The Moneychanger
Daily Commentary
Monday, 29 February a.d. 2016 Browse the commentary archive

Some commentators think that stocks have been rising on the expectation that the G-20 meeting in Shanghai would spawn some sort of concerted stimulus by central banks. Well, it didn't, and now stocks are sagging.

November, December, January, and February the MSCI World stock index (ex-USA) has fallen. Dow barely ended this month higher, S&P was lower, Russell 2000 fell third month running, Nasdaq 100 has fallen three months, & Nasdaq composite four months.

Chinese central bank lowered its bank reserve requirement 1/2%, and as if that meant something, stocks in Europe rose. I say "as if" because China is a command economy where such decisions are made for political, not economic, reasons. 'Tis all a vast Potemkin village, waiting for a vast & bloody fall. That Chinese move helped not US stocks, which peaked about 11:30 & fell wretchedly the rest of the day. Dow tumbled 123.47 (0.74%) to 16,516.50 & the S7P500 fell back 15.82 (0.81%) to 1,932.23.

Feels like I have stepped into a Salvador Dali filled with skulls & melting clocks, this surreal world where things seem real but are as insubstantial as wet cardboard. You poke 'em with a finger and punch right through.

US dollar lost its spunk today. Rose 4 basis points & did close above 50 DMA (98.14) at 98.22, but its momentum has slowed and it's looking a little wedgy, as in bearish rising edge. But no matter how shopworn, fly specked, and putrid the dollar looks, it has one advantage: sometimes it looks better than its closest rivals.

I say sometimes because today the yen rose 1.15% to 88.74. It may have topped already, but when it catches that safe haven bid for money running out of Europe & other Asian countries, it can pop. Mirroring the despairing condition of the EU and its economy, the euro fell 0.5% today to $1.0875, taking another nose dive.

Together we would do well to remember the CHARACTER of bull and bear markets. Bear markets stage sudden, sharp rallies that expire as suddenly as they began. Market proverb says the bear wants to lure as many investors as possible into his den to maul them at his leisure. Bear market can show dramatic advances and corrections more terrifying than a roller coaster -- the bull trying to shake off as many riders as possible.

Me, I don't know bull from bear. My astrological sign is the possum, so when markets scare me I tend to curl up in a ball & play dead.

Let's see, what's left? Gold & Silver. The yellow metal burst the surly bonds of below-$1,200 to soar $14.10 (1.2%) to $1,233.90, right back where this fun began. Silver flew 20.7¢ (1.4%) higher to perch at 1489.6¢.

Anyone trading the Gold/Silver Ratio, as many commodity traders do via the futures markets, would close out their long gold/short silver at 84.5, since the ratio topped there in 2008. Well, look at that: http://schrts.co/kh9gOy End of Day Ratio chart shows Friday's high at 84.53. Clearly something is driving that ratio, but what? What conditions resemble 2008? Are credit markets really that tight? I don't know, that's above my pay grade.

In any event, just from a technical standpoint that ratio ought to back off a while, even if it intends later to go higher. By the way, it is also monstrously overbought by its RSI & MACD, most overbought in 15 months. Hence it makes sense to swap gold for silver here, at any ratio above 80.

Today cast the while stock rally/metals correction into cloudy suspense again. Stocks seem to have stalled at those resistance areas, & gold turned around and recovered.

But still 't'ain't right. Gold has drawn an up-pointing bear flag, and that promises to take gold back to $1,180. That is the most likely outcome, but if gold can pierce $1,264 before that, it will take off for another $50 run or more. Here's a chart, http://schrts.co/pI1ZgR

Silver resolved an even-sided triangle by breakout out downside. http://schrts.co/gbhBRy That established a new downsloping channel sliding toward 1450¢ - 1440¢ Silver will only complete its penance when it breaks above not 1599¢ the last high, but the October 1640¢ high. Meanwhile it is offering y'all a chance to buy more on the cheap.

My wife Susan told me that yesterday was her first good day with her eye, and today was just a little better. I deeply appreciate y'all's concern.

On 29 February 1940 "Gone with the Wind" won eight Oscars. We've come a long way, baby.

Sorry, no commentary tomorrow. I'm finishing my monthly Moneychanger.

Interview I did last Wednesday on David Simpson's True Money show must have been pretty interesting. I'm getting calls & emails from all over the country. You can still listen to it at http://bit.ly/21h6f4x. Look for True Money Episode XI. I think there are three segments.

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
29-Feb-16 Price Change % Change
Gold, $/oz 1,233.90 14.10 1.16%
Silver, $/oz 14.90 0.21 1.41%
Gold/Silver Ratio 82.834 -0.207 -0.25%
Silver/Gold Ratio 0.0121 0.0000 0.25%
Platinum 933.70 19.20 2.10%
Palladium 495.60 13.50 2.80%
S&P 500 1,932.23 -15.82 -0.81%
Dow 16,516.50 -123.47 -0.74%
Dow in GOLD $s 276.70 -5.29 -1.88%
Dow in GOLD oz 13.39 -0.26 -1.88%
Dow in SILVER oz 1,108.79 -24.03 -2.12%
US Dollar Index 98.22 0.04 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: 1,237.90      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,267.61 1,288.65 1,288.65
1/2 AE 0.50 630.82 652.99 1,305.98
1/4 AE 0.25 318.50 332.69 1,330.74
1/10 AE 0.10 129.87 135.55 1,355.50
Aust. 100 corona 0.98 1,207.32 1,216.32 1,240.89
British sovereign 0.24 293.59 306.59 1,302.41
French 20 franc 0.19 232.85 236.85 1,268.61
Krugerrand 1.00 1,251.52 1,261.52 1,261.52
Maple Leaf 1.00 1,247.90 1,261.90 1,261.90
1/2 Maple Leaf 0.50 711.79 649.90 1,299.80
1/4 Maple Leaf 0.25 315.66 331.14 1,324.55
1/10 Maple Leaf 0.10 131.22 134.93 1,349.31
Mexican 50 peso 1.21 1,483.46 1,494.46 1,239.49
.9999 bar 1.00 1,242.23 1,249.90 1,249.90
SPOT SILVER: 14.90      
SILVER Fine Tr.Oz. BID ASK $/oz
VG+ Morgan $B4 1905 0.77 22.50 26.00 33.99
VG+ Peace dollar 0.77 17.50 20.00 26.14
90% silver coin bags 0.72 12,369.50 12,727.00 17.80
US 40% silver 1/2s 0.30 4,277.50 4,439.50 15.05
100 oz .999 bar 100.00 1,515.00 1,540.00 15.40
10 oz .999 bar 10.00 150.50 155.50 15.55
1 oz .999 round 1.00 15.00 15.46 15.46
Am Eagle, 200 oz Min 1.00 16.40 17.65 17.65
SPOT PLATINUM: 933.70      
PLATINUM Fine Tr.Oz. BID ASK $/oz
Plat. Platypus 1.00 948.70 978.70 978.70
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© 2015 Little Mountain Corporation, d.b.a. The Moneychanger. All rights reserved. May not be republished in any form, including electronically, without our express permission.

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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