Daily Commentary

Franklin@The-Moneychanger.com

Wednesday, 1 September a.d. 2010

     Stocks made me look like an idiot today, but that's okay.  First, it's not hard to do, and second, I only have to wait a little while and they will drop again, making me look like an investing genius.  That's the advantage of investing with the primary trend:  the trend will bail out your worst timing mistakes.  That 15-20 year trend is DOWN for stocks, & as time wears on, that bear will pull them down.  Oh, there will be, as today, flashes of hope -- "better manufacturing news in China & the US pointed to global recovery" -- but these serve only for the bear to lure more victims into his den, there to sit until he decides to maul them.

     I did, however, seriously misidentify where stocks were in their present downtrend.  So where are we now? Stocks today hit their 50 day moving average (10,260) rising 254.74 and closing at 10,269.47.  S&P performed similarly, rising 30.96 to 1,080.29.    Twenty DMA stands at 10,300, and today's high was 10,279.08.  Clearly that old resistance at 10,300 has lost none of its strength. 

     Odd look to today's chart, though.  Lifts straight up off the open, but from about 10:00 until close doesn't move 50 points -- flatlines.  Is that a complete exhaustion of buying power, or big sellers stepping in toward 10,300?  Or merely a very thin market, with very nervous shorts?  Whatever the cause, it is not normal trading.

     Aiding stocks' rise was a weak dollar today.  It made a low today at 82.194, and dropped for the day a sizeable 63.1 basis points.  Trading now at 82.468.  Overnight the dollar eroded from 83 to 82.2 at today's open, then bounced a bit but could reach no higher than 82.50.  Today's fall took the dollar below its 20 DMA (82.37).  The 200 DMA stands at 81.30, a mere 115 basis points below. 

    This no longer looks like a rally, unless the dollar is about to make a second touch (1st was in August) to the 200 day moving average before rallying.  The dollar has been boxing here with its 50 DMA (now 82.95),  unable to knock it down.  The jury is still out on the dollar, but don't look for higher prices tomorrow.

      Gold advanced steadily overnight to 1254, then was, quite literally, slammed on the US open.  Selling must have continued until 11:00 when it stopped at $1,243. Comex dropped off $4.10 to $1,244.20. 

     This comes as no cosmic surprise.  Whoever the short sellers are -- & I forbear to name names lest I earn the dread title "conspiratorialist" which the Establishment and its scabby yellow cur running dog media use to describe anyone who disagrees with them -- would logically counterattack before gold makes a new all-time high.  Heavens, even if it were only short sellers off the street, they would do the same. Yet gold remains above $1,235-1238, which is what's needed to stay in the rallying-game.

     Silver's chart looks like gold's, only better. Critical here is silver holding on above 1920c.  You  have to expect strife at old highs.  Silver followed the same pattern as gold, running into mystery sellers on the open.  Low came at 1925.2c, & Comex closed down 5.5c at 1932.7c.

     These closes today aren't bad numbers for silver & gold, but remember that when you are advancing, you must keep on advancing.  You can't bumble & pause long, or you stumble.

     September is often a very good month for silver & gold.  I remember 1979, when silver finished August about 1000c or maybe 1200c and by 21 January 1980 stood at 5000c.  Gold didn't slouch, either.

    On this day in 1715 died Louis XIV, Louis the Great, the Sun King of France, and not a moment too soon for the treasury.  He bequeathed bankruptcy & called it glory.  Flopping around trying to bail out the mess, the regent, the Duc d'Orleans, listened to the Scottish schemer John Law, gave Law a monopoly bank, the Bank of France, modelled on the bank of England (founded 1694).  Law parlayed that monopoly into a monopoly on the development of Louisiana, the Company of the Occident, and the combination of printing new money and offering stocks to speculate on set off a stock "investing" craze in France that within 5 years nearly broke the whole land.  All this resulted from Louis XIV's spendthrift ways.

     Another great date in French history on this day in 1870.  Louis Napoleon, France's next-to-useless emperor, allowed himself to be maneuvered into a war with Prussia by Bismarck, and after losing his army at Sedan was captured by the Germans. It was almost (but not quite) worth the loss of Alsace & Lorraine (Elsass und Lothringen) to get rid of Louis Napoleon.

     I can't figure it out.  The French are a great people. Why do they suffer such sorry rulers?  Even the one they have no ain't much of a prize.

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 $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. or 18 ounces of silver. US $ and US$-denominated assets, primary trend down; real estate bubble has burst, primary trend 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