'Twas a day that brought Rembrandt, Reubens, Picasso, & other Nice Gvoernment Men eager to paint the tape.

    Tell me not that the Dow Jones Industrial Average all by itself and with no help from the NGM on the Plunge Protection Team traded under 10,000 all day long, as low at 9,835, yet only decided to rise exactly at the close and ended at 10,012.24, up 10.05.  (S&P closed up 3.09 at 1,066.20).  Now I may have hayseeds  falling off my shoulders, but I didn't fall off a turnip truck  yesterday.  Some artiste painted that tape.  Stay out of stocks. Yes, I mark and understand that with the Dow in Gold Dollars at roughly G$195 (9.433 oz) shouts that gold has dropped just as much as stocks.  Yes, I see that, and have little explanation for stocks & metals moving together other than "flight from the dollar."  Therefore, when the flight turns the other way, both drop together.  They will, at last, diverge, & likely this year.

     The US DOLLAR INDEX rose today 44 basis points to 80.38, which has the forces of light running for cover.  Sorry as the dollar is, 'taint as sorry as the Euro or Yen.  Now that Greece, Spain, & Ireland (not to mention Portugal & Italy) look ready to default on their sovereign debt, the Frankenstein Euro might blow apart at its stitched seams.  Hence the investor rats pouring over the sides of the SS Euro headed for the life raft Dollar. Once the air begins to leak & hiss out of the Dollar they'll jump ship again.  I expect the dollar to rally as high as 81.50, but it could exceed that.  Powering it is a panic, & panics cannot be predicted.

     Speaking of "painting the tape," GOLD's low today was  $1,052 & on comex it closed down $10.20 at $1,052.20.  End of world, right?  Wrong, in the artermarket it rose as much as $18. Silver closed on Comex down 52c at 1482.3c, but in the aftermarket has traded up 40c or so.  Prices below are based on spot gold at $1,067.70 and 1518c, so don't conclude that premiums have shot out of this world -- you're seeing those higher spot prices.

    Silver has taken a rougher, further fall than gold.  The Ratio has broken out upside to 70+, and should reach 72.  If 72 doesn't stop it, it will revisit 84, painful as that is to say.

     This is the perfect low spot in the road to stop & lift up our eyes to the mountains.  Maybe we can figure out where we are. We will key off of gold, since silver will follow gold.

     Possibly today Gold made its low at $1,065 resistance & the $1,052 spike was just that, a spike low.  Gold will prove this by climbing through resistance/support levels above, namely, $1,075, $1,085, $1,100, then $1,120. 

     On the other hand, we now have to reckon as more likely lower prices because gold has broken that important resistance from $1,085 - $1,065.  Beneath gold lies support at $1,025 & $1,000. Strongest support is the apex of the triangle formed in 2008 at $970.  Could it fall to $680?  Yes.  It fell proportionately that much in 1974-76 correction that lasted 20 months, then came from a $103.50 low to reach $850 at the ultimate peak, an 8.2-fold increase.

     Am I just alibing?  Nope, such is the path of bull markets.  The bull is always trying to shake off as many riders as he can, & right now he is shaking mightily.

     But wait!  If you're so sure gold is going to drop that much, why not sell it now and buy back lower?  No, no, no, NEVER sell your position in a bull market.  NEVER.  If it goes lower, buy more but never, ever sell your position in a bull market.  Most of all,  remember that NOBODY knows where gold's correction will stop. Quite literally, we might have seen the low today.  Where would you be then if you sold your position?  Chasing the market and buying gold back at a higher price.

     Calm your spirits & be patient.  Risk takers can buy here.  Most crucial to remember is this:  the bull market in silver & gold isn't  even near its end yet.

     In their Nashville convention the Tea Party movement is being taught  the one enduring truth of American politics: Establishment parties always co-opt and de-fang popular  movements.  Hamiltonians transmogrify into Federalists who become Whigs who become Republicans, but the politics never change.  Now the Republicans are busily trying to digest the naïve Tea Party, but the Tea Party mistakes their devourers for their allies, and mistakes digestive juices for friendly chocolate sauce.  Timeo Danaos et dona ferentes.

     On this day in 1937 Fuehrer -- whoa!  Make that President --  Franklin Roosevelt attempted to pack the Supreme Court with sympathetic judges -- some say they were simply "pathetic" -- who would allow his radical corporativist expansion of federal power, by simply increasing the number of Supreme Court justices.  Der Roosevelt was miffed because the Supremes had overturned the National Recovery Act.

    Y'all enjoy your weekend!

Argentum et aurum comparanda sunt --                   

-- Silver and gold must be bought.
- Franklin Sanders, The Moneychanger

© 2010, 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 $1,250.00; silver's primary is up targeting 16:1 gold/silver ratio or $78.13; stocks' primary trend is down,   targeting Dow under 2,900 and worth only one ounce of gold; US$ or US$-denominated assets, primary trend down; real estate in a bubble, primary trend way down.

Footnotes:

     The US DOLLAR INDEX is a average exchange rate for the US dollar against the Euro, Yen, Pound sterling, Canadian Dollar, Swiss Franc, and Swedish Krona, weighted for each country's trade with the US.  It gives a general measure of the US dollar's performance against all other currencies.

     The DOW IN GOLD DOLLARS measures the Dow Jones Industrial Average in gold dollars (0.048375 troy oz. by law).  The DiG$ depicts the Primary (20 year) Trend of stocks against gold.  When the DiG$ is dropping, gold is gaining value against  stocks in a trend that should last 15 - 20 years.  The DiG$'s chart is identical to the Dow in ounces of gold, but gives us one unvarying measure all the way back to 1896.  Because it shows the primary trend ("tide") of gold against stocks, for  investors it is the single most important financial chart in the world today.  Since its August 1999 high at G$925.42 (44.8 ounces), the DiG$ has trended down, targeting a G$80 - G$20 (4 - 1 oz. of gold will buy the whole Dow).

     The DOW IN SILVER OUNCES shows how many ounces of silver are needed to buy the entire Dow.  The DiSoz is trending down with a target of under 36 ounces.

     The GOLD/SILVER RATIO is the gold price divided by the silver price, & shows how many ounces of silver it takes to buy one ounce of gold.  The Ratio shows us the Primary (20 year) Trend of gold's value against silver.  When the Ratio's trend is dropping, silver is gaining value against gold.  This trend targets a gold/silver ratio of 16 ounces of silver to one of gold within the next 5 - 10 years.  That implies that silver will massively, vastly outperform gold before this bull market ends.  When both metals are rallying, the ratio often (but not always) drops, confirming the rally.

NOTE:  The following are wholesale, not retail, prices To figure our  retail selling price,  multiply "Ask" price by 1.035.  To figure  our retail buying price, multiply    "Bid" by 0.97.  Lower commissions apply to larger orders, higher commissions to very small orders.

The Moneychanger
PO Box 178, Westpoint, Tennessee 38486
 (888)218-9226; (931)766-6066; fax (931)766-1128
www.the-moneychanger.com
franklin@the-moneychanger.com