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M A R K E T C O M M E N T A R Y
Friday, 20 May a.d. 2022
Well, I reckon this week the bottom rail is on the top. Silver climbed a generous 3.3%, gold rose 1.9%, and even the suffering white metals rose, platinum up 1% and palladium 1.1% higher. Scurvy US dollar index got its comeuppance shedding 1.4%, while stocks — oh, stocks! — crumpled 3%. They’d have done a sight worse than that had not the NGM’s magic hand been called into play today.
Why, oh, why am I so suspicious? Could it be that over the years, yea, increasingly over the last three decades, whenever the reek of dead fish fouls
markets we found out later something was indeed rotten in Washington. Ponder then the one day chart of the Dow Industrials Average for today, opening the day sightly higher then rolling, falling, tumbling, bouncing down the slope like a runaway bowling ball crashing down a steep hill. Got to 1:30 & stocks’ fairy godperson waved its magic wand and, Lo & behold! Mad dog buyers poured out of the woodwork like stampeding cockroaches, and the Dow which had been down 617 points rose up, yes, strode straight up 626 points to end up 8.77 (0.03%) at 31,261.90. What a stroke of luck for a market gripped in a downtrend's merciless iron hand! Why, it makes me wonder why Ronald Reagan bothered creating the Plunge Protection Team on 3 March 1988 by Executive Order 12631. With stocks natcherly so resilient and bouncy, why do we need Nice Government Men to manipulate the market?
Nor did Lady Luck forget the S&P500 . It had lost 90.47 (2.3%) when that 1:30 low struck, and never batting an eyelid levitated straight heavenward 91.04 to end 0.57 (0.01%) higher at 3,901.32. Now look at the Dow’s daily chart and the S&P500 together. Both are at the lower limits of their fall since 2021 began, and both and new lows today but closed the day higher, which y’all all know if the first half of a key reversal. My, what luck. If the indices can close higher Monday, then they will reverse upwards . . . but not for long, magic notwithstanding. Besides, I don’t believe in magic. I hope y’all aren’t taken in by magic tricks, since the Dow’s chart is now targeting 26,500.
For the whole week the scandalous, scurvy US dollar index lost 1.4%, though it did rise today 42.6 basis points (0.41%) to 103.15. Looking at the chart I think now we are justified to expect that its failure to conquer 105 marked the high tide of its advance for a while. Looking at those indicators plunging like suitcases falling out of a 747 jumbo jet! They are promising lower prices to come, at least a return to the 50 DMA at 100.89. It that turns out to be right, silver and gold will have easy sailing for the next few weeks.
Now I don’t imagine interest rates are naturally going to drop long term, just the opposite, but in the short term the US 10 year T-note yield has topped and fallen below its 20 DMA. It stumbled another 2.38% today to 2.787% and ought to re-visit the 50 DMA at least. This will not happen overnight, so silver and gold should meet no opposition from interest rates for a few weeks.
At the end of a week when any market rises strongly, Friday is likely to see selling as profit takers cash out positions before the weekend. That probably helped bring silver down 22.9¢ (1%) on Comex to 2166.9¢. Gold was flat with a 60¢ gain to $1,841.80. Gold/silver ratio rose 1.09% to 84.997 but did not endanger our island reversal which ought to send the ratio skittering down and silver and gold scurrying up.
What can you say about a 60¢ gold rise? Meager? Measly? Minimal? I say positive because gold stayed above its 200 DMA and its downtrend line so it keeps its upward momentum. Thinking about next week, gold needs to work its way through the 20 DMA ($1,859), round number and actual resistance at $1,895 - $1,900, and the 50 DMA ($1,911). This rally is like one of those heirloom tomato seedlings you’ve babied and pampered to get to half an inch tall. It’s a start, but it ain’t blooming yet.
Glance just a second at gold’s weekly chart. Study it closely and you’ll see that last week it closed below the 50 week moving average (frequent target of corrections) and this week reversed and closed above the 50 WMA. This foretells higher prices.
I’m not going to be too hard on silver after gaining 3.3% this week. This is solid progress off an extreme low, and silver remains above that falling wedge’s upper boundary and therefore headed higher. Barriers above are the 20 DMA at 2222¢, the 200 DMA at 2383¢, and old resistance at 2400¢. With the momentum indicators headed higher, I can’t find much to carp at.
I will show y’all what I noticed on silver’s 12 year weekly chart , something that reinforces my conclusion that silver has bottomed. See how silver last week fell down to its 200 week moving average. In up trending markets the 200 period moving average usually stops downward corrections. That works together with that strong band of support between 1900¢ and 2200¢ that reaches back into 2013. Good work, silver!
HOW ABOUT THOSE SANCTIONS? Whoops, not only are the sanctions not bringing Russia to its knees, the ruble is soaring, up 30% against the dollar this year and the best performing currency in the world. Main reason? Sanctions against Russian banks and central banks led Putin to demand payment for Russian gas in rubles. Since they buy most of their gas from Russia, European buyers are lining up to buy rubles to pay for gas. From a high in March of roughly 139 rubles to the US dollar, the dollar has sunk to about 61 rubes today.
Now let me see if I understand: the sanctions Joe Biden said would bring down the Russian economy have instead led to energy payments in rubles (replacing dollar or euros) and strengthening the ruble? Go, Brandon, go!
Argentum et aurum comparanda sunt.
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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$-denominated assets, primary trend down; real estate bubble has burst, primary trend down.
Be Advised:
Do NOT use these commentaries to trade futures contracts. I don't intend them for that or write them with that short-term trading outlook. I write them for long-term investors in physical metals. Take them as entertainment, but not as a timing service for futures.
NOR do I recommend investing in gold or silver Exchange Trade Funds (ETFs). Those are NOT physical metal and I fear one day or another may go up in smoke. Unless you can breathe smoke, stay away. Call me paranoid, but the surviving rabbit is wary of traps.
NOR do I recommend trading futures options or other leveraged paper gold and silver products. These are not for the inexperienced.
NOR do I recommend buying gold and silver on margin or with debt.
What DO I recommend? Physical gold and silver coins and bars in your own hands. For additional information, please see our Ten Commandments for Buying Gold and Silver.
One final warning: NEVER insert a 747 Jumbo Jet up your nose.
Explanation of Terms
The US DOLLAR INDEX is the average exchange rate for the US dollar against the Euro, Yen, Pound sterling, Canadian Dollar, Swiss Franc, and Swedish Krona, weighted for each country's trade with the US. It gives a general measure of the US dollar's performance against all other currencies.
The DOW IN GOLD DOLLARS measures the Dow Jones Industrial Average in gold dollars (0.048375 troy oz. by law). The DiG$ 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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Edited by Kidsdad 5/22/2022 16:46
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