Y'all are gonna think I've gone crazy as a Betsy-bug, but wait till I explain.
First, the FOMC meeting yesterday confused the stock market but enthused the US dollar index. For the life of me I can't gulp down the titles "dovish" and "hawkish" when it comes to the Fed cause th'only word that pops to my mind is "swinish" Still I struggle through to try to understand what all these clowns mean. I think by "dovish" they mean that the central bank criminals favor more inflation, by "hawkish" less.
Rather than trying to figure out the mental transmission by which Fed watchers & markets draw their conclusions, I would rather point out their actions, for buried within those actions are their conclusions.
Stocks sold off. Dollar rose. Whatever the FOMC statement (using that word to describe a Fed utterance is an insult to the English language) said, stock investors took it to mean their gravy train had derailed, and dollar investors thought it meant the dollar would become worth more. The Dow fell 0.18% (31.44 points), the S&P500 slid 0.14%. US dollar index added 83 basis points, a huge 0.74%.
Today, however, stock buyers re-thought (or Nice Government Men re-bought) and the Dow jumped 221.11 (1.3%) to 17,195.42. S&P500 added 12.35 (0.62%, not quite as much enthusiasm there) to close 1,994.65. US dollar Index rose 0.18 to 86.26. Yesterday gold & silver held on, today they took their big hit.
Think about the whole mess around the dollar. The Fed has been pouring into the financial system as much as $85 billion a month, now suddenly all that's vamoosed. But that extra money was sloshing around the system to finance the $50 billion of new yankee government debt every month, as well as push up stocks. Now that the slosh is squeezed down to a drip, whoops, now that the trough is dry, what happens? The yankee government is GONNA get that deficit financed, and that will be sucking slosh away from stocks. Not a pretty picture, Miss Janet.
Technically the dollar index might look strong, especially with a two day breakout above the downtrend line, but step back from that chart. Chart is at http://scharts.co/105jV4J Look at that rise from 1 July, practically straight up, then a peak in October and decline. Standard correction behavior is an A-Wave down, a B-wave up, then a C-Wave down. Often the B-wave can be stronger than a garlic milkshake, only to fool you and drop dead in a C-wave. The long preceding hyperbolic rise argues the dollar must correct for quite some time -- that is always the outcome of such spectacular rises. So perhaps the dollar is merely putting in a double top.
What makes all this so irksome is that the Nice Government Men manipulate currencies more than any other market, so technical conclusions might be precisely correct, only to be defeated by the NGM's manipulations. Hence I always tremble to say anything about currencies, not being privy to whatever secret deals they have made at the BIS over rubber chicken in their monthly meetings.
But for a moment, till disproved by a higher high in the dollar index, I am willing to work on this theory, that the US dollar index is making a double top that may even reach a leetle higher than the previous 86.87 top.
Today the US dollar index added 18 basis points (0.21%) to 86.26.
Stocks may be on their way to a double top which may include a higher high, or simply correcting on adrenalin. Either way, it mattereth not. Their next big move is rugward, for a long time.
Dow in Gold chart is at http://scharts.co/1rgAqB8 The last two days have taken it above its previous (early October) high at 14.28 oz (G$295.19) to a new high today at 14.34 oz (G$296.43 gold dollars). Here's another place where we either get a double top and a collapse, or go much higher. No way to chocolate-coat it.
Dow in silver is at http://scharts.co/1rgCkBw It has reached way above the early October high at 1,009.78 oz (S$1,305.57 silver dollars) to a new high today at 1,045.31 oz (S$1,351.51). This is the same situation as gold's: either it reverses near here or rises much higher.
I spoke about the US dollar index above, but didn't mention the other scrofulous parasitic blood-sucking fiat currencies, the yen & euro. Euro today broke down from an even-sided triangle, so it should drop more. The answer to the US dollar riddle I laid out above will control here. Euro lost 0.15% to close $1.2611. Yen broke its uptrend yesterday, punching through its uptrend line and plummeting hard. Ended down today 0.30% at 91.55.
Today gold lost $26.20 (2.14%) to close 1,198.10 on Comex. Silver lost 83.3 cents (4.84%) to close at 1639.1c.
Face it: either silver & gold are making double bottoms, or they will fall a lot further.
The last lows came on 3 October at 1678c and $1,192.20. This carries all the more meaning since these were the lowest closes in the 3+ year correction. Intraday low came for gold at $1,183.30 on 6 October (the following Monday; today's low hit $1,195.50. Silver's intraday low on 6 October was 1660 against 1633 today.
In itself silver's weaker performance says nothing. More volatile than gold, it always falls further on the downside.
Charts don't look quite the same, either. Gold's low today was higher than the early October low, silver's was not. Today's silver close was also lower.
Technically the picture is grim. Silver & gold rallied off those early October lows, but without conquering many technical targets. Now they've fallen off, and it would take a lunatic like me to say, this is one of those places that you puke in your wastebasket and buy. Why? Either this is the touchback low that proves the early October bottom, or it is the breakdown that will trim another $100 off of gold and $2.00 off silver.
Oh, I won't pull the deus ex machina of Nice Government Men out of the box and blame it on them, but I do muse in the back of my mind. How would I react if stocks were tanking & an FOMC announcement didn't quite bail 'em out? If I wanted stocks to keep floating, would I want silver or gold levitating? Or would I hit weaker silver as hard as I could and sell a batch of gold, too?
Y'all know that story about Joe the great fisherman who would never take anybody else fishing with him? His friend Fred finally wheedled him into a fishing trip. They motored out to the middle of the lake, Joe stopped the boat, reached down in his bag, and pulled out a stick of dynamite and started stuffing a fuse in it. He handed it to Fred, who turned greed and said, "You can't do that! That's illegal."
Fred never missed a beat. He pulled out another stick of dynamite & said, "You gonna fish, or talk?"
Folks, today y'all got to decide whether to fish or talk, cause the fuse is burning.
Argentum et aurum comparanda sunt —
Silver and gold must be bought.
— Franklin Sanders, The Moneychanger