PM Weekly Market Commentary – 07/10/2020

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  • Sat, Jul 11, 2020 - 01:14pm

    #1

    davefairtex

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    PM Weekly Market Commentary – 07/10/2020

On Friday, gold fell -4.75 [-0.26%] to 1824.74 on moderately heavy volume, while silver inched up +0.06 [+0.31%] to 19.12 on moderately light volume. The buck moved lower [-0.06%], SPX rallied [+1.05%] along with crude [+2.59%], while bonds were unchanged. It was a risk-on day.

The metals sector map shows juniors leading seniors, silver leading gold, and miners leading metal. All items except platinum are back above all 3 moving averages. This is a bullish sector map, although the lagging gold/Euros warns that close to half of the enthusiasm for gold is just a currency effect.

Name Chart Chg (W) 52w ch MA9 MA50 MA200 50/200 Last Crossing last
Silver Miners SIL 8.97% 51.23% rising rising rising rising ema9 on 2020-06-22 2020-07-10
Junior Miners GDXJ 7.94% 50.31% rising rising rising rising ema9 on 2020-06-19 2020-07-10
Copper $COPPER 6.22% 8.39% rising rising rising rising ema9 on 2020-06-19 2020-07-10
Senior Miners GDX 6.17% 48.03% rising rising rising rising ema9 on 2020-06-19 2020-07-10
Silver $SILVER 4.49% 26.02% rising rising rising rising ema9 on 2020-06-19 2020-07-10
Palladium $PALL 4.14% 28.19% rising rising rising falling ma200 on 2020-07-10 2020-07-10
Platinum $PLAT 1.69% 1.70% rising rising falling rising ema9 on 2020-07-10 2020-07-10
Gold $GOLD 1.30% 28.95% rising rising rising rising ema9 on 2020-06-10 2020-07-10
Gold/Euro $GOLD:$XEU 0.69% 28.44% rising rising rising falling ma50 on 2020-06-23 2020-07-10

This week, gold rose +23.43 [+1.30%] to 1824.74 on moderately heavy volume. The spinning top candle was a bullish continuation, and forecaster dropped, but remains in an uptrend. Gold is in an uptrend in the weekly and monthly timeframes.

Gold/euros dropped +10.99 [+0.69%] to 1614.01 on moderately heavy volume. The spinning top candle was a bullish continuation, forecaster dropped, but remains in an uptrend. Gold/euros is in an uptrend in all three timeframes.

COMEX GC open interest fell -2.9K contracts on Friday, and rose +16K contracts this week. That was 5 days of global annual production in new paper added to the market. Current open interest for GC: 53% of global annual production, up +1.49% this week.

Gold commercial net fell -1.1K contracts, which was +2.9K new shorts and +1.7K new longs. Gold managed money net rose +788 contracts, which was +5.5K new shorts, and +6.3K new longs.

Gold made a new 9-year high this week; it retreated a bit at the end of the week, but gold ended the week above the 9 MA, and is still in a reasonably strong uptrend over the longer term. Commercials do not appear to be heavily shorting gold as it moves higher.

Silver shot higher this week, up +0.84 [+4.60%] to 19.12 on moderately light volume. The long white candle was a bullish continuation, forecaster climbed, moving higher into its uptrend. Silver is in an uptrend in all three timeframes.

COMEX SI open interest fell -69 contracts on Friday, and rose +8.3K contracts this week. That was 17 days of global annual production in new paper added to the market. Current open interest for SI: 101% of global annual production, up +4.79% this week.

Silver commercial net fell -2.4K contracts, which was -1.6K fewer shorts and -4.0K fewer longs. Silver managed money net rose +866 contracts, which was +1.4K new shorts, and +2.3K new longs.

The gold/silver ratio dropped -3.10 to 95.44. That’s bullish.

Silver was finally able to close above round number 19 this week. This milestone, in the face of a fairly large build in OI, is a positive sign for silver. We also learned from Craig Hemke of the possibility that the shorting campaign may be coming to an end, if the shortages in physical silver continue.

GDX jumped +6.17% on moderately light volume, and GDXJ rallied +7.94% on moderately light volume. XAU moved up +6.96%, the long white candle was a bullish continuation, forecaster climbed, moving higher into its uptrend. XAU is in an uptrend in all three timeframes.

The GDX:gold ratio climbed +4.58%, and the GDXJ:GDX ratio climbed +1.64%.

This was an 8-year high for the mining shares, finally closing above the previous high set back in 2016. The uptrend in the miners looks extremely strong, especially in the weekly and monthly timeframes.

Platinum rose +15.22 [+1.80%], palladium rose +74.54 [+3.74%]. Platinum appeared to stage a failed rally this week, tipping back into a daily downtrend on Thursday. Palladium on the other hand turned up at end of week, and is now back in an uptrend.

Copper shot up +0.16 [+5.84%] to 2.90 on moderate volume. The confirmed bullish nr7 candle was neutral, forecaster climbed, moving higher into its uptrend. Copper is in an uptrend in all three timeframes.

Copper has been on fire this past few months; Friday saw a new one-year high, breaking abve the previous high set back in January 2020. RSI-7 for copper is now 94; that is extremely overbought. Is this risk-on or about shortages and inflation? Copper’s uptrend is quite strong.

The buck fell -0.70 [-0.72%] to 96.60 on moderate volume. The confirmed bearish nr7 candle was a probable bearish reversal (56%), forecaster fell, moving deeper into its downtrend. The buck is in a downtrend in all three timeframes.

Major currency moves included: CAD [-0.33%], EUR [+0.54%], GBP [+1.17%], JPY [+0.48%].

Money appears to be fleeing the buck – this doesn’t look like a risk-on move, but rather, money actually leaving the US for both Europe and Japan. The dollar downtrend has resumed, at least for now.

Crude rose +0.43 [+1.07%] to 40.76 on moderate volume. The northern doji candle was a reasonably strong bearish reversal (45%), forecaster was unchanged and remains in an uptrend. Crude is in an uptrend in the weekly and monthly timeframes.

EIA report: crude +5.7m, gasoline -4.8m, distillates +3.1m.

Crude edged higher until Thursday, when it sold off hard. On Friday, crude recovered; the harami pattern was a bearish continuation, but forecaster bounced back into a no-trend state. Was this just another one-day correction in crude? That’s hard to say.

SPX rallied +55.03 [+1.76%] to 3185.04 on moderately light volume. The spinning top candle was a bullish continuation, forecaster climbed, rising into an uptrend. SPX is back in an uptrend in all three timeframes.

Communication services [+4.33%] led, along with discretionary [+2.85%], while energy [-5.06%] and REITs [-1.83%] did worst. This was a bullish sector map.

The VIX rose +1.18 to 29.26.

SPX experienced some selling pressure on Thursday, but completely recovered the lost ground by Friday. Friday’s candle print was bullish, and daily forecaster resumed its uptrend. No bearish reversal for SPX.

TLT rallied +1.67%. The long white candle was a reasonably strong bullish reversal (44%), forecaster climbed, moving higher into its uptrend. TLT is in an uptrend in the daily and weekly timeframes. The 30-Year yield fell -12.0 bp to +1.31%.

TY dropped -0.01%. The doji candle was a bullish continuation, forecaster climbed, moving higher into its uptrend. TY is in an uptrend in the daily and weekly timeframes. The 10-Year yield fell -5.0 bp to +0.62%.

Strong rally for TLT, but just sideways movement for the 10-year treasury, which remains largely pinned to its recent trading range.

JNK climbed +0.40%. The doji candle was a bullish continuation, forecaster climbed, rising into an uptrend. JNK is in an uptrend in the daily and weekly timeframes.

Crappy debt recovered this week, although not as convincingly as SPX.

Physical Supply

The GLD ETF tonnage on hand climbed +8.99 tons, with 1200 tons remaining in inventory.

ETF Discount to NAV:
* CEF -0.12%
* PHYS +0.34%
* PSLV -0.25%
Bullion Vault Premiums:
* gold: -0.86
* silver: +0.05
Gold dealer big bar premiums:
* gold [1kg]: +0.42%
* silver [1000 oz]: +10.67%

Physical ETFs have mixed premiums, as are bullion vault’s premiums; silver bar premiums remain > 10%.

Grey Swans and Geopolitics

China & Decoupling: a former member of the government in China wrote an article projecting (more or less) a new cold war, with a bunch of different implications. It is unclear if this article was being tacitly critical of the current direction of the CCP, or supportive of it.  https://asia.nikkei.com/Editor-s-Picks/China-up-close/China-talks-of-US-decoupling-and-a-divided-world

Second Wave: Cases have yet to peak out either nationally, or in leading state Arizona (see chart below). Deaths remain in a downtrend nationally.

Second Stimulus: still no clarity. It could be anything from $1200, to a backdoor UBI (up to $2000/month “through the end of the pandemic”). It appears that Pelosi wants “the states” (Team Blue underfunded public pensions?) bailed out to the tune of at least a trillion dollars, in addition to any payments to individuals.
https://www.cnet.com/personal-finance/the-first-stimulus-check-brought-1200-per-person-what-about-a-second-payment/

Eurozone Breakup: No progress on the structure of a deal to implement EU’s 750 billion recovery package. German court ruling takes effect in four weeks.  https://www.ft.com/content/e1c2615d-3cca-4f75-8c23-f632784cb39c

Hong Kong: This week, both the House and Senate have passed the Hong Kong Autonomy Act by unanimous consent; it stipulates that the US government should restrict foreign banks and subsidiaries of US banks in Hong Kong from accessing the US dollar system if they conduct significant transactions with persons or entities that contribute to weakening Hong Kong’s autonomy.

https://www.msn.com/en-sg/news/world/us-senate-approves-hong-kong-autonomy-act-as-response-to-national-security-law/ar-BB16gqgK

US-Iran: things are quiet – for the moment. Drones remain a primary threat, for which there is currently no real counter.
https://www.stripes.com/news/middle-east/top-us-commander-sees-disarray-in-iran-after-soleimani-death-1.637013

North Korea: “no intention to sit face to face with the United States.”
https://www.usnews.com/news/world/articles/2020-07-06/north-korea-says-it-has-no-intention-to-sit-down-with-us-kcna

Economic Reports

Fed Balance Sheet: headline 6920.7B, -88.3B (-1.28% w/w). Fed continues to reduce; mostly that’s about liquidity swaps and repos.

Yield Curve Inversion: the 1-10 spread fell -4 bp to +47 bp this week. 1Y: 0.15% (-1 bp), 10Y: 0.62% (-5 bp).

Producer Prices: headline +0.89% m/m (prior +1.80% m/m) -4.13% y/y. Producer prices are recovering, but not rap
idly.

Summary

Gold rose to a new 9-year high, silver broke out to a new 10-month high, and the miners broke out to a new 8-year high. It was a good week for the metals.

If the demand for physical silver continues long enough, we could see the end of bankster shorting in the silver market. So far that hasn’t happened, however.

Crude had a momentary drop this week, and then recovered; same was true for equities, although the dip in equity prices was smaller.

Copper closed (barely) above the January 2020 high. This marks a total pandemic recovery for copper. Supposedly this is about a shortage of scrap copper and also a rebound in general demand from China. Will it last? That is hard to know.

Will the talk of trillions in new stimulus lead to anything? A grand trade-off does seem possible; Trump could get his $1200 checks, while Pelosi would get her Blue State pension fund bailouts. It would all be supported by more printing by the Fed. Trillions in new printing. No doubt this would be inflationary.

What will this do to the buck? We will have to see. Perhaps it is in a downtrend for this very reason.

I’ll leave you with my new creation; candlestick charts for cases & deaths for SC2 nationwide. I can’t explain why I didn’t do this earlier; candles are so much easier to read than line charts, at least for me. Does candlestick analysis work for SC2 cases? We will find out!  Note; these are “weekly candlesticks” for “daily data”.

Looks like a low percentage bearish reversal for cases; a “short black/spinning top” candle.

And a new low in deaths, nationwide. Bearish continuation – also a short black candle. Amazing how much easier things are to read when you have candles.

  • Sun, Jul 12, 2020 - 10:35am

    #2

    Eannao

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    Dr Copper

Hi Dave,

Thanks for the great work as always.

Copper’s upward move this week really caught my eye. Looking at it in simple terms, this is suggesting economic recovery, right?

If we can trust Dr Copper, his diagnosis seems to be for improving economic health. Perhaps due to fiscal stimulus on infrastructure spending?

  • Sun, Jul 12, 2020 - 10:49am

    #3

    Eannao

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    Platinum be cheap

Hi Dave,

Now that the gold bull is showing some solid momentum, I want to add to my PMs.

To paraphrase Mike Maloney, I can’t bring myself to buy gold when the Gold/Silver ratio is so high, so I was about to buy silver. But then I looked at the Silver/Platinum ratio, and platinum is near all time lows versus silver (my chart only goes back 20 years). Surely Platinum is the smart play right now? I’d really appreciate your thoughts.

  • Sun, Jul 12, 2020 - 11:26am

    #4

    davefairtex

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    platinum, etc

Yeah, I think that’s right.  Platinum is super cheap.  And if we’re right about what’s coming in terms of money printing, defaults, and some more money printing, and an eventual collapse of confidence in the system (this time, for real, by main street), then there will probably be a rush into anything that’s not paper at some point.

And probably – probably – platinum will catch a wild bid at that point and race back to something closer to the mean.  So it will probably do best, because money will be hunting for any shelter it can find.

The trick will be figuring out when to sell it.

As for copper – I dunno.  It would seem to be projecting good times ahead.  But I read about a shortage of scrap, and issues with mines in third world countries.  I’m less sure about this signal – it just seems too strong for where we actually are.

  • Sun, Jul 12, 2020 - 07:22pm

    #5
    Nate

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    Platinum

Long time ago I worked on a project that required a boatload of Platinum.  The US strategic stockpile provided us with nearly 1 metric ton.  (So there really is at least one PM metal housed there)  I shared the picture of 1000 ounce bars piled up with my local PM dealer.  He is a deep value guy and was super bullish on Platinum, and really bearish on Palladium .  He also mentioned how crazy the spreads on Platinum Eagles were.

FWIW, he had quite a number of gold coins on display and zero silver.  As in zero silver.  What did Dave say about folks taking delivery on the COMEX?  Has it hit the retail market?

  • Sun, Jul 12, 2020 - 07:47pm

    #6

    JAG

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    Candle-stick confusion

I can’t explain why I didn’t do this earlier; candles are so much easier to read than line charts, at least for me.

Yeah, candle stick charts elude me. On the first chart it looks like cases went down this last week, but when I look it up, I see they actually went up by 73,702 cases in the last 7 days compared to the 7 days before that (404,684, and 330,982, respectively).

I must be missing something, but if your chart doesn’t represent the actual numbers what good is it? Maybe I’m reading it wrong, but I don’t think I’m reading you wrong.

Not to mention that charting the deaths of people with price-action analysis seems a bit disrespectful.

I understand that we are all completely exhausted and burnt out by this pandemic, but seeking to minimize it can only hurt people, not help them.

  • Sun, Jul 12, 2020 - 10:27pm

    #7

    davefairtex

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    trends, candles, and pandemic minimization

JAG-

This is about trend analysis.  Are things improving, or not?  In this case, we’re looking for a bearish reversal/bearish continuation in the data.

Do you believe that line chart trend analysis for this data is respectful and appropriate, while candlestick chart trend analysis is somehow disrespectful and inappropriate?  Is applying a moving average to smooth out the weekend moves disrespectful?

You are correct about one thing – I am happy with this discovery.  I can now put a framework around the data itself that makes sense to me.  I just find candlesticks a ton easier to read than lines, after all these years.  They just speak to me more clearly.

Ultimately, I want to know what’s going on, and I want to project where things are going.

You think I’m trying to minimize the pandemic.  I think I’m trying to put it in context.  For instance: what’s the leading cause of death in the US?  Cherry pick your timeframe – say, between Feb 1 through end of June.  What’s the leading cause of death during that time?  SC2?  By factor of 2 or 3, perhaps?  Sure seems that way, given the urgency of the news coverage.

No.  SC2 is #3.  Leading cause of death remains heart disease, at 272k people.  Next is cancer, at 237k people.  SC2 comes in at #3, at 114k.  Are you worried about heart disease?  Cancer?  By the numbers, you sure should be.  You’re four times more likely to die from both of them as you are from SC2.

https://usafacts.org/articles/top-causes-death-united-states-heart-disease-cancer-and-covid-19/

My candles represent fixed periods; it isn’t “the last 7 days”, but rather, Monday through Sunday.  If data hasn’t arrived, it forms a partial candle, which can change over time as new data comes in.  (This is also true for my monthly charts I sometimes post mid-month).  I also smooth data using an MA7.  So the candle is the daily change, after calculating the MA7.   Should I discard the MA7 for the weekly candle?  I could, I suppose.  It looked a lot choppier when I did that, which seemed to make trend detection more difficult.

The chart I posted on Saturday was a partial week for the last candle, data through 07-10.  Here’s that same chart, updated with the latest data (through 07-11).  This too is just a partial week, until Sunday’s data arrives.  The chart is not clear as to what the last date is for partial weekly candles; by the time it gets to the charting code, it doesn’t know its just a partial candle.  Perhaps that accounts for the confusion.

Here’s data through 2020-07-11.  No top in this latest one, certainly.  Still incomplete.

And this one – a bullish reversal?  Maybe.

  • Mon, Jul 13, 2020 - 05:37am

    #8
    phusg

    phusg

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    PM Weekly Market Commentary – 07/10/2020

I think I’m not the only European who has recently come to see China in a different light, with the new Hongkong national security law being the tipping point. This trend is exemplified by an opinion article in very socialist leaning newspaper the Guardian titled, Trump is a bigot and a hypocrite, but he’s right to condemn China.

What’s happening in Hongkong is more sophisticated than Putin’s Crimea land grab, but boils down to the same thing.

I think (or is it hope?) that Europe will harden it’s stance and this could well lead to an escalating trade war and decoupling down the line.

  • Mon, Jul 13, 2020 - 06:12am

    #9
    phusg

    phusg

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    PM Weekly Market Commentary – 07/10/2020

As for the pandemic minimization I also get that sense from you now, in sharp contrast to your pandemic risk underlining when most of the West was busy putting it’s head in the sand.

No. SC2 is #3. Leading cause of death remains heart disease, at 272k people. Next is cancer, at 237k people. SC2 comes in at #3, at 114k. Are you worried about heart disease? Cancer? By the numbers, you sure should be. You’re four times more likely to die from both of them as you are from SC2.

Heart disease and cancer are not contagious, so entirely different category of death in my book. And surely you agree that most sensible people are concerned enough about them to try to eat healthily and exercise as much as possible i.e. do what they can to avoid them. If we do that for #1 and #2, why not #3?

I believe you that American Democrats have hijacked Covid for political ends, sections of media hijack it for their advertising ends and that the health sector is heavily influed by big farma, but all that doesn’t mean the disease isn’t a clear and present danger to a lot of people’s healths. It’s a nasty contagious disease that we don’t even know everything about yet. The latest research I’ve just seen provides pretty strong evidence that immunity tails off relatively quickly:

https://www.theguardian.com/world/2020/jul/12/immunity-to-covid-19-could-be-lost-in-months-uk-study-suggests

So as well though out as your herd immunity theory is, and it matches with Covid super-spreader evidence I’ve seen, I’m highly doubtful it’ll hold much longer.

  • Mon, Jul 13, 2020 - 09:33am

    #10

    davefairtex

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    categories, herd immunity, etc

phusg-

I’m all for trying to avoid all three diseases.

I’m furthermore assuming that Pharma is playing up every bit of fear at every level on every news outlet (which they largely control, because they are the primary advertiser) in order to maximize their income from this event.  This is a potential goldmine for them. The more scared we are, the more money they make.  So every way they can terrify us, they are trying hard to execute on.  They are pulling out all the stops.

Right now, the data says, the herd immunity thesis appears to be playing out.  Certainly, it is possible this vanishes.  But until such an effect shows up in the data, I’m personally not going to assume such an outcome.

I am not going to live in fear because of Pharma.  I just won’t.  Not until the data itself changes my mind.  And I’m not talking about the antibody test data; who knows what that really means in the wild.  I’m talking about the big data – the death rate seen in the population from this disease.

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