The Moneychanger
Daily Commentary
Thursday, 15 May a.d. 2014 Browse the commentary archive

Let's take stock of stocks.

Since the last days of 2013 the Dow has been attempting, lo, hath tried thrice, to break through 16,500 - 16,600 resistance, but has failed. Last try was a new all time high on 13 May at 16,613.97, but two days later the Dow is 268 points (1.7%) lower. Thus 'twas not a breakout, but a fake out.

S&P500 hath tried thrice since 1 March to break through 1880 - 1900, but it, too, hath failed. Today both it and the Dow bumped into their 50 day moving averages below. Meanwhile, the Nasdaq Composite & Russell 2000 have been lagging and dragging -- leading the way down, as it turns out.

Today the Dow lost 167.16 (1.01%) to close at 1,6446.81. S&P500 lost 17.88 (0.94%) and ended at 1,870.85. All this constitutes, until and unless the market gainsays with higher prices, a plain downward reversal.

Meanwhile the Dow in Gold and Dow in Silver are making good on the signals they have been hinting. Dow in Gold lost 0.1% today to 12.71 oz (G$262.74 gold dollars), and fell through its 20 DMA (12.76 oz). A heartbeat only separates it from breaking down from the flat-topped rising triangle it has been forming since mid-March. See chart here, Any close below today's will be outside that triangle.

The rising flat-topped triangle (Mercy, that's clumsy!) formed AFTER the 31 December 2013 peak at 13,80 oz (G$285.27), the high for the move. Other indicators point down.

Dow in silver rose 0.47% today to 844.12 oz (S$1,091.39 silver dollars), but only after falling through its 20 day moving average yesterday, and after twice bumping through its uptrend line. Indicators signaling a trip downhill. Chart is here,

That rotten US dollar index today touched its downtrend (from February) line and clean fainted. Lost 4 basis points to close 80.08. That's probably not too surprising for a first try at punching through.

Meanwhile the 10 year treasury not yield plunged yet again, down 1.61% to 2.502%, back at November 2013's low. This bodes bad indigestion for stocks. Money is fleeing stocks into government securities.

Euro lost 0.2% to $1.3711. That was up off the low at $1.3648. Euro has a long way yet to fall. This is only beginning.

Yen definitively broke above its reigning trading range boundary to close at 98.47 cents per Y100, up 0.31%. 200 DMA stands above at 99.06, ready to stop it.

It was disappointing to see gold lose $12.20 to $1,293.50 and silver give back 28.8 cents to 1944.7c. Disappointing, but hardly fatal.

Take silver first. Somewhat suspiciously massive selling appeared about 9:30 Eastern Time, massive enough to smash silver down from 1968c to 1943c in about ten minutes. I pass over this event in silence, since the Nice Government Men might take umbrage if I point the finger at them, although they are the most likely suspect. Silver rebounded in a couple of hours to 1963c, but faded off the rest of the day for that 1944.7c close.

Stepping back a bit, silver remains in an uptrend (higher highs, higher lows) that began with the 1868.5c low on 1 May. It touched back today to the 20 DMA. If it seriously intends an uptrend, it ought to cross above 2000c in the next two or three days.

Like silver gold got clobbered by mysterious but deep pocketed forces about 9:30, knocking it from $13,04 to $1,290.90 in less than a quarter hour. Comex closed below $1,295 at $1,293.50 but the day ended at $1,296.10.

Gold has been trending up since $1,268.40 low on 24 April 2014: higher lows, higher highs, except it must yet better $1,315.80, the very last high. Rising above $1,309 will also give gold escape speed from the even-sided triangle formation, and should lead to a much longer run. I didn't like higher volume today on a falling price, but other indicators keep on pointing their fingers up.

My dear wife reminds me that we have one of Minnie's 7 pups left: Great Pyrenees. This breed is the very best, gentlest, most loving & best guard dog we have ever had. It's a 1000 year old breed, raised up to guard sheep. When they're 8 weeks or so old, they bond to whatever they're around and protect that the rest of their life. Only drawback with these pups is that although they come from registerable parents, they can't be registered. Their uncle is also their father. Anyhow if you are interested, we have this one put left, a female, but she's for picking up here only. No shipping.

On 15 May 1862 the US Department of Agriculture was founded. US agricultural production began to drop off the following week. By the way, on 7 May 2014 the US DA published a solicitation. Seems it wants to buy .40 caliber S&W submachine guns. I reckon they need those to protect farm subsidies. Or to shoot starving people attacking cornfields?

On 15 May 1864 at the Battle of New Market, 257 young Virginia Military Institutes repelled a yankee attack. Their glorious victory is depicted in a painting in the VMI chapel.

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
15-May-14 Price Change % Change
Gold, $/oz 1,293.50 -12.20 -0.93%
Silver, $/oz 19.45 -0.29 -1.46%
Gold/Silver Ratio 66.514 0.352 0.53%
Silver/Gold Ratio 0.0150 -0.0001 -0.53%
Platinum 1,469.60 -15.80 -1.06%
Palladium 811.90 -16.70 -2.02%
S&P 500 1,870.85 -17.88 -0.95%
Dow 16,446.81 -167.16 -1.01%
Dow in GOLD $s 262.84 -0.19 -0.07%
Dow in GOLD oz 12.71 -0.01 -0.07%
Dow in SILVER oz 845.72 3.87 0.46%
US Dollar Index 80.08 -0.04 -0.05%
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: 1,296.10      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,331.09 1,341.46 1,341.46
1/2 AE 0.50 660.50 682.72 1,365.44
1/4 AE 0.25 330.25 347.84 1,391.36
1/10 AE 0.10 135.99 141.92 1,419.23
Aust. 100 corona 0.98 1,264.09 1,273.09 1,298.80
British sovereign 0.24 307.39 312.14 1,326.00
French 20 franc 0.19 243.80 246.83 1,322.08
Krugerrand 1.00 1,311.65 1,321.65 1,321.65
Maple Leaf 1.00 1,311.10 1,326.10 1,326.10
1/2 Maple Leaf 0.50 745.26 680.45 1,360.91
1/4 Maple Leaf 0.25 330.51 346.71 1,386.83
1/10 Maple Leaf 0.10 137.39 141.27 1,412.75
Mexican 50 peso 1.21 1,554.77 1,565.77 1,298.64
.9999 bar 1.00 1,300.64 1,315.10 1,315.10
SPOT SILVER: 19.46      
SILVER Fine Tr.Oz. BID ASK $/oz
VG+ Morgan $B4 1905 0.77 26.50 28.50 37.25
VG+ Peace dollar 0.77 22.50 23.75 31.05
90% silver coin bags 0.72 14,911.33 15,161.33 21.20
US 40% silver 1/2s 0.30 5,547.48 5,697.48 19.31
100 oz .999 bar 100.00 1,950.50 2,000.50 20.01
10 oz .999 bar 10.00 195.05 200.05 20.01
1 oz .999 round 1.00 19.56 20.06 20.06
Am Eagle, 200 oz Min 1.00 21.31 21.71 21.71
SPOT PLATINUM: 1,469.60      
Plat. Platypus 1.00 1,484.60 1,501.60 1,501.60
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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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