Friday, March 30, 2007

The Future Is Now

The U.S. dollar staged a broad rally this morning after a final data revision showed the U.S. economy grew more strongly than expected in the fourth quarter of last year. U.S. fourth quarter gross domestic product (GDP) grew 2.5 percent, based on the final reading, higher than median economists' forecasts of 2.2 percent. In other news, the number of U.S. workers filing new claims for jobless benefits dropped unexpectedly last week to the lowest level in more than two months. The data combination suggested the U.S. economy was more resilient than many initially thought, and supported market expectations that the Federal Reserve may keep interest rates on hold for some time.

Geez, really? I better start selling all my silver and gold...yeah, right. The fourth quarter ended THREE months ago! After "final data revision" the US fourth quarter GDP actually grew ONE FULL PERCENT less than original economist forcasts back in January. The fourth quarter ended THREE months ago! People, the data is THREE MONTHS OLD.

I'll give you three reasons right now to buy Gold and Silver:
  • The price of oil is above $64 a barrel at 6 month highs
  • New housing sales are at their lowest level in 16 years
  • The US Dollar is weak, the Euro is up, and the Yen is down

OK, that was five. The point is these reasons are staring us in the face, not waving to us in the rearview mirror. Oh, and there's this small issue with the Iranians... I pity da fools that sold their Gold and Silver because of yesterday's old news.

TODAY is not only the last trading day of March, it is the end of the first quarter. I can only imagine the the Gold and Silver positive economic data we're going to be seeing in the weeks to come. Any profits being booked today won't be from selling the Precious will be from buying them to cover short positions. Gold and Silver as of yesterdays close are both down for the month of March. For the first quarter through yesterdays close, Gold is up only 4.5% and Silver is up only 3%...let those profits ride.

Silver Resistance: 13.39 / 13.54 / 13.67

Silver Support: 13.25 / 13.16 / 13.03


Gold Resistance: 662.10 / 668.50 / 670.30

Gold Support: 660 / 658.30 / 655.50

Wednesday, March 28, 2007

Arrested For Driving While Blind

It's official. Straight from the horse's mouth comes "news" that the Planet's leading economy is essentially rudderless, directionless, and in a bit of a quandary as to what to do next to stave off the inevitable...Self Destruction.

Testifying on Capitol Hill infront of the U.S. Senate [quite possibly the largest collection of adults incapable of balancing a checkbook], Captain Ben Bernanke of the USS Sinking Ship [aka Chairmen of the Fed.] had much to say about the "direction" of the nation's economy, and the Fed's policy as it pertains to steering it through the thick financial fog that is now begining to envelope it.

Bernanke said the Federal Reserve last week changed its policy statement -- which investors look to for clues about future rate moves -- to gain "a bit more flexibility, given the uncertainties that we are facing and the risks that are occurring on both sides of our outlook."

There's an increased threat of higher inflation on the one hand and weaker-than-expected economic growth on the other, he said. Those economic crosscurrents can complicate the Fed's job.

The Fed's job? Just what the hell is the "Fed's job? Let's hop, skip and jump over to the Fed's web site and find out.

The Federal Reserve sets the nation’s monetary policy to promote the objectives of maximum employment, stable prices, and moderate long-term interest rates. The challenge for policy makers is that tensions among the goals can arise in the short run and that information about the economy becomes available only with a lag and may be imperfect.

Hmmmm...Based on this definition of the Fed's "job", it wouldn't be too big of a stretch to say that our bearded skipper is caught between a rock and a hard place, with the mother of all financial "perfect storms" much closer than the horizon he can no longer see through the fog.

Captain Ben and his crew appear to now be sailing the angering seas of financial chaos by the seat of their pants. No compass in hand, and no idea which way to turn next. Moderate long-term interest rates? Not very likely. Maximum employment? If Captain Ben raises interest rates to fight inflation, he'll be greeted with "maximum UNEMPLOYMENT". Stable prices? If Captain Ben cuts interest rates, he'll be greeted with INFLATION and soaring prices. Jumping ship is not an option, Captain Ben. But nobody would blame you if you did. The ONLY thing we can be certain of right here and now, is that our Skipper is uncertain.

Financial markets are intolerant of uncertainty...the seas are about to get mighty rough.

I stop and wonder what Gilligan would do. He'd buy Silver and Gold with all of Mr Howell's money. And you should do the same with yours.

Silver and Gold are a bit range bound of late, as the forces of good and evil duke it out in the trading pits...and the springs on our Rat Traps wind ever tighter.

Silver Resistance: 13.38 / 13.54 / 13.67

Silver Support: 13.25 / 13.16 / 13.03

Gold Resistance: 668.50 / 670.30 / 674.50

Gold Support: 662.10 / 658.30 / 655.50

Too many are thinking that another opportunity to buy Gold, Silver, and the Gold stocks will be created in the future, or that paper equities will survive, With that type of thinking, some do not see need to bother with adding Gold to portfolios at the present. That short sighted thinking is going to cause many investors to find themselves seriously left behind financially. Given the fundamentals for the U.S. dollar and the potential for instability of a historic proportion in the Middle East, Gold is essential for any portfolio. 1400 is a good target price for both U.S. dollar Gold and the NASDAQ Composite Index. And remember, the Gold bugs were the ones that first warned about the collapsing U.S. housing market. And again we were scorned by the cable business media!

By Ned W Schimdt

Tuesday, March 27, 2007

Gold/Silver Ratio

The Gold/Silver ratio is a mysterious number Precious Metals traders come across often with nary a passing glance. In the simplest of terms it is a number that represents how many ounces of Silver one ounce of Gold will buy at prevailing spot prices. Used as a technical tool, the Gold/Silver ratio more probably represents the relative value of Gold vs. Silver.

The Gold/Silver ratio became of interest to me last fall when in December Precious Metals tanked hard and fast following the runup off of the Sept/Oct lows. What grabbed my attention was that the Gold/Silver Ratio at the December peak was identical to the peak in April when we tanked hard and fast...exactly the same at 45.03. "How bizzare", I thought. Was this a coincidence, or perhaps a hidden signal that an interim top was at hand? I made a note of it for the future. And sure enough the future came quickly...The week of February 20th the Gold /Silver ratio reached 44.73 and...Gold and Silver tanked hard and fast. Wow, what does this mean? To be honest, I'm still trying to figure that all out... But, I'm convinced of this: Gold and especially Silver will launch skyward when 45 on the Gold/Silver Ratio is in the rearview mirror.

On the weekly chart of the Gold/Silver ratio above, it is interesting to note that each time the ratio has retreated to it's 50 week moving average a bottom in silver has occurred and an excellent buying opportunity surfaced. Could we be staring at an excellent buying opportunity in silver as we read this? Only time will tell, but recent history seems to be telling us that we are.

Please click on the chart to enlarge. The chart of the Gold/Silver ratio may on first sight be a bit confusing. The chart is falling because as time has passed since the dawn of the Precious Metals bull in 2001, The price of Silver relative to Gold has fallen. That is, as the price of silver has risen along with the price of gold, you can buy fewer ounces of Silver with one ounce of Gold.

These two articles I pulled from google go a long way in better explaining the Gold/Silver ratio. Both articles are back dated, but still relevant to today's ongoing bull market in Gold and Silver.

Silver Resistance: 13.36 / 13.54 / 13.67

Silver Support: 13.25 / 13.16 / 13.03


Gold Resistance: 668.50 / 670.30 / 674.50

Gold Support: 662.10 / 658.30 / 655.50

Squeeze Box

Silver has a Rat Trap of it's own baited to snare dem evil Rat Bastids over to da PPT. Silver's trap is locked and loaded a 13.03. In Friday's post we recognized the potential for dem Rat Bastids to try and steal the bait from our gold trap. We recognized that potential purely on technicals. But dem Rat bastids got a helping hand from the "existing homes sales" numbers Friday... And we got a "quick" retest of our 655.50 trap in Gold, and 13.03 in Silver as well.

Yesterday, we see that Friday's "helping hand" was a bit limp. Monday, "new home sales"plummeted to 16 year lows. Of course several anal-ysts claimed that "bad weather" caused this absymal number to materialize and should account for the shock of it. Of course, of course, had to be the bad weather. Seems I can't recall the ever blaming "good weather" for a rise in home sales. But I digress...

The US Dollar's decline resumed with Monday's weak housing data.

These retests of our fully baited traps has strengthened them both. By establishing support at these points the pressure builds on the shorts. The further we move up from them, the more the pressure builds. We want these traps to be the catalyst for a short squeeze...perhaps launching the mother of all short squeezes.

Please click on chart to enlarge.

Silver Resistance: 13.36 / 13.54 / 13.67

Silver Support: 13.25 / 13.16 / 13.03

Gold Resistance: 668.50 / 670.30 / 674.50

Gold Support: 662.10 / 658.30 / 655.50

A must read for silver traders:

Sunday, March 25, 2007

The BIG PICTURE: Weekly Review 3-23-07

And so, as expected, dem Rat Bastids circled their wagons Friday and tried to steal the bait in our trap. Do the number of "existing home sales" include homes sold that are in foreclosure? Anybody predicting or remotely suggesting that this number in anyway proves that the subprime meltdown will be contained has got to be blind, high , or both. This number is just another horn blowing...daily "noise" amplified by the media to try and take your eye off the Big Picture.

Courtesy of I have pasted the Big Picture above in 3-D: Gold, Silver, and the US Dollar. [Please click on the charts to enlarge.] These three weekly charts need to become your best friends.


The first chart is of SLV, the silver ETF. I chose this chart because it best portrays the spot price of silver and it contains volume information. Clearly, silver has been consolidating last Springs massive parabolic rise with the low established the week of June 12, 2006. The associated Ascending Triangle has very solid support running along the 50 week moving average and has now offered three excellent buying opportunities in silver off that June low.
It may have slipped past most folks radar, but SLV established a new closing high five weeks ago with the February 20, 2007 peak. Silver was on the verge of breaking out, and along with gold, was mysteriously kicked off the tracks as the Chinese Stock Market Hiccup felt round the globe unleashed a wave of fear over investors and speculators alike. At a time when silver and gold should have been held aloft as "safe havens" in a Market Meltdown, they were both kicked to the curb even as the US Dollar's decent into oblivion gathered speed.

Take note of the high volume [green arrows] that coincided with each bottom in silver circled in green above. These are blow-off bottoms. Blow-off bottoms are where savy investors and speculators, sensing "blood in the streets" step in and buy as the heard sells in a panic.

The top Of this Ascending Triangle consolidation in silver is 14.46. This red line in the sand is the launching pad for silver. A solid weekly close above this line on "big" volume should be the signal that silver is on it's way towards it's next intermediate peak. Using the June 12 low of 9.55 that projects to an intermediate peak of 19.37.


Gold like Silver has been consolidating last Springs meteoric rise and subsequent "crash" for the better part of the past year. Much like Silver, a breakout in Gold five weeks ago was thwarted as the chicken littles of the world ran about screaming "the sky is falling" when the Chinese Stock Market sneezed. Gold too, has solid support along its 50 week moving average. The support there has offered excellent buying opportunities.

658 repesents a 61.8% Fibronicci retracement of last Springs Gold Dump. Only the salvation delivered by Friday's "existing home sales" numbers averted a close above that line for the past week. Gold is clearly on track to retest the 730 highs from last Spring.

If you look closely Gold has also been consolidating within an Ascending Triangle. The line in the sand at 658 has, IMO, been breached and we are now in the process of retesting that line and the break of it. Once Gold again smashes thru this line and establishes it as new support Gold should get the "OK to throttle up" and be on it's way to it's next intermediate peak. Based on the June 12 low of 542.30 that projects to an intermediate peak for Gold at 773.


Where is the US Dollar absent Friday's "existing home sales" numbers? Closer to the BIG LINE IN THE SAND at 80 than it is presently. The US Dollar is clearly on the skids, and the edge of the cliff is getting ever closer. The US Dollar is dangerous. Rat Bastids everywhere can print the stuff out of thin air. Don't try this at home, you'll end up in jail. This weeks economic numbers "should" offer the US Dollar little in the way of support. To see a list of this weeks economic numbers on tap: . I expect the US Dollar to continue it's slow slide into the Dustbin of History going forward. There will, of course be, "signs of hope" along the way. We'll most likely see the first when the US Dollar gets down around the bottom of it's downtrend channel [green arrow]. I'd like to think that Silver and Gold will both be at or near their intermediate peaks at about the time the PPT comes to the US Dollar's rescue.

Silver Resiatance: 13.25 / 13.32 / 13.54
Silver Support: 13.10 / 13.03 / 12.90
Gold Resistance: 658.30 / 662.10 / 668.50
Gold Support: 655.50 / 650.90 / 647.80

Thursday, March 22, 2007

Cocked & Loaded

Our Rat Trap is now cocked and loaded. Dem Rat Bastids is sneaky SOBs though. The Doji we got for today's candle on the Gold Chart may be reason to show a little respect for our enemy and perhaps give pause before we get "...go for throttle up."

Doji ? From Doji form when a security's open and close are virtually equal. The length of the upper and lower shadows can vary and the resulting candlestick looks like a cross, inverted cross or plus sign. Alone, doji are neutral patterns. Any bullish or bearish bias is based on preceding price action and future confirmation. Doji convey a sense of indecision or tug-of-war between buyers and sellers. Prices move above and below the opening level during the session, but close at or near the opening level. The result is a standoff. Neither bulls nor bears were able to gain control and a turning point could be developing.

Dem Rat Bastids have stolen the bait before... I don't think they get to steal it again this time, but they certainly appear to be thinking about it. The doji we got today is at the top of the new uptrend channel, and gold has been up six days running. That and it is Friday. The Vermin always try and steal the bait on a Friday after the market in London closes at 11AM est for the weekend. A quick retest of 655.50 would be welcome and healthy and only wind the spring on this trap tighter. On the flip side, should gold move through today's high at 666 and close higher Friday, a steeper trend line that launches gold to 680 by the quarter's end may be established, and that ton 'o gold bricks may be closer to squashing our quary. A higher close Friday might also push the 9 day MA above the 50 day MA. As you can see by the vertical green line and black circle on the chart...a 9/50 crossover has the potential to be the straw that breaks dem Rat Bastids back.

Please click on chart to enlarge.

Silver Resistance: 13.54 / 13.67 / 13.80

Silver Support: 13.32 / 13.25 / 13.10


Gold Resistance: 668.50 / 670.30 / 672.50

Gold Support: 662.10 / 658.20 / 655.50

Words of Wisdom:

While inflation erodes savings and wealth, gold has historically preserved wealth.

Wednesday, March 21, 2007

"We Must Be Over The Rainbow..."

Have you ever been to the FOMC web site? Sure they have one: Just about everything the Fed Flim-Flam men have ever said is on here. Kinda takes the mystery away from them, doesn't it? "Pay no attention to the man behind the curtain." Wizards of Wall Street my ass.

The "great and all powerful" FOMC spoke today. Dorthy is still in OZ.

Did the Fed change anything?

Read this piece from Marketwatch to find out. I told my broker this morning that the key to the FOMC Statement today in regards to gold would be if they changed their "bias" from tightening to "neutral" . Apparently they have. The stock market loved this news because stock holders hate rising interest rates. The stock market wants a rate cut in the hopes that it will keep their little party going on Wall Street. I don't think they understand what falling interest rates could do to the dollar, and inturn foreign investors desire to own US Stocks. Profits to a foreign holder of US Stocks quickly evaporate in a weak dollar environment. That is unless your foreign currency is pegged to the dollar. If your foreign currency is stronger than the dollar, ie. the Euro, you would lose a substantial portion of your profits in US Dollars when you repatriated your money [brought it back home].

Falling interest rates are great for gold/silver bugs. Falling interest rates and a falling US Dollar are great for gold no matter how you slice it. The FOMC has obviously decided to kick the dollar to the curb here in the near term in an effort to hold together the illusion of a "strong economy". Inflate or die. Is there a better reason to own gold now? There are a lot of reasons to own gold ...but none better than a falling US Dollar. A falling US Dollar is gonna raise energy prices too. Take that to the bank.

If you sold your gold and silver holdings in the most recent bump in the Road to Riches that commenced with the First Trading Day in March, I pity the fool. For the Precious Metals may have come into Spring like a Bear, but they're going to go out riding a Bull.

Bullish Trifecta in silver today...RSI 50+, Stochastics bullish crossover, MACD bullish crossover.
Gap down from 13.54 remains unfilled, holding overhead supply till closed

Silver Resistance: 13.35 / 13.54 / 13.67

Silver Support: 13.25 / 13.16 / 13.10

Gold Resistance: 662.10 / 668.50 / 670.30

Gold Support: 658.30 / 655.50 / 650.90

Bullish Trifecta in gold today...RSI 50+, Stochastics bullish crossover, MACD bullish crossover. Rat trap poised to pop on dem rat bastids over to da PPT...Two days closed above 655.50.

Tuesday, March 20, 2007

Watch Yer Back

FOMC Today... Be wary. Be patient. Be advised. The Trap is set. [one close above 655.50 in the trap]

Silver Resistance: 13.40 / 13.54 / 13.69

Silver Support: 13.16 / 13.08 / 12.95

Gold Resistance: 658.30 / 660.50 / 663.60

Gold Support: 655.50 / 650.90 / 647.10

Monday, March 19, 2007

Rat Trap Set

The Rat Trap in gold appears to be set. $655.50 is the bait. Three straight closes above $655.50 maybe all it takes to drop a ton 'o gold bricks on dem Rat Bastids at the bullion banks fronting for the PPT [Plunge Protection Team]

Please click image to enlarge.

Silver Resistance: 13.26 / 13.35 / 13.54

Silver Support: 13.08 / 12.91 / 12.84


Gold Resistance: 655.50 / 658.30 / 660.50

Gold Support: 650.90 / 647.10 / 642.50

Sunday, March 18, 2007

Just Because You Have A Lot Of Money, It Doesn't Mean You're Rich

It's funny, people's perceptions of money. The focus is too often on the number of digits behind the dollar sign and seldom on it's value.

I came across Forbes' list of the "400 Richest Americans" this weekend. It was printed on 9-21-06. The second sentence of the piece: This year, for the first time, everyone in The Forbes 400 has at least $1 billion. My first thought was, 'Wow, that's amazing.' But as I pondered that bit of information further, I began to think, 'Wow, that's rediculous.' All 400 have $1B dollars or more? 'It must be a lot easier to make $1B dollars in this New Century than it was in the last one,' I thought. So I did a little Googling and quickly found that in 1987, 20 years ago, America's 400 wealthiest people included only 49 billionaires.

Why are there so many more billionaires today than just 20 years ago? INFLATION baby, pure and simple. A persistent increase in the level of consumer prices or a persistent decline in the purchasing power of money, caused by an increase in available currency and credit beyond the proportion of available goods and services. [Investopedia] In 2006, according to Forbes', The collective net worth of the nation’s wealthiest climbed $120 billion, to $1.25 trillion. Surging real estate, oil and other asset prices paved the way for 28 new members. If I did my math correctly, that is a 10.6% increase in their "wealth" in ONE YEAR. But has their wealth really increased, or do they just have more dollars to count?

Surging real estate, oil and other asset prices... Rising prices, the result of an inflating money supply, has allowed a lot of people to become billionaires based not on the "value" of their money, but by the number of digits behind the dollar sign that then puts a "price" on their assets. Billionaire, millionaire, or blue collar HVAC repairman...the price of your "assets" may have risen in the past 20 years, BUT the "value" of them has not.

Just because you have a lot of "money", it doesn't mean you're rich. The fact that today there are 400 Billionaires in America and twenty years ago there were only 49 should prove that. Need more proof? The "value" of the US Dollar has dropped about 35% just since 2002. In otherwords, $1M since 2002 has lost $350,000 of it's "value" in 5 years. One billion dollars was a pile of money in 1987 and it's a pile of money's just not worth nearly as much, and it's no big deal.

It would be interesting to note here in closing then, that in 2002, one ounce of Gold cost about $255. Today, once ounce of Gold costs about $655. An increase in price of about 257%. In terms of US Dollars, the "value" of $1m worth of gold since 2002 would have risen $257,000 to $1.257M.

The moral of our story...Rich Person A, with one million dollars in their bank in 2002 who left that stash in cash, is $350,000 "poorer" today than Rich Person B, who bought gold with their one million dollars and is $257,000 "richer" today based on the "value" of their one million dollars. Yeah, Rich Person A will ignorantly tell you that he still has $1M in his bank account, but what he doesn't realize is, is that it won't buy much.

Insure the "value" of your money, BUY GOLD.

Silver Resistance: 13.24 / 13.37 / 13.54

Silver Support: 13.06 / 12.93 / 12.84

Gold Resistance: 656.60 / 658.10 / 663.50

Gold Support: 651.40 / 647.80 / 644.50

Thursday, March 15, 2007

I Smell A Rat

Predominantly US Dollar negative news all week, and Gold and Silver are both in the red for the far. The spring on Gold and Silver winds tighter each day. The rat trap is set. Closes over $660 Gold and 13.24 Silver could spring the trap.

If the PPT uses "offshore" banks to buy domestic assets, are those funds counted towards Net Foreign Purchases of domestic assets? Note that December's TIC number was revised down from $15.6B to $14.3B. The January numbers certainly would explain the "new highs" in the Dow in January. Who said "funny money"?

Endeavour to perceivere...a ton of gold bricks are soon to squash these stinking rat bastids.

Silver Resistance: 13.03 / 12.68 / 13.24

Silver Support: 12.84 / 12.68 / 12.55

Gold Resistance: 647.60 / 650.90 / 658.50

Gold Support: 644.50 / 636.30 / 624.60

Wednesday, March 14, 2007

Always Forward, Never Straight

It's so easy to lose sight of The Big Picture, when all we choose to see is "today's" snapshot. If you're an active trader, you probably live and die by that daily snapshot of the market you like to trade. But if you want to sleep better at night, you should keep an eye on The Big Picture.

I think it's safe to say that if you're reading this, you understand the "fundamental" reasons why precious metals are in a bull market. The Weekly Charts are where we turn our gaze to visualize those fundamentals with a look at The Big Picture. I'm going to keep my commentary brief today, as I firmly believe that a "picture is worth a thousand words".

Above are weekly charts of silver and gold. The similarities between the two are to be expected. The blue trendlines define the upchannel both are scaling. The channels of both are drawn to exclude the euphoria of an overbought market, and focus on the "trend". The trend is obvious, and solidly up. And never forget, ...nothing goes straight up. The green arrows on the top right of both charts mark where time and price could potentially take both metals in the next 6 weeks. Silver's green arrow is at 18.06. Golds green arrow is at 730.40. Please click on the charts to enlarge.
Silver Resistance: 12.96 / 13.03 / 13.16
Silver Support: 12.80 / 12.68 / 12.55
Gold Resistance: 647.60 / 650.80 / 658.50
Gold Support: 636.30 / 624.60 / 614.10
A quick note about Wednesday's Current Account numbers... Mr. Media, you can't have it both ways. The current account narrowed, but set a new record. Yeah, right...
Current account narrows in fourth quarter
U.S. annual deficit grows to record at $856.7 billion

Tuesday, March 13, 2007

Goldilocks and The Three Bears

By now everyone has heard about our "Goldilocks Economy"...An economy that is not so hot that it causes inflation, and not so cold that it causes a recession. Everything in the Goldilocks economy is fine until the three bears (or bear market) come home for their porridge! The three bears obviously got Goldilock's address wrong today, but they were in the neighborhood. The three bears showed up at the homes of Gold, Silver, and Oil this afternoon.

Gold, Silver, and Oil are the enemies of the US Dollar...and that is why they were attacked today. Overwhelming Dollar negative news and data today SHOULD HAVE BEEN hugely positive for the precious metals. Unfortunately, the crooks on the Plunge Protection Team [PPT] chose to attack all three shortly after the London Exchanges closed [like we've never seen that before]. They had too. Allowing the dish [gold] to run away with the spoon [silver] would have been akin to pouring gasoline on the fire. Gold, Silver, and Oil are all barometers of inflation and measure the weakness in the US Dollar.

IMO, the PPT will throw the towel in on saving the stock market from the Subprime Mortgage Meltdown. A crashing Dollar would encourage all the foreign money invested on Wall Street to skip town. The foreign money sells their stocks and the stock market crashes...they then sell their dollars from those stock sales to take their money home and the Dollar crashes. But believe this: The PPT and their croonies at the Fed and US Treasury will find it impossible to defend BOTH the Dollar and the Stock Market. They will have to defend the Dollar and it's status as the World's reserve currency. To do otherwise invites certain economic catastrophe. Too bad for the PPT, economic catastrophe has been holding it's invitation to Goldilock's house party for several quarters now. And Gold Bear, Silver Bear, and Oil Bear will do little to help avert the demise of Dollar...they'll only make it worse. It's called a short squeeze...and the mother of them all is lurking. The gold and silver cartels at COT will be destroyed.

Short Squeeze: A situation in which a lack of supply and an excess demand for a traded commodity forces the price upward. If a commodity starts to rise rapidly, the trend may continue to escalate because the short sellers will likely want out. For example, say gold rises 15% in one day, those with short positions may be forced to liquidate and cover their position by purchasing the metal. If enough short sellers buy back the gold, the price is pushed even higher.

Investigate the oil companies for "excessive profits"? I vote to investigate Goldman Sachs... This from their report of "record" profits for Q1:

Revenue from trading fixed-income, currencies and commodities rose 20 percent to $4.6 billion. Equities trading revenue climbed 26 percent to $3.1 billion.

It pays to be on the PPT...Hey, didn't Hank Paulson, current US Treasury Secretary, used to be Director at Goldman Sachs. My mind is wandering now...

Silver Resistance: 12.80 / 13.03 / 13.24

Silver Support: 12.68 / 12.55 / 12.27

Gold Resistance: 647.70 / 650.70 / 658.30

Gold Support: 642.60 / 637.10 / 624.70

Economic Data Jamboree Begins Today

Looking at the balance of this weeks economic reports and one senses we may see some explosive volatilty in The US Dollar around every corner and over every hill as we move through the week. Our rancid currency could be wearing cement shoes by the close of trading Friday. Beware The Plunge Protection Team.

Today, Tuesday, we get the Dollar rattled with the Retail Sales numbers for February. The market expects +0.3%. I'm certain the weather will get mentioned along with this report.

Wednesday, we get the often over looked Current Account numbers. To learn more about the Current Account go here: .
The market expects -$203.5B...I expect it to be much worse. We also get Crude Inventories Wed.

Thursday we get PPI numbers for February. The market expects +0.5% headline, and +0.2% core PPI. A core number above 0.2% will not put a smile on George Washington's face. Also on Thursday we get the Net Foreign Purchases number. This is often refered to as the TIC Report. To learn more about this report go here: . The market expects $60B...LOOOOOOOOOOL, it did last month too, and it came in at 15.8B Another rotten number like that and the US Dollar could be primed for a death spiral.

Friday we get the CPI numbers for February. The market expects +0.3% headline, and +0.2% core. Anything over that and the currency traders begin to chatter about Bernanke raising interest rates to fight inflation...currency traders seem to believe that inflation is good for our smelly dollar. Rising interest rates are very bad for the economy...and very good for gold. Despite what you may read or hear to the contrary.

Our plates will be full each day for the rest of the week...better to be long the metals than short here imo.

Silver Resistance: 13.10 / 13.23 / 13.35

Silver Support: 12.80 / 12.68 / 12.49

Gold Resistance: 657 / 663 / 672

Gold Support: 645 / 634 / 624

Sunday, March 11, 2007

Retesting Recent Lows Before Liftoff

The 50 Day Moving Average and the 200 Day Moving Average should be every traders best friend. Opportunity is more likely to knock in the presence of one or both of these moving averages than at any other time in a bull or bear market's existence.

In the one year [daily] chart above, the 200 Day Moving Average has proven to be solid support for the silver bull. The 50 Day Moving Average on the other hand, has offered little if any support. But if you look closely, it has offered "trading opportunities".
In the green circles lie our trading opportunities. Though past performance is no guarantee of future performance, this recent "trend in opportunity" has solidly established itself following the last three major sell-offs in the silver market. Silver sells off in a hurry, falling through the 50Day Moving Average like a hot knife though butter. Each time it establishes a low and quickly bounces back up to the 50 Day Moving Average. After "kissing the 50" it quickly rolls over to retest the recent low. It is important to note that a retest may, or may not go below the recent low that is being tested. It is this retest of the low that presents a major buying opportunity for silver traders. Use the internal indicators RSI and Stochastics as confirmation of the "setup" to take advantage of this trading opportunity. A stochastics crossover to bullish, once oversold, signals the door to opportunity has opened [green arrows on stochastics]. A failure to breach and hold above 50 on the RSI should signal the rollover [the green arrows on RSI] has begun, and will be confirmed by the stochastics crossing over to bearish. The brave trader may look for a quick short side trade here. Cover and go long at the next bullish stochastics crossover. It remains to be seen if that will occur at the blue trend line, or the 200 Day Moving Average. If past performance is our guide, a tremendous buy opportunity in silver may be soon upon us.
Silver Resistance: 13.10 / 13.23 / 13.35
Silver Support: 12.80 / 12.68 / 12.49
Gold Resistance: 657 / 663 / 672
Gold Support: 645 / 634 / 624
Make no mistake, despite gold’s rise from its $255 low in April of 2001 to over $650 as I write, so far, only the thinnest of trickles, a minor fraction of global capital, has made it into gold. When the flight to safety really heats up, the real fun will begin, and the price of gold won’t just add dollars, it will add digits.

Data Headlines

How often do you compare what a headline says to what the body of the story says? For example, let's look at the headlines for Friday's "important economic data"...

From Marketwatch:

The headline for Friday's over touted non-farm payroll numbers:

Job growth slows to 97,000 in February
Unemployment rate unexpectedly falls back to 4.5%

The folks at Marketwatch want you to believe that inspite of slowing jobs growth, the unemployment rate fell. But did it really? Let's see what the "story is"...

The jobless rate fell to 4.5% from 4.6% because people dropped out of the labor force, not because unemployed workers got jobs. According to a survey of 60,000 households, the labor force fell by 190,000 in February, the biggest drop in more than three years.

Shocking! 190k fewer people had jobs in February, but the unemployment rate "fell". Hmm, me thinks based on these statistics it should have rose. Do you know why these people "dropped out of the labor force"? Because their unemployment benefits have run out, and the government no longer counts them as part of the work force. Jeeze, these people are out of work, but because the government no longer sends them a check every week...they disappear. How convenient. Moral of the story: Headline numbers seldom tell the "whole story".

While we're disecting this data, let's count how many times the weather is blamed for the numbers in this one story. FOUR times! LOL!!! It's ALWAYS the weather's fault.

Now, the headline for Friday's US Trade Balance numbers. From Marketwatch also:

U.S. trade gap narrows again in January
Fourth decline in past five months adds to sense deficit is stabilizing

Again, the folks at Marketwatch want you to believe something other than the truth. Is the Trade Balance even close to "stabilizing"? Looking closely at the story we read this:

As a result of the revisions, for all of 2006, the U.S. trade deficit amounted to a record $765.3 billion, wider by 6.8% from 2005. It was the fifth year in a row that the trade gap set a new record high.

Stabilizing? Seems to me the US Trade Balance has the pedal to the metal. Five years in a row the Trade Balance has set a record. Stabilizing? Accelerating, if you ask me. Moral of the story? Headline numbers seldom tell the "whole story".

This is just TWO pieces of goverment data that come out EVERY month and is reported by "the media". This is the news that "moves the markets" , and these misleading headlines are the tools of the Spin Doctors. This is why the daily moves in the PM markets are often so volatile. Stay focused on the "Big Picture", and don't throw away good positions in a panic following the herd. The precious metals are in a bull market that may last the next 5-7 years. Use this "daily noise" to trade a portion of your portfolio if you must, but ALWAYS keep the majority of your capital invested in the bull, and you'll never be left at the station wondering why you sold out, just as the market jumps higher.

Friday, March 9, 2007

Quack Box

I have had the misfortune this morning of watching CNBC. Beginning at 6AM est, before every break, after every break and everything in between the talking heads are "speculating" about the markets reaction to the sacred monthly "jobs number". The non-farm payrolls number released each month is probably the poster child for government manipulation of statistics. The attention it gets is rediculous. It comes out at 8:30AM est. The esitmate is for 100k jobs. Also at 8:30 the Trade Balance number prints. This forthcoming data has not been mentioned once, not one time all morning. This IS the most important number of the day. The talking heads ignorance of it is proof of that. The estimate is for -$60B. Any number uglier than that is gold positive...well, it should be ;-) . What ever the numbers for either set of data...I'm sure both will be explained "by the weather".

Thursday, March 8, 2007

Blame It On The Weather

Friday brings us US non-farm payrolls data and the US Trade Balance data. The data may be gold/silver positive or negative...always is. And somehow, the talking heads will find a way to explain the results of both,... by blaming the weather. Bet the farm on it.


Resistance: 13.10 / 13.25 / 13.54

Support: 12.94 / 12.80 / 12.55


Resistance: 656 / 663/ 670

Support: 648 / 635 / 626

Excellent read:

Building A Bottom

Internal indicators in both Gold and Silver are beginning to signal that "near-term" bottoms may be taking shape. A turn up in RSI from mid 30s and Bullish Crossover of Stochastics are the first signs that a bottom in the market is being built. We wait for a Bullish Crossover of MACD for confirmation and an internal Bullish Trifecta in both Gold and Silver.

Hank Paulson is a shill. He's really in China begging them for help in containing the fall in the US Dollar.

Today'sEU rate decision, and Friday's nonfarm payrolls, and the US Trade Balance will be key movers in the PMs to close the week. Bear in mind the Trade Balance numbers are for January, and may be helped by the recent low in oil prices that month.

Good Read:

Wednesday, March 7, 2007

GOLD: The Big Picture

Another "correction" in the gold market sends the gold bugs scattering like cockroaches on the kitchen floor at midnight when the refridgerator light hits them. Panic and fear once again rains on the goldbugs parade. Is this "over reaction" warranted? Hardly. Too often, we allow the daily "noise" in the gold market to spook us and force our eye off the "big picture". What's the big picture? The long term trend in gold...a trend that is today supported by solid fundamentals: A recognized top in the US Dollar, Declining trust in US paper assets, Bullish general commodity markets, Deficits of the US Budget/Current Account/Trade Balance, and a recognized top in the US Treasury Long Bond. So much of today's analysis of gold focuses on the "daily" charts, and not enough on the weekly charts, aka The Big Picture. The Big Picture that the weekly charts offers us is one that smooths out all the noise in the daily gold trade. Take a good look at a weekly chart of gold here: Focus on the 50 week moving average, the RSI, and the MACD. The sky is not falling, and the end of the gold bull is not even in sight. As a matter of fact, gold is probably closer to the end of the begining of it's bull market, than it is the begining of the end of its bull market. In relation to the big picture, think of gold as going on sale last week...and with a close over 653 the sale will soon be over. Trade the daily noise...The Big Picture is there to remind you that the trend is your friend. Buy those dips.

Daily Gold Resistance: 656 / 663/ 670

Daily Gold Support: 642 / 627 / 612

Weekly Resistance: 688

Weekly Support: 50 week moving average

Good Read:

Tuesday, March 6, 2007

Overhead supply - Silver

The threat to the success of any bounce here is obvious "overhead supply". The gap down on last Friday, March 2 was ugly to say the least. It will be a battle to fill it, let alone keep it closed. This overhead supply held by those who wished they'd gotten out sooner may weigh on the silver market for the next 5-9 trading days. Case in point: The December 18 gap down to finish the initial correction of silver at that time...the market rose tenatively to fill and attempt to close that gap only to roll over and retest the initial low set on the 18th. In three days we not only retested that low but established the low for the correction and the bounce on Jan 8, 2007 that established the most recent upleg in silver. Gaps on the way down are most always our nemisis on the way back up. That being said:

Daily Resistance: 12.95 / 13.10 / 13.54

Daily Support: 12.68 / 12.55 / 12.36

The uptrend line connecting the lows since the June low remains key, as does the nearby 200 Day MA

Good Read: