The Moneychanger
Daily Commentary
Monday, 14 October a.d. 2013 Browse the commentary archive

Durn! Y'all let the market go to pot while I was gone!

I got to go on my trip to Costa Rica in spite of and American Airlines, but of course leaving the country got pulled out of the line at my gate, me and two other old white guys (who have committed so many terrorist acts lately) & patted down and rubbed all over with explosive detection tags. I am happy to report that I was not covered with traces of cordite or TNT, so they let me leave the country with everything but my dignity. In fact, they were nicer than our own TSA. I noticed, though, that they didn't check a single woman. I ain't saying ne'er a word, not one word.

Last Wednesday 10 October everything turned, stocks up & metals down. Dollar turned up then, too, but hasn't been able to hang on to the gains. Metals have not resolved their uncertainty, but stocks have. US dollar's hanging on by a gnat's ear.

Dow fell plumb to its 200 DMA & that bottom support line at 14,719.43 (intraday) before it turned up. Since has rallied plumb straight up, gained 323 points last Thursday alone, & busted through its 50 and 20 DMAs (15,180 & 15,230).

S&P500 didn't drop as far at the Dow, but hit an uptrend line from its June & August lows, pierced it to 1,646.47 (intraday), then turned slap around & headed up. It also has closed through its 50 & 20 DMAs (1,678 & 1,694).

So stocks are just a rallying away, but since I am a natural born fool from Tennessee, I keep asking, "Why?" I could see 'em rallying like mad on news of a debt ceiling deal, but why BEFORE a deal? If they're rallying without news, what happens when the news appears & they've already burned up all their buying power?

Logical target for this move is to the top channel line, call it 15,800 & 1,735. Of course, that's not guaranteed by any means. Both the S&P500 & the Dow have painted out head & shoulders top formations since April. For both, the neckline was the point where they turned around last week. If that H&S is ruling action, then I wouldn't expect this present rally to reach much further. But I expect this is the last hurrah, so they might even throw over the top of the channel. Internal measures like market breadth & margin debt make this stock market look like Grandpa on a walker & carrying an oxygen bottle.

As you would expect given last week's performance, the Dow in Gold & the Dow in Silver have risen. Both stand above their 50 & 20 day moving averages, so momentum for now lies skyward. Neither has yet reached the June highs at 12.514 oz or 816.77 oz. Today the Dow in gold closed at 11.988 oz (G$247.81 gold dollars), down 0.24% on the day, while the Dow in Silver ended at 718.03 oz, down a nothing 0.03% today.

Downtrends from June highs remain unbroken, although both indicators are in a short term uptrend.

I recall vividly that after August 1999 when stocks peaked against gold, i.e., the Dow in Gold peaked, how anxiously I watched that chart day after day. It fell into October, then rose into January, but never could reach that August peak. Then it went sideways for the rest of twelve months. Sometimes the turn ain't obvious, & you have to bite nails a while to see what turns out.

Until the US dollar index climbs above 81, we've got nothing to talk about. It did trade up through its 20 DMA (now 80.43) last week, but fell back under it today, trading now at 80.259. The dollar has no net below 79.50 but 73. Just keep remembering that.

The euro wrapped up the day at $1.3564, up 0.17%, but even with a week to work, it hasn't made any progress & is actually lower than it was the week before I left -- notwithstanding its breakout above its top channel line that week. When a market breaks out & ought to move higher but doesn't, it points to a dearth of supporters & all the weakness that implies.

Yen also last week lost all the previous weeks gains. Today it shuttered at 101.37, down 0.1%, or, in plain English, no place.

Now if I were the Nice Government Men with a whole economy & all sorts of markets to manipulate, what would I do? Why, I'd have worked my government fingers to the bone, dialing up my yellow running dogs who do my bidding in markets & working their bones to death. I'd have kept that dollar up, the euro & the yen down, I'd have bought stocks like my government pension depended on it, and I would have slapped silver & gold silly every chance I got.

Wow, here's something odd. That's just what happened. Shucks, just a coincidence.

I'm going to say something that might surprise y'all: silver & gold did NOT break down last week. Yes, yes, I know they tumbled on Wednesday & Friday, but they did not "break down." By that I mean "break down through any significant line in the sand or change direction (first you have to HAVE direction to change direction). Look, I'll show y'all what I mean.

Today gold closed at $1,276.40, up $8.40, while silver rose 9.5 cents to 2131c. You can see the gold chart at & silver at

Gold remains in an upside-down head and shoulders building a right shoulder. Last weeks lows did NOT close below the support line connecting the shoulders' tops. More, that right shoulder has built a bullish falling wedge, which rouses expectations of a breakout toward the sun.

Silver hath done likewise. That top of the shoulders line caught silver, too, and it also has built a falling wedge.

Yet I will climb only so far out on this limb. I gold cannot hold above $1,272 at the close or silver cannot remain above 2090c, they'll take one more tumble down toward the June lows, which were 1817 & $1,179.40.

That means that if you buy here and they drop further, you'll look foolish If you buy here & metals rocket upward, you'll have bragging rights to your brother-in-law.

I repeat, lest y'all missed my NGM comments above, if I were the NGM, I would be steady suppressing silver & gold while this debt-ceiling farce plays out. & I remind y'all again that whichever way this silly negotiation flops, it will still be a flop because nothing is being done to address the real problem, that the government debt has grown too big ever to pay off. Therefore, the government will most surely default, either by outright default, i.e., repudiating the bonds, or by severe inflation. I can't say WHEN it will happen, only that it WILL.

On 14 October 1066 at the Battle of Hastings the invading William "the Conqueror," duke of Normandy, defeats the Anglo-Saxon forces of King Harold II. Harold dies in the battle. The Anglo-Saxons were defeated more by their own disunity than William's strength. William's victory & subsequent take-over in England introduced a new language, Norman French. The nobility & courts used French, the people Anglo-Saxon, & over the centuries the melding of the two became English. That's why even today when the lowly swine remains out in the sty where the Saxons would tend him, he remained a "swine," but when transmogrified for the dinner table he becomes "pork" (porc). Ditto the "cow's" transformation to "beef" ("boeuf"), the sheep's to "mutton" ("mouton"), & the "chicken's" to "pullet" ("poulet"). Zut alors!

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

— Franklin Sanders, The Moneychanger

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Market Snapshot See more charts and market data
14-Oct-13 Price Change % Change
Gold, $/oz 1,276.40 8.40 0.66%
Silver, $/oz 21.31 0.10 0.45%
Gold/Silver Ratio 59.897 0.128 0.21%
Silver/Gold Ratio 0.0167 -0.0000 -0.21%
Platinum 1,380.60 3.00 0.22%
Palladium 714.25 5.45 0.77%
S&P 500 1,710.14 6.94 0.41%
Dow 15,301.26 64.15 0.42%
Dow in GOLD $s 247.81 -0.60 -0.24%
Dow in GOLD oz 11.99 -0.03 -0.24%
Dow in SILVER oz 718.03 -0.19 -0.03%
US Dollar Index 80.26 -0.04 -0.05%
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SPOT GOLD: 1,278.20      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,312.71 1,319.74 1,319.74
1/2 AE 0.50 651.37 673.29 1,346.58
1/4 AE 0.25 325.69 343.04 1,372.15
1/10 AE 0.10 134.11 139.96 1,399.63
Aust. 100 corona 0.98 1,246.63 1,256.63 1,282.01
British sovereign 0.24 302.69 314.69 1,336.85
French 20 franc 0.19 238.64 245.64 1,315.69
Krugerrand 1.00 1,301.21 1,312.21 1,312.21
Maple Leaf 1.00 1,293.20 1,308.20 1,308.20
1/2 Maple Leaf 0.50 734.97 671.06 1,342.11
1/4 Maple Leaf 0.25 325.94 341.92 1,367.67
1/10 Maple Leaf 0.10 135.49 139.32 1,393.24
Mexican 50 peso 1.21 1,533.29 1,544.13 1,280.69
.9999 bar 1.00 1,282.67 1,293.67 1,293.67
SPOT SILVER: 21.35      
SILVER Fine Tr.Oz. BID ASK $/oz
VG+ Morgan $B4 1905 0.77 26.00 29.00 37.91
VG+ Peace dollar 0.77 24.00 27.00 35.29
90% silver coin bags 0.72 15,869.43 16,119.43 22.54
US 40% silver 1/2s 0.30 6,105.03 6,255.03 21.20
100 oz .999 bar 100.00 2,124.50 2,204.50 22.05
10 oz .999 bar 10.00 218.45 219.45 21.95
1 oz .999 round 1.00 21.45 22.25 22.25
Am Eagle, 200 oz Min 1.00 22.60 24.15 24.15
SPOT PLATINUM: 1,380.60      
Plat. Platypus 1.00 1,405.60 1,445.60 1,445.60
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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.

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