SD Midweek: The fog of manipulation makes it hard to tell how long this tunnel is, but gold & silver can see the light at the end of it…
On Monday I said the gold to silver ratio should move back between 81 – 82.
That is exactly what we see:
Here’s a point to consider-
Gold looks like it’s headed lower, but silver looks like it can’t go much lower.
This means that, albeit with downside action, the gold to silver ratio should start coming down. This is good news, however. You see, this could finally be the start of the move in the ratio that everybody is looking for.
If gold goes down, percentage wise, more than silver during this latest smash, the ratio will start coming down, but as the metals begin to rally, we could finally see silver starting to outperform gold. When that happens, the gold to silver ratio will be coming down for the right reasons because silver will be moving to the upside faster than gold will.
So get ready.
Yeah, we’re at 81 now, but we’re right at the pivot point where everything changes.
And gold’s downside might be minimal.
Well, let’s start with the dollar.
Pop quiz time: What is the dollar screaming?
It’s screaming “overbought”.
The Relative Strength Index (RSI) is in extreme territory. Now, this is not to say the dollar can’t keep up the rally from here, but as we can see, the dollar was already weak overnight and into this morning. So we’ll see. It could have put in the top yesterday.
The question for gold then is this: Did the cartel, together with the dollar rally and the gold smash, hit gold with enough momentum to keep it sinking in price?
After all, they hit gold real good yesterday:
Generally speaking, and every time over the last 52 weeks as shown on the chart above, any time gold drops below its 200-day moving average, gold went lower for a couple of weeks.
This is not to say we can’t buck the trend, and I’m prepared for gold to move lower from here.
But I would also not be surprised if we do buck the trend and what we get is a nice technical bounce off of the 200-day.
Now, I know: “But Half Dollar, the COT Report is bearish”.
I get it.
Which is why I’m prepared for a move lower. Also, because we could get a smash today at 2:00 p.m. EST when the Fed released their May FOMC Statement, and we could also get a smash on Friday with the BLS Jobs Report, and some slice-and-dice prep work for Dudley to jawbone the markets later on Friday afternoon, we could move lower for the rest of the week..
But corrections happen over price or time, and the cartel has been on the clock long enough.
Call it working overtime if you will. So I’m just not so sure how bad the smash is going to continue. Because of the bearish smash below the 200-day yesterday, I’m reserved, but the worse things get on the charts, the closer we are to the turn.
And the over all trend is up. Gold and silver have resumed their bull market super-cycles in early 2016.
In such a roundabout way, my point is this: While everybody is pessimistic and looking for the smashing to continue through the rest of the week, I’m not so sure.
In fact, silver looks like it’s painting a “bullish engulfing” candle:
That candle is the last one on the chart, and it represents the overnight and Wednesday morning pre-market action.
And notice how the trend, as painful as it may be, is in fact overall to the upside.
Granted, I’m assuming the downside is limited here. If we fall below the December low, call it the $15.72 close on December 11th, then all bets are off. But if everybody is so short this market, wouldn’t some serious short covering be triggered on a drop below $16 and most definitely below $15.80?
The cartel knows where all those stops are, and I get it, they can and will just feed the market with paper, and it’s worked so far, but what if the coffers are lower than stated and the integrity of the stockpile as stated by, say COMEX and the LBMA, is not to be trusted?
If palladium doesn’t turn around soon it’s going to put in its own death cross:
But see how quickly things can change?
If we rally from here and take out the April 18th high close at $1026.65, then we will have put in a series of two higher-lows and two higher-highs.
The point is that the rally can and probably will catch a lot of people off guard.
But we do see how troubling death crosses can be using platinum’s daily chart:
But look at the last candle. It’s a mirror image of the dollar’s action overnight.
Which is why I’m getting bullish.
Because everybody also expects the dollar to just keep on rallying, but remember, everybody has to and is usually wrong.
Now I know I keep harping back to the dollar, but the move has been important.
However, when we look at it, we can see that for the gains over the last ten days, the smashes on gold & silver were exceedingly harsh:
That is to say, the dollar is up some 3.2%, but gold is down 4.26%, and silver peak to trough (call it $17.35 to $16.09), is down a whopping 7.26%.
See why I’m getting bullish here folks?
COT Report aside, to quote a wise man, “Look around you Ellen, we’re at the threshold of hell”!
And that’s exactly when the situation gets better. So while the situation could get a little worse from here, I don’t think it can get much worse.
Especially if whole number support for gold & silver hold.
Copper is trying to get back above its 200-day moving average:
See how important those averages are?
There are traders out there who will not buy a stock unless it is above whatever moving average they follow. Nor will those traders sell a stock if it is below the moving average.
So charts matter, and technical analysis matters, because while in the grand scheme of things under the heavy hand of manipulation, it may not matter like it should, traders who are actually in these paper markets act and make decisions on what they’re seeing in the charts.
Crude Oil is in about a $3.50 range:
Crude just doesn’t know what to do right now, but this is a good point – crude is waiting to see how the fundamentals work themselves out.
What are those fundamentals?
- The inflation story becoming a self-fulfilling prophecy
- President Trump talking (spooking?) the market with his April 20th Tweet with OPEC directly in the crosshairs
- Increasing escalation of force between Israel and Iran (a major oil producer)
- Politics and geo-politics elsewhere affecting the ability to get crude to the market (think Venezuela, Nigeria, etc)
- Wage inflation and cost push inflation increasing the cost of crude oil production
And all of those fundamental factors are pointing to higher prices.
So we’ll see.
It looks like we could come back down to the 50-day moving average with the way the Moving Averages Convergence – Divergence (MACD) looks on the daily chart above, but I’m bullish on crude.
Which goes hand-in-hand with being bullish on gold & silver while being bearish on the U.S. dollar.
The yield on the 10-Year is squarely in its new range of 2.9% to 3.0%:
We haven’t tested the lower support level of the channel, and we might not. Especially if there’s momentum and a surge through 3.0%.
Which could start having an effect on the stock market, regardless of the pop off the lows yesterday:
No, that candle on the end doesn’t look like a bullish “hammer doji” signaling a bottom. To me, it reeks of manipulation via the Plunge Protection Team saving the markets with an intra-day turnaround.
Because, you know, look what’s right below the bottom of that candle?
The 200-day moving average.
Amazingly, with all that’s going on, volatility has subsided once again:
Initially I had thought that 20 had become the new 10, but as the months play out, it is looking more and more like 15 is the new 10.
Either way, I’m not so sure the ESF and the Fed, who, together with their agents working on their behalf, make up the cartel, are going to be able to keep the VIX as falling and flat-lined as they did over the last couple of years.
Bottom line: There is light at the end of the tunnel.
Just don’t play that game where you hold your breath trying to make it all the way through the tunnel before coming out the other side, because the fog of manipulation is perverting our depth perception so as the tunnel may be longer than estimated.
– Half Dollar