Friday, December 17, 2010

Will the Gold Price Recover for Another Leg Up Before Entering a Lengthy Correction? I Think So

Gold Price Close Today : 1,378.60
Gold Price Close 9-Dec : 1,392.00
Change : -13.40 or -1.0%

Silver Price Close Today : 2911.3
Silver Price Close 9-Dec : 2878.9
Change : 32.40 or 1.1%

Gold Silver Ratio Today : 47.35
Gold Silver Ratio 9-Dec : 48.35
Change : -1.00 or -2.1%

Silver Gold Ratio : 0.02112
Silver Gold Ratio 9-Dec : 0.02068
Change : 0.00044 or 2.1%

Dow in Gold Dollars : $ 172.32
Dow in Gold Dollars 9-Dec : $ 168.85
Change : $ 3.47 or 2.1%

Dow in Gold Ounces : 8.336
Dow in Gold Ounces 9-Dec : 8.168
Change : 0.17 or 2.1%

Dow in Silver Ounces : 394.73
Dow in Silver Ounces 9-Dec : 394.94
Change : -0.21 or -0.1%

Dow Industrial : 11,491.91
Dow Industrial 9-Dec : 11,370.06
Change : 121.85 or 1.1%

S&P 500 : 1,243.91
S&P 500 9-Dec : 1,233.00
Change : 10.91 or 0.9%

US Dollar Index : 80.360
US Dollar Index 9-Dec : 80.059
Change : 0.30 or 0.4%

Platinum Price Close Today : 1,704.00
Platinum Price Close 9-Dec : 1,678.50
Change : 25.50 or 1.5%

Palladium Price Close Today : 741.85
Palladium Price Close 9-Dec : 737.60
Change : 4.25 or 0.6%

For the week the GOLD PRICE and SILVER PRICE gave contradictory results, while stocks rose 1% and platinum and palladium rose. The US dollar index rose significantly, though slightly.

Silver is fighting, gold is fighting, but will they recover for another leg up before entering a lengthy correction? I think so.

Today painted out another V-bottom for the day at $1,364.70. This looks like a double bottom with yesterday's $1,361.30 low. Resistance overhead lies around $1,378. Comex GOLD PRICE closed near the high at $1,378.60, up $8.20. To advance from here or hold this place, gold must not dip below $1,370. Looking up, gold's hurdles appear at $1,380, then $1,395 and $1,405. A close through $1,350 would send gold tumbling. Bear in mind that the coming Christmas holiday will dampen gold activity next week as traders flatten out positions before the holiday and stay home the following week.

Mmmmm . . .That SILVER PRICE chart charms me. Yesterday silver left a V-bottom at 2829c. That appeared to have ended the correction. Today silver confirmed that by falling to 2863c. How does that confirm a bottom? Simple. On the five day chart silver trended down from Tuesday through Thursday. Draw a trendline across those tops, and you will discover that silver today proved that trendline and its new uptrend by trading back to that trendline for a final kiss good-bye, posting a double bottom around 2865c, then climbing. Comex close found silver way up, 35.6c, and over 2900c at 2911.3c. Having revisited that 20 DMA support that has held silver up since August, silver now appears ready to challenge 2940c and 2990c. Momentum indicators are mixed. RSI isn't bad but the MACD is iffy.

Bottom line? It appears -- unless gainsaid by closes below 2800 and $1,350 -- that silver and gold will make one last run up before they rest for six to 18 months. It might be spectacular, and should come soon.

STOCKS today pulled an odd step. Most indices rose slightly, while the Dow sank 7.34 points to close at 11,491.91. S&P500 rose 1.04 to 1,243.91. Daily charts look nothing the same. Dow plunged early in the day, rose to unchanged by 2:00, then fell again into the close. Nasdaq rose all day while the S&P500 rallied big about the time the Dow was stumbling. Generally that sort of confusion doesn't come before strength, but you ought to have long ago sold all your stocks anyway, sharply dampening your interest in whatever they do.

The US DOLLAR INDEX finished its correction before New York opened for business this morning, hit a low at 79.554, lower than I expected it to fall. Nothing deterred, the dollar roared out of that low to 80.60, but fell back a little below that weighty 80.40 support/resistance. Trading now at 80.36, the dollar index netted an additional 17.9 basis points today.

Today's performance, placed against the longer term backdrop, makes a persuasive argument that the Dollar bottomed back in November at 75.63 (intraday). Rally should carry the dollar at least to 82.15, the halfway mark of its fall from the June 88.71 high. But if the dollar climbs above its 200 DMA (now 81.71), it ought at least reach the last high at 83.56, not far from the 61.8% correction level at 83.71. Either way, for now 'tis enough to know that the dollar is headed up. Only a close below 78.80 would argue against that direction.

The Dollar is hinting that markets are about to flip-flop. Those that for several months have been rising on dollar weakness -- stocks, silver, gold, commodities -- are about to be whipped by a rising dollar. That argues that tops are near -- within a month or so -- for those markets while the dollar will rally for some time.

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

- Franklin Sanders, The Moneychanger
Phone: (888) 218-9226 or (931) 766-6066

© 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.