I have to share a lesson with y'all that I learned in 1980, and it cost me about $100,000 -- and those were 1980 dollars. Here 'tis: "Every rise in a market doesn't necessarily show strength." This becomes diabolically deceptive when you are long a market past the time you should have exited, and want your opinion confirmed. Best way to get anybody to believe a lie is, as Lenin told his secret police chief Felix Dzerzhinsky when he asked how he would get people to believe in the phony opposition he was creating, is to "Tell them what they want to hear." We lie to ourselves the same way, picking & choosing the facts that agree with us, & pitching out those bothersome facts that gainsay our bent. It's a VERY expensive habit. Strength in markets does not necessarily reveal true underlying strength, anymore than strength in a fever victim fighting off nurses reveals his healthful state. So I watched today with interest as stocks rose, the Dow by 34.68 (0.27%) & the S&P500 by 3.37 (0.27%). My, O, my, they are a-blowin' & a-goin, except that they ain't. Both have merely rallied to the neckline of a topping head & shoulders formation, a neckline they punctured in May. This "strength" is merely a market touching back to the breakdown line, a typical "final kiss good-bye." Worse, both have formed deadly rising wedges, promising much lower prices. But, shucks! What do I know? I'm just a natural born ridge-running fool and I ain't even been wearing shoes but a year and a half, let alone even seed a pair of them pointy-toed Eyetalian shoes them Wall Street fellers wear. How could I know Sic 'em from Come Here? Let that alone & let's look at currencies. Hey! Don't make that face! I don't want to do it either, but I have to., US dollar index eroded today, down 11 measly basis points to 82.89, not much above the 82.734 low and down only 0.14%. This strikes me as the same Invisible Hand of the Nice Government Men we always see. In any other market, breaking crucial support would knock it a long ways lower, but not the dollar index -- only so low and no lower. Well, let drop my conspiratorialism -- well founded as it is in history & government policy -- and look at the chart. 20 day moving average lurketh at 82.78, & a break through that SHOULD take the dollar lower. Uptrend line today strikes about 81.70, but the loud confirmation of the dollar's earthward intention would come with a close below the last low, 81.52. Trend remains up until that happens. Yen gapped up today and gained 0.27% to 128.77c (Y77.66/US$1). It's almost touching the downtrend line overhead, & last high came at 128.77. I mention that because it must exceed that last high in order to confirm even the SUSPICION of an uptrend. Other indicators favor higher yen. Not joining in the general jubilation today was the euro, closing unchanged at 122.79. Slight chance the MACD might be turning up. Slight. Expect to see 1.2000 or 1.1800 before you see that. Silver added 12.3 cents to close Comex at 2719.4c. Gold augmented (that's for you engineers) by $9.70 to close at $1,580.10. Oh, it's tough grinding through these vibrations! Gold's 5 day chart shows a rounded bottom yesterday with a surge today to $1,591.50, and of course the Invisible Hand was up early this morning, right at the open, but when gold shrugged that slapping off, the Hand showed up again about 1:00 to make sure gold didn't reveal the game by closing a lot higher, driving it down to $1,576.20 right before the close. Yeah, sure. Silver's chart moves across five days in a range from 2680c to 2760c, & it reached that high again today at the open but -- What a surprise! -- came the invisible hand to slap it down. Doesn't matter a pile of beans, silver and gold are both holding their own, biding their time. Just wait patiently, holding your cards, till silver & gold start slapping those Nice Government Men back. Whenever we have to trudge and wallow through long corrections fatigue eventually dulls us. We have a long term strategy, it is working, it has thrilled us with new, un-heard of highs, but then it corrects, as anyone could foretell, & we descend into despair & self-doubt. Awww, cut it out! No fundamental has changed. All those factors sure to drive silver & gold up -- more inflation from government & central banks -- continues unabated. Unabated?! Mercy, they've had SIX YEARS to clean up their act, and they only piled the mistakes, inflations, & bailouts higher & deeper. The never learn, they never help, they never apologize. Governments, central banks, banks, & Wall Street face the same imperative: INFLATE OR DIE. They will inflate, even if all the rest of us die. On 19 July 1870 the silly French emperor Napoleon III's allowed himself to be manipulated by German Chancellor Bismarck into a war. His vastly overrated army was destroyed at the Battle of Sedan on 1 September 1870, less than two months later, and Napoleon III was captured. The French deserved better, but at least that war rid them of the last Bonaparte. MILESTONES OF AMERICAN CULTURE. On 19 July 1954 was released Elvis Presley's first single, 'That's All Right, Mama" with a flip side of "Blue Moon of Kentucky." He was 19, & the public went wild. On the other side of the Atlantic -- I don't know if this says anything or not -- on the same day JRR Tolkien's Fellowship of the Ring was published. GOOD THINGS GOING ON HERE: Sometime in September, at last, I hope to publish volume one of AT HOME IN DOGWOOD MUDHOLE, the tale of my family's move to the farm. I have to admit, it makes me laugh and cry. I hope it does the same for y'all. Another thing: Labor Day Saturday we always throw a big party here at the farm, our Bodacious Hoedown. It includes games and an Old Time band, dance caller, and big dinner with all trimmings, featuring our mean grown here on the farm. Details on that tomorrow.
Argentum et aurum comparanda sunt —
Silver and gold must be bought.
— Franklin Sanders, The Moneychanger
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