It All Begins in the Public Education System

If you want to know why or how this nation can have raised a generation that is so appalling ignorant of its own system of government, a system of checks and balances designed to prevent any one individual or institution from lording it over the people, please read the following quotation.

"[A]bout a hundred years ago, Professor John Dewey of Columbia University came up with a very different conception of education -- one that has spread through American schools of education, and even influenced education in countries overseas. John Dewey saw the role of the teacher, not as a transmitter of a society's culture to the young, but as an agent of change -- someone strategically placed, with an opportunity to condition students to want a different kind of society. A century later, we are seeing schools across America indoctrinating students to believe in all sorts of politically correct notions. The history that is taught in too many of our schools is a history that emphasizes everything that has gone bad, or can be made to look bad, in America -- and that gives little, if any, attention to the great achievements of this country." --economist Thomas Sowell

Let's take what any citizen/patriot understands - the United States is NOT A DEMOCRACY. It never has been nor should it ever become one. The Founding Fathers despised democracy which they regarded as nothing but RULE BY THE MOB. Being the students of history that they were, they had learned the lessons of the city states of ancient Greece and were thus determined to prevent such a system of government from developing here in the new nation that they were constructing.

As I mentioned in a previous post - one of the fears of the Founders was the TYRANNY OF THE MAJORITY. That is why they gave us a system of checks and balances and a separation of powers within a REPUBLIC, based on a system of FEDERALISM - The fact that this is not widely understood nowadays is a testimony to the ignorance of this generation.

Here is the pertinent clause in the US Constitution:

Article IV, Section 4

The United States shall guarantee to every State in this Union a Republican Form of Government, and shall protect each of them against Invasion; and on Application of the Legislature, or of the Executive (when the Legislature cannot be convened) against domestic Violence.

Note well - it does not guarantee the States a DEMOCRATIC Form of Government.

It many cases it is not the fault of the teachers but rather the school boards and the administrators which dictate what can and cannot be taught in the classroom. Based on what we see in today's society, the teachers' unions, school boards and administrators have raised a generation of dupes. If we want to take back our nation from the grip of those on the left who would impose their version of utopia upon the rest of us, then we had better start looking at what we allow our children to be taught and even more importantly, make the time to get involved in their education.

They are our children and the future of our nation; not wards of the state to be indoctrinated against our own values and traditions.

Silver Builds on Previous Gains; Nears Breakout Point

Both silver and gold are moving higher today as they add to gains made in yesterday's session, gains which I might add, tremendously improved the technical chart picture for silver.

See the chart posted yesterday evening in reference to silver but note also the following chart detailing the strong move higher in the Continuous Commodity Index.

It is closing in on its 50 day moving average which closely corresponds to the level near 565, the line marked, "initial resistance" on the chart.

As you can see, since September of last year the entire commodity complex as a whole, has been trapped within a defined downtrending channel. This is important to note because it has enabled the idea that the Fed's easy money policy are not proving to be inflationary, to gain credence. After all, if wholesale prices of basic commodities are trending lower, it is difficult to make the case that an inflationary episode lies just around the corner.

This latest move higher in the index must therefore be closely monitored as any change in the technical posture of this chart, will be the first sign of inflationary pressures beginning to surface in the economy at large. If, and this is a big, ""IF", the index pushes past BOTH resistance levels noted on the chart and breaks out of the channel, especially if it clears the region near 578, expect to hear increased chatter about inflation. This should especially benefit silver, which is much more sensitive to inflation pressures than is gold, or least has been if recent past is any indication.

Quite frankly, I have been a bit surprised that it has taken so long for the sector to see much in the way of money flows, especially with the equity market moving so strongly higher on the thesis that the global economy is recovering. If it is, especially in the case of China, then commodities as a whole would also benefit under such a scenario. Throw in the fact that a Yen Carry Trade, or even a Dollar Carry Trade, could easily be used by aggressive hedge funds to leverage themselves up to the gills once again to try to take advantage of the ultra low borrowing rates to fund such a carry trade, and the ingredients for a rally in this sector should seemingly be coming into vogue.

Moving back to the silver chart, it pushed through the 200 day moving average in yesterday's trade but instead of falling back below that level, it has added to gains and is now threatening a  breach of what has been tough overhead resistance near the $31.50 level. If it takes that out, it will make a try at the downtrending 50 day moving average just shy of the $32 level.

The RSI looks good as it has pushed through the peak made in that indicator coinciding with the first push to $31.50 at the beginning of this year.

Incidentally, the Platinum group metals are both putting in strong performances today; this is helping silver as it tends to feed into an impulse to buy industrial metals.

Gold is strong today as it works towards its overhead resistance first near $1685 but more specifically near the $1696 level. That level also happens to be where the falling 50 day moving average comes in. Expect some opposition to the metal if it makes it to that point.

Gold needs to put a handle of "17" on itself if it wants to get any excitement going in terms of sparking some short covering and more momentum oriented buying. If it does, all of those fresh hedge fund short positions that were added below $1650 over the last two weeks will be in serious trouble.

Response to Texas Secession Requests Settles Nothing

I found the White House official response to the Petition on its website requesting that the state of Texas be allowed to peacefully secede rather comical.

Invoking Lincoln, as if to lend credence to its dogmatic denial, settles nothing.

First of all however, before I get to that, I wish to state that no state need ask "permission" to secede. Secession in and of itself, is the last resort of free people whose unalienable rights are no longer respected or protected by a runamok central government - Such a government which regards itself as superior to any document limiting what it can or cannot do according to that founding document. Take away that right, and no people can be said to be truly free for what you have in effect created is a FORCED/INVOLUNTARY UNION from which no man or woman can ever hope to be separated, irregardless of any future circumstances or chain of events which might arise in the future.

Does any rational individual believe that under such circumstances, those who are the oppressors would graciously accede to any "request" from the beleagured citizens to depart? Hearkening back to the time of Israel in its bondage in Egypt, , one might just as well have expected Pharoah whom when COMMANDED, not requested by the Most High, to let His oppressed people go free, stubbornly refused.

The response to any "response" from the central authority is taken directly from the founding document of these United States.

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.--That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed, --That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness.

Appealing to Lincoln and his warped vision of such a thing as a "perpetual union", settles nothing in the matter. The South was subjected by force and brought back into the union against its wishes. We might as well argue that had the British defeated Washington's army at Yorktown and captured his officers thus ending the war, that the attempt by the colonists to "declare their Independence" and "secede" from British authority was also null and void. Force only settles one thing - that a governing power bent of crushing the unalienable rights of its citizens can and will succeed given enough force of arms even thought it may be resisted.

The whole idea of a Constitution creating a system of Federalism with limited power to the Central Authority and checks and balances upon the three, co-equal branches of government, was to prevent the TYRANNY OF THE MAJORITY. The Founders well understood that a purely democratic system of government would eventually fail to secure liberty since the ultimate outcome of such a system would be the permanent subjection of the rights of the minority to the whim of the majority.

Unalienable rights are God-given, meaning that they cannot be infringed upon by government. Indeed, government exists only to SECURE or PROTECT AND MAKE CERTAIN, these rights are not violated or transgressed.

Here then is the main difference between those on the left and those on the right. The left wishes to create their version of utopia here on earth. The right believes that while a well-ordered and peaceful society is the ultimate purpose of any government, here, in a fallen and sin-corrupted world, no utopia is possible. Given the nature of men, steps must be taken to ensure that they never hold sufficient, unbridled power with which they can usurp these unalienable rights.

The left, in its attempt to create its paradise, takes whatever steps it deems necessary to bring it about, EVEN IF IT MEANS PUSHING ASIDE GOD-GIVEN UNALIENABLE RIGHTS. You see, a large part of the problem with the left is that many are either agnostic or are true secularists. (As an aside - there are some who are agnostic who still understand something about human nature and thus liberty and the need to preserve it from governmental overreach but such are few and far between.)

This poses an immediate clash with those of us who believe in a God, a Higher, Supreme Power, to which all men must answer and who is the bestower of certain rights. If there is no God, no Hgher Power, then the very idea of unalienable rights derived from Him becomes an archaic, utterly meaningless concept.

I will go so far as to declare that many of the left see the state in the role of God, the Higher Power, to which all must submit and that it and it alone is that which dispenses "rights" to the citizens or subjects. It may thus grant or withdraw any such rights that it grants depending on that which it aims to achieve. This is why you will see constant attacks on the Constitution by those who hold it up to ridicule as outdated or insufficient to deal with our modern times. The simple fact is that it stands as an obstruction to their grandiose schemes.

What happens however when the check on power which the Founders built into the Constitution is pushed to the very edge or even disregarded? What are free men to do when their own central government begins to whittle away at their unalienable rights all in the name of achieving some leftist nirvana (income equality, equality of outcome instead of equality of opportunity, reduction of violence, free medical care, etc.)? What are they do to if their voices are no longer heard nor represented in the halls of power in a far away district? What course can they take if they find themselves in the MINORITY now subject to the whims of a ruthless majority which feels no restraint upon its quixotic quest for an earthly paradise?

The answer should be as "SELF EVIDENT" as it was to the author of the Declaration of Independence who deliberately chose those words to describe a sacred truth - namely - they have a right, nay a duty, to cast off such a government, separating themselves from it and pursue that system of government which can best secure those unalienable rights.

This is what secession means and why those in power will always detest, despise and condemn it. I have said it before and will say it again - the FORCED UNION of Thomas Jefferson and Karl Marx is doomed to failure. One side will eventually vanguish the other as there is no common ground between them both. It is best to let them both peacefully go their separate ways.

Silver Chart

Silver finally managed to get a close above that stout resistance level at the $31 level. On a day  in which the platinum/palladium group metals were all moving to the upside, it is refreshing to see the grey metal finally going along for the ride.

The ideal technical price action now would be to see additional upside movement up and away from this level without surrending its gains and falling back down below $31 again. Even at that, you can see the very short term uptrend that has formed in silver over the last week+ of trading.

A sharp push now through the $31.50 level will spark some decent short covering and serve to bring in new momentum based buying.

We will see if silver can do just that.

Downside support remains slightly above the $30 level.

HUI showing some Signs of Life

That the precious metals mining shares, as evidenced by the HUI, have been a disappointment to their holders, is certainly an understatement. The HUI registered a loss of 13.2% last year in 2012. It did manage to recover from its worst levels having sank below the 380 mark at one point although that was little consolation to those who are long term holders of the shares and did not sell after the chart pattern broke down in the fall of last year.

That being said, there are some signs of life in the sector based on the chart analysis of the HUI. Take a look at the following chart that contains one of my favorite indicators, the old, reliable RSI or Relative Strength Indicator.

What I have constructed is a simple 3 day moving average of the actual RSI indicator itself in order to smooth out the signal line and eliminate the sharp spikes. Do you see what is happening?

Following the breakdown from the September high, as price descended, the RSI followed it lower in a rather smooth fashion. Lower prices on the HUI were matched by lower levels on the RSI. That continued until the middle of November when the index caught a bit of a short covering pop that looked as if it might put an end to the decline.

However, the rally lasted no longer than 5 days and prices began to move lower again. However, the increase in the number of up days even as price worked lower began to be picked up by the indicator as it no longer marched lock step in union with price itself. As a matter of fact, the indicator has begun registering a SERIES OF HIGHER LOWS even as price has been making a series of LOWER LOWS. In other words, a near perfect textbook case of BULLISH DIVERGENCE is appearing.

This is a clue that perhaps the sector is getting ready to experience an upmove and finally reverse the downtrend. It should be noted that this is just a POSSIBILITY of an upward move occuring, not a certainty.

What needs to occur to confirm a definitive bottom is that an overhead resistance level must be taken out, preferably with good volume across the various gold shares that comprise this particular index.

Based on this chart, I have noted such an area. A CLOSING push through 455 or so will be a strong affirmation of such an occurence while a push through 465 or so will turn the chart decidedly bullish.

Let's wait and see what develops. For the time being note that were price on the HUI to fall down through support near 420 and be unable to recover that level on an intraday basis or by the next day of trading, the pattern would be negated and one would have to wait for further price action to decipher what comes next.

Silver Chart

Silver has been stuck in a range trade for the last month with selling entering on approaches to $31 and beyond while buying has appeared on moves down to $30 and lower.

The RSI or Relative Strength Index has been stuck in a range between 65 on the top and 30 on the bottom. The indicates a market within a consolidation pattern with a bit of a friendly bias to it. It's ability to remain above 30 on the RSI suggests that the next move will be to the upside although it will need to push past that stubborn overhead resistance zone noted on the price chart in order to do so.

I think that as long as Copper, Palladium and Platinum continue to look strong on the price charts, the Silver bears are going to have their work cut out for them in breaking down the support zone noted. Also, it is difficult to conceive of this market falling apart with equities continuing their upside party.

Any move through the late December high near $31.50 will spark a strong wave of short covering.

Trader Dan interviewed at King World News Metals Wrap

Please click on the following link to listen in to my regular weekly radio interview with Eric King on the KWN Markets and Metals Wrap.

http://www.kingworldnews.com/kingworldnews/Broadcast/Entries/2013/1/12_KWN_Weekly_Metals_Wrap.html

Gold Chart - Update

Gold gave back a goodly portion of its torrid gains from yesterday in today's session. In spite of the weaker Dollar, it was hit with a fairly good wave of selling. Noteworthy however is that it did end the pit session ABOVE the 200 day moving average after having fallen being this level at one point during the trading session.

The price action continues to reflect the uncertainty abounding in the minds of many regarding gold's future. I will not be convinced that this market is going to undergo a sustained move higher until it clears that solid blue line near $1698 and preferably until it gains a handle of "17" in front of it. While the close, particularly to end the week, was at least NOT BELOW that 200 day moving average, it is not enough to turn the technicals friendly yet.

Clearly traders are selling rallies in this market as it works within a defined range trade although it is disappointing to see it unable to at least climb back above the $1690 level before moving back to the bottom side of the range. It was unable to even gain the $1680 level before the selling started.

One thing to note - the COT REPORT is telling me that there is a growing number of hedge fund short positions that were established in gold BELOW the $1650 level. Those positions are under water. The key for the bulls is to push price high enough to cause some pain to the shorts; enough to force them out. That is why it is imperative that the resistance level noted on the chart is conquered. Failure to do so will give these losing short positions a new lease on life.

Downside support remains intact from $1640 on down towards $1626.

Summary - more of the same boring price action in gold  but for at least this week, the bulls managed to eke out a minor victory. Whether they can build on that next week is anyone's guess right now as it seems for all practical purposes that the hot money is flowing into equities for the time being. The Commitment of Traders report indicates the loss of speculative interest in gold, and silver, for the time being. That will need to change if these markets are going to get anything sustainable to the upside.