|Gold Price, $/oz||1,246.80||-12.60||-1.00%|
|Silver Price, $/oz||16.32||0.10||0.64%|
|Dow in GOLD $s||296.92||6.04||2.08%|
|Dow in GOLD oz||14.36||0.29||2.08%|
|Dow in SILVER oz||1,097.12||4.56||0.42%|
|US Dollar Index||94.76||0.82||0.87%|
It's complicated. I reckon it's always complicated, & today got more complicated. In a word, "Dollar index may have broken out to the upside, as well as stocks; higher dollar will reveal how stubbornly silver & gold are determined to rise."
First, look at this US dollar index chart, http://schrts.co/QHFePt
The dollar index formed a falling wedge from mid-March until yesterday. Wedges generally resolve by breaking out opposite the direction they point. Today the dollar index rose 82 basis points (0.87%) to 94.76, enough to poke unabashedly through the wedge's top boundary. MACD & RSI also witness a reversal upward.
What can happen? IF the dollar index can confirm the breakout by piercing the 20 DMA (94.96), then it will run for the 50 DMA (96.22). Before that comes important resistance at 92.25, so watch that.
Yesterday I mentioned that a falling dollar occasions upward re-pricing in all assets. When the dollar rises, we'll find out which assets were merely passively re-pricing, and which mean to rise and no matter the dollar.
On a good quarterly earnings report from JP Morgan, stocks rose, especially bank stocks, dog of dogs, cat of cats, rotten stock of all rotten stocks. Investors ignored a report from US banking regulators that failed 5 of 8 big banks on their plans for a bankruptcy that would not rely on taxpayer money. Among the five failers was, of course, JP Morgan.
Ponder the Bank Stock Index ($BKX), here, http://schrts.co/sAeVt2
$BKX gapped up & closed above the 20 DMA. That didn't draw my eye as much as the two preceding tops at the same point, causing to echo off the walls of my cranium the market proverb, "Double tops hold, triple tops don't." Also, the MACD is striving to turn up.
Seems awfully late in this stock rally for bank stocks to be so juiced, but nobody ever got rich arguing with charts. Another day's higher close will send the $BKX toward the 200 DMA, now at 70.46.
None of this happens in a vacuum. Remember that monetary demand for gold, the real driver of the gold price, feeds on distrust of financial markets, while the $BKX feeds of trust in same. Here's the Gold/$BKX spread, http://schrts.co/WBD5zq
Mark the gap today as it fell down ($BKX rose faster than gold). Mark that it nearly reached the last low at 18.63. Mark that the MACD has turned down.
Bottom line? Gold/$BKX must turn around, and soon, or stocks in general will suck money away from gold. This may be a Last Hurrah for bank stocks & stocks, but that theory must be validated by a lower $BKX tomorrow and higher Gold/BKX.
A similar conundrum appears in stocks. Dow gained 187.03 (1.06%) today to close at 17,908.28. S&P500 gathered 20.7 (1%) to 2,082.42. For both indices that posts a new high for the rally that began mid-February, a long-in-the-tooth rally that had appeared to be rolling over. Fluke, or will the rally extend? Gravity beckons strongly, but a higher close tomorrow would send stocks higher still.
I look at the charts of the Dow in Gold and Dow in Silver & see unequivocal downturns from the upward correction. They argue strongly against higher stocks.
Gold price backed off $12.60 (1%) to $1,246.80. Silver gainsaid and went her own way, rising 10.3¢ (0.6%) to 1632.3¢
I am struggling, wrestling with this, because every bit of this says, "YAHOO! We're marching higher." Oh, gold backed off? Right, but only to the top of that $1,240-$1,245 resistance/support. Perfect: a touchback before take-off. Stayed above the 20 DMA. Has broken out of a triangle to the upside, go look, http://schrts.co/IG5nzx On the other side, the RSI an MACD are a little queasy.
Silver has closed two days above the last high (1617¢) confirming its intention to climb higher. Here's a different chart, http://schrts.co/D2sR3W
If we draw a trading channel (green dashed lines), silver has hit the upper boundary. Far more important, though, is that silver has crossed above its downtrend line form the April 2011 high. Normally a bounce back away from a channel boundary will follow, but since silver is punching into that very, very long term downtrend line, It might push ahead. I'm worried that gravity will take it, but fretting that it might reach escape velocity. Odds probably favor a short correction. Those odds become stronger if the dollar index manages to keep climbing.
Aurum et argentum comparenda sunt -- -- Gold and silver must be bought.
- Franklin Sanders, The Moneychanger
© 2016, 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 or 18 ounces of silver. US $ and US$-denominated assets, primary trend down; real estate bubble has burst, primary trend down.
WARNING AND DISCLAIMER. 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 short term trading outlook. I write them for long-term investors in physical metals. Take them as entertainment, but not as a timing service for futures.
NOR do I recommend investing in gold or silver Exchange Trade Funds (ETFs). Those are NOT physical metal and I fear one day one or another may go up in smoke. Unless you can breathe smoke, stay away. Call me paranoid, but the surviving rabbit is wary of traps.
NOR do I recommend trading futures options or other leveraged paper gold and silver products. These are not for the inexperienced.
NOR do I recommend buying gold and silver on margin or with debt.
What DO I recommend? Physical gold and silver coins and bars in your own hands.
One final warning: NEVER insert a 747 Jumbo Jet up your nose.