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PM Weekly Market Commentary – 9/20/2019

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  • Sat, Sep 21, 2019 - 10:37pm

    #1

    davefairtex

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    PM Weekly Market Commentary – 9/20/2019

On Friday, gold jumped +17.99 [+1.19%] to 1527.11 on moderately heavy volume, while silver rose +0.20 [+1.12%] to 18.08 on moderately light volume. The buck rallied [+0.30%] as did bonds [10Y yield -1.9 bp], while SPX [-0.49%] fell along with crude [-0.39%].

Friday’s strong gold rally started when Chinese negotiators canceled a farm visit, cutting their trip short and heading back to China earlier than planned. The news hit the wires about 1:10 pm, and that drove gold higher along with bonds, while SPX fell.

https://www.cnbc.com/2019/09/20/chinese-trade-negotiators-cancels-us-farm-visit-cuts-trip-short.html

The metals sector map is the reverse of last week; silver led gold, juniors led seniors, and miners led metal. That’s the sign of an uptrend. Copper did quite poorly, suggesting trouble with the US-China trade deal. It appears as though the PM correction is over. How long this holds is anyone’s guess, however – there have been a large number of twists and turns in this trade deal to date.

Name Chart Chg (W) 52w ch MA9 MA50 MA200 50/200 Last Crossing last
Junior Miners GDXJ 8.22% 37.39% rising rising rising rising ema9 on 2019-09-19 2019-09-20
Senior Miners GDX 7.70% 51.56% rising rising rising rising ma50 on 2019-09-20 2019-09-20
Silver Miners SIL 4.40% 19.50% rising rising rising rising ema9 on 2019-09-19 2019-09-20
Silver $SILVER 3.14% 25.77% falling rising rising rising ema9 on 2019-09-20 2019-09-20
Gold/Euro $GOLD:$XEU 2.48% 34.05% rising rising rising rising ema9 on 2019-09-19 2019-09-20
Gold $GOLD 1.94% 25.73% rising rising rising rising ema9 on 2019-09-19 2019-09-20
Palladium $PALL 1.01% 55.15% rising rising rising falling ema9 on 2019-08-30 2019-09-20
Platinum $PLAT -0.38% 13.35% falling rising rising rising ema9 on 2019-09-20 2019-09-20
Copper $COPPER -4.20% -6.20% falling falling falling falling ema9 on 2019-09-17 2019-09-20

Gold jumped +29.10 [+1.94%] on the week, erasing last week’s drop and then some. The hammer candle was bullish (41%) and forecaster jumped higher, moving back into an uptrend. Gold is back in an uptrend in both weekly and monthly timeframes. Gold/Euros is in an uptrend in the daily and monthly timeframes. That’s a big improvement over where we were last week.

The October 2019 rate-cut chance is at 44%, and the Dec 2019 rate-cut chance is 93%, and a 63% chance of 2 rate cuts. The market is totally ignoring that Fed dot plot.

COMEX GC open interest rose +4,327 contracts on Friday, and +14,798 contracts this week.

Commercial net fell -13k contracts, which was +20k shorts, and +7k more longs. Commercial shorts remain near all-time highs. Managed money net rose by +8k contracts, which was -5k fewer shorts and +2k more longs.

Silver jumped 0.55 [+3.14%] to 18.05, recovering much of last week’s loss. The bullish harami was actually a bearish continuation, and forecaster moved a bit higher but remains in a downtrend. Silver remains in a downtrend in the daily and weekly timeframes.

The gold/silver ratio fell -1.04 to 84.46. That’s bullish.

COMEX SI open interest rose +667 contracts on Friday, and +4,500 contracts this week.

Commercial net rose +7.2k contracts, which was -4.7k fewer shorts, and +2.5k more longs. Managed money net fell -7k contracts, which was -6.1k fewer longs and +794 additional shorts. Both commercials and managed money positions suggest an intermediate term high may be in place.

Miners recovered all their losses from last week plus a little extra; XAU climbed +5.71%, the bullish harami was quite bullish (56%), and forecaster inched higher pulling XAU back into a slight uptrend. XAU’s reversal on the daily looks much more emphatic; XAU ended the week in an uptrend in all 3 timeframes.

GDX:$GOLD jumped +5.64%, and the GDXJ:GDX ratio climbed +0.49%. That’s very bullish.

USD

The buck rose +0.27 [+0.28%] to 98.10. The buck spent alternating days rising, then falling, then rising, etc. The short white/NR7 candle was unrated, and forecaster moved a bit higher into an uptrend. The buck remains in an uptrend in both daily and weekly timeframes.

The big currency moves: EUR [-0.64%], AUD [-1.67%], JPY [+0.49%].

SPX

SPX fell -15.32 [-0.51%] to 2992.07. The spinning top candle was a bullish continuation, and forecaster inched lower but remains in a reasonably strong uptrend. Daily forecaster printed a very bearish swing high on Friday (63%), but daily forecaster remains in an uptrend. SPX remains in an uptrend in all 3 timeframes.

Discretionary and industrials led the market lower, while utilities and REITs were strongest. This is bearish – you never like to see utilities & REITs at the top – with more than a hint of trouble in the trade talks. Copper’s plunge this week supports the trade-talk concern too.

Name Chart Chg (W) 52w ch MA9 MA50 MA200 50/200 Last Crossing last
Gold Miners GDX 7.70% 51.56% rising rising rising rising ma50 on 2019-09-20 2019-09-20
Utilities XLU 1.48% 19.81% rising rising rising rising ema9 on 2019-09-17 2019-09-20
REIT RWR 1.27% 9.11% falling rising rising rising ema9 on 2019-09-17 2019-09-20
Healthcare XLV 0.54% -2.66% rising falling falling falling ma50 on 2019-09-11 2019-09-20
Energy XLE 0.33% -18.42% rising falling falling falling ema9 on 2019-09-20 2019-09-20
Defense ITA -0.26% 5.98% rising rising rising rising ema9 on 2019-09-20 2019-09-20
Technology XLK -1.11% 6.79% falling falling rising falling ema9 on 2019-09-20 2019-09-20
Cons Staples XLP -1.18% 9.04% falling rising rising falling ema9 on 2019-09-13 2019-09-20
Homebuilders XHB -1.26% 7.41% rising rising rising falling ema9 on 2019-09-19 2019-09-20
Materials XLB -1.35% -4.33% rising rising rising falling ema9 on 2019-09-20 2019-09-20
Financials XLF -1.44% -3.11% rising falling rising falling ema9 on 2019-09-20 2019-09-20
Telecom XTL -1.74% -10.74% rising falling falling falling ema9 on 2019-09-18 2019-09-20
Industrials XLI -1.94% -2.58% rising rising rising falling ema9 on 2019-09-19 2019-09-20
Cons Discretionary XLY -2.46% 2.21% falling falling rising falling ma50 on 2019-09-20 2019-09-20

The US was the second-worst performing equity market this week; Latin America was on top.

VIX rose +1.58 to 15.32.

Rates & Commodities

TLT jumped higher this week, rising +3.92%, climbing 5 days out of 5. Forecaster ended the week in an uptrend. The 30-year yield fell -21 bp on the week, which is a fairly strong weekly move. Even so, TLT has not yet recovered all the fairly dramatic losses suffered during last week’s big move.

TY rose +0.97%, but the bullish harami print was a bearish continuation, and forecaster moved lower into a mild downtrend. Daily forecaster moved back into an uptrend on Tuesday; TY ended the week in an uptrend in the daily and monthly timeframes. Just looking at the monthly chart, it appears that the bond uptrend remains in place.

DGS10, the 10 year yield, fell -17 bp to 1.73% this week. The bearish harami was quite bearish (49%) and forecaster moved lower but remains in a very weak uptrend. The monthly DGS10 chart remains in a fairly strong downtrend.

JNK rose +0.36%; in spite of that, JNK daily tipped over into a slight downtrend on Friday. BAA.AAA differential rose +2 bp to +89 bp; it was a small move higher – by and large, there are few worries from the credit markets about low quality debt.

Crude jumped +3.53 [+6.45%] to 58.22. All the gains came on Monday’s huge rally, some of which was subsequently retraced on Tuesday – all driven by the attack on the Saudi oil refinery which knocked 5.7 mbpd offline for an unknown amount of time. The Saudis on Tuesday suggested the downtime will be brief – but who knows what the truth actually is. The weekly shooting star candle was bearish (37%) but forecaster moved higher into an uptrend. Crude ended the week in an uptrend in the weekly and monthly timeframes.

Physical Supply Indicators

* The GLD ETF tonnage on hand jumped +19.64, with 894 tons remaining in inventory.

* ETF Discount to NAV:

PHYS 12.16 -1.21% to NAV [decrease]
PSLV 6.57 -2.04% to NAV [increase]
CEF 14.77 -3.15% 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 no premium for gold, and a 7 cent premium for silver.

* Gold dealer big bars premiums were: gold [1kg] 1.16% and silver [1000oz] 3.08%.

Grey Swans & Geopolitics

  • Ebola: total cases 3145, with 2103 deaths (CFR: 67%). That’s 54 new cases this week, which is an increase over last week. While this remains a fairly low number, at least compared with the recent past, a “security incident” took place this week in the Mandima Health Zone, where a local healthcare worker died of EVD, and the local community got upset and responded with violence. All Ebola containment activities in that region have been suspended until further notice. We’ll see the fallout from that in the next few months. https://www.who.int/csr/don/19-september-2019-ebola-drc/en/
  • Iran: who fired the missiles? Did Iran give the order and the Houthis push the button? Does it matter? A critical oil facility in the swing producer in the region, protected by (theoretically) the best US defensive systems that money can buy, were hit and knocked out anyway. It appears that the balance of power may have moved back to the “offense”.  That said – if Iran continues to attack Saudi Arabia, it will not be long before Saudi Arabia responds.  Iran has oil facilities too.  The Sunni/Shia war appears to be heating up, with 17.3 mbpd of oil traffic caught in the middle.
  • Italy – migration: With Salvini out of power, the talk in the EU is now about “automatic migrant distribution” among EU nations, so that Italy doesn’t have to bear the burden of all those migrant arrivals alone. But without any deterrent in place, it is likely that arrivals into Italy will climb. And each Migrant Sea Taxi offload will be used by Salvini to score points with the people of Italy who have demonstrated to have serious migrant fatigue. EU automatic redistribution won’t address this issue. Unless there is a fundamental migration policy change that includes deterrence, eventually an election will occur, and Salvini will take power. And he won’t have to share this time.
  • US-China trade: China trade negotiators cut short their trip and decided not to visit US farms, and the market tea-leaf-readers interpreted this as bad news for the state of play in the trade negotiations. Does it mean anything? I’m guessing probably not.
  • BRExit: As the clock winds down to October 31st, Mish tells us that the odds of a negotiated BRExit deal (something that the EU has said all along was absolutely not going to happen) have increased. It turns out that the EU, when faced with an impending no-deal BRExit, appears willing to negotiate after all. Who would have thought? Mish’s excellent summary here: https://moneymaven.io/mishtalk/economics/odds-of-brexit-deal-rise-as-2-most-recent-uk-polls-show-lib-dems-vs-labour-split-ytLtvsKmJUmkVo03BqBG-A/
  • Yield Curve Inversion: the 1-10 spread fell -13 bp to -11 bp. The yield curve is once more inverted. (1Y: 1.84%, 10Y: 1.73%)
  • Hong Kong: protests continue in Hong Kong; no idea as to the size, or severity. One target of the protesters is the subway line, which has acted to close stations apparently acting on orders from the government in an attempt to reduce the protesters ability to move and concentrate. As a result, protesters now target MTR facilities and harass staff. In response to the damage, the MTR is now considering hiring Ghurkas as a protection force for their stations and equipment. Employing fierce Ghurka soldiers as a “police” force for your facility – what could possibly go wrong?  Unless of course you actually want a bunch of protesters to be beheaded with Kukris, of course.  https://www.scmp.com/news/hong-kong/law-and-crime/article/3029805/recruiting-gurkhas-protect-hong-kongs-mtr-protest
  • North Korea: Trump said this week that Bolton’s suggestion to use the “Libyan Method” on North Korea set the talks back “very badly” and hoped “a new method would be very good.” North Korea sounded receptive. They also referred to the now-departed Bolton as a “nasty troublemaker”, a “warmonger”, and a “defective human product” – one of the few points of agreement I have with that regime.

Recession Watch

  • Industrial Production: headline +0.6% m/m (7.2% annualized), and manufacturing +0.5% m/m. These are expansionary numbers. My INDPRO predictor has moved back into an uptrend.
  • Housing Starts: headline single family starts (MA3) +4.1% m/m, and +2.3% y/y; that’s the first uptick for y/y housing starts in 10 months, and that’s cautiously positive for housing.
  • FOMC: dropped rates 25 bp, but the Fed dot plot projected that no more rate cuts would be forthcoming for another 15 months. Nobody believes this dot plot, not even Powell himself. Fed saw the US labor market as strong, US manufacturing as weak, global growth as weakening, and trade issues as volatile.  There was also a very curious jump in US overnight lending rates which signals that the financial system doesn’t have nearly enough cash. Is some form of QE in the offing?  Who exactly is running out of cash?  Both interesting questions.

Summary

The main event this week was the aftermath of the successful attack on the critical Saudi oil facility that took 5.7 mbpd offline for an as-of-yet undetermined amount of time.  As a result, crude is now back in a reasonably strong uptrend. This overshadowed the Fed’s 25 bp rate cut (with allegedly no more to come), and the mini-disturbance in the US-China trade talks when the negotiators cut their trip short for reasons unknown. Nobody really noticed the strong INDPRO report.

Bonds rallied along with gold, silver, and especially the mining shares. Was this just a bounce after a big sell-off last week? Or was this an impending return to the longer term uptrend for the safe havens? If we go with the monthly charts, all those items remain in uptrends. For now, it is probably wise to go with the trend in place.

Big bar gold premiums on gold remain low, and ETF discounts were mixed. There is no shortage of gold or silver at these prices.

The COT reports show that gold remains at or near a long-term high, while silver looks to be at a intermediate high.

Now that the ECB and Fed meetings are past, the things on the schedule to watch are BRExit, and the US-China trade negotiations. Wild card is Iran v Saudi Arabia, and the larger Sunni/Shia conflict.

There are two positive BRExit outcomes that bear thinking about. The first is a negotiated BRExit that passes Parliament, which is now a possibility with the new flexibility that the EU is showing. The second is an initial no-deal BRExit that causes both the UK and EU to hastily conclude a deal that addresses the new reality in a realistic and pragmatic manner. Either of these outcomes would be distinctly Euro-positive, and thus probably gold-negative. All things come to an end, and the end to the BRExit saga appears to be coming up in the next 4-6 weeks.

Likewise, a positive outcome in the US-China trade deal would be dollar-positive, and gold-negative. It would also probably impact the chances of further Fed rate cuts.

Worst case for gold: a negotiated BRExit that passes Parliament, followed by a US-China trade deal.

Best case for gold: a no-deal BRExit with lots of acrimony, followed by a breakdown in US-China trade relationship. This probably causes ECB money printing, a flight out of the Euro, and new highs in gold, US treasury bonds, and the buck.

Weekly trends (in order of strength):

Uptrend: SPX, gold, DJI, crude, NDX, platinum, USD, miners.

Downtrend: copper, 10-year treasury, gold/Euros, silver, bitcoin.

Note: If you’re reading this and are not yet a member of Peak Prosperity’s Gold & Silver Group, please consider joining it now. It’s where our active community of precious metals enthusiasts have focused discussions on the developments most likely to impact gold & silver. Simply go here and click the “Join Today” button.

  • This topic was modified 3 weeks, 5 days ago by davefairtex davefairtex.
  • Sun, Sep 22, 2019 - 07:21pm

    #2
    Sparky1

    Sparky1

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    Grey Swan: Thomas Cook airlines collapses; 600K travelers potentially stranded

Thomas Cook collapses, potentially leaving thousands of travelers stranded

https://www.cnn.com/2019/09/22/business/thomas-cook-collapse/index.html

Excerpts:

“Thomas Cook had been scrambling over the weekend to avoid collapse after the Royal Bank of Scotland and a range of other banks demanded that Thomas Cook Group PLC find £200 million ($250 million) in funding by this upcoming week.”

“The development comes after a tumultuous year for Thomas Cook. Since May 2018, shares have fallen by more than 96% amid Brexit uncertainty and intense competition in the tourism sector. “

  • Mon, Sep 23, 2019 - 03:11pm

    #3
    Luke Moffat

    Luke Moffat

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    Volume

Dave,

Any comments about today’s gold volume? My trading app shows it as ridiculously high. Is this just a glitch on my app or are we seeing some committed buying?

Cheers,

Luke

  • Mon, Sep 23, 2019 - 11:04pm   (Reply to #3)

    #4

    davefairtex

    Status Diamond Member (Online)

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    re: Volume

I don’t see anything out of the ordinary on my charts.  Look at stockcharts; $GOLD’s volume was decent but not crazy.  Looks like a modest breakout to me.

  • Tue, Sep 24, 2019 - 01:15am   (Reply to #3)

    #5
    Luke Moffat

    Luke Moffat

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    re: re: Volume

Must just be my app then, it showed Monday’s volume double that of Friday’s

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