I'm taking a short vacation this week and won't return until next Tuesday, 11 July Given the large moves in gold and silver today, I thought I ought to leave y'all some guideposts.
The US dollar index popped up 55 basis points (0.57%) to 95.97. Chart tells the whole story, http://schrts.co/OkJ5UT
Toda's pop only brings the dollar index (scabby beggar!) up to the lower boundary of the range it tumbled out of -- normal touchback behavior. However, the dollar has been pummeled for nine days, so some countertrend rally should be expected. Forget not that governing the scene is that big completed head & shoulders top. The green line on this chart marks the neckline of that H&S, so that ought to stop any rally. Before it reaches that, the dollar index must conquer the long unconquered 97.50 resistance. Dollar should see 93 before it sees 103. In plain words, trend has definitively turned down.
Meanwhile in Japan Prime Minister Abe's party got slaughtered in an election by an "outsider." Do y'all notice a pattern emerging in elections since Brexit? Yen has been rolling downhill since mid-June, and today closed at 88.18 down 0.93% on the day and down from 91.23 on 14 June. Behold the chart, http://schrts.co/UuqBFa
Interest rates are on a tear rising. Here's the yield on the 10 year Treasury, http://schrts.co/pF66iv
That red line across the chart is the downtrend line from 2007, so, yes, breaking up through it is fraught with meaning. The yield has been fighting that line, trying to cross and stay above it, since last December. Today (red arrow) it punched through the top boundary of the trading channel. Needs to confirm by rising another day, but looks determined.
Since they move opposite to each other ("are inversely correlated," for you engineers), rising interest rates means falling bond prices. Mercy! Look at the 10 year Treasury note, http://schrts.co/8tWGcM or the 30-year Treasury bond, http://schrts.co/IoR0Nw Probably adding to that momentum is a rising stock market, which tends to suck money out of bonds.
Another reason for US dollar strength is a leetle change in the differential between interest rates on US Treasury debt and German. The differential widened, favoring the dollar.
Stocks are a walking self-contradiction. Dow today rose 129.64 (0.67) to 21,479.27 & the S&P500 added 5.60 (0.23%). All's great in stock-land, right?
Not a-tall. Consider the Nasdaq 100, rite-chere, http://schrts.co/TxwAHm From the high 9 June at 5897.69 it has fallen to 5596.96 today, down 5%. Fail not to notice that it has broken down out of an even sided triangles. Indicators forecast more plunging.
Or ponder the Nasdaq Composite, lo, here, http://schrts.co/DPyfC8 After a 9 June high at 6,341.70 it closed today 6,110.06, down 3.6%. Also hath broken the floor out of an even sided triangle. These two indices look like breaking markets.
Dow Industrials chart shows a megaphone or broadening top, http://schrts.co/Q6KUW0 as does the S&P 500, http://schrts.co/vtdPMb Yet in the midst of all this the Dow Transports make a new high today, seen here http://schrts.co/wCgJv7 That also looks like it might be a broadening top, although Dow Theory says that a new high in the Transports confirms a new high in the Industrials.
Regardless, the smash-down in technical stocks gainsays strength in senior indices. This is a very confused market, and confused markets are not trustworthy. Boom-boom draweth nigh.
Gold took a massive body blow today, losing $22.80 (1.84%) to close Comex at $1,217.90. Silver was hit worse, down 53.1¢ (3.2%) to 1603.7¢.
Part of the blame lies with a shortened trading day before a holiday. On such days the big traders are absent and sometimes the little traders run the stops. Light attendance might exaggerate the move, but a rising dollar and rising interest rates didn't help. Or rising stocks stealing all the headlines.
Gold just eroded from about $1,240 at midnight down to $1,230 at 11:00. Then it gapped down and fell head over heels. In the aftermarket it has recovered to $1,222.75.
On the daily chart here, http://schrts.co/HVNUhZ today's fall trashes the uptrend line from December 2015 & returns nearly to the May low ($1,214.30) and the bowl lip of the bowl that formed Nov 2016 - January 2017 and presaged gold's upward breakout.
Silver broke about the same time today that gold did, but had already given up more ground. However, the daily chart isn't quite the same mess as gold's, perhaps because silver's was messier already. It broke through that uptrend from the December 2015 low. It's below all three moving averages, which are in bearish (downward) alignment. Indicators are poisonous.
Yep, we are at the seasonal low period for silver & gold, weakest time of the year. Must be time to buy.
Here are some limits. Either silver holds the line at 1600¢ or it risks returning to 1580¢ or lower. Should find strong support at 1580¢. If gold fails at $1,215, it can fall to $1,194.50.
Here are some milestones for stocks. The S&P500 below the last low, $2,406, risks freefalling, as does the Dow below 21,200. Dollar index is just playing rebound unless it can seriously penetrate 96. But even that won't amount to a hill of beans if it can't overcome 97.50.
July 4, 1863 brought unrelieved disaster to the Confederate States. On 3 July Lee withdrew is army of Northern Virginia from Gettysburg, conceding the battle and losing his risky gamble of invading the north -- although he almost succeeded in wheeling through Virginia to take Washington. But in the end, he didn't.
In Mississippi on 4 July CS General John C. Pemberton (actually a Pennsylvanian) surrendered Vicksburg, the Gibraltar of the Mississippi, to Union forces under Grant. Pemberton had foolishly allowed himself to get bottled up in Vicksburg. These two disasters together marked the high tide of the Confederacy. We lost the Second War for Independence.
Y'all enjoy your Fourth of July Holiday. I'll see y'all again on 11 July, God willing.
Argentum et aurum comparanda sunt —
Silver and gold must be bought.
— Franklin Sanders, The Moneychanger