A party aboard the Titanic
Yesterday was a very interesting day. The dollar appeared to break out above the resistance of no less than 3 concurrent restraining trendlines, evidently celebrating the European ship being "holed below the water line" by the French "non" vote, but to this writer yesterday's action is more akin to a "party aboard the Titanic."
The dramatic throw over breakout by the dollar was flagged as a possibility in Monday's Gold Market update. It is strongly suspected that this may be a final climactic "blow off" by the dollar, and if it is, then this is the last chance to load up with Precious Metal stocks before a substantial advance gets going.
There are many persuasive reasons to believe that the dollar is at the end of its rope. Yesterday's sharp rise comes after a substantial advance over the past several weeks that has resulted in a substantially overbought condition in an area of heavy resistance, meaning that the dollar is now very vulnerable to a rapid reversal. The gold market doesn't buy yesterday's big move. Although gold fell significantly intraday, it closed with a comparatively minor loss, comfortably held a downtrend line, and formed a bullish "hammer" candlestick, suggesting that yesterday could well be the final low. Furthermore, there is an unprecedented large "Commercial" short position in the dollar now, and, as the commercials have a consistent track record of being right, this is regarded as the "kiss of death" for the dollar.
In the article "Silver - situation becoming EXPLOSIVE" posted on www.clivemaund.com on the 27th May, it was stated that "Due to a possible acute supply crisis we may be in a situation where silver decouples from gold and goes on a tear." Silver ignored the big rise in the dollar yesterday and continued to make good gains, and looks set to run to $8 very quickly.
The conclusion is that what appears to be a further threat to Precious Metals stocks is, in reality, a great opportunity masked by danger. Gold stocks are already signalling that they have bottomed and silver stocks are already forging ahead.
A blanket "buy alert" was issued for silver stocks across the board, just as the big advance in silver stocks began, in the "Silver - situation becoming EXPLOSIVE" article posted last week on www.clivemaund.com and now it's gold's turn, so we will be highlighting better opportunities in gold stocks on the site in coming days.
is an English technical analyst, holding a diploma from the Society
of Technical Analysts, Cambridge, England. He lives in Chile.
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