Wednesday, October 29, 2008

A Leeetle Rate-Lowering Announcement From the Fed and the US Dollar Index Came A-Tumblin Down

Gold Price Close Today : 752.80
Change: 13.50 or 1.8%

Silver Price Close Today : 9.805
Change: 1.015 or 11.5%

Gold Silver Ratio: 76.78
Change: -7.330 or -8.7%

US Dollar Index Today: 84.50
Change: -1.72 or -2.0%

My, O, my, all it took was a leeetle rate-lowering announcement from the Fed & the US Dollar Index came a-tumblin' down. Dropped 172.4 basis points today, another 100 bp yesterday, who knows what she'll do tomorrow.

We remember the proverb, "What goeth straight up soon goeth straight down." Dollar must be acting in accord with its true fundamentals, which are the same as a drowning man floating in the Pacific Ocean wearing a steel helmet and having 200 lb. anvils tied to each foot.

Yet another example of the straight-up-straight-down was displayed in the stock market today. Opened up 2.79, rose 298.2 points, yet closed down 83.63, losing a total of 381.83 points, although up & down. Here, I suspect, we have an example of why you have to keep your head trading & stifle your emotions. Fed announced a rate cut, the unsophisticates reacted by buying with both hands, the sophisticates waited until newbies had hung themselves out to dry, then sold into their naïve hands, all the way down.

Reminds me of another proverb my friend Barry P., world's most disciplined trader (well, nearly) taught me: "In a bear market, money returns to its rightful owner." Oh, and once last proverb, also fitting, from Barry P.:"The market is not benevolent." Believe it or not, I have those proverbs right on my wall where I see them every day. It helps my humility problem. And so reminds me not to toot my own horn when I have a day where I hit the market EXACTLY on the head & begin to think I am pretty smart, before being market-smacked again.

The SILVER PRICE did indeed turn around yesterday, and today added -- hear this! -- $1.015! Closed at $9.805! Not to be outdone, the GOLD PRICE closed at $752.80, up $13.50, but gold was in fact outdone because the Gold/Silver ratio dropped to 76.79. Most likely course from here is a little drop-back, then a run higher.

Here are some gold numbers to watch, barriers or milestones upside: 1st target is $786, last low; then $800.61, 17 day moving average; then $828, August low & September correction low; then the 300 DMA at $850. Of course, $850 is The Big Number on its own, the 25 year resistance and top of the 1980 bull market.

The silver price milestones to watch: $10.50 first. That marked lows in August, September, & October (till it broke). Next comes $11.7, the August 2007 [sic] low; $12.46, the 50 DMA, & at last $13.50-70, the September high.

The Dow in Silver Ounces dropped 136.73 oz today! Remember as you watch this run that a high probability remains that after a run-up that makes everybody grin, a correction will come. That is the one we have to watch, because as long as it holds above yesterday's low, the silver price has bottomed.

In 1929 this day became Black Tuesday as prices collapsed on the New York Stock Exchange, wiping out thousands of investors. What is it the French say? "The more this changes, the more it stays the same."

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

- Franklin Sanders, The Moneychanger

"Buy Silver and Gold Coins at:"

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 $3,130.00; silver's primary is up targeting 16:1 gold/silver ratio or $195.66; stocks' primary trend is down, targeting Dow under 2,900 and worth only one ounce of gold; US$ or US$-denominated assets, primary trend down; real estate in a bubble, primary trend way down.