Tuesday, August 23, 2011

The Gold Price Could Just as Well Rise Tomorrow as Fall - Better Brace for a Rough Ride, Though

Gold Price Close Today : 1858.30
Change : (30.40) or -1.6%

Silver Price Close Today : 42.281
Change : (1.040) or -2.4%

Gold Silver Ratio Today : 43.95
Change : 0.353 or 0.8%

Silver Gold Ratio Today : 0.02275
Change : -0.000184 or -0.8%

Platinum Price Close Today : 1862.70
Change : -41.20 or -2.2%

Palladium Price Close Today : 762.95
Change : -0.05 or 0.0%

S&P 500 : 1,162.35
Change : 38.53 or 3.4%

Dow In GOLD$ : $124.33
Change : $ 5.54 or 4.7%

Dow in GOLD oz : 6.015
Change : 0.268 or 4.7%

Dow in SILVER oz : 264.34
Change : 13.78 or 5.5%

Dow Industrial : 11,176.76
Change : 322.11 or 3.0%

US Dollar Index : 73.84
Change : -0.234 or -0.3%

Sorry I missed y'all yesterday, but I went to speak for Campaign for Liberty in Memphis. They treated me with great courtesy, and only a few people fell asleep during my speech. I really had fun, saw a lot of old friends, and slipped out of Memphis without being arrested.

Yesterday the GOLD PRICE hit another new all-time high, and today traded as high as $1,912.50 after hitting $1,918 yesterday. About 3 a.m. NY time the GOLD PRICE ran onto the shoals, dropping from $1,900 to $1,872 in an hour. Steadied out between $1,870 and $1,867 until New York opened, where gold's friends (or traders looking for a shorting opportunity) ran it nearly to $1,990, then let it drop about 11:00 all the way to $1,850. Comex closed down only $30.40 at $1,858.30, but in the aftermarket GOLD peeled off another $30 to $1,828.70.

Our old friend the Key Reversal has now raised one of his two heads. Remember that what we saw today in gold -- a break to new high territory with a close lower than the day before -- is only the first head. To qualify as a genuine Key Reversal the GOLD PRICE must follow through tomorrow with a close lower than today's.

That's likely after the long rise we've just come through, but no certainty. It's likely because GOLD has moved far above its 20 day moving average envelope, and that right universally marks a top.

On the other hand, the tear that gold's been on together with lurching markets and that $2,090 Point and Figure chart target still hangs out there. The GOLD PRICE could just as well rise tomorrow as fall.

Support at $1,820/$1,825 now becomes the pivot. If gold doesn't hold that line, it could drop to $1,720. If that doesn't hold, then the GOLD PRICE has a bigger correction in mind and we have to reckon with $1,650 or even $1,560. As yet, gold has given us no signal it will reach these levels, they are merely targets that hang at the horizon when we lift our eyes.

The SILVER PRICE hit a high above 4410 yesterday, then rolled over and headed down. Opened in New York around 4275c, rose to 4380c by 11:00, then sank steadily. By Comex close silver had lost 104c to close at 4228.1c. In the aftermarket silver has sunk to 4185c, and clearly 4150c supports it here.

The SILVER PRICE has also posted the first half of a key reversal. A close below 4100c will suck silver toward its 50 day moving average at 3813c. Once again I warn, I remind, a key reversal is not in place until BOTH parts appear.

Better brace for a rough ride, though.

Did y'all ever seen those black and white cartoons from the 1930s? Markets now reminder me of those cartoons, one where a huge crowd of people is milling around on the deck of an ocean liner. Suddenly, they all run to one side and the ship rolls over that way. Then they reverse and run to the other side of the ship and she rolls over in THAT direction. It's really comical.

Thus today we saw the great ocean liner SS Stocks heel over nearly keel up, rising 322.11 points (2.97%) to 11,176.76. The SS S&P500 rolled with it, gaining 38.53 (3.43%) to 1,162.35.

Most likely stocks have turned up for a brief while. Momentum indicators (RSI and MACD) appear to have turned up, and between 8 August and 19 August the Dow has made a pair of higher highs. (That also means that a close below 10,801, the 19th's intraday low, gainsays any rally.) No, nothing fundamental has changed, the passengers are merely running to the other side of the boat. None of them see the iceberg ahead.

Stocks must climb a long ways merely to confirm they have turned up by crossing above their 20 day moving average (11,436 right now). 50 DMA and 200DMA are fractions of a point from making the Death Cross -- 50dma at 11,990.06 and 200 at 11,989.17. Death cross has mainly a an effect on morale, which stocks have very little of right now.

Stocks -- the thin hulled liner plying the iceberg laden waters of the Northern Investment Ocean.

The US dollar turns very slowly when it turns up. It's been seeking to claim that accomplishment since May, and wallows along still. Today the US dollar index cropped 23.4 basis points to 73.84, but this remains in its 73.4 - 75.5 trading range. Between 25 July and 18 August the dollar has made a double bottom at 73.40, so that should yield strong support now.

The Euro rose 0.55% today to 1.4440 -- maybe because Dominique Strauss-Kahn found the charges against him dropped? As good a reason as any, since none other of substance materializes. Stinky euro is trading in a 1.4540 - 1.3950 range, floating like a man with his arms bound behind his back and a large anvil tied to his feet. Europe's troubles have not waved good-bye, and happy days are not here again.

Over in Japan the Nice Government Men are going to have to take measures with the yen, or lose their place at the buffet in Basel next month when the central banks representatives meet at the BIS. Today the yen closed at 130.40c/Y100, up 0.22% (Y76.69/$). Yen's strong as a spoonful of wasabi, and no saké in sight.

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.