Wednesday, May 11, 2011

I'll be Surprised if Silver and Gold Prices Don't Make Another Big Drop

Gold Price Close Today : 1501.10
Change : (15.50) or -1.0%

Silver Price Close Today : 35.509
Change : (2.971) or -7.7%

Gold Silver Ratio Today : 42.27
Change : 2.861 or 7.3%

Silver Gold Ratio Today : 0.02366
Change : -0.001717 or -6.8%

Platinum Price Close Today : 1777.60
Change : -22.20 or -1.2%

Palladium Price Close Today : 717.55
Change : -17.60 or -2.4%

S&P 500 : 1,342.08
Change : -15.08 or -1.1%

Dow In GOLD$ : $173.93
Change : $ 0.02 or 0.0%

Dow in GOLD oz : 8.414
Change : 0.001 or 0.0%

Dow in SILVER oz : 355.69
Change : 24.08 or 7.3%

Dow Industrial : 12,630.03
Change : -130.33 or -1.0%

US Dollar Index : 75.34
Change : 0.759 or 1.0%

My similes and metaphors may ofttimes want some explanation. When I say that trying to buy in a correction is like trying to catch a falling knife, think about it: you might catch the handle, but you also might catch the blade or point. Better to pick it up after it hits the floor. Yet if you wait too long, you might miss it altogether -- the falling knife dilemma.

Some of y'all misunderstood my comments about the gold/silver ratio target for swapping back into silver from gold. I used 47.5 as an example, but I am expecting and hoping the ratio will surpass that mark. Ultimately, 58 may not be reasonable, but I am still pondering while the market unfolds.

Precious metals markets twisted today to bite in the back all those too-quick-to-jump optimists, LO! me among them.

The GOLD PRICE reached $1,562.22 overnight, and then the sellers struck about 7:00 a.m. From there gold avalanched to $1,495.50, but climbed back over $1,500 before Comex closed at $1,501.10, losing -- ouch! -- $15.50. End of three-day bounce, resume decline. Crossed under the 20 DMA ($1,507.45), and stepped through that $1,505 cover over the well. Well shaft drops clean to last low at $1,462.40. Lower prices to come, $1,445 perhaps, or $1,380, or even the 200 DMA at $1,362.50. Correction hasn't hit the floor yet.

Plug was pulled on the SILVER PRICE about the same time as the GOLD PRICE. It fell from 7:00 a.m. (EDT) until 1:00 p.m., then slithered along 3500c rest of the day. Comex registered 297.1c lower than yesterday at 3550.9c. Volatility, thy name is silver!

All that has happened is that the silver price rose for three days to reach its 50 DMA (3908c), touched that overnight, then stepped into a hole. Last low was 3315c, next should exceed that. Looking now for 3100c or even 200 DMA at 2867c today -- BICBW.

BICBW -- but I could be wrong. I always add that because it's true. Anybody on any day has a 50% chance of being right, and a 50% chance of being wrong. I never substitute my judgment for my customer's. He might be right and I might be wrong.

But I'll be surprised if silver and gold prices don't make another big drop. Not enough time and price have passed for the knife to hit the floor.

US DOLLAR INDEX today took off to the upside. It traced out yesterday and early today a long narrow triangle, down to 74.40, then shot up. Once it cleared 75 it sped up, and came to roost at 75.335, up 75.9 basis points (1.01%). Now the dollar is soaring above its 20 DMA (74.13) and its 50 DMA (75.27). Hard to maintain that it isn't rallying, because it is. 75.25 was the March low so might offer a little resistance, but more likely is a sprint to 76.61. Rally is only beginning.

Confirming the dollar's rally was the sagging euro today. Already below its 20 DMA (1.4548), today it sank below its 50 dma (1.4209) and stopped sinking at 1.4195, down 1.5%. Doesn't matter how high the Euro central bank cranks interest rates if the market is terrified Greece et. al. are about to bankrupt.

Yen fell slightly, trying to decide whether it will abandon its recent rally. Or, more accurately, the Nice Government Men behind the yen are trying to decide.

Every stock index fell today. From the Russell 2000's down 1.78% to the S&P500's -1.11%to the Dow's -1.02%, the direction uniformly turned down. Dow closed at 12,630.03, down 130.33 (after the NGM goosed it at the day's end), nearly kissing its 20 DMA (12,565). The S&P500 lost 15.08 to close at 1,342.08.

Stocks remain the arm garters and celluloid collars in the Investment Fashion Show.

Stocks' momentum has crested and turned down. No matter how many water wings or how high they inflate them, the NGM simply can't keep the sinking stock market afloat. It's a bear market, boys.

Argentum et aurum comparenda sunt -- -- Gold and silver 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 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.