Tuesday, July 19, 2011

The ONLY Strategy for a Bull Market is to Buy and Keep on Buying - The Trend is Your Friend

Gold Price Close Today : 1602.10
Change : 12.30 or 0.8%

Silver Price Close Today : 40.211
Change : (0.122) or -0.3%

Gold Silver Ratio Today : 39.84
Change : 0.425 or 1.1%

Silver Gold Ratio Today : 0.02510
Change : -0.000271 or -1.1%

Platinum Price Close Today : 1767.80
Change : -7.40 or -0.4%

Palladium Price Close Today : 787.25
Change : -8.50 or -1.1%

S&P 500 : 1,326.73
Change : 21.29 or 1.6%

Dow In GOLD$ : $162.41
Change : $ 1.39 or 0.9%

Dow in GOLD oz : 7.857
Change : 0.067 or 0.9%

Dow in SILVER oz : 313.03
Change : 5.96 or 1.9%

Dow Industrial : 12,587.42
Change : 202.26 or 1.6%

US Dollar Index : 75.16
Change : -0.327 or -0.4%

The proverb says, "A cobbler should stick to his last." The "last" is the form a cobbler makes shoes on, so it means that you should stick to what you do best and most profitably..

In the last 2-1/2 months I have been steadily whipped in trying to find a bottom in silver and gold's reaction off their end-April highs. They simply have not unfolded as I expected. Problem is, trying to get a little better price for people, I have told some to hold off for those better prices, just in time to watch silver and gold skyrocket.

In a bull market, waiting to buy is almost always -- with few exceptions -- a mistake Your shoemaker's last is identifying and aligning yourself with the primary trend that will last 15 - 20 years. Your last is not trying to scalp out silver and gold at the correction's plumb bottom. If you buy and it drops 10%, it won't matter in the long run for the market will double, triple or quadruple. The trend will bail out your worst timing mistakes.

So don't ever expect to hear me say "Wait to buy" again. I'll tell you what I think the market is doing, but y'all need to remember that the ONLY strategy for a bull market is to buy and keep on buying. The trend is your friend.

Today y'all saw a very overbought gold and silver market spooked by silly, inconsequential news. The euro eased up on hopes that an EU summit would fix the sovereign debt crisis (it won't), then O'Bama said the budget plan floated by the "Gang of Six" senators might break the impasse over raising the federal debt ceiling (not likely).

Even if the Gang of Six plan were adopted, it would only cut $4 trillion over 10 years -- they have to multiply the reductions by 10 years, otherwise you couldn't find them with an electron microscope. But multiply a $3.5 trillion budget, which WILL NOT stop growing, by 10 to $35 trillion, then divide $4 trillion by that. It's a minute 11.4%. Friends, when over 30% of income in the US comes from direct federal government spending, that's not a dwarf star in a dark sky.

The European crisis will be papered over with a "re-scheduling" which will bail out the banks and feed those tapeworms even more fatly and permanently on the victim countries. The debt ceiling question is 100% theater, as every goof involved knows they have no choice and no will but to raise the debt ceiling. They are quibbling about $100 million. If you were spending too much on your $2000 monthly budget and tightened your belt by a like amount you would be struggling along on only $1,999.94. Drama, the theater of the despicable.

But the Beast of Muddy Brain can't see it, and so is sucked in to its own destruction and deceit, flaring in empty hope when O'Bama speaks a kind word toward a deal.

To fix the problem requires a will to let the bankrupt fail, let unemployment rise, let bad debt be written off, suffer two years of economic agony, and never again be seduced by the Keynesian stupidity that government can guarantee prosperity by borrowing and spending. Or that individuals can prosper by borrowing to consume. Since you won't see that until Ben Bernancubus can walk on water, you will see more of the same stupidity until finally the machine grinds to a hyperinflationary halt and a dictator arises to decorate the lampposts with bankers and their politician flunkies. Pray for a better outcome.

The GOLD PRICE hit $1,609.89 today and was rolling along for what anyone might have expected to be an easy down day. Comex closed down only $1.20 at $1,600.90 after a $1,609.90 high. Then came the announcement shortly after the close, and in less than half an hour after market gold dropped to $1,585, then to $1,582.30. Support lies at $1,575 - $1,580, then $1,560. Lowest extent of the fall will probably hit tomorrow, for I don't expect this to last long. Unless gold drops significantly below $1,560, I believe it has begun a new rally. But watch $1,560, and the 20 DMA at $1,430.

Absent that gainsaying below-$1,560 close, the GOLD PRICE should reach $1,675 before it really corrects.

The SILVER PRICE had lost only 12.2c by the time Comex closed at 4021.1c. Then came the "News" and in a few more than 30 minutes silver had lost 100c, then hit a low at 3853c. It quickly recovered and climbed above 3900c in the aftermarket, but will take another blow tomorrow. Support comes at 3850c and at 3800.

I will buy at 3850c and buy more at 3800c. Yes, I am aware this all might be a trap and silver might drop thru the whole support area 3350c - 3850c, but I'll buy some anyway.

TODAY stocks, oversold and grasping at straws, jumped in a single mighty bound on open from below 12,400 Dow to above 12,500 and then to 12,600. Dow closed up 202.26 (1.83%) at 12,587.42 and S&P500 added 21.29 to end up 1.63% at 1,326.73

Think. Ponder. Savor the thought. Once upon a time stock markets were driven by economic realities; today they are driven by political will o' the wisps.

Stocks have become the Bigfoot in the Investment Menagerie. Do yourself a favor: get out of the middle of the road. Eighteen wheeler's coming. Sell your stocks.

Dollar index took a blow to the chin today, dropping 26.2 basis points to 75.221 (down 0.34%). Remains above support at 74.80 and above 20 and 50 DMAs (75.10 and 75.02). Uptrend unbroken.

Euro put a little profit in day traders' pockets today, but without altering anything on the chart. Remains in a downtrend. Of course, if the Euro summit on Thursday publishes some bogus "solution", euro will jump, probably to 1.4500. But if they really do solve anything, well, I'll grow me a tail, swing through the trees and start eating bugs and leaves for a living.

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.

Be advised and warned: Do NOT use these commentaries to trade futures contracts. I don't intend them for that or write them with that outlook. I write them for long-term investors in physical metals. Take them as entertainment, but not as a timing service for futures.