Monday, November 27, 2006

Gold and Silver Prices Break Out

I'm going to start out this commentary with a lecture: in a bull market, get long, and then get longer. Sure, it's fun to scope out markets and forecast them with technical analysis, but in a primary uptrend the proper course is to buy, then buy more, and then buy more again. Don't let the phantasm of price dips become the enemy of real profits. Application: silver and gold are in a primary uptrend that will last another 10 years or so, a bull market. Get long, and then get longer.

The breakouts in SILVER AND GOLD PRICES, confirmed by both rising above their September highs (1306 & 638.50) and holding those levels two days, looks real. Nor can it be written off to "dollar weakness" as light-weight minds are wont to do. Silver & gold were already rising against other currencies before the dollar broke. This appears to be the breakout I have been looking for since the correction began last May. Further confirmation is needed tomorrow by silver and gold rising still further. At some point, probably from much higher levels, the breakout will play "touchback" toward the point at which it broke out, most likely around these very prices we see today.

STOCKS were beaten today with an iron bar and left for dead. The Dow fell 158.46 points, but the S&P fell harder, roughly the equivalent of 198 points on the Dow. Now the lines are drawn and we can see that Mr. Bear didn't want the rally to get over 12,330. This may not be, indeed, probably is not, the last we'll see of prices at these nosebleed levels. That may continue into 1st quarter of next year, but maybe not. Stocks usually rise into the end of the year -- 'twould be a perfect turnaround to fool the greatest number if Mr. Bear just pulled the bottom out as a Christmas present
for his victims.

The Dow in Gold Dollars (DiG$) today extended its down- trend and confirmed it with a lower low at G$391.10 (18.92 oz), a decisive break through the longer term uptrend line, and a close below the 50 day moving average (DMA) (G$412.39), the 17 DMA (G$402.65), and nearing the 200 DMA (G$388.11). Closing through the 200 DMA will sink the DiG .

The US Dollar Index dropped 105 points from Wednesday to Monday (that's what I've show below), to close at the very bottom of its range and below. It closed below the May 2006 low, and below the point where this rally began in May 2005. It the Nice Government Men can't catch it here, twill drop back to the Dec. 2005 low at 80.50. The dollar's long term trajectory points to 60 (yes, sixty) but since 80 forms the bottom of a 35 year trading range, you can expect bounces from there. The NGM will be engineering the fall below 80 in stepwise fashion.

Argentum et aurum comparenda sunt --
-- Gold and silver must be bought.

- Franklin Sanders, The Moneychanger

"Buy Silver and Gold Coins at the Best Prices"

To avoid confusion, please remember that the comments above have a very short time horizon. Always invest with the primary trend. Gold's primary trend is up, targeting at least $1,250.00; silver's primary is up targeting 16:1 gold/silver ratio or $78.13; stocks' primary trend is down, targeting Dow under 2,900 and worth only one ounce of gold; US$ or US$-denominated assets, primary trend down; real estate in a bubble, primary trend way down.