Friday, March 18, 2011

Gold Price Must Break $1425 Resistance

Gold Price Close Today : 1,415.90
Gold Price Close 11-Mar : 1,421.60
Change : -5.70 or -0.4%

Silver Price Close Today : 3506
Silver Price Close 11-Mar : 3593.3
Change : -87.30 or -2.4%

Gold Silver Ratio Today : 40.39
Gold Silver Ratio 11-Mar : 39.56
Change : 0.82 or 2.1%

Silver Gold Ratio : 0.02476
Silver Gold Ratio 11-Mar : 0.02528
Change : -0.00051 or -2.0%

Dow in Gold Dollars : $ 172.88
Dow in Gold Dollars 11-Mar : $ 175.14
Change : $ (2.26) or -1.3%

Dow in Gold Ounces : 8.363
Dow in Gold Ounces 11-Mar : 8.472
Change : -0.11 or -1.3%

Dow in Silver Ounces : 337.75
Dow in Silver Ounces 11-Mar : 335.19
Change : 2.56 or 0.8%

Dow Industrial : 11,841.52
Dow Industrial 11-Mar : 12,044.40
Change : -202.88 or -1.7%

S&P 500 : 1,279.20
S&P 500 11-Mar : 1,304.28
Change : -25.08 or -1.9%

US Dollar Index : 75.572
US Dollar Index 11-Mar : 76.706
Change : -1.13 or -1.5%

Platinum Price Close Today : 1,723.60
Platinum Price Close 11-Mar : 1,781.00
Change : -57.40 or -3.2%

Palladium Price Close Today : 730.90
Palladium Price Close 11-Mar : 762.50
Change : -31.60 or -4.1%

First, look at the Table of the Week above, and carefully observe the winners and losers. Whatever else happened, at the end of the week the scoreboard shows plus or minus, just that simple.

The GOLD PRICE shone today, even climbing over its 20 day moving average ($1,424.40) to finish Comex $11.90 higher at $1,415.90. Closely attend: this was positive and constructive but not dispositive. Gold showed power and friends, but not enough to BREAK resistance at $1,425. Oh, it got CLOSE, as close as $1,423.50, but it didn't BREAK through $1,425. Until that happens, the gold price is merely bouncing off the $1,383 low preparing for another downleg.

Now if that does happen -- if the gold price pierces $1,425 and closes sharply higher, heading for the last high at $1,436, and then betters that, well, gold has a rally on its hands. Until we see that, the downtrend in force remains in force. And today's rally only brought the gold price up to touch the downtrend line.

On Comex the SILVER PRICE rallied magnificently, up 80c to close at 3506c. Great job, clearing 3500c resistance AND climbing through the 20 DMA (3451c). Great job, but it only climbed to the downtrend line. Needed for a breakout is a close above 3600c confirmed speedily by a close above 3671, the last intraday high.

Apparently I confuse folks, because all my writing lately about silver and gold in a corrective downtrend has got them calling asking me if they ought to sell out their bull market position and buy back when they go lower. My answer never varies:

"You are about to make the biggest mistake of your financial life."

Y'all are not smart enough to sell and buy back lower, and neither am I nor most of the folks you'll ever meet. Some people believe they can consistently predict a market, but they are wrong. Only a very few do it successfully. How many 80 year old retired day traders do you know? Not as many as were forced into retirement because they lost all their capital.

The notion of selling now and buying back lower betrays a fundamental misunderstanding of our investment strategy. Investing Rule No. 1 is, "Always align your investments with the primary trend, the trend that will last for 15 or 20 years, whether up or down." Think stocks, 1982 - 2000. Or silver and gold, 1960 - 1980. Or, think stocks since 2000, or silver and gold 1980 - 2001.

You will always make more money WAITING than you will ever make TRADING. Our strategy is not to catch every little up and down jiggle, nor even the BIG jiggles, but to cut a long, long piece out of a powerful uptrend that will rise 25 or 30 times its beginning price.

You sell out, and here's what will happen. You are just gimcrack sure and certain the market is about to drop. You sell, and it obliges your confidence by rising 30%. Whoops. You just LOST your bull market position, and will either walk away in disgust to miss the rest of the bull market, or you will buy back in having missed that big rise and cost yourself a bundle.

On the other hand, say that you sell and it does drop. Will you buy back in when it drops 20%? 30%? 40%? No, no, now you are investing genius now and you just KNOW it will drop 50%, so when it only drops 23%, you miss it and watch it shoot thru the price where you sold it. You have now lost your bull market position, and are sitting on a pile of rapidly depreciating Ben-Bucks.

Friends, stop and think what y'all are doing, and don't change horses or strategies in mid-river, especially when it's at flood stage. Y'all made a good decision to invest in silver and gold for the life of the primary uptrend (bull market). You will sell at the top, and in the meantime increase your profits by swapping between silver and gold. That's a workable and profitable plan, and if you stick with that simple goal, you will make bushel-basketfuls of profits. Be patient, keep your eyes on the horizon, sit on your silver and gold. Your strategy is working, and will keep on working. Don't mess with it, cause it's not broken.

Right on cue those Nice Government Men from Japan hit the yen market and pushed it down 1.49% today. Or maybe it was just profit-takers scraping some money off the table and into their laps before they drove out to Long Island for their Friday martini. In this case, I'm betting mostly on the NGM.

Either way, it didn't help the dollar. Euro gapped -- yes, gapped-- up to prove beyond all controversy that it intends to leave the earth behind, no matter how many bankrupt member nations it needs to lift with it. Closed today 1.4182, up 0.77%. Next stop is the last high at 1.4281.

The US DOLLAR INDEX tanked 46.9 basis points (0.6%) today and is trading at 75.572. It's deeply ungentlemanly to say, "I told y'all so," but if y'all were betting on the dollar, y'all deserve it.

In one mighty bound -- no, no, bound is UP so let's make that PRATFALL -- the dollar reached the November intraday low of 75.63 and exceeded it. Good work, Bumbling Ben.

If the dollar can't hold its perch here -- and it won't -- then twill seek the Dec. 2009 low at 74.23, then go for 70.70 from 2008. Yet I keep telling myself that SOMETIME here the pendulum is due to swing the other way taking the dollar up and silver and gold down. I don't mean on any long-term basis, only on a short-term correction. Yet no such dollar strength has materialized. Shucks, not only has the dollar NOT pulled on its Superman suit, it can't even find a phone booth to change in.

Responding to what I wrote yesterday about the guru who keeps misdirecting his listeners into stocks, a friend wrote, "I'm watching as mankind goes from bleeding itself with small, self-inflicted cuts to stabbing itself through its own heart with a Bowie knife." I take no pleasure in responding, "I know what you mean." I've been watching that same tragedy for decades. As Louis Armstrong said, "Some people don't know and you can't tell 'em." It starts with fiat money and central banks and metastasizes to government education and training otherwise intelligent people to depend on "experts" for every decision, robbing them of their dignity and independence. Mercy, why not live off a government check? Why would I want to work? What other value does life hold than money? Why would I want independence? Don't that come with responsibility? Not for me!

Yeah, mankind are the best argument I know to prove original sin. But let's get back to markets.

STOCKS today resembled a girl who can dance very well in her high school productions, but when she tries out for the Rockettes she's painfully outclassed. For the week it was the same story. At its low the Dow had dropped nearly 500 points from last Friday's close. Today merely carried it a bit above the 50% retracement level.

Look at the chart ("$indu" on The 20 day moving average (12,066) has turned down and is barrelling toward the 50 DMA (12,015). When the 20 crosses the 50, momentum will be locked downhill. This plunge will likely reach 11,000 before it stops.

Today the Dow gained 83.93 to close at 11,858.52. That sounds pretty snappy until you find out that the high was 11,927. Not enough buyers wanted to hang around for prices above 11,900. Dow's last two-and-a-half days were correcting the previous fall. Fun's over now -- time to go back to work falling toward the earth's core.

Stocks are still the Eau de skunk in the Great Investment Parfumerie.

AMERICAN CULTURAL MILESTONES: On this day in 1961 was born the Poppin' Fresh Pillsbury Dough Boy.

On this day in 1986 the US Treasury Department announced that a clear, polyester thread would be woven into bills in an effort to thwart counterfeiters. What effort would be made to thwart the US Treasury in printing mountains of counterfeit "money" was not announced.

Y'all enjoy your weekend. Argentums et aurum compared sunt --

-- Silver and gold must be bought.

- Franklin Sanders, The Moneychanger © 2011, 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 bubble has burst, primary trend down.

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

- Franklin Sanders, The Moneychanger