Well, my, my! Even a blind hog finds an acorn every now & then, & I reckon this blind hog found his'n yestiddy. I told y'all I'd been thinking wrong about silver & gold, looking at patterns, but identifying not the ones ruling the market. I redrew those yesterday, suspicious that metals were near turning around, & look what happened.
Well, I didn't do anything. The Nice Government Men in the Bureau of Labor & Statistics did all the heavy liftin', and disappointed the US dollar market & stocks & interest rates. They just stomped off in a big pout. Silver & gold were tickled to death.
Since the Fed has announced that it watches the unemployment rate ("jobs report") as its most important gauge for raising interest rates, watchers hung like buzzards on dead oaks waiting for the report today. If it was good, the Fed might raise the discount rate in June. If vanilla, no information. If it showed much lower unemployment, then the brave Rhode Island Reds at the Fed would not dare raise rates.
In the event, the Bureau of Labor Statistics report fell dismally short of estimates. Plus the March & April reports, were as usual, revised downward. The dollar tanked, silver & gold rose.
But ponder the fable of government employment statistics. If they measured anything really important, government statisticians would change the scale until they got the rosy number the administration wanted. As it is, they are wholly unreliable, BUT if the terrible employment news even filtered through the governments churchifying statisticians, how bad must it have been IN FACT?
Thus the entire week was thrown a-gollywoggle with an unexpected happy ending for metals.
First let us ponder, stifling our Schadenfreude, that scurvy tapeworm on the world economy, the US dollar index. We tasted today how much speculation was under it, is always under it, keeping it afloat. Remove the chance of a rate rise, and it sank a magnificent 154 basis points (1.61%).
Technically the damage was near fatal. It collapsed from the 95+ resistance area and sliced through the 50 & 20 day moving averages. On the chart this now shows a failure even to reach, let alone breach the 200 DMA (now 96.60). Worse, it broke through the upper range boundary it had only escaped on 23 May. In short, the scrofulous dollar looks sorry as gully dirt. It will need a long spell to recover, if it does. Chart's here, http://schrts.co/OkJ5UT
Yen & the Euro took the dollar's tumble as their signal to jubilate. Euro rose 1.82% to $1,1356. Yen rose a whopping 2.1% to 93.74¢ per Y100.
Let me preface everything else I say with this: IF CONFIRMED. Today appears to have been the watershed for many markets, but follow through must confirm appearance. I'm not going to keep saying "If Confirmed," so y'all just add it yourselves.
Inflation markets did not react uniformly to the dollar's plunge. Oil, which you would have expected to make hay of it, went nowhere, down 0.9% to $48.62. Lo, the chart, http://schrts.co/KvfGnd Still looks like its about to break down. Copper juiced, up 2.23% to $2.113. http://schrts.co/02nSGN CRB rose 0.64%, a.k.a., little or nothin'.
Yield on 10 year US Treasury notes fell -- WHOA! -- 5.91% to 1.704%. Mercy, fell all the way to the bottom of the 4 month range. Look at it, http://schrts.co/68TDbQ
Stocks are fighting, but not effectively, to remain above their 20 & 50 DMAs. Head & shoulder pattern in both Dow & S&P500 will shortly take 'em down in the Market Elevator: "Basement, please!"
Dow lost 31.5 (0.18%) to 17,807.06. S&P500 backed off 0.29% (6.13 points)) to 2,099.13.
Okay, pack away that Schadenfreude and gloating, & let's look at the Dow in Gold like adults. Chart's here, http://schrts.co/8Sv0tc
The Dow in Gold since march has formed a megaphone reversal. Today it ricocheted off the top boundary of that megaphone, which was almost the 200 DMA, and fell plumb back to the uptrend line form the 2011 low. Turned down today, settled at 14.33 oz.
Dow in Silver fell 2.79% today to 1,038.15 oz. Its upward correction never even reached the 200 DMA, today it fell sharply and Monday should fall through its 50 DMA.
Why, would y'all LOOK at that! Silver popped up 34.1¢ (2.1%) to 1634.6¢. Gold -- am I reading this right, or does that have one zero too many in it? -- rose $30.30 (2.5%) to $1,240.10. Both of them rose straight up at 9:30 when the employment report was released.
Y'all go look at the gold chart first, http://schrts.co/keWFnm
That range bounded by the heavy pink lines appears to be ruling gold. It bumped into the bottom line with a $1,201.50 low this week, and today bounced stupendously, clean to the 50 day moving average ($1,247.77). The RSI bounced up, the volume rise confirmed the price rise, momentum turned up, and the rate of change has stopped falling & turned up.
Mercy! What do y'all need, an engraved invitation?
But gold needs to confirm this performance by improving it, crossing above the 50 & 20 DMAs next week. Since we are entering a weak season for gold (June-July), we may have to endure a lengthy crabwalk. But tuck this away: as long as it stays above $1,201.50, we have seen the low.
In a bull market, surprises always come to the upside. Today's surprise said that gold will not revisit the 200 DMA. That also makes sense, looking at the chart. Falling all the way back to that 200 DMA would look weak after that bold, fierce climb out of that bowl in January.
Now y'all switch to silver's chart, http://schrts.co/aLdx54
RSI turned up sharply. Silver bounced off lateral support and off that uptrend from January. It touched the 50 DMA (1647¢) & closed not far below it. Volume confirmed the higher price. Momentum (MACD) turned up.
Today's performance shouts that the pattern ruling silver is that range marked by the green lines: The uptrend line from the January low bounding the range bottom. Assuming silver can advance next week through the 50 & 20 DMAs & generally behave itself and improve its gains, we will not again in this lifetime see silver below 1600¢.
I can't resist saying it once more: IF CONFIRMED.
Don't forget the gold/silver ratio, http://schrts.co/fbhoU8
Consistent with my interpretation that silver & gold have completed their correction & bottomed, the ratio remains below the 200 DMA and the lower boundary line it punched through in April. Ratio confirms. Now it needs to drop, or at leas move sideways a while..
Last Wednesday I appeared on David Simpson's True Money Show. He's a talented interviewer. You can download the podcast at http://bit.ly/1Uj0ZEw
I have one more week with this K-wire sticking out of my toe. Next Friday it's coming out! I appreciate with all my heart your kind prayers which have sped my recovery.
On 3 Jun 1864 at the Battle of Cold Harbor in Virginia, Union Genl. US Grant threw his men into a hopeless frontal assault against the Confederate Army of Northern Virginia's fortified potions. In 30 minutes the yankees suffered 7,000 casualties. It was the Union's worst day since the assault on Marye's Heights at Fredericksburg in 1862. Grant later wrote in his memoirs that he regretted that decision for the rest of his life.
Y'all enjoy your weekend.
Argentum et aurum comparanda sunt —
Silver and gold must be bought.
— Franklin Sanders, The Moneychanger