"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat

Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput


Monday, March 5, 2012

Silver clinging to Support at $34

Risk off trades were in vogue today after news came out that China reported that expected growth in their economy would be slowing a bit. That was all that was needed to bring out the sellers in both the equity and commodity markets.

Silver fell below pyschological round number support at $34 but then recovered, only barely, by the end of the trading day.  It is clinging to support above this level as I write this.

There is a band of stronger support as one drops down towards $33 which will be tested unless the market can keep its footing above $34.

It is still trying to repair the technical damage inflicted from last Wednesday's bear raid which forced an outside reversal pattern on the daily chart. Thus far this selling that we are seeing seems to be drying up as it does move below $34 but any further negative global economic news will see that selling reappear once again.

Gold dropped below $1700 at one point but value buying took it back above this level. Just as with silver, it is going to have some work to do in order to repair the technical damage it suffered last Wednesday. Chart painting is more effective in these modern markets because very few fundamentally based traders are still around anymore. Alan Jackson had a terrific hit song entitled, "GONE COUNTRY" which contains a line that says: " the whole world's gone country". Well, the whole world has gone technical analysis when it comes to trading. Therefore chart painting has to be respected for the technical signals its gives off. Value based traders can still take advantage of this but they need to be careful.

There seems to be a bit of a tug of war between those who are reading the recent US ECONOMIC DATA as encouraging and those who are looking at a recession in the Euro Zone coupled with slowing Chinese growth prospects eventually spilling over into the US. We will see which side wins out in this battle - the bonds were even conflicted today - first rising on the slowing growth news and then sinking lower to close the day as the equity market recovered from its worst levels of the session.

Not too much definitive to say therefore until we get a clearer picture.


  1. At the end of the day - liquidity wins out. China just cranked up the liquidity spigots and so did the EU. People run for the doors, and the weak hands get shaken out, but risk on will be back in vogue in no time. Fundamentally, nothing has changed from a liquidity perspective. Nobody is draining the swamp quite yet. Au contrare, they are still flooding the swamp.

    The fact that the dollar did not continue its rally could end up being a tell for a reversal back to risk on. We'll see.

  2. i think silver is going to be dragged down by the stock market. Stock is over due for a correction.

  3. Dear Abby Dear Abby
    Stop wishing for bad luck and knocking on wood – song by John Prine
    Maybe the lesson in all of this market noise can be resumed by George W. Bush. He truly regretted that the economy failed on his watch. So maybe what my uncle told me, once again is going to be true? That they will not let “it” happen – read letting the economy fall apart, as gauged by the Dow Jones. I have to add here that my uncle died in 2005, and I had the privilege to tell him face to face, that he was right. I knew that in a short while I would be right, but he was right at that moment, and we live in the present. But the old dream lives on – that by instigating flash crashes – you can “correct” undesired behavior by market participants. Pavlov used this experiment on dogs; progress has it that we have moved science forward – now using this in the marketplace. I guess my question regarding this behavior is: when does the conscience of “modern man” kick in? Has it been anaesthetized by all the fun we are having trading back and forth? And the changes of trend! OK Dan, your chart on Sunday shows that gold is in an uptrend – no one will question that - I am a happy bag holder. But it’s that nagging doubt in the back of my mind, will they actually let it happen? Will they let gold and silver go to the prices that monetary creation would suggest? Or does the system break first – followed by, we throw the bums out – as in Freud’s work, the Totem and the Taboo.
    Have a Super Tuesday!

  4. I also like the question that is asked before I publish each posting.
    “Please prove that you are not a robot.” Yes I am not a robot because I have feelings which are generated by my five senses; because I care for my fellow man, and for our common destiny; because I have a sense of right and wrong (sometimes blurred by my sinful nature); that I believe in God and in the Apostolic Creed. If this does not compute, perhaps a binary cell – you know, one of those on/off things is malfunctioning? Perhaps the one right next to the risk button?

  5. Help Wanted
    Bottom fishers welcome
    Required: ability to stay underwater for long periods
    Patience and dexterity to separate metal from paper
    Ability to let junk settle to the bottom
    Ability to not produce bubbles
    Carnivores need not apply

  6. OK everyone, its 8:30 and the music is playing one of Ben’s favorite songs, “Let’s Twist Again”.
    So everyone up onto the dance floor. Oh and don’t forget to mention that there will be one less chair when the music stops.

  7. Sorry Dan – the devil made me do it
    When things get this bad, full moon or not, I’ve just got to laugh it off – you know it’s only money kinda thing.
    So while we’re onto songs, I asked the DJ for this Bob Dylan classic
    Subterranean Homesick Blues
    You don’t need a weatherman
    To know which way the wind blows
    Get sick, get well
    Hang around a ink well
    Ring bell, hard to tell
    If anything is goin’ to sell
    Try hard, get barred
    Get back, write braille
    Get jailed, jump bail
    Join the army, if you fail
    Look out kid
    You’re gonna get hit
    But users, cheaters
    Six-time losers
    Hang around the theaters
    Girl by the whirlpool
    Lookin’ for a new fool
    Don’t follow leaders
    Watch the parkin’ meters
    Ah get born, keep warm
    Short pants, romance, learn to dance
    Get dressed, get blessed
    Try to be a success
    Please her, please him, buy gifts
    Don’t steal, don’t lift
    Twenty years of schoolin’
    And they put you on the day shift
    Look out kid
    They keep it all hid
    Better jump down a manhole
    Light yourself a candle
    Don’t wear sandals
    Try to avoid the scandals
    Don’t wanna be a bum
    You better chew gum
    The pump don’t work
    ’Cause the vandals took the handles


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