Tuesday, June 12, 2007

The Momentum Indicators Want Silver to Turn Up

SILVER dropped a bit more than GOLD today, but dropped only to 1298 & closed over 1300. Silver is not far from its 200 DMA at 1289, & its 300 DMA at 1261. It acts like it may drop more, but the momentum indicators want silver to turn up. Come to think of it, since March silver has made a series of higher lows (1249, 1276, 1298) with two lower highs. That's a triangle, cranking tighter and tighter to break out -- but which direction? It's a bull market, so main chance lies with up.

GOLD seems drawn to its 200 DMA at 637.29 & that support area at 635. Again, though, the momentum indicators are hinting at rising.

You know, I think back over this bull market so far, & we've seen several frustrating periods like this, when prices went sidewise or looked weak so long that at last people began to think silver & gold were going to crash & there wasn't a bull market after all. Looking back over that time, I don't now regret recommending to a single person to buy & then finding it dropped. No, what I regret are the people I told to "Wait" right before the market took off upward, and we waited, & waited, and waited, and never got in. As I said yesterday, in a bull market the best strategy is to get long, hold tight, and get longer.

As I noted yesterday about the Dow, I don't like double closes. Today the Dow fell 130 points. All the indices dropped, & the S&P500 landed on its face below the psychologically important 1500 level. The Dow traded today in a corrective pattern as it rose, then couldn't hold its gains and broke to new lows at the end of the day. No reason to hope for higher prices tomorrow, but every reason to swap stocks for silver & gold. Dow is now approaching its 50 day moving average at 13,153 (could reach that tomorrow), and not far from its 200 DMA at 12,411.85.

Despite gold's poor showing today, the Dow in Gold Dollars fell further, to G$423.80 (20.501 oz) from yesterday's G$424.15 (20.518 oz). It's sitting right on the 17 DMA (G$423.56), first tripwire for further falls. Odd -- here's a rare example of the different mathematics that can affect the DiG$: both gold and the Dow are falling, but stocks are falling faster so the DiG$ falls.

The US DOLLAR INDEX today closed up 23.8 basis points at 82.934, which clinches its breakout. A close above 83 will send the shorts scurrying.

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.