PM Weekly Market Commentary – 08/07/2020

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  • Sat, Aug 08, 2020 - 11:49am

    #1

    davefairtex

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    PM Weekly Market Commentary – 08/07/2020

On Friday, gold plunged -29.05 [-1.40%] to 2047.32 on heavy volume, and silver plunged -0.64 [-2.19%] to 28.55 on extremely heavy volume. The buck screamed higher [+0.70%], SPX was mostly unchanged [+0.06%], crude fell [-0.88%], while bonds were unchanged.

The metals sector map has silver in the lead, gold in the middle, and the miners trailing; the junior miners were even in negative territory this week, and all of the miners have now fallen below the 9 MA. What to make of this? Well, miners do tend to lead, except in some relatively rare situations when silver rallies in an out-of-control sort of way. Like it did in 1980, 2011, and – apparently – right now.

Name Chart Chg (W) 52w ch MA9 MA50 MA200 50/200 Last Crossing last
Silver $SILVER 15.25% 67.66% rising rising rising rising ema9 on 2020-06-19 2020-08-07
Platinum $PLAT 6.77% 13.04% rising rising rising rising ema9 on 2020-08-04 2020-08-07
Palladium $PALL 3.04% 55.41% falling rising rising rising ema9 on 2020-08-07 2020-08-07
Gold/Euro $GOLD:$XEU 3.01% 28.72% rising rising rising rising ema9 on 2020-07-21 2020-08-07
Gold $GOLD 2.65% 35.28% rising rising rising rising ema9 on 2020-07-17 2020-08-07
Silver Miners SIL 2.07% 65.63% falling rising rising rising ema9 on 2020-08-07 2020-08-07
Junior Miners GDXJ 0.84% 43.41% falling rising rising rising ema9 on 2020-08-07 2020-08-07
Senior Miners GDX -0.47% 43.57% falling rising rising rising ema9 on 2020-08-07 2020-08-07
Copper $COPPER -2.41% 7.41% falling rising rising rising ema9 on 2020-08-07 2020-08-07

Gold rallied +52.88 [+2.65%] to 2047.32 on heavy volume. The long white candle was a bullish continuation, forecaster climbed, moving higher into its uptrend. Gold is in an uptrend in all three timeframes.

Gold/euros rallied +50.73 [+3.01%] to 1737.79 on heavy volume. The long white candle was a bullish continuation, forecaster climbed, moving higher into its uptrend. Gold/euros is in an uptrend in the daily and weekly timeframes.

COMEX GC open interest fell -1.5K contracts on Friday, and fell -35K contracts this week. That was -11 days of global annual production in paper removed from the market. Current open interest for GC: 51% of global annual production, down -3.21% this week.

Gold commercial net rose +2.0K contracts, which was -23K fewer shorts and -21K fewer longs. Gold managed money net fell -3.7K contracts, which was +9.1K new shorts, and +5.5K new longs.

The COT report revealed that it was the commercials that fled COMEX this week; managed money actually went short. I’ve never seen this behavior before during a large price move higher. Mostly, in large moves like this, it is managed money buying. Not now.

In addition, 9k contracts stood for delivery this week, adding to the 36k that stood for delivery last week. This week, not normally a delivery week, saw as many deliveries as most entire months prior to 2020.

Friday saw a big down day, but Friday’s bearish engulfing print was actually neutral. Daily forecaster dropped hard, but not quite enough for a reversal. By the numbers, gold remains in an uptrend, although it is hinting at – maybe – entering a correction next week. After Friday’s sell-off, RSI-7=73, which is only slightly overbought. No bearish reversal for gold.

Silver screamed higher, up +3.79 [+15.31%] to 28.55 on extremely heavy volume. The long white candle was a bullish continuation, forecaster edged lower, but remains in an uptrend. Silver is in an uptrend in all three timeframes.

COMEX SI open interest rose +960 contracts on Friday, and rose +21K contracts this week. That was 45 days of global annual production in new paper added to the market. Current open interest for SI: 120% of global annual production, up +12.37% this week.

Silver commercial net fell -3.7K contracts, which was +7.6K new shorts and +3.9K new longs. Silver managed money net fell -648 contracts, which was +668 new shorts, and +20 new longs.

The gold/silver ratio dropped -8.84 to 71.71. That’s massively bullish.

There was a huge increase in open interest in silver; commercials are piling in short as price rises, which is the usual behavior at COMEX. There aren’t many contracts standing for delivery (just 437 contracts this week). But even with the commercials piling in, this was the 4th best week on record for silver; the other 3 were in 1980 and 2011. That’s the territory we are in right now.

Friday’s large sell-off was concerning (daily candle: spinning top, 42% bearish), and while daily forecaster dropped, it wasn’t enough for a reversal. There was some dip-buying at end of day, which kept things from looking too ugly. No bearish reversal for silver.

GDX fell -0.47% on moderate volume, while GDXJ rose +0.84% on moderately heavy volume. XAU moved down -0.25%, the doji candle was a possible bearish reversal (39%), forecaster dropped, but remains in an uptrend. XAU is in an uptrend in the weekly and monthly timeframes.

The GDX:gold ratio dropped -3.13%, while the GDXJ:GDX ratio climbed +1.30%. That’s mostly bearish.

The mining shares did poorly this week, especially compared with gold and silver. Daily forecaster reversed on Thursday, and dropped further on Friday. Weekly weakened, but remains in a slight uptrend. The doji candle print was strongly bearish – at least for that candle type. Possible reversal for the mining shares.

Platinum rose +62.68 [+6.37%], and palladium climbed +56.07 [+2.55%]. Platinum did especially well this week, but daily forecaster reversed into a downtrend on Friday’s 44 point plunge. Palladium remains in an uptrend.

Copper plunged -0.07 [-2.45%] to 2.79 on extremely heavy volume. The spinning top candle was a bearish continuation, forecaster dropped, dropping into a downtrend. Copper is in a downtrend in both the daily and weekly timeframes.

Copper was starting to fade last week, but reversed convincingly this week; all of the damage happened on Friday. Not sure what the cause was; Friday’s plunge started around 9 am, and it was quite abrupt.

The buck rallied +0.09 [+0.10%] to 93.42 on moderately heavy volume. The doji candle was a possible bullish reversal (39%), forecaster climbed, but remains in a downtrend. The buck is in an uptrend in the daily timeframe.

Major currency moves included: EUR [-0.35%], GBP [-0.63%].

Friday saw a big rally in the buck; daily forecaster has reversed (daily print: swing now, 56% bullish), buck is now back above the 9 MA. Weekly print was moderately strong. It looks as though the buck may be putting in a low, at long last.

Crude shot up +1.20 [+2.96%] to 41.74 on moderate volume. The long white candle was a reasonably strong bearish reversal (41%), forecaster dropped, moving deeper into its downtrend. Crude is in an uptrend in the daily and monthly timeframes.

EIA report: crude -7.4m, gasoline +0.4m, distillates +1.6m. It was a positive report, but it did not seem to affect prices much at all.

Crude looks a bit confused right now; daily remains in an uptrend, weekly, a downtrend, with a somewhat bearish candle print. Maybe: believe monthly, which remains in an uptrend.

SPX rallied +80.16 [+2.45%] to 3351.28 on moderate volume. The white marubozu candle was a bullish continuation, forecaster dropped, but remains in an uptrend. SPX is in an uptrend in all three timeframes.

Industrials [+4.53%] led, along with financials [+3.26%], while REITs [+0.66%] and sickcare [+0.83%] did worst. This was a bullish sector map.

The VIX plunged -2.25 to 22.21.

It was a new 5-month high for SPX. NYSE advance ratio ended the week on a relatively positive note. Sector map looked bullish, forecasters mostly bullish – weekly looks a bit weak but still in an uptrend.

The 10-Year yield was unchanged at +0.0 bp to +0.55%. The doji candle was a bearish continuation, forecaster dropped, moving deeper into its downtrend. The 10-Year yield is in a downtrend in both the weekly and monthly timeframes.

Fed continues to buy Treasury bonds – bond yields continue to fall. We saw a new all time low for the 10-year yield this week.

JNK fell -0.21%. The short white/NR7 candle was unrated, forecaster dropped, but remains in an uptrend. JNK is in an uptrend in the daily and weekly timeframes.

Crappy debt looks relatively weak – it looks ready to tip over. This is a sharp contrast with equities.

Physical Supply

The GLD ETF tonnage on hand climbed +20.17 tons, with 1262 tons remaining in inventory.

ETF Discount to NAV:
* CEF -2.23%
* PHYS -1.02%
* PSLV -2.77%
Gold dealer big bar premiums:
* gold [1kg]: +1.89%
* silver [100 oz]: +10.15%

Economic Reports

Yield Curve Inversion: the 1-10 spread fell -2 bp to +42 bp this week. 1Y: 0.13% (+2 bp), 10Y: 0.55% (+0 bp).

Fed Balance Sheet: 6945.2B, -3.8B, Liquidity Swaps: -11.8B, Reverse Repos: +3.5B, Treasury Securities: +12.1B, MBS: +86M. More treasury bonds, fewer liquidity swaps.

Nonfarm Payrolls: headline +1.8M, avg hourly earnings: +0.07 (+0.24% m/m), manufacturing: +26K (+0.21% m/m). Headline recovery: 43% of pandemic losses.

Auto/Light Truck Sales: headline +9.99% m/m, Auto Sales: +15.18% m/m, Heavy Truck Sales: +13.60% m/m. Auto sales have recovered perhaps 70% of the pandemic losses.

Summary

Silver, gold, and the miners all went different directions this week. Silver went nuts (a 15% weekly gain definitely qualifies as nuts), gold staged a strong rally (and made new all time highs in both USD and Euros), while the miners appear to be setting up for a correction. I’m guessing that people holding the miners may be a teensy bit concerned with the pace of the rally in the metals. Or maybe its something else. From my view from far outside the bankster trading desks, I really have no clue.

The buck appears as though it might be putting in a low. Friday’s rally was reasonably strong, enough to pull DX back above the 9 MA. What causes the low for the buck? My opinion: two things. 1) falling cases in the US, and 2) the temporary failure of the money-printing stimulus negotiations. If the market believes that Pelosi won’t get that $3.4 trillion in new printed money, the buck probably rallies off that news. That’s my sense anyway.  #2 is probably more important than #1.

And – quite possibly – this combination could also cause a correction in PM too. Not because the buck rallies per se, but because “no stimulus” and “dropping cases” means a return to relative normalcy. That’s dollar positive.

The focus will then turn to Europe, where cases in some countries post-lockdown are rising, and the GDP impact of lockdowns has been nothing short of catastrophic. Here are the GDP changes for the various nations (since Q4 2019):

Spain: -23.1%
France: -18.3%
Italy: -17.8%
Germany: -13.3%
Sweden: -7.8%

Will the new EU “corona virus rescue plan” paper over this problem? Word on the street [I have no reference; number pulled from my fallible memory] is that Spain would get 80B euros in the $500 billion Euro corona virus rescue plan. That’s 6.1% of GDP. Look again at Spain’s GDP losses: 23% of GDP. Those GDP-loss chickens will come home to roost someday: a vast number of people in Spain are unable to pay rent, mortgages, or debt of any sort. That will be true going forward, independent of rescue. Spain is just one example. I predict the eventual impact will be strongly dollar positive.

Most likely, gold will rally also, once this process starts to unfold. How long will this take? I have no idea. Months, perhaps? More information will appear at the next ECB meeting; that German court decision is still “a thing.”  That’s another shoe that has yet to really drop.

Cases in the US fell sharply this week, down perhaps 17% from the highs set 3 weeks back. Now deaths are starting to fall as well, down 9%. I believe things are on track for “relative virus calm” in most parts of the country by the end of September. Call it “The Sweden Outcome.”  In progress.

(Senator) Chuck Schumer did an amazing turnabout this week; apparently, now it is now a-OK to open schools. The Party of Science has belatedly noticed that children are less affected by COVID than by seasonal influenza. Internal polling probably showed this “don’t open schools” position, which was most likely put in place to deliberately cripple the economy prior to the election and make people miserable, was not polling very well among real Americans. And – just like that – children can now go back to school. Because – science!  [FD: embarrassingly, I am a registered Democrat. Voted for Obama.  The whole bit.]

https://townhall.com/tipsheet/cortneyobrien/2020/08/07/wait-now-top-dems-want-to-open-schools-n2573938

Did I mention this before?  “Everything that happens in an election year, regardless of how it might seem unconnected, is about the election.”

  • Sat, Aug 08, 2020 - 04:03pm

    #2
    agitating prop

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    PM Weekly Market Commentary – 08/07/2020

Excellent,

Thank you, Dave. I have some pm shares that have outpaced the price of bullion. I am going to wait a little while and sell if they lose more than 2% next week…I think. There is a lot to consider here.

  • Sat, Aug 08, 2020 - 04:54pm

    #3
    wotthecurtains

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    PM Weekly Market Commentary – 08/07/2020

Sounds like the executive orders are coming down now, including an elimination of the payroll tax.

 

Anyone have thoughts on what this means or if it can really happen?   If this stands, can Trump just remove all Federal Taxes by executive order?

  • Sat, Aug 08, 2020 - 08:49pm

    #4
    @SilverChartist

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    Appreciate the transparency, but..

Dave,

 

Genuinely appreciate the transparency here:

[FD: embarrassingly, I am a registered Democrat. Voted for Obama.  The whole bit.]

…but, can you expand on your thought process in the past and how it has, seemingly, changed?  I was surprised when I read that.

FD: I find both parties despicable and don’t have a dog in the fight.

#FalseLeftRightParadigm

  • Sat, Aug 08, 2020 - 09:25pm

    #5
    Mommer

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    PM Weekly Market Commentary – 08/07/2020

Although I don’t understand everything you write, I really appreciate these summaries, Dave. Thank you!

  • Sat, Aug 08, 2020 - 10:56pm

    #6

    davefairtex

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    things change

silver chartist-

Heh well its called change.  JHK was also a democrat, as I understand it.  We probably both went through similar transformations.

The design/structure of the US political system means that there can only be two parties, and if you are going to have any influence, you need to pick one of them.  In 2008, I was perfectly happy voting for Obama.  Better than the alternative, I thought.  Hope & Change.  Well, then no bankster went to jail, and the wars just kept on coming, and sickcare just got worse and worse.  8 years later, no hope, and no change.  Was he different than Bush II?  Smarter, certainly.  But much the same outcome.  It was a helpful process for me.

Back in 2008, I didn’t quite understand just how firmly a grip that the Donor Class had on the political structure.  I wasn’t really paying attention.  And now I think – things are even worse than that.  CAF talks about “control files” – it feels more something along those lines is happening, most likely via NSA surveillance.  Was it always like this?  I don’t know.  I haven’t lived through “always”.  I just have a sense that things are like this now.  The last 12 years was really useful in showing me this.

I can observe the politics of division in real time.  Fire up “race” riots, so we don’t have space to talk about sickcare at 20%; we only can talk about “defunding the police” vs “law and order.”  Awfully convenient.  A fake, engineered crisis to distract.  And the harvesting continues apace.  But this is just a part of the picture.

“The left” used to be anti war.  And pro civil liberties.  I like both of those things.  Obama was neither of those things.  “The modern left” cozies up to Brennan and Clapper.  Doesn’t want to pull a single soldier out of any of our foreign wars.   Freedom of speech?  Google, facebook, and twitter are all about censorship now – but only of the voices they don’t like.  [I have friends at many of those companies!]  And the left is all about “canceling” people they don’t like.  Remember when ACLU used to defend the rights of the nazis to march?   Such a quaint concept today.  Can you imagine?  They’d all get cancelled.

Again, the last 12 years have been really instructive.  🙂

And even knowing all this, I still get annoyed when the actors are so utterly transparent, hypocritical, and destructive.  I’d really like to remove money from politics, end the revolving door, destroy all those control files, break up the monopolies, and see what might come out the other end.  I have hope it might be something good.  Or at least more reasonable.

  • Sat, Aug 08, 2020 - 11:58pm

    #7
    RPSTemple

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    Same in UK

DF –

The same has happened in the UK. There is really no difference between our three parties. (There is one difference – the opposition parties want to stay in the EU – but there is not a clear majority for that in the population as whole! Never mind). Ever since ‘New Labour’ have controlled the Labour party, the so called left wing party has been in favour of business, encouraged us to join in various USA overseas adventures etc.

The period when Corbyn was leader, the Labour party was under the direction of ‘Old Left’ and the PTB spent the period using all their resources to prevent him becoming PM, as he might not do their bidding.  If the following is true, just like the Democratic party in the USA and Bernie Sanders, the party administration was working to undermine Corbyn’s chances of leading the labour party to victory in a UK general election.

https://www.independent.co.uk/news/uk/politics/labour-leak-report-corbyn-election-whatsapp-antisemitism-tories-yougov-poll-a9462456.html

The entire establishment, including the BBC, ran stories implying that Corbyn was “Anti Semitic”, or even if he wasn’t, some of his key supporters were and he would do nothing about it. Was he anti Semitic, I doubt it, but it’s a good smear tactic.  Also stories kept appearing that the Labour party under Corbyn was relying on support from Russia or under the influence of Russia.

The current leader of the Labour party, Sir Kier Stammer, is right out of the establishment. Ex Director of Public Prosecutions and has a title. Say it all. The ‘controlling influences’ have got back to being fully in charge.

  • Sun, Aug 09, 2020 - 12:29am

    #8

    davefairtex

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    corrupt left

RPS-

Yeah, as soon as the “Labour” party decided that it was in favor of unlimited immigration from the continent, you just know there is just nobody in country who represents the interests of the working man.

I saw the charges of anti-semitism on Corbyn.  It looked like a scam to me too.  I also think he was secretly pro-BRExit, which would have ripped Labour in half.

Everywhere, the “labor-ish” parties have betrayed working people, and instead, have substituted political correctness as the thing they fight for.

Transgender bathrooms don’t hit the bottom line of the corporations, while restricting the importation of low cost labor does exactly that.

If “Labour” was really for the working man, they would be all in for BRExit.

Likewise, if the Democrats were really the pro-worker “Union” party they used to be, they’d be all over Building The Wall, deporting all the illegal immigrants, and in favor of ID requirements to work.

Funny thing is, I’m really more of a small business capitalist.  But without a powerful group that can represent the interests of the working man, large corps buy up the politicians, and you end up with a collection of monopoly-rackets that perpetually harvest the wealth from the country.

We need everyone’s interests to be represented for things to work out properly.

  • Sun, Aug 09, 2020 - 12:48am

    #9

    davefairtex

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    and some good news: Arizona!!

I’ve been saying for a while that Arizona is our future.  Look at the latest update:

And here’s the candle version.  This lets you see time blocks more clearly.  Two more of those long black candles, and it will be over.  For Arizona anyway.  Most of the other states look like this too, except AZ is leading by 1-3 weeks.

Almost there.  Another month.

  • Mon, Aug 10, 2020 - 06:34am

    #10

    JAG

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    What is “cheap”?

You know, Nate jokingly asked last week why should he sell his gold because there was nothing to buy. Gold and Silver are such a “no brainer” investment that I think the market will punish us for that at some point. So I’ve been stewing on the question….

So what is cheap?

  • VIX calls are not cheap but they are getting cheaper.
  • The USD is cheap, so maybe UUP (Invesco USD Bullish Fund) could become a play.
  • DBA, the Invesco Agriculture Fund, still looks cheap to me but it is staring to turn up. This might be a great inflation hedge too, especially if gold goes south.
  • XLF, the rotten banksters, looks relatively cheap.
  • Maybe JETS, the airline ETF. It’s definitely cheap.
  • Maybe XLE, energy, is relatively cheap too.

What am I missing folks? What is hated right now? Thanks for your input.

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