Step One Completed
The first step in confirming a bottom is finding one. We found one last week and the action today looks to confirm it.
In the previous post, I asked you to watch for a break out and UP today and we've gotten it. First things first, however. Remember, any gains made while the metals are closed or on holiday are almost always clawed back once trading resumes. Almost always. And we saw this again today. The good news is that, once again, the old adage is holding...namely, "what was resistance becomes support and vice versa".
So, now what? Again, I must caution you against expecting too much, too soon. Though we have been base-building for over a week, we still need to overcome some additional resistance before the bottom is clear to everyone and the shorts begin to aggressively cover. Silver is still slightly ahead in this process and should continued to be watched for clues. For now, as you can see below, silver has clearly broken through the downtrend lines on both the 4-hour and 12-hour charts. This is undeniable and an obvious sign of the bottom to this correction/pullback. Closing above $32.25 is our first goal, followed by a close above $32.60 or so. Once that happens, the mealy-mouth, panty-waste spec shorts will begin to cover and price will extend toward the area around $33.35, where they will make their next defense.
The gold chart also shows a clear base and breakout on the 4-hour chart. It shows this on the 12-hour chart, too, but a case could still be made gold needs to clear $1720 first. OK, that's fine. $1720 is our pivotal level, anyway, so watch that area closely. A close above there and gold will jump toward $1730. The area between $1730 and $1740 might present some challenges but, ultimately, besting $1755 will become our next main goal.
I only wish to discuss one "news" item today and it's something that I don't think is getting enough press. Our old pal, KosherDakota made a speech yesterday that is being overlooked.
I began to ridicule this knucklehead a few years ago as it seemed he was trotted out to give the "hawkish" or "dovish" monetary policy view every time a little additional MOPE and SPIN seemed necessary. Here are a couple of samples. First, from August of 2010, three months before the announcement of QE2: http://www.minneapolisfed.org/news_events/pres/speech_display.cfm?id=4525. Before you know it, ole KosherDakota was all in favor of "bond buying" by The Fed: http://blogs.wsj.com/economics/2010/11/30/feds-kocherlakota-wants-inflation-expectations-increase/
But then, by the end of QE2, he was trotted out to assure the markets that QE could be bad and was perhaps gone for good. There might even be a rate hike just around the corner, maybe as soon as late 2011: http://www.minnpost.com/business/2011/05/fed-president-sees-possible-rate-hike-2011-economy-slowly-improves. And here we was in late June of 2011, dissenting at the FOMC and calling "stronger easing measures" the "wrong approach": http://wtbx.com/news/articles/2011/jun/27/tax-code-hurts-stability-feds-kocherlakota/
So, what happened yesterday? Chuklehead The Clown was back in the news! He was speaking in Duluth and he openly stated that:
"The U.S. economy is recovering from the largest adverse shock in 80 years–and a historically unprecedented shock should lead to a historically unprecedented monetary-policy response".
He went on to add that:
“Given how high unemployment is expected to remain over the next few years, these inflation forecasts suggest that monetary policy is, if anything, too tight, not too easy".
You can read all about it here: http://blogs.wsj.com/economics/2012/10/30/feds-kocherlakota-fed-may-not-be-providing-enough-stimulus/.
Even the left-leaning and progressive (Keynesian) website Slate has an article about it today: http://www.slate.com/blogs/moneybox/2012/10/31/narayana_kocherlakota_s_duluth_speech_a_masterpiece_of_intellectual_rigor.html
Intellectual rigor my ass. This guy just flips and twists in the wind. For now, he is simply being trotted out yet again to foreshadow the next direction of Fed policy. We should now fully expect a formalized increase in the projected 2013 QE∞ plan when the FOMC next meets in December, regardless of the SPIN and MOPE that comes out on BLSBS day or from O'Bomney.
To that end, I've received several emails wondering what I expect from the metals if Romney is elected. The answer is simple: MORE OF THE SAME. Those that fear a downturn in price because of a Romney-imposed austerity or firing of The Bernank are delusional. Let me state this very clearly as a reminder for all eternity:
QUANTITATIVE EASING CANNOT END. NOT THIS YEAR. NOT NEXT YEAR. NOT EVER. IN 2013, THE FED WILL PURCHASE OVER $1T OF NEWLY ISSUED AND REFUNDED U.S. GOVERNMENT DEBT. WITHOUT THE FED PURCHASING MBS FROM THE PRIMARY DEALERS, AUCTIONS WOULD FAIL AND INTEREST RATES WOULD RISE DRAMATICALLY. THIS WOULD RAPIDLY ACCELERATE THE DEMISE OF THE GREAT PONZI AND THIS CANNOT BE ALLOWED. THEREFORE, IT MATTERS NOT WHOM WILL BE THE NEXT PRESIDENT. QE WILL CONTINUE UNABATED, REGARDLESS. ALL OF THE TALK ABOUT THE BERNANK AND SPENDING CUTS IS SIMPLE POLITICAL SPIN TO GET VOTES, SIMILAR TO THE PHRASE "BORROW FROM THE CHINESE".
Lastly, I leave you with another great article from Jeff Nielson at BullionBullsCanada. http://www.bullionbullscanada.com/gold-commentary/26018-the-great-gold-scam
Have a great day!