The Moneychanger
Daily Commentary
Tuesday, 6 February a.d. 2018 Browse the commentary archive

However bad your life may be, it would be worse if you owned (XIV) Velocity Shares Daily Inverse VIX Short- Term ETN or ProShares Short VIX Short-Term Futures ETF.

ETN = Exchange Traded Notes, which are "a type of unsecured, unsubordinated debt security first issued by Barclays Bank PLC based on the performance of a market index minus applicable fees, with no period coupon payments distributed and no principal protections."

If that sounds scary, it ought to. It's a monster-spawn of the trend since 1980 to securitize every possible financial asset & index, feeding the demand for more gambling vehicles.

The XIV is designed to move OPPOSITE to the Volatility Index (VIX). The volatility index measures investor complacency in the stock market. Lower the VIX, more complacent the investors. And since investors have lately grown more smug than ever, the volatility index reached its all time intraday low at 8.56 last November. As late as 12 January it hit 9.54 and on 16 January closed at 11.08. Yesterday it closed at 37.32, and today has traded as high as 50.30. Here's a 28 year weekly chart,

Why would you buy the XIV? It's price moves opposite to the VIX, so if you thought the market would stay calm forever, world without end, you'd buy the XIV & start planning your Caribbean vacation.

Whoops. The last two day's stock market plunge changed all that, and jacked up volatility to levels not seen since 2015, nay, really not since 2008. Yesterday the XIV closed at $99, today trading in it has been halted but value is zero.. Chart's here,

There's an ETF that also trades inversely to the VIX, SVXY or ProShares Shot VIX short-Term Futures ETF. Here's a picture of what's happened to SVXY,

Here's a Bloomberg article on the extent of VIX derivatives,

By the way, in the next days you are liable to hear the financial media advising you to "buy the dips" in the stock market. Fall for that, and it'll be the last time you dip your toe in that water. Sharks will bite it off.

There's some kind of rotten fish in Denmark and New York. Stocks had an up and down day, crossing above and below the unchanged line. At 2:30 when the Dow was still underwater at 24,248.25 "somebody" heavyweight started buying and ran the Dow up nearly 600 points. Generally when there's an "unseen hand" it ain't Adam Smith's but the Nice Government Men of the Plunge Protection Team, doing what government is supposed to do: protect Wall Street & the banks. You can see the days trading at Click on "DJIA" for chart.

Dow Industrials ended 567.02 (2.33%) higher at 24,912.77. S&P500 rose in like bogus fashion 46.2 (1.74%) to 2695.14.

Dow chart, shows high volume today but the index remains below the 50 day moving average and the steep uptrend lines.

I'm sitting here gagging. Is there a genuine, honest market left in the world anywhere? Only comfort is a little Schadenfreude that gambling products like VIX derivatives are blowing up on the pointy-toed shoe genius of Wall Street. Leverage to the max!

US dollar index disappointed yet again. Fell 11 bps (0.1%) to 89.45, wilted like Superman over a Kryptonite milkshake when it got near 90. Dollar index' determined refusal to rally leads to suspicions that nature is getting an "unseen hand" from someone.

For the Interesting Things Department, the Palladium Less Platinum spread which has been widening since 2016 (from -502.3 to +148.65) appears to be breaking down. You can see it here,

Gold slid $6.90 (0.52%) on Comex to land at $1,326.10. Silver peeled off 9.1¢ (0.55%) to 1654.8¢.

Look at gold here, A band of support stretches from $1,318 up to $1,325. Today gold closed below its 20 DMA -- not good -- but still holds on above $1,325. Odd, isn't it, that the high was $1,349.30 but it tumbled back to $1,326.10. Probably another week left to this correction before gold resumes rallying.

Silver is hiding right here, Since October silver has built what seems to be an upside-down head and shoulders reversal pattern. That implies the low we've seen so far at 1650¢ ought to hold. If it is a H&S it implies a target above 1850¢ for the next move. But note that silver has of yet given no indication of turning up.

Don't lose your head. Lots of volatility ahead in everything, but this time it seems stocks really have broken, and bonds as well. Hang on to your gold & silver, buy more on drops, and get ready for a wild ride.

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
6-Feb-18 Price Change % Change
Gold, $/oz 1,326.10 -6.90 -0.52%
Silver, $/oz 16.55 -0.09 -0.55%
Gold/Silver Ratio 80.137 0.024 0.03%
Silver/Gold Ratio 0.0125 -0.0000 -0.03%
Platinum 991.30 -1.20 -0.12%
Palladium 1,006.45 -30.45 -2.94%
S&P 500 2,695.14 46.20 1.74%
Dow 24,912.77 567.02 2.33%
Dow in GOLD $s 388.35 10.80 2.86%
Dow in GOLD oz 18.79 0.52 2.86%
Dow in SILVER oz 1,505.49 42.31 2.89%
US Dollar Index 89.45 -0.11 -0.12%
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: 1,320.40      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,320.40 1,333.40 1,333.40
1/2 AE 0.50 656.40 696.51 1,393.02
1/4 AE 0.25 328.20 354.86 1,419.43
1/10 AE 0.10 131.28 144.58 1,445.84
Aust. 100 corona 0.98 1,284.55 1,294.26 1,320.40
British sovereign 0.24 310.82 316.77 1,345.68
French 20 franc 0.19 244.77 247.77 1,327.10
Krugerrand 1.00 1,323.04 1,336.04 1,336.04
Maple Leaf 1.00 1,328.40 1,344.40 1,344.40
1/2 Maple Leaf 0.50 759.23 693.21 1,386.42
1/4 Maple Leaf 0.25 336.70 353.21 1,412.83
1/10 Maple Leaf 0.10 139.96 143.92 1,439.24
Mexican 50 peso 1.21 1,575.96 1,593.01 1,321.23
.9999 bar 1.00 1,315.40 1,333.40 1,333.40
SPOT SILVER: 16.53      
SILVER Fine Tr.Oz. BID ASK $/oz
VG+ Morgan $B4 1905 0.77 21.00 24.00 31.37
VG+ Peace dollar 0.77 14.50 17.50 22.88
90% silver coin bags 0.72 11,422.13 11,708.13 16.38
US 40% silver 1/2s 0.30 4,624.13 4,799.13 16.27
100 oz .999 bar 100.00 1,627.50 1,672.50 16.73
10 oz .999 bar 10.00 166.75 171.75 17.18
1 oz .999 round 1.00 16.28 16.63 16.63
Am Eagle, 200 oz Min 1.00 17.13 17.93 17.93
SPOT PLATINUM: 991.30      
Plat. Platypus 1.00 1,006.30 1,036.30 1,036.30
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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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