Thursday, April 29, 2010

Silver and Gold Prices Non Confirmation

Gold Price Close Today : 1168.40
Change: -2.90 or -0.2%

Silver Price Close Today : 18.549
Change 44.2 cents or 2.4%

Platinum Price Close Today: 1729.60
Change: 22.70 or 1.3%

Palladium Price Close Today: 550.95
Change: 11.35 or 2.1%

Gold Silver Ratio Today: 62.99
Change: -1.698 or -2.6%

Dow Industrial: 11,167.32
Change: 122.05 or 1.1%

US Dollar Index: 82.07
Change: -0.31 or -0.4%

Here I am skidding and slinging my car around in mid-road, but that Dollar Index looks like it topped yesterday. Even if it didn't what sort of strength does it show to break out (albeit slightly) to a new high for the move, a high above the last two highs, and then fall? No strength at all. Dollar index today had 30.8 basis points ripped off its back and is trading now at 82.073. Should it break that 82 fence tomorrow, it will fall at least 40 bps, maybe further.

Now y'all all think I am red-faced and tongue-tied because the Dow rose today to 11,167.32 (up 122.05). I'm not, no more than I am embarrassed by the S&P500 rising 15.42 to 1,206.78. Folks, you are watching a top in progress, and big markets turn slowly. Especially big markets that have big friends in government desperate to keep them up by any means possible. Stay out, stay away, stay calm. The weeping, whining, and whimpering will begin shortly.

In this day's trading silver and gold prices reversed their stances from yesterday. Today silver closed up strongly, 44.2c to 18.549 on Comex while gold dropped slightly, $2.90 $1,168.40. Let me clarify why this bothers me.

It's a "non-confirmation." For instance, if the Dow Jones Industrial Average rises to a new high but the Dow Transportation Average refuses to rise to a new high, that's a "non-confirmation." If the future really holds greater profitability for stocks, then those two ought to agree with each other. If they don't agree, the market is telling you, "There's a hold-up, a roadblock here, a fishhook! Look out, warning light!" On the other hand, when markets that ought to agree in fact confirm each other, that's a green light.

Silver and gold prices move together in bull markets. While they won't confirm each other every single day, in general and at turning points they must. That's why silver's failure to make a new high when gold made one in December was a massive, flashing yellow light. And look what happened.

Now from day to day sometimes silver and gold might disagree naturally, and, as I have hinted with all the subtlety of garlic breath, the NGM like to intervene in silver to drag gold down. So one day or another doesn't necessarily constitute a non-confirmation. Today's action seemed to me to gainsay yesterday's non-confirmation. Silver bounced up to its last high and made up for lost time yesterday. Gold stuttered and stumbled because it is right on the verge of a big jump. It's to be expected that a breakout like that would attract a lot of short sellers who think that this time gold will fail again.

What would comfort my wearied apprehension? Gold smashing definitively through $1,170, silver topping 18.80, and the Gold/Silver ratio dropping through 62:1. That would erase all the ambiguity.

Now I've talked so much back and forth y'all have probably lost my point: gold and silver looked strong today and are slogging through a break-out that will carry gold to $1,300 and silver to a new high above 2068c, unless some terrible crisis lurketh all unforeseen and unsuspected. Buy gold and silver.

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

- Franklin Sanders, The Moneychanger

© 2010, 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.