Thursday, September 09, 2010

Whether After a Shorter or Longer (3-4 wk) Correction, Silver and Gold Will Move Much Higher this Fall

Gold Price Close Today : 1249.70
Change : (5.90) or -0.5%

Silver Price Close Today : 19.780
Change : (0.198) cents or -1.0%

Platinum Price Close Today : 1548.00
Change : -10.00 or -0.6%

Palladium Price Close Today : 521.00
Change : -5.00 or -1.0%

Gold Silver Ratio Today : 63.18
Change : 0.331 or 0.5%

Dow Industrial : 10,415.24
Change : 28.23 or 0.3%

US Dollar Index : 82.68
Change : 0.126 or 0.2%

Whenever a market breaks into higher ground, then fails to hold on to that gain, it smells of weakness. The Dow today reached 10,476.62 early in the day, plateaued, then commenced dropping about 12:30, down nearly to unchanged. Then it livened up a bit and climbed toward the close, dropping off the last 30 minutes to close up only 28.23 at 10,415.24 (S&P500 rose 5.31 to 1,104.18). Add to this: 10,450 was the resistance stocks had to beat today, they pierced that, but couldn't hold on. Now they might break through tomorrow, but this looks sort of like a double top at 10,450 (with Friday). Or stocks might head tomorrow for 10,750. Either way, gravity has not been repealed and will shortly reassert its irresistible dominion.

The dollar rose 12.6 basis points to 82.684, but has resolved nothing. Yesterday and today it bottomed at roughly 82.40, while Tuesday and Wednesday it topped at 82.90. Dollar is trapped between those boundaries, and will end our bewilderment by breaking through one or the other. If the dollar were a horse, I wouldn't be betting on it.

The GOLD PRICE backed off $5.90 on the Comex close to $1,249.70 and now is trading at $1,244.80. We may have seen the end of the rise, or it may have one leg up left. But back off: a 50% correction of the move from the July 27 low at $1,155.90 would take gold to $1,209.10, awfully close to that well-known $1,210 support, right on the 50 day moving average ($1,211.36), and perfect correction to launch another advance.

On the other hand, the 20 DMA stands at $1,236.06, and if this amounts to a correction before one last leg up, it ought to stop there.

Much the same could be said for the SILVER PRICE, but silver's rise from 23 August when it touched the 200 DMA is a right vertical affair. Breaking out as it did from that long banishment under roughly 1950c, it has the look of a runaway market.

What's the other side of that? It's a vertical rise, and nothing goes straight up for long. If it is a breakout from that 2+ year triangle, then it might touch back to the breakout point, which was roughly 1850c. That's that "final kiss good-bye" move we see so often. 50 DMA is at 1838c, 20 DMA at 1888c, so there's support there. Also, in the late August breakout, 1880c served twice as milestone resistance/support. My guess is that a break below 1950c will carry to one of those points. If it doesn't break 1950c in two days or so, then it will head back up.

Whether after a shorter or longer (3-4 wk) correction, silver and gold will move much higher this fall. Much.

On this day in 1513 at the Battle of Flodden Field James IV of Scotland was killed by the English, the last British monarch to die in battle. It was a battle of English bills (a hooked chopping blade on a 6 foot pole) versus Scottish pikes (a long pointed spear not meant to be thrown, 10 to 25 feet long). The English lost 1,500 to 5,000 Scots killed. It was the beginning of a long decline for Scottish power that was not reversed until James VI became James I of England. All of those Stewarts were troublesome.

I didn't get any sleep last night. Was lying peacefully in bed reading when a helicopter buzzed overhead in my room. Sure enough, it was a Japanese hornet. They're about the size of the last two joints of a grown man's little finger and their sting last six to 12 months.

I can get along with just about any wildlife, snakes, spiders, armadillos, but there's just no reasoning with a hornet. It is them or me, and there's no possible way to sleep with one in the room. Before you strike, you must patiently wait for the hornet to fly in circles around the room, then Whack! when he lights. However, that only stuns him. It takes a direct blow with a ball-peen hammer to kill one.

And I dispatched this one with no more damage than waking my wife up. Calmed her down, lay back down to read, and not 5 minutes later, here comes another one. Evacuated my wife and called in my daughter, who helped me assassinate this one, too.

I turned off the light, but all night long kept waking up, wondering if another one had crept in the room. I'd have slept with a .45, the only other effective weapon against a Japanese hornet, but they make such big holes in the wall.

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.