Dear Readers, yesterday's commentary carried a terrible misstatement, and it couldn't have been more untimely. Apparently between the time it left my hands and the time it was sent to you, the devil, aliens, or the Nice Government Men got to it and changed "Gold is forming an upside-down head and shoulders. . ." "The Dollar is forming an upside-down, etc." It was confusing, but in the context I hope you could understand that before the saboteurs got to it, I meant that the GOLD PRICE and not the dollar was making that reversal formation.
Couldn't have been more untimely, since I was explaining to you that was one of the factors forcing me to conclude that gold had finished its downside penance and was about to rise. Whoa! Today the gold price arose with a vengeance, sending Nice Government Men all over Washington puking in their waste baskets. Shot clean through all that $1,105 resistance mess, clean through $1,118 resistance, and on to an $1,128 high, coming to rest on Comex (where the public is always fleeced) at $1,127.00, up $21.90.
Friends! Behold! The gold price gapped up today, which most always means a lift-off for higher stratospheric regions. If this move truly is as strong as it promised today, then it must advance again tomorrow, not spend time trifling here -- ought to burst through $1,132 and knock on or through $1,140 tomorrow. Recall that's where gold stalled on its last trip, well, $1,144.80, so a close higher than that forces the presumption that gold has burst forth into a rally. A closely following close above $1,160 must confirm that. On the downside, a close below $1,118 gainsays all the above.
And in the heavens there was silence for the space of 30 nanoseconds, and all the inhabitants of Babylon and of Wall Street gazed up into the heavens at their loudspeakers, and Behold! the Angel of the Fed did speak, and all those who bought and all those who sold and all those who just watched and hoped that someday they might buy and sell did listen, and the Angel of the Fed announced the decision of the Council of the Fed in the firmament assembled, and the Angel of the Fed said, "Nothing. We are doing nothing. For a long while yet." And all those dollar buyers who had looked to the Fed for salvation found themselves downhill of a Great Stone rolling over their bodies and their wallets as the Dollar Index tumbled down and down and down, 57.8 basis points, before it rolled to a stop at 79.673, which just happened to fall at dollar support. And the Angel of the Fed flapped his paper wings in dismay, and scowled, well-knowing that if the dollar index breaketh 79.60, it will accelerate like a Democratic politician from Detroit at a congressional hearing on sudden-acceleration-syndrome in Toyotas. Yea, the Angel feared, the dollar may go into overdrive, and head downhill into the ditch. Filled with pitch. And derivatives. And government debt.
And so was it revealed that the Idols of the Fed were hiding feet of clay beneath their wingtips.
Thusfar the Fed's announcement about interest rates today. Clearly the dollar had been edging up on airy expectations that the Council of the Fed in the firmament assembled would begin to raise interest rates, or at least bluster as if they were. Sorry, the economy's pump is sucking far too much wind for those brave spirits to risk any such move. If the dollar breaks 79.60, twill hit 78 or 78.50 quickly. That would make room for a pleasant little gold rally. $ index now stands beneath its 20 DMA. Yet what's an Angel to do? Protect the dollar & gut the economy? Not by the hair on Ben Breanne's chinny chin chin.
The Dow Industrials and the S&P500 and every other index including the South Jersey and Delaware Hosiery Manufacturers Stock Index rose today. The Dow added 43.83 to 10,685.98 and the S&P500 climbed 8.95 to 1,159.46. Clearly the Fates have cut the string for stocks, and they must make their dooméd climb to the last high at 10,730 before the earthquake arrives. Keep thyself clear, dear Reader.
Yet a little proof for the above is found in the Dow In Gold Dollars (DiG$). It had flirted with G$200 (9.675 oz), but has traded out onto a shelf hanging over an abyss, never a propitious formation on a chart. Fell today for the third day to G$196.00 (9.482 oz). Thus whispereth the DiG$ in our ears that stocks are fixing to tumble and gold to rise.
While the gold price shot up the SILVER PRICE lagged not far behind, throwing its shoulder at that same $17.50 door that stopped it last time. Silver rose 36.7c to $17.45 today. As with gold, so with silver: tomorrow it must make good her gains and rise more, battering through that last high at $17.64.
I believe we have a breakout in metals, but confirmation is needed. There'll be some excitement here the next few days.
Argentum et aurum comparenda sunt -- -- Gold and silver must be bought.
- Franklin Sanders, The Moneychanger
© 2009, The Moneychanger. May not be republished in any form, including electronically, without our express permission.
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. Whenever I write "Stay out of stocks" readers inevitably ask, "Do you mean precious metals mining stocks, too?" No, I don't.