Sunday, April 8, 2007

Buy The Dips

U.S. Gas Prices Jump 18 Cents in 2 Weeks So what... The Labor Department reports that 180,000 "new" jobs in the month of March. There's no need to fear those prices at the pump...those 180,000 McJobs are gonna fix everything. Or so you will be lead to believe by the talking heads when you flip on CNBC Monday morning. OK, that's the last I'm going to flog that dead horse. For more on my thoughts on Friday's Nonfarm Payrolls report please see my Saturday, April 7 post here Perspective Is Everything . I'd rather look at Gold and Silver this evening.

Based on Friday's jobs number we should expect the US Dollar to be strong out of the box Monday, Precious Metals to be pressured, and the stock markets to be cowering in fear of an interest rate hike by the Fed. Nobody should be surprised by anything that transpires in the markets Monday. There is little economic data this week until Friday's PPI and Trade Balance numbers are released at 8:30AM EST. The US Dollar will in turn more than likely pick up a bid thru the middle of the week. Do not dispair. Use this opportunity to buy or add to your Precious Metals positions. In a bull market buy the dips. In a bear market sell the rallys. The US Dollar IS in a bear market. Rest assured, those traders looking to unload some US Dollars or add to their shorts, will take this opportunity to do so. I'm pretty confident that Friday The 13th will be a dark day for the US Dollar.

Of course, the Precious Metals could completely ignore the revered jobs number and continue their ascent. Let's review where we've been, and take a look at where we may be going this month.

With our Rat Trap at 13.03 we drew a line in the sand and put dem Rat Bastids on notice and put a six-pack of Kick Ass on ice. Unable to steal the bait at 13.03, dem Rat Bastids retreated to the 50 day moving average, and established a line of defense in the hopes of derailing our advance. Their "line of resistance", though admirable, proved inadequate as the truth about the sub-prime debacle began to be accepted by even the ignorant. And now that we finally have dem stinkin' Rat Bastids on da run, they sneak in a "surprising" jobs number on a market holiday. We don't call dem Rat Bastids for nothing... We got 'em right where we want 'em...desperate.

As we breached their defenses at the 50 day moving average, we established a new line in the sand. Old resistance, becomes new support. That support is at 13.39 and helps us set a new Rat Trap on top of the old one. We'll call it a compound Rat Trap. As you can see on the chart of SLV above...we've moved to the top of the current uptrend channel with our break through at the 50 day moving average. This "technical" development will probably have more to do with any pause in silver this week than the jobs number will. A retest now of support at 13.39 would be good for our cause, and offer a nice opportunity to buy or add to our positions in Silver.

Do not panic IF our defenses bend at 13.39, the bottom of the uptrend channel should offer powerful support. It would not surprise me if Silver banged around between 13.70 and 13.39 until Friday morning. If the bottom falls out of the US Dollar Friday, expect dem Rat Bastids to put up their next line of defense at 14.04. If that line should fail them there, look for them to circle their wagons tight at 14.43. It's too early to call, but I expect this leg up in Silver to reach 14.90 - 15.06 before dem Rat Bastids have enough ammo to set a trap of their own.

666 may be the number of the beast, but for the past two months it's looked more like dem Rat Bastids idea of a bad joke. For several weeks in mid-February, and again in late-March dem Rat Bastids taunted our bull with a red flag there. The green circles surrounding the congestion at 666 on the Gold chart above show the battle waged between the bulls and dem Rat Bastids. In February, we failed to see the trap they had set for us there. Yes, we broke their defenses at 666 spot in February, but did so low on ammo having spent most of it fighting our way off the low in January. After taking our lumps, we regrouped at a "higher low" and set a little trap of our own in the futures pits at 655.50 [650 spot].

On March 23 dem Rat Bastids tried to rattle our Rat Trap and failed miserably. In so doing, they handed us the 50 day moving average. With the 50 day moving average now on our side, and a new uptrend established, we reloaded our guns with one bad economic number after another and went hunting for bear. Dem Rat Bastids regrouped and reestablished their defense of 666.

Technically, we are in a much more powerful position today to take out 666 and make it our own. Once again, old resistance, becomes new support. With 666 as not only horizontal support, but uptrendline support as well, we should be in a powerful position to defend any tricks Friday's jobs number may present this week. A retest of support of 666 will be very good for our cause and offer an excellent opportunity to buy Gold or add to positions.

Don't panic if our defenses should bend at 666 spot. We still have the 50 day moving average on our side and it should offer powerful support. Looking forward to Friday The 13th, should the US Dollar fall out of bed that morning on the PPI and Trade Balance numbers, we have plenty of ammo now to put dem Rat Bastids on da run. Expect them to next defend 696 in the futures pit [691 spot]. And expect them to wage war at 734 in the futures pit [729 spot].

Silver Resistance: 13.67 / 13.80 / 14.04

Silver Support: 13.54 / 13.43 / 13.30

Gold Resistance: 674.50 / 679 / 684.30

Gold Support: 670.30 / 668.50 / 664.70

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