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Unsurprisingly, gold and silver are not done bottoming, as per today’s evidence, and to my favourite Kansas Cityan’s temporary chagrin. And like the dollar reflects the value of gold and silver as it crashes, so gold and silver serve as lodestone for the direction of the dollar.
See, gold taking a bloody digger like it did today is not consistent with a plunging dollar. Quite the opposite. And remember that daily silver chart from just a few days ago? Here it was:
Those were the predicted directions. Now, let’s look at the same chart as of close today:
Wacky, no? We reversed almost completely the pop we had the day before, and gold did worse, achieving recent near term lows for 2011.
It might get even worse, so hang on, and deploy capital sparingly. I have added to my ZSL about two hours before the end of yesterday’s session. I felt a pained fool at the time… “but I got better.”
Here’s what I’m really getting at. Take a look at this very large Fibonnaci Retrace on this almost three year dollar chart :
Now I realize the above chart is a bit busy, almost akin to the Punch Buggy Post we had the other night. However, you need only take into account a couple of things. First, we are hovering almost exactly at the Golden Ratio — the 61.8% retrace of the large dollar move from the depths of the last Bernanke dollar destruction in March of ’08, to the peak in early March of ’09, when the market bottomed. This is a significant resistance point for the dollar, in my opinion.
Second, we are also very close to the rising trend line in the dollar. I believe the dollar is far too oversold to break the longer term trend at this time, unless of course Bernanke just starts shooting Benjamins out of cannons on K-Street tomorrow afternoon.
So, if by chance that very strong Fibonacci line does not hold tomorrow, then I believe the uptrend line will in the next few days.
Whichever the case, we should get a snap back in the dollar, no matter how brief. I think we see at least a 5-7% correction out of that dollar, which will likely include our miners. I may lay some more DXD, QID, and SDS at that point.
I also think our miners will rebound first, so be ready to start collecting. Best to you all.
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Jake, look forward to devoting a larger portion of my investments to some of your ideas in the future for the long term. I have a hard time forgetting the silver gold trades back in late 2008-early 2009. Any thoughts on NG? Doesn’t look like there will be any significant mandates in the near future for NG vehicles or energy.
I have to be careful here… are you talking about the gold miner, NG, or the industry of natural gas exploration and extraction?
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The gas, apparently it is abundant and noone wants to use it save T bone.
T-Bone and Mrs. Jake, who keeps every (gas) fireplace in the house roaring all winter long.
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Good stuff. Looking at how steep a drop it is to that 50% retracement line is enough to keep my finger off that “buy” button for a few days longer.
HOGWASH
hahaha
You got it – http://www.hogwashsanitizer.com/
Did you bail on EXK?
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Jake, what are your top mining picks for the coming comeuppance? SLW n EXK? others?
I believe I will do a piece this weekend on that. It will be mostly the usual suspects (i.e., the Jacksonians) with a couple of surprises thrown in.
If you don’t have at least some EXK and SLW, however, you should get some today.
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Keep an eye on the Middle East over the next few months and see if gold and oil react.
The so called Islamists could move on to Jordan after Egypt (Muslim Brotherhood) ,Tunisia,Yemen, and Lebanon (Hezbollah).
Pro democracy movements my ass.
Saudis have a heavy Al Qaeda presence and I am sure the King there is getting nervous.
None of this has been priced into the markets.
Won’t happen to Saudi. They fund over 30000 wahabi mosques around the world according to Zubrin’s book “Energy Victory”. Wahabi is apparently the denomination where, shall I say, “least tolerant” muslims come from.
Yes Wahhabism, along with the Egyptian Muslim Brotherhood (where Al Zawahiri came from) is the font of Al Qu’aeda.
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My bad. Typo. I meant Wasabi. Saudi’s eat the hottest wasabi with their sushi.
lol
Well a one-day rise is not much of a bounce. Why even bother trading it? Just tell everyone to short it till it bottoms. I saw the resistance trend line, too, but it looked like it had already broken through.
What are you talking about? Do you think I’m a mind reader?
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Orko Silver (OK) looks likely to get bought by its big neighbor (Pan American). I’m betting on it.
You can keep your Vancouver mad money. I want good ole ‘Murican liquidity.
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Like Pan American shares at half price?
Yesterday I wrote here, PM’s sector will bottom today, I meant Gold not mining shares, it did at $ 1308 in Asia in the morning.
I am back here, when POG is trading above $ 1430.
nice call on the inverse etfs .. jake wins again !
Thanks, wish I had grabbed some AGQ w. my SLW the other day, but I’m not yet ready to call a hard turn…
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FML. Sold a bunch of core GLD and SLV yesterday. 🙁
You’ll have plenty of time. Don’t despair. This is merely the beginning. If you still have some, hold on. If you’ve none, dip your toe.
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Are you revising your target low projections of Monday Jan. 24th?
For which asset?
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The 89 day simple moving average has held four straight days for SLV; however, the 50 day sma is looming above it now. Yours and Ashraf’s thesis of a decline to the 200 moving average is still a possibility,
but I picked up more SIL today just in case we have a reversal and SLV can re-trench itself above the 50 sma. Many of the silver miners’ charts all look the same, wedged between those 2 MAs.
Just don’t get it all at once. I think we may have another week of turmoil. If not, it’s not like you are going to miss the “final Bernanke,” as I call it.
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Moving averages don’t mean shit when there is chaos on the streets of Egypt!!!