Year yield fell -14.0 bp to +0.58%. This was 4 bp away from the all time low, set back on March 9th.

JNK fell -4.07%. The closing black marubozu candle was a bullish continuation, forecaster climbed, but remains in a downtrend. JNK is in a downtrend in both the daily and weekly timeframes. With massive Fed intervention this week, crappy debt still managed to plunge. This is not a good sign.

Physical Supply

The GLD ETF tonnage on hand climbed +7.31 tons, with 972 tons remaining in inventory.

ETF Discount to NAV:
* CEF +0.25%
* PHYS -0.03%
* PSLV +1.53%
Bullion Vault Premiums:
* gold: +1.05
* silver: +0.16

Gold 100 gram bars: 5.52% premium, Silver 100 oz bars 20.04% premium. Physical ETFs are mostly in premium (especially PSLV), and premiums remain at Bullion Vault. Physical gold and silver remain in short supply.

Notice there are no physical COMEX bars available at retail.

Grey Swans and Geopolitics

Patient Zero: We may have located Patient Zero for the virus. Not the wet market, but a Chinese lab – the Wuhan Institute of Virology. There are clear signs of a coverup at the lab. They pretended a particular lab researcher didn’t exist, removing her picture and her bio. Her name was Huang Yan Ling, and she worked at the lab on a bat corona virus project. After being confronted with evidence that she did in fact exist, and had worked at the lab, the lab explained that she had moved on but was fine. As we learned from Watergate, it is never the crime that gets you – it is the coverup. This, plus a whole lot of supporting evidence, including a paper written by a Chinese professor in Wuhan, strongly suggests this project (and the accidental infection of the researchers there) was the source of the pandemic.

https://www.nationalreview.com/2020/04/coronavirus-china-trail-leading-back-to-wuhan-labs/

Testing/severity/CFR: Iceland’s widespread voluntary testing regime tells us that at least 50% of infected people requesting a test have no symptoms. The people in the test group were self-selected, however, which skews the results – people with symptoms are much more motivated to get tests than those that don’t. This is good news, since that increases the denominator for the CFR. Wild-assed guess: perhaps 75% of randomly-selected positives would be asymptomatic. If true, that cuts the CFR by a factor of 4. https://www.cnn.com/2020/04/01/europe/iceland-testing-coronavirus-intl/index.html

Model Error: While the models have accurately forecasted the number of infected people, the models appear to have substantially overstated the number of hospitalizations that have occurred as a result of the infections. (This could account for NY Gov Cuomo asking for tens of thousands of ventilators – and then not needing them after all.) Is this because of a successful treatment regime? A younger population? A model with some serious flaws? All of the above? We don’t know yet. But the takeaway: things aren’t as bad as we expected them to be.

https://www.washingtontimes.com/news/2020/apr/2/white-houses-favorite-coronavirus-model-overshot-h/

HCQ: Two HCQ clinical trials have primary endpoint dates of April 21. Another HCQ test started at NYC hospitals on March 28th. Trump hinted: “it’s looking like it’s having some good results.” How much better would the results be if the HCQ were given before patients appeared at the hospital, and the US had a testing regime like Iceland?

Hong Kong: No news.

US-Iran: US claims that Iran was planning a “sneak attack” on US bases in Iraq. The US has withdrawn troops from a number of other bases, redeploying them to the Kurdish section of Iraq. There have been a number of attacks, followed by a number of reprisals from the US.

North Korea: DPRK fired some more missiles – I think it was last Sunday. Did anyone care? When the sun is shining, nobody notices the moon.

Economic Reports

Fed Balance Sheet: headline $5,811B, +557.3B (+9.59% w/w) (prior +11.15% w/w). More than half a trillion dollars, in just one week! And we were worried when the repo operations last year were getting out of hand. Now they’re just a rounding error.

Yield Curve Inversion: the 1-10 spread fell -19 bp to +42 bp this week. 1Y: 0.16% (+5 bp), 10Y: 0.58% (-14 bp).

Nonfarm Payrolls: headline -701K (-0.46% m/m), avg hourly earnings: +0.11 (+0.38% m/m), manufacturing: -18K (-0.14% m/m), PTW/Only PTW Work Available: +4.0K, PTW/Slack Work: +1.3M (+31.34% m/m). This last indicator is screaming “impending recession.”

Summary

While gold moved slightly lower this week, gold/Euros rallied strongly, printing a new all time weekly closing high. Gold/USD’s slight drop was just about the big move higher in the buck. Miners are slowly recovering from the big plunge that happened last month, and silver – while it is doing better than platinum – it too is struggling to recover.

While copper is moving up in fits and starts, crude screamed higher this week on the potential for a historic production limitation agreement between the US, Saudi Arabia, and Russia. While nobody is talking explicitly about a 3-country deal (OPEC++?) right now, that’s what my tea-leaf-reading is telling me.

Gold and silver OI continues to plunge; it is my belief that, after dropping so severely, once OI starts to reverse higher, that will tell us that the recent lows are in for gold – and probably silver too. But so far, we are not seeing that reversal in OI just yet – not in gold, and not in silver.

There are ongoing shortages of physical PM. No COMEX bars at retail, and premiums are increasing. Nobody can buy physical gold at anywhere near the COMEX price. And the “physical ETFs” are mostly in premium as well.

Crappy debt reversed course back down this week, right alongside SPX. This was even with half a trillion dollars of money handed out to the banksters to support all the various at-risk markets. That’s not confidence-inspiring.

And about that half-trillion dollars – Wolf Richter did the heavy lifting in providing the details on the various programs. Here are a few, just by name, and size:

Treasury Bonds: $3.34 trillion [+330 billion]
Mortgage Backed Securities: $1.6 trillion [+73 billion]
Repos: $263 billion [-100 billlion]
Foreign Central Bank/Liquidity Swaps: $349 billion
Primary credit: $44 billion
Primary Dealer Credit Facility: $33 billion
Money Market Mutual Fund Liquidity Facillity: $53 billion

https://wolfstreet.com/2020/04/02/helicopter-money-for-wall-street-1-5-trillion-in-3-weeks-of-fed-bailouts/

Gold appears ready to break out, at least in Euro terms. The Fed is spending money like an entire ship’s crew of drunken sailors ashore: half a trillion, PER WEEK. And we haven’t even started handing out the $2 trillion in free cash yet. Will this lead to inflation? It sure seems like it should.

Ultimately though its hard to say. This is my very first pandemic, so if I don’t get things exactly right, that would be why.
.

  • Sat, Apr 04, 2020 - 05:04am

    #2

    davefairtex

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    follow-on maps

PM Sector Map:

Name Chart Chg (W) 52w ch MA9 MA50 MA200 50/200 Last Crossing last
Senior Miners GDX 2.38% 10.89% rising falling rising falling ema9 on 2020-04-01 2020-04-03
Gold/Euro $GOLD:$XEU 2.09% 32.01% rising rising rising rising ema9 on 2020-04-02 2020-04-03
Copper $COPPER 0.46% -25.33% rising falling falling falling ema9 on 2020-04-03 2020-04-03
Gold $GOLD -0.32% 27.09% rising rising rising rising ema9 on 2020-04-02 2020-04-03
Junior Miners GDXJ -0.67% -6.31% rising falling falling falling ema9 on 2020-04-03 2020-04-03
Silver $SILVER -0.75% -3.97% rising falling falling falling ema9 on 2020-04-02 2020-04-03
Palladium $PALL -1.28% 58.46% rising falling rising falling ema9 on 2020-04-03 2020-04-03
Platinum $PLAT -2.41% -19.81% rising falling falling falling ema9 on 2020-04-03 2020-04-03
Silver Miners SIL -2.78% -10.29% rising falling falling falling ema9 on 2020-04-01 2020-04-03

Equity sector map:

Name Chart Chg (W) 52w ch MA9 MA50 MA200 50/200 Last Crossing last
Energy XLE 5.29% -53.76% rising falling falling falling ema9 on 2020-04-02 2020-04-03
Cons Staples XLP 3.44% -0.09% rising falling falling falling ema9 on 2020-03-26 2020-04-03
Gold Miners GDX 2.38% 10.89% rising falling rising falling ema9 on 2020-04-01 2020-04-03
Healthcare XLV 2.11% -4.41% rising falling falling falling ema9 on 2020-03-26 2020-04-03
Telecom XTL -1.83% -21.16% rising falling falling falling ema9 on 2020-04-03 2020-04-03
Technology XLK -1.87% 2.06% rising falling falling falling ema9 on 2020-04-03 2020-04-03
Materials XLB -3.73% -26.33% rising falling falling falling ema9 on 2020-04-03 2020-04-03
Industrials XLI -4.33% -26.63% rising falling falling falling ema9 on 2020-04-01 2020-04-03
Cons Discretionary XLY -5.75% -20.90% rising falling falling falling ema9 on 2020-04-01 2020-04-03
Financials XLF -6.52% -26.05% rising falling falling falling ema9 on 2020-04-01 2020-04-03
Utilities XLU -6.99% -10.02% rising falling falling falling ema9 on 2020-04-03 2020-04-03
Defense ITA -8.81% -33.11% rising falling falling falling ema9 on 2020-04-01 2020-04-03
REIT RWR -10.47% -34.43% rising falling falling falling ema9 on 2020-04-01 2020-04-03
Homebuilders XHB -13.49% -33.38% rising falling falling falling ema9 on 2020-04-01 2020-04-03
  • Sun, Apr 05, 2020 - 07:25am

    #3
    @SilverChartist

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    Gold CoT

I really like the way CoT data is portrayed in these charts..

 

  • Sun, Apr 05, 2020 - 07:27am

    #4
    @SilverChartist

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    Silver CoT

  • Sun, Apr 05, 2020 - 07:41am

    #5

    davefairtex

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    managed money silver COT

Here’s something interesting I saw in the COT – with “managed money”, which is the New COT rather than the legacy COT.

Usually, with managed money, as price drops, longs drop out, and shorts increase.  And vice versa when prices rise.  Long & short levels move in opposition.

But now, both are moving in synchrony.  Both longs AND shorts are dropping at the same time.  This is very unusual.  No matter what price does, levels of both longs and shorts fall.  This says to me: “deleveraging”.  My belief: once the deleveraging is over, that will mark the low, at least for COMEX.

  • Mon, Apr 06, 2020 - 07:13am

    #6
    @SilverChartist

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    $GDX

Metals up nicely this AM. (Mon)

$GDX breaking UP and out from 8-wk downtrend line & neckline of irregular reverse H&S.

Next test:  200SMA ($27.45), followed by $32 level.

The cheapest gold, right now, is still in the ground.  Miners way undervalued relative to actual metal.

  • Mon, Apr 06, 2020 - 09:44am

    #7

    JAG

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    $GDX

Interesting chart penny(?).

It’s hilarious how the miners are shut down for an indefinite time and the stock market thinks they should be priced higher.

I just bought JDST and I’m waiting for a reality check. I’ll probably get destroyed.

  • Mon, Apr 06, 2020 - 10:19am

    #8

    davefairtex

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    silver breakout above 15

This could be the real deal, +0.68 to 15.18

Gold also knocking on 1700.  Interesting how the equity market rally [+5.41%] hasn’t caused trouble for gold and silver at all.

Miners still lagging.

Inflation inflation inflation inflation.

2008 redux.  But this time, faster.

I wonder how much the Fed will print this week.  Another 500 billion?  More?

I get the sense you guys think I’m a nutjob for looking through the current pandemic.  But I think that’s what the market is doing too.  I’m seeing good news in all the numbers.  Is it HCQ?  Something else?  I don’t know.  I’m sitting in the cheap sits with the rest of you.

FD: I’m long.  I don’t dare say what, or else you all would laugh.  🙂

  • Mon, Apr 06, 2020 - 02:31pm

    #9
    jmone

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    PM Weekly Market Commentary – 04/03/2020

I’m still on the sideline watching in awe at the markets.  I agree that the markets are looking through the current pandemic, but I don’t think they are seeing the main street damage that will persist for some time.  I still expect to see high unemployment, large earnings downgrades that will take a much longer time to turn around.

If the price per share is even remotely based on forward earnings, I fail to see how the current enthusiasm on the stock market makes sense unless it is either FOMO or… that the new hero is MMT where federal debt does actually not matter.  Just print, till full employment coupled with the the MMT premise that there is actually no requirement that the “debt” ever needs to be paid back or serviced.

  • Mon, Apr 06, 2020 - 03:49pm

    #10
    @SilverChartist

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    $GOLD, Reverse H&S, $1700 breakout?

If the $1700 neckline of this revere H&S pattern is cleared on vol, it would project a move to the all-time high near $1920 in fairly short order.

Not a prediction, but a distinct possibility.

The remainder of this week will be very telling!

(Total sidenote: but the uranium sector is worth watching here as well.)

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