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PM Weekly Market Commentary – 11/22/2019

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  • Sat, Nov 23, 2019 - 09:10am

    #1

    davefairtex

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    PM Weekly Market Commentary – 11/22/2019

On Friday, gold fell -2.45 [-0.17%] to 1468.61 on heavy volume, while silver dropped -0.10 [-0.58%] to 17.11 on heavy volume also. The buck rallied [+0.28%] along with SPX [+0.22%], crude fell [-0.62%] while bonds were mostly flat [10y yield +0.2 bp].

The metals sector map shows gold leading silver lower, and the miners leading the metals lower. This is a mixed sector map, but a generally bearish one. All PM items are below both the 9 and 50 MA lines, which says they are in medium-term downtrends. Last week’s reversal has been unwound.

Name Chart Chg (W) 52w ch MA9 MA50 MA200 50/200 Last Crossing last
Palladium $PALL 4.20% 58.28% rising rising rising rising ema9 on 2019-11-18 2019-11-22
Copper $COPPER 0.36% -3.87% falling falling falling falling ema9 on 2019-11-22 2019-11-22
Platinum $PLAT 0.16% 5.99% rising falling rising falling ema9 on 2019-11-22 2019-11-22
Silver $SILVER 0.15% 18.93% rising falling rising falling ema9 on 2019-11-22 2019-11-22
Senior Miners GDX 0.07% 38.22% rising rising rising falling ema9 on 2019-11-21 2019-11-22
Gold/Euro $GOLD:$XEU -0.23% 22.80% rising falling rising falling ema9 on 2019-11-21 2019-11-22
Gold $GOLD -0.43% 19.46% rising falling rising falling ema9 on 2019-11-21 2019-11-22
Junior Miners GDXJ -1.29% 34.43% rising rising rising falling ema9 on 2019-11-21 2019-11-22
Silver Miners SIL -1.72% 24.56% falling rising rising falling ma50 on 2019-11-22 2019-11-22

Gold fell -6.31 [-0.43%] to 1468.61. The spinning top candle was neutral, and while forecaster moved higher, it remains in a downtrend. Gold daily entered a downtrend on Thursday. Gold is back in a downtrend in all 3 timeframes, as is gold/Euros.

The Dec 2019 forecast is now looking at a rate increase: 7% chance.

COMEX GC open interest fell -7,842 contracts on Friday, and -15,914 contracts this week. We are finally starting to see some short covering as prices start to modestly decline. Current open interest for gold: 86% of global annual production, a decrease of -2%.

Commercial net fell -18k contracts, which was +14k new shorts, and -3k fewer longs. That’s another new all time high for commercial shorts. It is very unusual for commercial shorts to peak during a price decline – as in, I’ve never seen it happen. But it is happening now, at least through Wednesday anyway. Managed money net rose +20k contracts, which was +12k new longs, and -7k fewer shorts. It is my belief that official intervention is driving the unprecedented activity of the commercials at this time.

Silver rose +0.06 [+0.35%] to 17.11. The doji candle was neutral, and forecaster jumped into an uptrend. Silver daily dropped into a downtrend on Thursday; silver ended the week in an uptrend in both weekly and monthly timeframes.

The gold/silver ratio fell -0.67 to 85.83. That’s bullish.

COMEX SI open interest rose +973 contracts on Friday, and +2,627 contracts on the week. Current open interest for silver: 127% of global annual silver production, up +2% this week.

Commercial net fell -4.7k contracts, which was -3k fewer longs, and +1.7k new shorts. Managed money net rose +8.2k contracts, which was -7k fewer shorts, and +1.2k new longs. Silver commercials are acting normally – the net position has been slowly falling during the recent price decline. The contrast with gold is striking.

Miners inched up +0.05%, the doji candle was slightly bearish (31%), and forecaster was unchanged, remaining in a slight downtrend. XAU daily dropped into a downtrend on Thursday, resulting in the miners ending the week in a downtrend in both daily and weekly timeframes.

GDX:$GOLD rose +0.50%, while GDXJ:GDX ratio dropped -1.37%. That’s somewhat bearish.

USD

The buck rose +0.27 [+0.28%] to 97.85. The spinning top candle was bullish (40%) and forecaster inched higher but remains in a downtrend. DX daily moved back into an uptrend on Thursday, resulting in the buck ending the week in an uptrend in both daily and monthly timeframes. The buck is now back above all 3 moving averages as well.

What is the dollar strength all about? I think it might be caused by the projections for a rate increase (!) which I do not take seriously, but it is a reflection of the relative strength of the US economy, and the assessment that the rate cuts really are at an end, at least in the near term anyway. This whole thesis doesn’t help gold at all.

The big currency moves: EUR [-0.36%], GBP [-0.50%], AUD [-0.50%], CAD [-0.49%].

SPX fell -10.17 [-0.33%] to 3110.29. The short black/spinning top was a bullish continuation, and while forecaster fell, it remains in an uptrend. SPX ended the week in an uptrend in all 3 timeframes.

This week, sickcare and financials did best, while materials and REITs were at the bottom. This was a mixed sector map.

Name Chart Chg (W) 52w ch MA9 MA50 MA200 50/200 Last Crossing last
Healthcare XLV 0.82% 9.62% rising rising rising rising ma50 on 2019-10-15 2019-11-22
Financials XLF 0.57% 15.08% rising rising rising rising ema9 on 2019-11-22 2019-11-22
Utilities XLU 0.24% 16.43% rising rising rising falling ema9 on 2019-11-14 2019-11-22
Gold Miners GDX 0.07% 38.22% rising rising rising falling ema9 on 2019-11-21 2019-11-22
Cons Staples XLP -0.05% 11.88% rising rising rising falling ema9 on 2019-11-22 2019-11-22
Energy XLE -0.42% -6.38% falling falling falling falling ema9 on 2019-11-21 2019-11-22
Technology XLK -0.75% 35.13% rising rising rising rising ema9 on 2019-11-21 2019-11-22
Industrials XLI -0.78% 17.12% falling rising rising rising ema9 on 2019-11-20 2019-11-22
Cons Discretionary XLY -0.87% 17.93% falling falling rising falling ema9 on 2019-11-19 2019-11-22
Homebuilders XHB -0.96% 31.02% falling rising rising falling ema9 on 2019-11-19 2019-11-22
Telecom XTL -0.97% -0.70% falling falling falling falling ema9 on 2019-11-20 2019-11-22
Defense ITA -1.07% 22.71% rising rising rising falling ema9 on 2019-11-21 2019-11-22
REIT RWR -1.35% 10.19% falling falling rising falling ema9 on 2019-11-21 2019-11-22
Materials XLB -1.71% 11.29% falling rising rising falling ema9 on 2019-11-19 2019-11-22

The US equity market was #3 this week, with Developed Asia leading world equity markets lower.

VIX rose +0.29 to 12.34. Puts remain cheap.

Rates & Commodities

TLT jumped +1.55%, the long white candle was a bullish continuation, and forecaster ended the week in an uptrend. The 30-year yield dropped -9 bp to 2.22%.

TY rose +0.26%, the spinning top was a bullish continuation, and forecaster moved into an uptrend. TY is now in an uptrend in both daily and weekly timeframes.

DGS10, the 10 year yield, fell -6 bp to 1.77%. The opening black marubozu was a bearish continuation, and forecaster dropped into a downtrend. DGS10 is now split: downtrend on the weekly, uptrend on the monthly. Reminder: yield uptrend = bond downtrend.

While gold has resumed its downtrend, it appears as though bonds may have reversed.

JNK fell -0.25%, the hammer candle was a bearish continuation, while forecaster ended the week in a downtrend. Friday saw a swing low print for JNK on the daily chart (bullish 60%) so that might portend a bullish reversal for JNK. BAA.AAA differential rose +1 bp to +88 bp. There are still no real worries about debt quality right now.

Crude fell -0.09 [-0.16%] this week, largely unchanged after trading in a fairly large trading range. The doji candle was a bullish continuation, and forecaster edged lower but remains in an uptrend. Crude ended the week in an uptrend in all 3 timeframes.

The EIA report on Wednesday was mildly bearish: crude +1.4m, gasoline +1.8m, distillates: -1.0m, but it was a distinct improvement over the API report on Thursday, and it was responsible for the large reversal that happened on Wednesday.

Physical Supply Indicators

* The GLD ETF tonnage on hand fell -4.98 tons, with 892 tons remaining in inventory.

* ETF Discount to NAV:

PHYS 11.85 -0.94% to NAV [decrease]
PSLV 6.24 -1.39% to NAV [decrease]
CEF 14.04 -3.73 to NAV [decrease]

* Premium for physical (via Bullion Vault: https://www.bullionvault.com/gold_market.do#!/orderboard) vs spot gold (loco New York, via Kitco: https://www.kitco.com/charts/livegoldnewyork.html) shows a $1 premium for gold, and a 5 cent premium for silver.

* Gold dealer big bars premiums were: gold [1kg] 1.26% and silver [1000oz] 3.51%.

Grey Swans & Geopolitics

  • US-China trade: Trump declared that tariff rollback won’t happen unless China agrees to stop stealing IP and forcing tech transfers. Xi gave a speech and made mostly-happy noises about the prospects of an agreement. On Friday, Trump said the deal was “potentially very close.” Both houses of Congress passed the Hong Kong Human Rights and Democracy Act virtually unanimously; a Trump veto would easily be overridden. Trump says he stands with both Hong Kong and “his friend” Xi. This allows space for Xi to play Trump – but for how long? Until Trump sorts out he is being played, presumably. Next date to watch: December 15, when the next round of tariffs are due to hit. No doubt we will get “really super close” to a deal immediately prior to that date. Note: China had vowed to “retaliate” if Congress passed the HK Act. Did we see any retaliation?  Not so far.
  • Fed Not-QE: the Fed balance sheet fell – for the first time since not-QE started – by $17 billion, but still up $270 billion from the lows of August 30, 13 weeks ago. That’s a rate of $21 billion per week.
  • Hong Kong: as mentioned, Congress passed the HK Act with a veto-proof majority. Dems want to embarrass Trump, and Reps are starting to become China hawks. It is a marriage made in heaven. Trump may find himself overruled. A defector from the Mainland’s security service laid out the jobs he did on behalf of Beijing, providing the identities and operational details on espionage and disruption activities in Hong Kong, Taiwan, and Australia. Here’s a crazy thought: could Hong Kong be the catalyst to bring down the CCP? Related: if China had a government similar to Taiwan, they could well be unstoppable. https://www.hongkongfp.com/2019/11/23/chinese-defector-spied-hong-kong-provides-intelligence-trove-australia-report/
  • Iran: Iran imposed a domestic Internet blackout following widespread protests caused by a gasoline price increase. The crackdown by Iran’s security forces are believed to have killed at least 100 people, according to Amnesty International.
  • Italy – migration: No news.
  • BRExit: election in 2 weeks. Mish poll analysis concludes the Tories are likely to win a substantial majority in the upcoming elections; voters are more scared of Corbyn than anything else.
  • Yield Curve Inversion: the 1-10 spread fell to +21 bp, due mostly to the rally in the 10-year this week. 1Y: 1.56% (+2 bp), 10Y: 1.77% (-6 bp).
  • North Korea: After a Trump tweet which encouraged KJU to “act quickly” to reach a nuclear deal, the DPRK responded by saying “we are no longer interested in these meetings that are useless to us.” DPRK wants sanctions relief before it will agree to do anything concrete. Iran says the same thing. Do sanctions actually work as a persuasive tool? I’m thinking: no.  And maybe they aren’t meant to.

Recession Watch

  • PMI Composite Flash: headline 51.9 (prior 51.2), manufacturing 52.2 (prior 51.5), services 51.6 (prior 51.0). No contraction in either sector, according to the flash numbers.
  • Consumer Sentiment: headline 96.8 (prior 95.7), best score since July. Interestingly, consumers who are Dems foresee a recession, while Reps see continued expansion. That shows the power of State (and “Resistance”) media to spin the narrative.
  • FOMC Minutes: policy is currently “neutral”, until the economy moves enough to cause a “material reassessment.” Regarding the repos: some members suggested a “standing repo facility” as one option. Others wanted “higher reserves” as a buffer but were unsure what that level should be. Others expressed concern that some market participants could be “stigmatized” by participating in repo operations.

Summary

Gold and silver dropped back into downtrends this week, while bonds appear to have reversed. The US-China trade deal got even more iffy, what with the Hong Kong Human Rights and Democracy Act passing Congress, and Trump stating that tariff rollbacks won’t happen unless China stops stealing IP and forcing tech transfers. The CCP trotted out Xi to say nice things about the trade deal, but how long that glow lasts is an open question. The HKHRDA act passed both the House and Senate with a veto-proof majority, and there were threats by the CCP to retaliate if passage occurred. There are an estimated 85,000 US citizens living in Hong Kong, within easy reach of the PLA. Will we see Friendly Xi or PLA retaliation?

US consumer sentiment remains positive, the PMI flash numbers project mild expansion, and the Fed looks set to – if not raise rates, at least it won’t be cutting them in December.

The Fed’s Not-QE program went into reverse this week. Are things improving? Maybe they are. Or maybe it was just a reaction move in a longer-term uptrend. I will continue to keep a close eye on the numbers.

Big bar premiums on gold and silver have actually increased, while ETF discounts have shrunk. It appears as though gold buyers are buying the dip. This is a positive sign.

Gold OI fell for the first time this week; at the same time, the commercial short position hit a new all time high; the divergence could be due to the lag in COT reporting. Even so, this sharp increase in commercial shorts during a price decline is “very unusual” (i.e. it has never happened before in history). Either the banksters have changed their highly profitable operational paradigm, or this is not a commercial actor going short. Evidence: the chart below.

Tinfoil hat time: what if Trump found out about the PPT, and has decided to employ them in service to his US-China trade deal? “Keep the markets moving higher – pound gold if you have to – in order to paint a happy picture of the US economy, in order to encourage China to come to the table and sign this deal which we all know would be good for the country and in the national interest.”

And one last thing. Bitcoin broke below its longer term 7500 support this week. There is a lot of “air” underneath this support level; hard support is down at 3000. Not saying it goes there but…longer term traders have seen price drop from 19k down to 3k before. On the other hand, the very fact I’ve posted a bitcoin chart – first time in years – may well mark the low.

Weekly trends (in order of strength):

Uptrend: DJI, NDX, crude, SPX, 10-year treasury, silver.

Downtrend: bitcoin, USD, gold/Euros, copper, platinum, gold, miners.

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  • Sat, Nov 23, 2019 - 08:07pm

    #2

    charleshughsmith

    Status Bronze Member (Offline)

    Joined: Aug 15 2010

    Posts: 700

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    BTC support

Thanks for posting the chart of BTC. Support/resistance levels around $6200 and $4500 pop out to me.  $6200 seems baked in, $4500 maybe. But given the rampant interest in BTC here (heh), please post BTC charts as regularly as oil, SPX and gold…

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