Mmmm. Why do the 5 day Dow, gold, & silver charts look so much alike? Something ain't right. Over the long term, stocks & gold & silver move opposite to each other, because what drives gold up -- inflation -- drives stocks down (by filling the economy with uncertainty & inefficiency). But markets aren't logical in the short term, & these irrational divergences can persist a long time.

Dollar index rose 24.8 basis points (0.32%) today to 80.155. 'Tis not that the dollar is strong or attractive for its high interest rate, but that the unreasoning, madding mob's fear is driving them into US dollars & US government treasuries. Want to know what sort of looney world we live in? In this looney world, US dollars (pure moonbeams) and US government Debt (moonbeams & dope smoke) are counted "safe." Surely somewhere in this universe there's a planet that makes sense. I want to go there.

The "flight to safety" is buoying up the sinking dollar, flagellated by fear that the euro & lots of European government debt & banks will fall face down in the financial mud. Euro dropped beneath $1.3000 today, gapped down & closed down 0.5% at $1.2933. By now half the speculating world is short euros, so they'd better hope no Eurocrat comes up with some fix that would drive the euro suddenly skyward.

STOCKS were swimming in concrete shoes today. At the low they reached 12,748, but ended the day at 12,835.06, down "only" 97.03 (0.75%). S&P500 lost 9.14 (0.67%) to 1,354.58.

Five day charts for both stocks indicate that in the last two days they MIGHT have begun turning around. On the longer term charts the S&P500 has penetrated the neckline of its head & shoulders top formation & kept on falling. Dow today nearly completed the right shoulder of its H&S, & will complete it when it closes about 12,650. That argues against anything more that a temporary turnaround.

Silver pricked the bottom boundary of that falling wedge with its 2861 cent low, but closed within the wedge. Is that an aberration or a violation? Silver is sloppy in observing chart lines, often spiking over or under without following through. No way to know until it follows through up or down.

Silver closed near the 2931c high of today's range, losing 21.7c to close 2919.7c on Comex.

Today gold tumbled again, down $10.30 to close beneath $1,600 at a morale bruising $1,593.70, but only $2 from the high. Low was an ominous $1,580.54. That is probing the bottom boundary of the falling wedge. Resolving that usually bullish falling wedge with a plunge would be very bad juju.

On both the five day silver & gold charts there begins to form an upside down H&S that will signal a reversal, IF gold falleth not through $1,580 (today's low) & silver toppleth not through 2860c.

Checking silver as a percentage of its various moving averages, it is approaching last December's low readings. Unless silver intends to make this a mighty slump indeed, that whispers that an end to this decline draws nigh.

On 9 May 1936 Mussolini's Ital took Addis Abba and annexed Ethiopia. No reason was given, & none could be imagined.

On 9 May 1785 Jospeh Bramah patented the beer-pump handle, so that people would no longer have to lift up that big barrel just to get a swig of beer.

Argentum et aurum comparanda sunt —
Silver and gold must be bought.

— Franklin Sanders, The Moneychanger

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© 2015 Little Mountain Corporation, d.b.a. The Moneychanger. All rights reserved. May not be republished in any form, including electronically, without our express permission.

Warnings and Disclaimers

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 trend is up, targeting 16:1 gold/silver ratio or $195.66; stock's primary trend is down, targeting Dow under 2,900 and worth only one ounce of gold or 16 ounces of silver. US$ and US$-denominated assets, primary trend down; real estate bubble has burst, primary trend down.

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 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. For additional information, please see our Ten Commandments for Buying Gold and Silver.
• One final warning: NEVER insert a 747 Jumbo Jet up your nose.

Explanation of Terms

The US DOLLAR INDEX is the 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, and 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.

Other Important Information

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