PM Weekly Market Commentary – 08/14/2020

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  • Sat, Aug 15, 2020 - 07:19am

    #1

    davefairtex

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    PM Weekly Market Commentary – 08/14/2020

On Friday, gold fell -9.72 [-0.49%] to 1955.12 on moderately light volume, and silver plunged -1.11 [-4.00%] to 26.66 on heavy volume. The buck moved lower [-0.25%], SPX was unchanged [-0.02%], crude fell slightly [-0.23%], while bonds inched higher [the 10-Year yield fell -1.0 bp].

The metals sector map was pretty much the inverse of last week; copper was the only item to rally, while all the rest of the metals fell – silver led gold lower, with the miners clustered in the middle. A falling dollar didn’t seem to help at all. All items are now below the 9 MA. Currently, at least, this looks like a correction in an uptrend.

Name Chart Chg (W) 52w ch MA9 MA50 MA200 50/200 Last Crossing last
Copper $COPPER 2.62% 10.47% falling rising rising rising ema9 on 2020-08-13 2020-08-14
Platinum $PLAT -2.25% 13.88% rising rising rising rising ema9 on 2020-08-14 2020-08-14
Palladium $PALL -2.63% 48.75% rising rising rising rising ema9 on 2020-08-14 2020-08-14
Silver Miners SIL -4.40% 65.05% falling rising rising rising ema9 on 2020-08-11 2020-08-14
Gold $GOLD -4.50% 27.37% falling rising rising rising ema9 on 2020-08-11 2020-08-14
Junior Miners GDXJ -4.87% 43.37% falling rising rising rising ema9 on 2020-08-07 2020-08-14
Gold/Euro $GOLD:$XEU -5.00% 19.50% falling rising rising rising ema9 on 2020-08-11 2020-08-14
Senior Miners GDX -5.59% 40.45% falling rising rising rising ema9 on 2020-08-07 2020-08-14
Silver $SILVER -6.48% 53.97% rising rising rising rising ema9 on 2020-08-14 2020-08-14

On the week, gold plunged -92.20 [-4.50%] to 1955.12 on moderately light volume. The swing high candle was a probable bearish reversal (59%), forecaster dropped, but remains in an uptrend. Gold is in an uptrend in the weekly and monthly timeframes.

Gold/euros plunged -86.98 [-5.00%] to 1651.57 on moderately light volume. The swing high candle was a likely bearish reversal (74%), forecaster fell, dropping into a downtrend. Gold/euros is in a downtrend in all three timeframes.

COMEX GC open interest fell -6.3K contracts on Friday, and fell -10K contracts this week. That was -3 days of global annual production in paper removed from the market. Current open interest for GC: 50% of global annual production, down -0.95% this week. 4209 GC contracts stood for delivery at COMEX this week.

Gold commercial net rose +8.0K contracts, which was -4.0K fewer shorts and +4.0K new longs. Gold managed money net fell -16K contracts, which was +5.8K new shorts, and -9.9K fewer longs. These were relatively small changes; commercials covered and went long as price fell, while managed money bailed out and went short.

While weekly forecaster hasn’t tipped over yet, the candle print was bearish, and the daily ended the week in a downtrend. We may not have seen the low for gold, and/or, the bullish reversal will end up being “a process.” There are still more managed money longs to rinse – yes, it seems that the wash & rinse cycle is still with us; 10k managed money longs bailed out this week.

COMEX SI open interest fell -4.2K contracts on Friday, and fell -14K contracts this week. That was -29 days of global annual production in paper removed from the market. Current open interest for SI: 111% of global annual production, down -8.03% this week. 141 SI contracts stood for delivery at COMEX this week.

Silver commercial net rose +5.5K contracts, which was -2.2K fewer shorts and +3.4K new longs. Silver managed money net fell -8.1K contracts, which was +1.5K new shorts, and -6.6K fewer longs.

The gold/silver ratio climbed +1.63 to 73.34. That’s bearish.

There was a lot of short-covering on Friday’s drop, and a lot of short-covering overall this week – half of it on Tuesday’s big plunge. The daily is flat, while both weekly and monthly continue pointing higher. So far – we are just seeing a correction in an uptrend.

GDX dropped -5.59% on moderately light volume, and GDXJ fell -4.87% on moderately light volume. XAU plunged -5.31%, the swing high2 candle was a likely bearish reversal (74%), forecaster dropped, falling into a downtrend. XAU is in an uptrend in the daily and monthly timeframes.

The GDX:gold ratio dropped -1.15%, and the GDXJ:GDX ratio climbed +0.76%.

This was a clear weekly bearish reversal for the mining shares – even though on Friday, daily forecaster moved back into an uptrend. The candle print was very highly rated; that’s a bad thing. I suspect the lows for the miners will be “a process.”

Platinum fell -19.66 [-2.04%], and palladium dropped -41.87 [-1.94%]. Platinum remains in an uptrend; I don’t have a weekly model for palladium.

Copper shot up +0.07 [+2.51%] to 2.86 on moderate volume. The long white candle was a reasonably strong bullish reversal (43%), forecaster climbed, but remains in a downtrend. Copper is in an uptrend in the daily and monthly timeframes.

Copper dropped hard twice this week, but ended on Friday with a rally. It could go either way here. Longer term, copper is in a strong uptrend.

The buck fell -0.32 [-0.34%] to 93.10 on moderately light volume. The short black/spinning top candle was unrated, forecaster dropped, moving deeper into its downtrend. The buck is in a downtrend in all three timeframes.

Major currency moves included: CAD [+1.03%], EUR [+0.52%], GBP [+0.36%], JPY [-0.65%].

Last week’s potential dollar rebound faded this week; the dollar executed a failed rally. It appears that any low for the buck will be “a process” also. Longer-term trends remain bearish.

Crude climbed +0.73 [+1.75%] to 42.47 on moderate volume. The short white/NR7 candle was unrated, forecaster climbed, but remains in a downtrend. Crude is in an uptrend in the daily and monthly timeframes.

EIA report: crude -4.5m, gasoline -0.7m, distillates -2.3m. The bullish report didn’t seem to move the market in either direction.

After updating my models to use Armstrong’s cycle inputs, forecasters for crude stopped looking quite so fragile. Haven’t updated the weekly yet, but that long term forecaster looks a lot stronger.

SPX rose +21.57 [+0.64%] to 3372.85 on moderately light volume. The confirmed bullish nr7 candle was neutral, forecaster climbed, moving higher into its uptrend. SPX is in an uptrend in all three timeframes.

Industrials [+3.10%] led, along with energy [+2.64%], while utilities [-1.84%] and REITs [-1.78%] did worst. This was a bullish [-11] sector map.

The VIX fell -0.16 to 22.05.

No bearish reversal for SPX. In fact, SPX is 5 points away from its all time high.

TLT plunged -3.94%. The confirmed bearish spinning top candle was a likely bearish reversal (64%), forecaster dropped, dropping into a downtrend. TLT is in a downtrend in both the daily and weekly timeframes. The 30-Year yield rose +20.0 bp to +1.43%.

The 10-Year yield rose +13.0 bp to +0.70%. The confirmed bullish spinning top candle was a likely bullish reversal (75%), forecaster climbed, rising into an uptrend. The 10-Year yield is in an uptrend in the weekly and monthly timeframes.

The 10-year yield may have made its all-time low last week. Losses for the 30 year were fairly large. Bonds are starting to show signs of trouble. It looks like something important happened last Friday – that’s when TLT really started to reverse. TLT looks much more bearish than the 10-year.

JNK plunged -1.42%. The confirmed bearish nr7 candle was a probable bearish reversal (50%), forecaster dropped, falling into a state of no-trend. JNK is in a downtrend in the daily timeframe.

Crappy debt has also – probably – reversed.

Physical Supply

The GLD ETF tonnage on hand dropped -13.83 tons, with 1248 tons remaining in inventory.

ETF Discount to NAV:
* CEF -2.70%
* PHYS -1.39%
* PSLV -3.53%
Gold dealer big bar premiums:
* gold [1kg]: +1.29%
* silver [100 oz]: +11.53%

While physical ETFs are in fairly serious discount, premiums remain on the big bars.

Economic Reports

Yield Curve Inversion: the 1-10 spread rose +13 bp to +56 bp this week. 1Y: 0.14% (+0 bp), 10Y: 0.70% (+13 bp).

Fed Balance Sheet: 6,957B, +12.0B (+0.17% w/w), Liquidity Swaps: -5.9B, Reverse Repos: -2.4B, Treasury Securities: +14.4B, MBS: +82M. Fed continues to buy Treasury bonds.

Retail Sales: headline +0.84% m/m, retail sales (ex-autos): +1.86% m/m. Retail sales are making new highs.

Industrial Production: headline +2.94% m/m, manufacturing: +3.30% m/m. Recovered 50%.

Producer Prices: headline +0.93% m/m (prior +0.89% m/m). Recovered 50%.

CPI All Urban: headline +0.58% m/m (prior +0.56% m/m), CPI less-food/energy: +0.62% m/m (prior +0.23% m/m). Recovered 90%. These are very high inflation numbers; headline, annualized, is 7%, while core inflation is 7.4%!

Summary

Gold, silver, and the miners all reversed direction this week. In order of weakness: miners, gold, silver. In fact, it isn’t even clear silver has really reversed yet, even after the big sell-off on Tuesday.

Craig Hemke thinks he knows why PM took off a few weeks back; the Fed is floating trial balloons on inflation, saying they are considering letting inflation get over 2% before taking any action to raise rates. Combined with “interest rate caps” (which means infinite QE to force treasury bond yields to stay within a range), alongside printed-money stimulus plans, this pretty much guarantees an inflationary outcome.

Last time, QE just went into asset prices. This time, QE is being injected into the economy. How do we know? Well, lots of people haven’t been working, and yet they are getting paid with newly printed money. Fewer products + more money = guaranteed price increases. Retail sales are at all time highs, while manufacturing has only bounced back 50%. That just has to be inflationary. And that’s showing up in the CPI right now too.

Treasury bonds are now heading lower in spite of $12 billion in Fed purchases per week. This is a new thing. I’m not sure the decline continues if equities start to tip over, but – maybe $12 billion per week isn’t enough to keep the treasury bond market propped up forever.

Equities continue to make new highs, although they could be running out of steam; SPX moved up to within 5 points of the all time high this week, but could not move through it. Copper keeps threatening to sell off, but bounces back recovering most of its losses. Crude is slowly moving higher. Crappy debt is selling off, which looks distinctly risk-off. In short – risk assets are a mixed bag right now, but the decline in crappy debt may be a leading indicator of things to come. September will be here soon.

And it is looking less likely that there will be another stimulus plan. Pelosi wont’t get her $2 trillion, and so Americans won’t get any more checks. Is that good or bad? I’m not sure.

US cases continue to move lower, but substantially more slowly than last week. I blame California, where cases spiked higher instead of dropping this week.

We’re halfway through August; next ECB meeting in 4 weeks.

Hemke thinks that the Fed will pull the trigger on their new plan in September – announcing the new policy of inflation targeting and rate repression. He believes the banksters are well aware of this plan, and they will be using the month of August to bail out of their short positions. I think it is an interesting theory. If true, it could make for a choppy rest of the month.

https://www.youtube.com/watch?v=QHrNGmxLCpo

  • Sat, Aug 15, 2020 - 06:12pm

    #2

    davefairtex

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    Trump Considering Pardon for Snowden

If Trump does this, he will have my undying gratitude.  Snowden is a hero.

https://www.reuters.com/article/us-usa-politics-snowden/trump-says-hes-considering-pardon-for-leaker-edward-snowden-idUSKCN25B10Z

  • Sun, Aug 16, 2020 - 08:27am

    #3

    JAG

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    It’s all just market-ing

Nice report DF, much appreciated.

DF: Craig Hemke thinks he knows why PM took off a few weeks back; the Fed is floating trial balloons on inflation, saying they are considering letting inflation get over 2% before taking any action to raise rates. Combined with “interest rate caps” (which means infinite QE to force treasury bond yields to stay within a range), alongside printed-money stimulus plans, this pretty much guarantees an inflationary outcome.

Sorry to disagree, but the FED creating inflation is a (crack) pipe dream. They are only talking inflation because they know the economy is a sh*t-show and they have no hope of actually inflating the economy at all. All the FED can do is add debt to the economy, which is, by definition, deflationary.

What is the predominant market narrative these days? Inflation is coming! Inflation is coming!

That’s just ‘market’-ing. Don’t drink the cool aid.

Mr. Market suffers from bipolar disorder, inflation when he is manic and deflation when he is depressed. As an individual investor your only shot at maintaining your next egg against the big boys is to gradually take the opposite position of Mr. Market’s mood.

The bitcoin mania on YouTube is incredible right now. I see why you don’t like DF.

I sold half my bitcoin position on Saturday because it just made me ill to watch all the hype. The goldbug mania is almost as bad, though the pullback this week helped squash it a little.

  • Gold, silver and bitcoin are going to the moon.
  • Wendy’s: Where’s the beef?
  • The dollar is dead.
  • Microsoft Windows 10…The Future Starts Now
  • Stocks can only go up because the FED is printing.
  • Miller Lite: Great taste, less filling.
  • Bonds are selling off because inflation is here.
  • Pepsi performs better than Coke in taste tests.

It’s all just marketing designed to do one thing; get your money.

  • Sun, Aug 16, 2020 - 10:17am

    #4

    lambertad

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    chap wood index

JAG,

Aren’t you the one who posted the link to the Chapwood index a few weeks back? If that wasn’t you, then I apologize, but you should give it a look. Of the 50 large metro areas tracked, the lowest 5 year average was 6.9%. 5 years. Average.

Just because the CPI says inflation is under 2.0% doesn’t mean that’s actually what it is. See the chapter on Fuzzy numbers from the crash course.

They’re just making stuff up.

On a different topic, I came across this podcast from Peter Zeihan, worked for Stratfor for a long time, now independent analyst – I guess he can get more money that way. Anyway, absolutely fascinating geopolitical take on where the world is headed. Really a head scratcher. I will have to listen again to really take it all in. https://hiddenforces.io/podcasts/peter-zeihan-disunited-nations/

  • Sun, Aug 16, 2020 - 10:19am

    #5

    davefairtex

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    its all marketing

Well I certainly agree with that.  It is all marketing.  And they’re all trying to get your money.

Here’s another one: “the herd is right about the trends, but wrong at both ends.”

I think the buck does well once #NotMyPresident gets re-elected, and/or CA/TX both get the same herd immunity that appears to be in place in many other regions.

I also think this election will be a wake-up call for the mayors and prosecutors that have winked at the riots in their cities.  Evidence: that prosecutor in Atlanta that decided to prosecute his cops in the Rayshard Brooks case was absolutely annihilated (73%-27%) by his former subordinate in a primary battle.   Incumbents very, very seldom lose this badly.  This guy was just crushed.  It looks as though Police Lives Matter too.

https://thehill.com/homenews/state-watch/511683-atlanta-area-district-attorney-in-rayshard-brooks-case-loses-runoff-race

Will this play out nationwide?  That’s the question.  My guess is: yes.

I think Team Antifa has grossly overplayed its hand.

As for inflation: debt repayment and default are deflationary.  Debt creation is inflationary.

So if Uncle Sam creates money using debt, hands that money to real people who then spend it, and then the Fed buys that debt and squirrels it away on its balance sheet, never to be seen again, it isn’t like “real debt”.  It will never deflate, because it will never get paid back.

And if more money is being spent, and fewer things are being produced – that’s inflation by definition.   spending / production = gross inflation rate.

Very roughly speaking, inflation = Retail Sales / Industrial Production.

I’m not being swayed by marketing – these are the current numbers.  Of course, if they change, then I’ll change my position.  Who wants to lose money?  Not me.

  • Sun, Aug 16, 2020 - 11:49am

    #6

    davefairtex

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    geopolitical discussion

lambertad-

Thanks for the interview link.  Its fascinating; I had the sense that the CCP was doing badly in recent months, but I didn’t connect the dots as to just how dependent their entire business model was on the US Navy.

Without the USN patrolling the world’s oceans, China has a really bad outcome.

Trump has asked questions of the US foreign policy establishment that nobody has even thought about for 50 years.  “Why are we doing this? Why are we paying all this money?”

The reason used to be: to defeat the Soviet Union.  Of course, with the fall of the Soviet Union some 30 years ago, the question has a different answer.  Certainly there is no official national policy objective being met by this ongoing effort.

The interviewee doesn’t say so – and it may not be in his thinking, but I suspect that the elite globalist-industrialists are the ones behind keeping this whole operation going.  Why does the USN continue to patrol the sea lanes?  Globalism, and elite profits – outsourcing manufacturing to China, and then centralizing profits.

Definitely worth listening to.

  • Sun, Aug 16, 2020 - 03:58pm

    #7
    jmone

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    PM Weekly Market Commentary – 08/14/2020

There is also the supply side with PMs.  As the price moves up so does production (in the long run) as mines with higher AISC now becomes profitable and existing mines seek to increase their production.  Sustained “Going to the Moon” prices for PM will only occur if inflation takes the Dollar to the floor.  At this point I’m not in the EOTW camp and not even in the HyperInflation camp.

However I think there will be more extreme volatility in markets that we need to be prepared for…. both for asset protection and leverage these assets higher.  I’m prepared to move back into PM and short Equities, but I’ll continue to sit on the sidelines in cash and wait for now as picking direction and timing is critical…. and for some reason the big players are not giving me a call to let me know what their plans are in advance.  🙂  As before if there are more big moves in the market I’ll try to take the middle out of the move.

PS – my dad passed peacefully on the weekend.

  • Sun, Aug 16, 2020 - 04:54pm

    #8
    robie robinson

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    PM Weekly Market Commentary – 08/14/2020

We should all pray for a peaceful passing. I trust you are content.

I am debating on burial ‘neath the orchard or a cremation and spread over the garden, pastures, orchard.

A dear friend of mine was cremated and sat for a few year on the mantle. His wish, as his family and friends knew, was to be poured out on a manure spreader of composted manure and spread over the family farm. His wish was realized by family and friends.

May I offer Wendell Berry, not only as solace, but also as perspective?

He goes free of the earth.
The sun of his last day sets
clear in the sweetness of his liberty.

The earth recovers from his dying,
the hallow of his life remaining
in all his death leaves.

Radiances know him. Grown lighter
than breath, he is set free
in our remembering. Grown brighter

than vision, he goes dark
into the life of the hill
that holds his peace.

He’s hidden among all that is,
and cannot be lost.

I pray I added no grief, robie,husband,father,farmer

  • Sun, Aug 16, 2020 - 05:19pm

    #9

    pinecarr

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    PM Weekly Market Commentary – 08/14/2020

That’s beautiful, Robie.

My condolences also for the loss of your dad, jmone.

  • Sun, Aug 16, 2020 - 05:50pm

    #10

    sand_puppy

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    PM Weekly Market Commentary – 08/14/2020

Yes very beautiful poem Robie.  Wendell Barry really puts the ineffable into words.

When the drop of water returns to the ocean.

He’s hidden among all that is,
and cannot be lost.

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