Monday, May 14, 2007

"Ticking Away The Moments That Make Up A Dull Day"

General malaise in commodities hard and soft today kept the Precious Metals on the soft side today. As I've said before, never underestimate copper's influence on Silver [and Gold] The bumbling US Dollar and a firmness in OIL allowed the Precious Metals to maintain a little bit of a bid all day.

A lack of any pertinent economic data across the globe left the metals markets generally directionless today. But that may all change Tuesday as there is a raft of potentially volatile data hitting the wires. German and EU GDP numbers and UK CPI and Retail Sales numbers will be revealed before any here in the US.

Data on U.S. consumer prices, which may offer crucial insights on the direction of inflation in the economy, will be released on Tuesday at 8:30 a.m. Eastern time. The median forecast of economists surveyed by MarketWatch calls for a 0.5% gain in the CPI and a 0.2% increase in the core rate, which excludes food and energy prices.

The Federal Reserve Bank of New York's survey of regional manufacturing also is due out, as is the Treasury Department's International Capital report.

"The dollar might have recovered from the lows seen recently but, as far as we are concerned, the risks still lie to the downside for a number of reasons," said Steve Barrow, chief currency strategist at Bear Stearns.

Treasury Department's International Capital report will most likely be the most "overlooked" piece of data by the media, but could be potentially the most damaging to the US Dollar. Estimates are for $74.4B. A number below that will be bad...and a number below the recent Trade Deficit number $63 will be very bad. ...but good if you own Precious Metals.

Fundamentals supporting all the Precious Metals remain absolute. Technically the picture looks damaging to be sure. Silver is walking a thin line here flirting regularly the past couple days with support at our original Rat Trap of 13.03. As ugly as things look, a reversal may be imminent. Today's data if negative enough would be most helpful...

Please click on the chart to enlarge.

While perusing Silver's predicament today I noticed that recent "technicals" as well as price action look very similar to the mid-December dump and subsequent January bottom. Both declines included a gap down thru the 50 day Moving Average [MA]. A quick bounce back to the 50 day MA and a turn down to a lower low. The similarities in the two retracements that caught my eye first though, was the Stochastic at the bottom of the chart. The "double bottom" there coinciding with the lower lows leaves the potential for a possible reversal here. Also of note is that our current retracement does not come from an "over bought" condition as the last two did. And the MACD at this time is tracing a much shallower bottom than the previous two bottoms. RSI 36 has proven support for the past 8 months. If this current retrace is a "fake-out" as discussed yesterday, I suggest the market quit playing games immediately.

Silver Resistance: 13.16 / 13.24 / 13.32

Silver Support: 13.03 / 12.92 / 12.80

_____________________________________All prices SPOT

Gold Resistance: 672 / 674 / 678

Gold Support: 668 / 666 / 664

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