Thursday, February 10, 2011

Is The Gold Price Forming the Fatal Broadening Top Pattern That Usually Breaks Out to the Downside? Wait and See

Gold Price Close Today : 1361.90
Change : (2.90) or -0.2%

Silver Price Close Today : 30.091
Change : (0.182) cents or -0.6%

Gold Silver Ratio Today : 45.26
Change : 0.176 or 0.4%

Silver Gold Ratio Today : 0.02209
Change : -0.000086 or -0.4%

Platinum Price Close Today : 1825.10
Change : -29.00 or -1.6%

Palladium Price Close Today : 821.35
Change : -8.90 or -1.1%

S&P 500 : 1,321.87
Change : 0.99 or 0.1%

Dow In GOLD$ : $185.62
Change : $ 0.25 or 0.1%

Dow in GOLD oz : 8.980
Change : 0.012 or 0.1%

Dow in SILVER oz : 406.41
Change : -0.33 or -0.1%

Dow Industrial : 12,229.29
Change : -10.60 or -0.1%

US Dollar Index : 78.19
Change : 0.547 or 0.7%

Daily chart of the GOLD PRICE today takes the fatal shape of a Broadening Top, where highs are level or slightly rising and lows keep getting lower. Dow made a similar patter at the 2000 top, but later became a diamond top. Never mind, it only matters that it's a pattern that usually breaks out to the downside.

Only other interpretation is that gold has established a ceiling of resistance at $1,367/$1,365 and must bayonet its way thru that barbed wire and machine guns before it advances further. (Whoa! My metaphor gland is SMOKING today!) On Comex today gold shut the doors down $2.90 to $1,361.90.

The SILVER PRICE five day chart looks more like a rounding top, but since broadening tops sometimes show a rising upper boundary, it might be called that, too. Upper barrier for silver is 3050c, and the lower safety net is 2965c. On Comex today silver closed down 18.2c at 3009.1c.

The daily chart opened about 3018c, then slammed down to 2967c, and rose smartly back to 3025c, but closed lower. Y'all don't get mad and start throwing inkwells at me through the computer, I have to tell y'all what I see. Silver can only overcome the bad juju of the last three day's chart by clearing that 3050c level.

Stepping back a bit and viewing the five month chart. So far SILVER has merely made a lower high than its 3 January peak, which constitutes nothing more than a double top or maybe a peaking B-wave of an A-B-C correction.

Of course, closes above $1,365 and 3050c resistance would gainsay my elaborate ratiocination.

That old meth-head the US DOLLAR INDEX decided to go straight today. It burst up off yesterday's 77.50 bottom, adding 54.7 basis points and leaving that chart looking even more like a head and shoulders bottom. From here the dollar will spike its own future if it closes, even trades, below 78. Overhead it needs to break clean through 78.35.

The dollar cleared its trend-change trip-wire 20 day moving average (78.13) and closed at 78.188. The Euro, on the other hand, closed at 1.3602, down 3/4 of one percent and below its 20 dma (1.3607).

Early in the day stocks were knocked down and they stayed down the rest of the day. Again it was a mixed day, with some indices up and some down. Dow lost 10.6 points to close 12,229.29, looking something like the repeating decimal fraction of an ounce of silver's statutory value in "dollars of silver," that is, $1.29292929292.

But I digress, for as we all know, stocks ain't like silver at all. Besides, stocks might have broken their uptrend. If so, expect the rats to come over the sides of the ship in great carpets whenever the Dow cuts through 12,000.

S&P500 today closed up a meaningless 0.99 point to 1,321.87.

My confidence in stocks remains as high as it has been since 2000.

(Some of you won't get that, I'll bet.)

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.