The Moneychanger
Daily Commentary
Thursday, 6 March a.d. 2014 Browse the commentary archive

Today's mystery to ponder is the market proverb, "Bull markets always climb a wall of worry."

I thought the US dollar index had plumb fallen off the cliff when I saw it closed down 45 basis points (0.56%) to 79.68. Then I peered at the chart a little closer, drew another line, and durned if it hadn't traced out a falling wedge, which generally (but NOT always) resolves with an upside breakout, i.e., the opposite of the way it points (ditto a rising wedge).

Well, that better be the answer, because at 79.68 the dollar index is at its December low (79.50) and closing in on its low since October (79.06). Behold, the limb of decision. Either the dollar index bounces up from here, or the limb breaks & it hits the ground many points below.

The euro played mirror image of the US dollar index today, rising 0.9% to $1.3860.

I have the same aversion to the euro that I do to cheap shyster lawyers with greasy hair and a smooth line of patter. Doesn't matter how smooth you talk, beneath that pinstriped vest beats no heart and he is way too clever for his own good or mine. Euro is a gallon jug of trinitrotoluene being transported over a bombing range held to the back of a four-wheeler by old rubber bands. One day it'll blow everything to kingdom come. But for today, my, my, it is all shine. It popped way up to the old overhead uptrend boundary & closed up there. If indeed it passes roughly 1.3875, it would run to $1.4000.

But there in that chart appeareth the inverse of the dollar index' falling wedge, namely, a rising wedge. I confess, the euro did break through the top of that wedge today, but that may amount to no more than a fake-out, a false break out that quickly reverses. Euro rose today on news from the European Central Bank commissar's meeting that they would keep their interest rate at 0.25%, & that everythin' in Euroland is jes' hunky-dory peachy, economy-wise. I reckon we'll see.

Yen gave up the ghost today and gapped down 0.74% to 97.03 cents/y100. This takes it below its 20 day moving average and to its 50 DMA, and pierces the lower boundary of its short-lived trading range. Part of this plunge was no doubt occasioned by the euro's quick rise, so let's see if it holds below 97.5 tomorrow.

Stocks behaved oddly today. Always makes me a bit leery when a market jumps way up but give up most of the day's gains by the close. Lack of commitment there. S&P500 made a new all time high close at 1,877.03, up 3.22 (0.17%). It's on its way, it seemeth, to validating a breakout over an earlier high (exceeding 1,888). High today was 1,881.94.

Dow still lags the other indices. Rose 61.71 (0.38%) to 16,421.89. Reason I keep harping on the Dow not confirming the other indices is I remember 2000 so well. Dow topped in January, others didn't top till March, but it blew the warning all that time. Dow showed similar behavior in January this year when for several days before the big drop it refused to confirm new highs in other indices.

Dow in Gold kept on dropping today, down 0.74% to 12.15 oz (G$251.16 gold dollars). Momentum is down, & 200 DMA stands nearby at 11.99 oz.

Dow in silver crossed again below its 20 DMA (763.21 oz) today, falling 1.39% to 761.19 oz. Come to think of it, we may have seen the upper limit of the upward correction two days ago.

On to our meditation, "Bull markets always climb a wall of worry." Plainly spoken, "As bull markets climb, there are always hundreds of reasons that argue they should rise further." However, in a bull (rising) market, all questions eventually resolve at higher prices, so the bull climbs that wall of worry.

Yes, I do have a purpose other than philosophizing. I'm thinking about silver & gold. Lo, ponder, & be still: gold mounted $11.50 (0.9%) today to close at a new high for the move, $1,351.70. The gain we attributed to the Ukraine war scare has not evaporated. Silver trotted right alongside & outpaced gold, jumping 30.3% (1.4%) to 2154.2c.

Only think that makes my heart race the least little bit about gold is that the high at $1,352.50 did not quite meet Monday's $1,355. Still, the close was higher. It's also trading in the high half of the Bollinger Bands, but not as smack-up against the top line as it was all through February. And for all the pause at the old $1,360 resistance, the move off the December low does not look complete.

I need not figure this out, as the market will tell us tomorrow by falling sharply away from $1,350 or punching right through it. In that case, you ought to buy it.

Silver's better performance today took the gold/silver ratio back below 63:1 for the first time in four days, to 62.747. This is also faint, but hopeful.

Silver has now twice hit the 200 day moving averages (2101c) twice bounced off, and now soared away. It needs only to close above 2218c (the recent high) to launch another rally leg. That, too, would be a spot to buy.

On 6 March 1836 after 13 days of fighting, the siege of the Alamo ended when Santa Anna's Mexican army of 3,000 defeated, overran, and killed the 189 Texas volunteers. But in one of history's oft- repeated turnarounds, 46 days later the victors became the vanquished when General Sam Houston defeated Santa Anna in an 18 minute battle at San Jacinto. About 630 Mexican soldiers were killed and 730 captured, but only 9 Texans died. The Alamo defenders managed to delay Santa Anna long enough to enable militia to gather under Sam Houston.

My favorite flag of the Texas War for Independence is called the Gonzalez Flag. Under a lone star it pictures a cannon over the motto, "Come and take it." It was the Texians' response to the Mexican commander's demand for the surrender of the weapon. The ensuring fight was the first of the war. The motto directly translates the response of Spartan King Leonidas to the Persian army's demand they surrender their weapons: "Molon labe -- Come and take 'em." It's the same response free men always make.

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
6-Mar-14 Price Change % Change
Gold, $/oz 1,351.70 11.50 0.86%
Silver, $/oz 21.54 0.30 1.43%
Gold/Silver Ratio 62.747 -0.354 -0.56%
Silver/Gold Ratio 0.0159 0.0001 0.56%
Platinum 1,486.20 10.20 0.69%
Palladium 780.95 8.30 1.07%
S&P 500 1,877.03 3.22 0.17%
Dow 13,421.89 61.71 0.46%
Dow in GOLD $s 205.26 -0.81 -0.39%
Dow in GOLD oz 9.93 -0.04 -0.39%
Dow in SILVER oz 623.06 -5.98 -0.95%
US Dollar Index 80.14 -0.03 -0.04%
IMPORTANT NOTE: The following are wholesale, not retail, prices. To figure our retail selling price, multiply the "ask" price by 1.035. To figure our retail buying price, multiple the "bid" price by 0.97. Lower commissions apply to larger orders, higher commissions to very small orders.
SPOT GOLD: 1,350.30      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,388.11 1,397.56 1,397.56
1/2 AE 0.50 688.14 711.27 1,422.54
1/4 AE 0.25 344.07 362.39 1,449.55
1/10 AE 0.10 141.68 147.86 1,478.58
Aust. 100 corona 0.98 1,316.95 1,325.95 1,352.73
British sovereign 0.24 320.24 324.99 1,380.61
French 20 franc 0.19 253.99 256.95 1,376.28
Krugerrand 1.00 1,366.50 1,376.50 1,376.50
Maple Leaf 1.00 1,365.30 1,380.30 1,380.30
1/2 Maple Leaf 0.50 776.42 708.91 1,417.82
1/4 Maple Leaf 0.25 344.33 361.21 1,444.82
1/10 Maple Leaf 0.10 143.13 147.18 1,471.83
Mexican 50 peso 1.21 1,619.78 1,630.78 1,352.56
.9999 bar 1.00 1,355.03 1,369.30 1,369.30
SPOT SILVER: 21.49      
SILVER Fine Tr.Oz. BID ASK $/oz
VG+ Morgan $B4 1905 0.77 25.50 27.50 35.95
VG+ Peace dollar 0.77 22.50 24.50 32.03
90% silver coin bags 0.72 15,901.60 16,151.60 22.59
US 40% silver 1/2s 0.30 6,147.80 6,297.80 21.35
100 oz .999 bar 100.00 2,154.00 2,204.00 22.04
10 oz .999 bar 10.00 215.40 220.40 22.04
1 oz .999 round 1.00 21.59 22.09 22.09
Am Eagle, 200 oz Min 1.00 22.99 24.19 24.19
SPOT PLATINUM: 1,486.20      
PLATINUM Fine Tr.Oz. BID ASK $/oz
Plat. Platypus 1.00 1,501.20 1,518.20 1,518.20
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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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