Tuesday, January 18, 2011

Gold Price Looks to Continue Correction, What Would Change My Mind?

Gold Price Close Today : 1368.10
Change : 7.70 or 0.6%

Silver Price Close Today : 28.910
Change : 0.592 cents or 2.1%

Gold Silver Ratio Today : 47.32
Change : -0.717 or -1.5%

Silver Gold Ratio Today : 0.02113
Change : 0.000316 or 1.5%

Platinum Price Close Today : 1823.90
Change : 12.50 or 0.7%

Palladium Price Close Today : 812.90
Change : 19.90 or 2.5%

S&P 500 : 1,295.02
Change : 1.78 or 0.1%

Dow In GOLD$ : $178.87
Change : $ (0.23) or -0.1%

Dow in GOLD oz : 8.653
Change : -0.011 or -0.1%

Dow in SILVER oz : 409.48
Change : 1.67 or 0.4%

Dow Industrial : 11,837.93
Change : 50.55 or 0.4%

US Dollar Index : 79.00
Change : -3.334 or -4.0%

Right now, The GOLD PRICE and the SILVER PRICE both have today bounced off a touch of the lower Bollinger Band (I explain Bollinger Bands below) which hints but guaranteeth not that they will move higher.

Today I want to introduce y'all to Bollinger Bands. This is a technical indicator which you statistics buffs will love and the rest of you will stare at like a calf looking at a new gate. Bollinger Bands measure volatility by comparing where the market presently stands to its recent volatility. As volatility increases, the bands automatically spread (and vice versa) because Bollinger bands are two standard deviations of the 20 DMA above or below the 20 DMA.

There, I've said it.

Never mind, just consider what they mean. When the market reaches the bottom or top Bollinger Band, is it highly likely (two out of three) to reverse. Readings outside the Bollinger Bands are very much overdone.

Regardless of the Bollinger Bands I find myself a tad distrustful of silver and gold right now. Gold remains below its 50 DMA ($1,383), and silver only climbed above its 50 DMA (now 2849c) today. Aftermarket also lacks enthusiasm, falling off after Comex close. On the other hand, silver coin premiums have stiffened slightly.

Today the GOLD PRICE gained $7.70 to close on Comex at $1,368.10. The $1,376 spike high that came around 9:00 showed how strong resistance up there is. Gold spent the balance of the day chastened and declining, to a low at $1,363.80 about 3:15 Eastern. Gold has trended up since Friday, but only barely. Gold's breach of that December $1,362 low leaves me nervous, but it hit $,1353 on 7 January, then on last Friday hit $1,355. That qualifies, at least until contradicted, as a double bottom. Yet given the size and duration of the preceding rise, two weeks hardly seems enough time spent correcting.

What would change my mind? Gold above $1,392 would help. Above $1,406 I become warm and fuzzy, and above $1,425 I throw caution to the breeze and double up.

But we aren't there yet.

The SILVER PRICE hit the ceiling at 2906c today, but it bunched and clustered under 29 like a bull making up its mind to jump over a fence. Relative Strength Indicator (RSI) is neutral, while MACD points down. Once again, good as it looks I believe silver still needs to perform a bit more penance before it re-enters the limelight. I'd like to see a few more of those "experts" write articles explaining how the "silver bubble has burst." That will clinch the upside reversal.

There were no tender feelings abounding in the Dollar Index today. It sank 33.4 more basis points (0.43%) to 79.003, on its way to 78.50. Be not surprised if the dollar rallies tomorrow, since it is pushing the envelop of its decline. I still expect the dollar to check its fall around 78.50. Low today was 78.635, not far off my mark.

Euro on the other hand is pushing its upper envelope and its luck. It has slightly bested is 50 day moving average (1.3329) and closed today at 1.3380. Looks like a countertrend rally in an ongoing downtrend, although the MACD indicator is arguing with me about that.

Lawsy, Miss Claudie, it sure looks good to me! Yes, yes, the Dow rose another 50.55 points to 11,837.93 and the S&P levitated 1.78 points to 1,295.02, and the fish are jumping and the cotton is high and Ben Bernanke is going to take care of all of us. I'm warning y'all, you take that poor, half-frostbit snake into your bosom to warm him up and he'll bite you. Keep clear of stocks, and maintain a watchful suspicion.

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.