Monday, July 02, 2007

Bullish Non-Confirmation for Gold

I'm reconsidering my near term outlook on Gold and Silver Prices. I came in this morning to stare at the Unhedged Gold Stocks Index (HUI) chart. Lo, behold! It breaketh not down, nor hath. That makes a non-confirmation with gold's break last week, one I would call a bullish non-confirmation, because surely the stocks depend on how gold performs. Yet I recall how many times I have been fooled by a rally bouncing off a low in a downtrending market, & I put my hand over my mouth. Still, gold merely touched off its 200 day moving average, then turned up. Needs now to close over 667 to confirm.

SILVER broke its 200 DMA last week. Yet when you review the last 3 years, there have been only few times silver has dropt thru that 200 DMA, & few exceptions to the rule that those 200 DMA breaches happen just before spectacular rallies. And it closed above 1259 today, something else I liked. And the premium on US 90% silver coin remains high-ish at minus 50 cents.

Add to all that silver & gold's seasonal pattern, which usually posts a low around this time of year. Maybe my pessimism last week was overhasty. I fear it was.

The US dollar has simply collapsed, down 31 basis points today, 57.5 Friday, and 10 last Thursday, a total of 97.5 points lost in 3 days. The buck now rests a hair's breadth from the 81.25 May low. If that fails, then the only safety net below is the Dec. 2005 low at 80.39. If the dollar does catch at 81.25, then it will have made a double bottom platform from which to build a rally. But, yes, it does have room & momentum enough to fall further.

STOCKS, the Great Gurus tell us, rebounded today on several big [enormously stupid & debt laden] buy out deals. Let's try something else: they bounced off the 50 day moving average because any investor with a computer & a smattering of technical knowledge suspects it will bounce from there & so buys. I think the Dow looks like it's rolling over, Al Thomas, who has forgotten more about trading stocks that most of us will ever know, thinks it's going higher still (his site I have learned to be careful when my conclusions disagree with an "old dog's" conclusions.

Still, it makes little practical difference for me, because there's no sense buying stocks when gold is leaving them in the dust. The Dow In Gold Dollars today dropped again, and has once again failed at that G$430+ level. That argues gold will once again be outperforming stocks strongly.

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.