Yea, the Fed hath spoken, & 'tis naught but vexation, vanity, & hot air. His Munificence Ben said he will keep on buying $85 billion in securities ever month, because of "bad weather."
Nay, I joke not. The FOMC blamed the "temporary pause" in the economy (temporary since 2008) on "temporary forces," like bad weather. I couldn't make up stuff this silly if I stayed up late nights.
His Munificence said he is not backing off his inflation, so gold & silver surged higher. So did the 10 year Treasury yield. It rose a huge 0.91% to 2.006%, punching through resistance at the upper channel line. If it clears 2.4%, many more folks will begin to wonder why they are holding a losing position in US treasuries.
Of that $85 billion His Munificence plans to spend monthly monthly, he will spend $45 billion on Treasuries & another $40 bn on Mortgage Backed Securities. In other words, he's bailing out the banks still. He's making the Fed the septic tank for their sewage-grade assets. HMB also said he would keep on spending $85 bn a month if the outlook for the labor market does not improve substantially.
The Keynesian stupidity motivating HMB is like your mechanic claiming he aims to fix your automobile by taking off all four wheels, dropping the transmission, dousing it with gasoline, and throwing in a match. This will do the same for the economy.
Stocks did not like His Munificence's plans, & dropped. Dow lost 49.69 (0.38%) to 13,904.73. S&P lost 6.8 (0.45%) to 1,501.03.
Since I am only a natural born fool from Tennessee, I don't claim to know much. But I have observed that tops in the stock market are just about impossible to pinpoint, even as you watch them. 'Tis an enormous market, & just about the time you are certain it's been beat, it raises its head for one last spike up. Therefore, I am not pinpointing or predicting, only pointing out the witnesses for the prosecution
First, the Dow & the S&P500 both have pricked their overhead resistance (top jaw of the Jaws of Death), & both have peeked through the top of a fatal rising wedge. Both are in the right shoulder of a 16-year old head & shoulders. Both have traced out a broadening top ("Jaws of Death") since May 2011, and within that have formed another head & shoulders through 2012.
Call the other witnesses. The Dow in Gold gapped up four days ago, formed an island reversal, and if it gaps down again tomorrow will complete the formation. In the same time silver gapped up, gapped again to a single day top (452.10 oz), gapped down yesterday & again today, leaving that top isolated in what also partakes of Island Reversal flavor. Wait! Call those other two witnesses, the RSI & MACD that both point out a severely overbought Dow & S&P500.
But shucks -- all those witnesses may be lying.
Ben's generosity to the banks didn't help the US dollar index much. It fell , losing 31.4 basis points (0.4%) to end at 79.255. This confirms its breakdown from its short term uptrend yesterday.
Euro gapped up on that news, way over $1.3500 resistance, up 0.56% to $1.3565. That answers what it intends to do: rise.
Yep, the yen made another new low for the move today, closing down 0.4% at 109.84 cents/Y100.
US$1=Y91.04=E0.7372=0.031102 oz Ag=0.000595 oz Au.
Silver rose 99.3 cents today to close Comex at 3215.2c. Gold added $19.10 to $1,679.90.
In the last two days silver has risen 139.6c (4.5%) & gold $27 (1.6%).
What jumps out at us today is silver closing above its 50 day moving average (3189c). Either telepaths are working in the silver market, or news of the FOMC's announcement leaked out. Silver gapped up on the open, traded straight up, then gapped up again, & crossed 32 resistance & the 50 DMA in the bargain.
What's important about the 50 DMA? Because it has capped every move since mid-October. Only barrier left before silver is the downtrend line from the October 2012 high, tomorrow about 3245c. Last high was 3249c, so any close over 3250c tomorrow will send silver shooting for 3450c, next resistance. I can't see what will stop it, but then, I not a telepath or clairvoyant.
Gold's story is a wee bit more complicated. It didn't quite best its 50 DMA (1688.44), but shot through its 20 DMA and punched into the 150 DMA (1,681.13). One tee tiny jump tomorrow takes it through the 50 DMA, but a much bigger test faces gold: bursting through $1,700. Exactly at that resistance tomorrow awaits the downtrend line from the October 2012 high. Breaking through now will boost gold to challenge $1,725.
Every move you THINK is a breakout needs to confirm by moving further in the same direction the next day. Still, both silver & gold have built an uptrend -- higher highs and higher lows -- since 4 January.
Look for higher silver & gold prices tomorrow. Again I will say, I believe silver & gold made their post-October correction low on 4 January 2013. From here both should launch a rally that will carry gold to $2,350, maybe by end-May, that will mark only the first leg of a much longer rally.
I have to warn y'all to be careful of "We Buy Gold & Silver Shops." Today I had a customer who wanted to sell US 90%. He called one of these shops, & they offered him $14.8 times face value for what I bought for $22.802 times face value. Y'all have to check around for pricing. Some of these folks would steal the quarters off a dead man's eyes.
On 30 January 1649 Charles Stuart, former king of England, was beheaded. Twelve years later, in 1661 after the Stuarts had been restored to the throne, Oliver Cromwell, Lord Protector of the English Commonwealth, was dug up and ritually executed, even though he had been thoroughly dead for two years.
On 30 January 1900 the British who had invaded the Boer republics in South Africa asked for a larger army. The Boers proved superior fighters (they invented the "commando") and were armed with the most modern rifles (Mausers) with smokeless powder. They could fire away at the British, but without smoke the British couldn't determine where they were.
Henry Ford said, "Any man who thinks he can be happy & prosperous by letting the government take care of him better take a close look at the American Indian."
Argentum et aurum comparanda sunt —
Silver and gold must be bought.
— Franklin Sanders, The Moneychanger