Reminder: I will be vacationing with my family from 8 September through 12 September, so will not be publishing commentaries that week.
When governments or central banks throw a surprise party, all bets are off. Today the European Criminal Bank threw a heck of a surprise party, announcing (1) an interest rate cut from 0.15% to 0.05%, (2) cutting the interest rate on funds held at the ECB (think "Federal Funds" in the US) to negative 0.2 percent (yes, they are charging banks to hold reserves), and (3) an asset-backed securities and bond buying program, as much as E500 billion ($691 billion) over three years, or US$230 billion a year, about US$20 billion a month, small by Federal Reserve standards. In plain English, the European Central bank is going to inflate.
The ECB news sent the US dollar index screaming up 93 basis points (1.12%) to 83.80, highest close since 11 June 2013. That's a gigantic move for a currency.
Euro fell 1.59% to $1.2941, it's lowest since 10 July 2013. That sets up a further drop to target the last low at $1.2755. It appears the deal has been cut long ago to let the dollar rise and the euro drop. Come on! These things don't happen without consultation and conspiracy.
Japanese yen lost 0.3%, all yesterday's gain and then some for a new low for the move. It ended at 95.05.
All this currency turmoil has made the US dollar look better and pay more interest, a prime determinant of exchange rates. Ten year treasury yield rose 1.58% to 2.448%. That brings the 10 year yield near its 50 DMA (already above the 20 DMA) and not far from the bottom boundary of the triangle it broke down out of in August. Needs to climb over 2.5% to prove itself.
The ECB's currency tricks did not please US stocks. The Dow gave back 14.16 (0.08%) to close at 17,064.12. S&P500 dropped 3.8 (0.19%) to 1,996.92, below the fabled 2000 mark.
I'm no more'n a natural born durned fool for Tennessee, so I cannot peer into the deep thangs of the cosmos, but theseyere lines on charts fascinate me. S&P500 today closed below an internal uptrend line (it marked the rising wedge's lower boundary), and it is dropping on rising volume. That means that there's a feedback loop: faster it falls, more folks sell. Momentum indicators appear to be rolling over earthward, as for the Dow's.
Dow in Silver exceeded the 1 June high at 892.22 by closing up 0.58% to 894.40 oz (S$1,156.40 silver dollars). It has reached turning-green overboughtness on the RSI. Some time ago I calculated a possible target at 912 oz (S$1,179.15). We might see that.
Dow in gold rose today 0.23% to 13.48 oz (G$278.66 gold dollars). This takes it above the downtrend line from the 13.80 oz top in December.
Pondering both these indicators and their last 10 months' trading, I keep getting the picture that both are presently double topping, or will have by sometime next week.
Needless to note, today's dollar surge helped not silver & gold. Gold gave back a lethargic $3.80 to close Comex at $1,265.10. Silver puked up 4.4 cents to close at a new low for the move, 1906.4 cents.
Today gold hit a high of $1,279.20 then was trashed by the ECB's surprise party. Closed near the low of its range. Yet, in all this gold remains simply within that downsloping channel from the July high, in fact, not quite at the bottom line. Considering the strength of today's stroke, gold acquitted itself quite well.
Silver closed below that downtrend line from the August 2013 high, and barely above 1900c support. On news about as bad as an announcement that alchemists had learned how turn mulch into silver, silver dropped four point four measly cents. Silver is acting as if it is sold out, that is, not attracting any new sellers. Unhappily, that ain't no recipe for success. Got to have buyers to raise the price.
Best thing that can be said for silver and gold is that a large skunk sprayed all the markets, but silver & gold don't smell too bad. T'aint much, but 'tis something.
On 4 September 1862 Robert E Lee at the head of the Confederate army invaded Maryland, beginning the Antietam Campaign.
On 4 September 1870 the French proclaimed the Third French Republic as they overthrew the scoundrel Emperor Napoleon II. The Prussians had defeated and captured him at the Battle of Sedan.
Merciful heaven! I mentioned SILVER BONANZA yesterday but forgot to add the link, http://store.the-moneychanger.com/products/silver-bonanza Y'all go look. Why? It's still the best book ever written about silver.
I wrote it in 1993 for Jim Blanchard. Unhappily, when a New York publisher picked it up, they gutted it, deleting roughly a fourth of the book, the part with all the history without which nobody can understand why silver acts as it does.
With permission, I have republished not that gutted version, but the original unexpurgated version in PDF. Originally published at $75, we well it on our website for $39. For one week only (offer expires 10 September 2014) I am offering it to my commentary readers for $19, twenty bucks off list price. Here's how to get that price. Go to http://store.the-moneychanger.com/products/silver-bonanza click on "Add to cart," and during check out you will have a chance to enter the special offer code "MC0903). SILVER BONANZA is available only in PDF format. Act quickly! Time's a wastin'!
Argentum et aurum comparanda sunt —
Silver and gold must be bought.
— Franklin Sanders, The Moneychanger