Tuesday, January 04, 2011

Silver and Gold Price Highs Must be Near

Gold Price Close Today : 1378.50
Change : (44.10) or -3.1%

Silver Price Close Today : 29.492
Change : (1.604) cents or -5.2%

Gold Silver Ratio Today : 46.74
Change : 0.993 or 2.2%

Silver Gold Ratio Today : 0.02139
Change : -0.000464 or -2.1%

Platinum Price Close Today : 1756.20
Change : -10.90 or -0.6%

Palladium Price Close Today : 776.00
Change : -19.00 or -2.4%

S&P 500 : 1,270.20
Change : -1.69 or -0.1%

Dow In GOLD$ : $175.30
Change : $ 5.75 or 3.4%

Dow in GOLD oz : 8.480
Change : 0.278 or 3.4%

Dow in SILVER oz : 396.38
Change : 0.91 or 0.2%

Dow Industrial : 11,690.18
Change : 20.43 or 0.2%

US Dollar Index : 79.43
Change : 0.301 or 0.4%

One thing you learn trading markets or go broke quick, and that is Nothing is a given. Never take anything for granted. Always be ready for markets to do exactly the reverse of what you expect.

I recur to this not because silver and gold crumpled today, but to remind y'all that today's crumpling might not mean the top came yesterday. Notoriously at tops markets make double tops, separated sometimes by what appears at first a crash.

Clearly I got it wrong yesterday thinking a three wave correction was completed. That raises other possibilities. Now silver's 5 day chart has tacked on to that three wave decline yesterday a sideways movement, and today's drop. That also, top to bottom, might be an A-B-C decline, setting silver up to rise tomorrow. That's not crazy -- when a market becomes as overbought as silver now is, any whiff of trouble sends newcomers scurrying out of the market looking for cover. Another reason that yesterday might not have marked the top.

Here are the details of silver and gold today.

The SILVER PRICE opened around 3080c, then dropped 40c on open. Then it dropped another 30c, tried to rally, then fell to 3000c, broke through 3000c, rallied sideways off 2980c, fell yet again 60c to 29.306 at 12:45. By Comex closing silver had lost 160.4c to close 2949.2c. In the aftermarket silver traded briskly up to 2980c, leaving behind what conceivably might be denominated a V-bottom. Conceivably.

The GOLD PRICE painted out nearly the self-same pattern as the SILVER PRICE, same time. Low came at $1,374.50, and Comex charge gold $44.10 to close at $1,378.50. Clearly, $1,425 offers resistance more formidable than we anticipated. In a single day it cost gold all the advance of the past six days. More, it fell to the 50 day moving average. Now that's not as bad as it sounds, since Gold has been skating up its 50 DMA since November, employing it as sure support. Might rebound off the 50 DMA and turn around.

Last night I sat staring into the Great One-Eye until all the candles burned out, poring over the Gold/Silver Ratio's behaviour, toting up the odds of the Ratio extending its fall, a.k.a., silver and gold extending their rise. I came away with the conclusion that a Ratio low must be very near, which is to say, silver and gold price highs must be near. Mid-January is about as far as I think this rally can survive, but that leaves room for one more surge upward from here, or even from a lower base.

Most damaging to the ratio was its poking its head through the 20 day moving average, although it didn't close there. The 20 DMA acts as a very sensitive indicator for the Ratio, and it has already reached levels that mark its maximum historical drop below the 20 DMA. On the other hand, the RSI has not fallen down to 15, but remains today at 35.36. However, the RSI did reach that extreme in November. Anyway you look at it, all this says that the Ratio's drop is living on borrowed time.

Behold! I only tell you what I see.

And let not these consolations pass from your mind: about three months after the peak will come a low in silver and gold that will offer a SPECTACULAR buying point. Moreover, silver and gold remain in a primary up trend (bull market) that has at least three and perhaps nine more years to run. It is just beginning.

US DOLLAR INDEX today rose 30 basis points to 79.428, but the careful observer sniffs and asks, "What meaneth this trumpery?" 79.50 is the real resistance, and any close below that does that same thing to the markets that four candy bars do for a six-year old, pump him up with screams and running then drop him to the floor.

STOCK indices looked a mite peak├ęd today. Most indices closed lower, but the Dow rose. S&P500 fell 1.69 to 1,270.20 while the Dow, almost alone among stock indices, rose 20.43 to 11,691.18. Stocks are the botulism on the investment buffet. Leave them alone.

During the Twelve Days of Christmas (Christmas thru Epiphany, 6 Jan) our office will be working only four hours a day. Please be patient, leave a voice mail or send us an email at [email protected].

Thanks for your understanding.

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.