Today offers an example of what I try to tell people about governments manipulating markets. If they're all manipulated, they complain, why even try to figure out where they're headed?
Because the manipulation never works for long. They can only manipulate at the margin, & that doesn't last.
Case in point: on Friday (always before a weekend) the Bank of Japan threw a surprise party by announcing a 0.1% interest rate reduction, taking Nipponese interest rates into negative territory. Yes, that means the central bank will CHARGE banks to hold balances.
We need not delve into the moronic Keynesianism behind this move, we need only observe that stocks jumped worldwide. The dollar, facing a huge interest rate advantage over the yen, leapt a massive 102 basis points while the yen (I warned y'all the Japanese Nice Government Men would have to do something about that rally) gapped down 160 basis points or 1.35%. Stocks were jumping over the prospect of more central bank money creation, implied in the BoJ move.
Leave aside the presupposition that the BoJ always works in concert with the Fed, which would make the timing at January's end perfect, raising stocks' performance at months' end. Can't prove that, only suspect.
Several decisive & far reaching events appeared:
1. In the face of a madly rising dollar and buying panic in stocks, silver & gold never wavered but held firm. Magnificent showing, stout & brave.
Note & miss not that NEGATIVE interest rates means that the old argument against silver & gold -- they pay no interest -- no longer holds. Negative interest rates mean that you have to PAY to hold cash or government bonds, while holding silver or gold costs nothing. Think long & hard on that. Long & hard.
2. Today the US dollar index sank 0.67% to 98.98, leaving behind another failed attempt to get through 100.04. It also closed BELOW the 50 DMA (98.87). More, it has on Wednesday & Thursday broken down from a rising wedge, but on Friday jumped up into the wedge's middle. Today it gave up all that and fell out again. All this stinks of blubbering weakness, but that needs confirming by a dollar index close below 98.45, and then 97.20.
3. Stocks' hop up merely cannibalized or advanced in time the peak of the reaction rally. Dow reached a high at 16,466 & S&P500 1,940, both near my rally targets of 16,600 and 1,950. Yes, stocks can still move a little higher, to 17,000 and 2,000, but the BoJ's gamble did no more than drive them a little faster than otherwise. Wait and see.
TODAY the Dow backed off 17.12 (0.1%) to 16,449.18. S&P500 crawfished 0.86 (0.4%) to 1,939.38.
Dow in silver today closed 1,146.84 oz, down 0.72%. Friday took it slightly through its 1,149.74 oz 200 DMA, but today it fell beneath again. Beautiful, and argues the DiS rally may have ended. Watch it.
Dow in gold turned down, still below both the 200 (15.36 oz) & 20 (14.83 oz) day moving averages at 14.58 oz. Close below 14.17 oz renews downtrend.
After all that good news Friday for metals, gold bucked off the shackles today and jumped $12.30 (1.1%) to $1,127.90. Y'all pay close attention here: $1,128 is not only resistance from the last six months, it is also where lieth the downtrend line from the October 2012 high, and about where gold's 200 DMA is trading ($1,132.50). On the weekly chart, gold also breaks out upside through the downtrend from October 2012 & the 50 week MA stands nearby at $1,141.50.
So clearing $1,128 will throw gold over a huge hurdle.
Silver, silver, silver. High today was 1442¢, Comex close came at 1142.9¢, up 11.3¢ (0.8%).
Silver, too, is set to pop, BUT must first clear 1465¢, the last two highs & the post-2012 downtrend line on the weekly chart. The monthly chart needs to see 1530¢ plus for a skyward breakout.
Clearly Friday marked the end & low of the metal's little corrections, PROVIDED they march out smartly again tomorrow. Better start buying.
Governments talk a lot about terrorism, but never mention media & government terrorism. For example, there are the Terrorist Diseases they threaten us with, from bird flu to now the nika virus. Why do I suspect they are trying to stamped us into vaccination? Why might that not be a good idea? he asked the swine-flu vaccine casualties. Don't bother me, I've got Vitamin C.
And beware the Terrorist Weathermen. When my parents retired they watched the news & weather four times a day. They lived in North Alabama, but you let a hurricane in Yucatan turn up on Terrorist Weather, & they were ready to board up the windows. So it storms: I'll wear a raincoat. It snows: I'll throw another log on the fire. Forget living in terror, they just want to keep you panicked so they can control you.
Argentum et aurum comparanda sunt —
Silver and gold must be bought.
— Franklin Sanders, The Moneychanger