Y'all know always to buy a rising market only, right? That must be correct because that's what everybody does, only they wait until the market has already made a huge rise to do it. It's human nature. They feel comfortable in a crowd, like lemmings.
The folks who make the money -- the ones who look for oversold markets that offer real value -- are vanishingly scarce. Human nature.
WHEREFORE, now while silver & gold, it seems, have finished their corrections, nobody wants to buy, so they will wait until gold has climbed from $1,350 to $1,900 so they can be "sure" it's going to rise.
One other item: most likely, the Fed won't taper. Not at all. None. Oh, I know they are rattling their tongues (their sharpest weapon) about tapering again, but look at that Adjusted Monetary Base chart here, http://bit.ly/11YmbW. Note the "hockey stick" shape. Fed took the Adjusted Monetary Base, the fuel for inflation, from about $850 billion in August 2008 to about $3.5 trillion lately. I am waiting for somebody to explain to me how, facing the present deflationary & depressionary headwinds, the fed will WITHDRAW high-powered money from the economy at all, or even taper off its monthly purchases (new money creation at an $85 bn monthly rate or $1.02 trillion yearly). More likely, in fact, is that the Fed INCREASES money creation, because they are now wed to the notion that money creation alone will fix the depression.
And while that inflation causes both poor & great to suffer, it drives silver & gold higher & higher. And it's coming. It's already baked into the cake, at least, that's what Adjusted Monetary Base says.
Last week silver & gold performed just about perfectly. They jumped through two resistance levels on Monday, backed off Tuesday to the highest resistance, and Wednesday jumped to higher levels still. Gold jumped over its 50 day moving average (DMA), as did silver. Only silver's weakness Friday marred the week.
Today both silver & gold stalled. Gold lost 40 cents to $1,352 while silver lost 10.5 cents and ended 2249.8c.
Let's realistically face the outcomes here. First, there remaineth the possibility of one further leg down, taking told toward $1,200 and silver toward $18. Seasonally both are moving out of the time when seasonality makes new lows likely. But until gold closes above its 200 DMA (now $1,432) and last peak $1,434, this possibility remains alive. Should it occur, it will mark a solid double bottom with the June low.
Second outcome is that I really am seeing upside-down head & shoulders patterns on both charts, which really are targeting $1,675 & $31.83. But first like all good runners, silver & gold must make it over the hurdles without tripping. Nearby silver must beat the 2300c mark that whipped it last week, although it has already better the last peak (2252c). I am most anxious to witness a close above 2355, then over 2512c, the August peak and the neckline. In between lies silver's 200 DMA at 2427c.
In the same rally outcome, gold needs to rise above $1,376, then $1,400. Big leap comes at the August high of $1,434 and the 200 DMA ($1,432.77). The really clench it all down hurdle is $1,550, where gold broke down in April. However, technically momentum turns upward when gold closes over the 200 DMA.
Buttressing the case for higher gold & silver are the Dow in Gold & Dow in Silver. While stocks are making new highs, both indicators are falling, revealing the relative strength in metals. Dow in gold today closed roughly unchanged at 11.515 oz (G$238.05 gold dollars). Dow in Silver rose 3.15 oz (0.46%) to 692.01 oz. Trend favors metals, 'cause it's down.
Stocks continue to levitate, but with a few bluebirds of unhappiness flying by. Dow Theory says that a new high in the Transports or Industrials needs to be confirmed by a new high in the other. Dow Industrials has stubbornly resisted making a new high while the S&P500 made daily new highs. The Dow Transports made 4 new highs in the last 5 days, while the Dow Industrials have not. Maybe the Industrials will catch up?
Dow fell 1.35 (0.01%) to 15,568.93 while the S&P500 rose 2.34 (0.13%) to a new high at 1,762.11. S&P500 has broken out above the upper trend line but the Dow laggeth onward. Meanwhile, margin debt has reached levels not seen since the 2007 peak. Does that mean anything?
US dollar index remains floating above 79, refusing to follow through on its breakdown. Closed today at 79.343, up 14.2 basis points (0.18%). Euro has risen to $1.3785, higher than last week but down 0.13% today. It's only edging forward. Yen ended today at 102.38, down 0.30% & little changed in the last week.
On 28 October 1793 Eli Whitney applied for a patent for the cotton gin. Migrating from New England to seek his fortune in the South, the widow of Revolutionary War hero Gen. Nathanael Green invited him to visit her Georgia plantation. Whitney said he got the idea while watching a cat trying to pull a chicken through a fence. The gin was a drum studded with hooks that pulled cotton fibers through a mesh & left the seeds outside.
Previously removing seed from cotton was a labor intensive hand process. Suddenly, Whitney's gin made cotton profitable and re-invigorated slavery in the South. The gin transformed Southern agriculture and the national economy. Cotton exports boomed from less than 500,000 lb. in 1793 to 93 mn lb. by 1810.
Friends, Volume 2 of At Home In Dogwood Mudhole (Best Thing We Ever Did) is now available for preorder at www.dogwoodmudhole.com. It went to the printer today and we estimate it will be ready to ship the first week in December, in time for Christmas.
I must be crazy generous, but if you will use the discount code HOGWILD I will give you free shipping to US addresses, up to $6 (enough for 2 copies). Offer expires Sunday, 30 November 2013. Also, the PDF version will be available for sale and immediate download tomorrow, with Kindle & ePub editions coming in a few weeks.
Argentum et aurum comparanda sunt —
Silver and gold must be bought.
— Franklin Sanders, The Moneychanger