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September 08, 2008

Precious Points: Full Faith and Credit
by Oroborean

"About the best that can be said is that gold has put in a series of higher highs and lows since hitting a bottom three weeks ago, but resistance at the 5-week simple moving average, the bearish crossover of the 50-week ma over the 5, and the failure of MACD to confirm this move higher, all weigh heavily. The situation in silver is similar, but even less optimistic. We shouldn't be surprised to see gold near $900 and silver near $15 in the short term, though this won't necessarily mean a bottom is in place." ~ Precious Points: Topping the Copper Top, August 30, 2008

A few weeks ago, this update mentioned the complete lack of credibility of Treasury and the Fed, at least compared to other agencies of certain other nations. That lack of credibility has again produced consequences as the Treasury's attempt to talk the market into backing Fannie and Freddie were ignored almost entirely, necessitating the nationalization of the GSE's and the secondary market in mortgages. Which begs the question, just how much money is there?

The answer, of course, is virtually infinite, as the government's debt is simply offset by future tax revenues, as always. It's uncertain exactly how markets will react to the news, but it's quite possible it'll be seen as a positive development. Whereas my personal view has always been that U.S. default is unlikely if not impossible, on top of the Bear Sterns buyout, two wars, and the largest budget deficits ever, another potentially huge tax payer liability seems to at least suggest a way it might happen.

In the short term, precious metals will continue to trade along with many commodities opposite the dollar, which may be bullish because many commodities appear ready for a relief rally as the dollar prepares to consolidate. The wave count presented in gold last week is essentially unchanged.

But whereas gold has so far made a higher low, silver did not fare so well. The good news is that five waves down might now be complete and silver, too, could be ready to rally at least to about $13.

And IF the diagonal described in copper last week is going to survive, it must rally off the Friday lows, as the pattern has been stretched to the limit of the parallel, almost beyond credibility.

For limited time only, TTC has reopened its doors to the retail trading community, but this your last chance to join. New membership will be suspended again as of the closing bell Monday afternoon. Because we take the quality of our service very seriously, we strictly limit membership and work to develop members' trading skills. Having noticed an improvement in our current membership, most of which are professional, institutional traders, we will accept a limited number of new retail members for one week only. TTC does not issue trade signals because we teach you how to trade. We don't spoon feed you because we teach you how to take care of yourself. So, whether you're a novice trader who wants to get better, or a more experienced pro that's wants to share what they've learned and go to an even higher level in multiple markets and timeframes, TTC is the place for you.

And, on top of all that, only TTC members are eligible to purchase the custom commemorative "Unbiased Trader" precious metal medallion - available soon. Professionally designed and proof struck on 5 oz .999 fine silver or 1 oz pure gold in association with the Northwest Territorial Mint, last year's supply sold out quickly, so join now to reserve your chance to purchase your own "Unbiased Trader" TTC medallion.

Joe Nicholson (oroborean)
www.tradingthecharts.com

This update is provided as general information and is not an investment recommendation. TTC accepts no liability whatsoever for any losses resulting from action taken based on the contents of its charts, commentaries, or price data. Securities and commodities markets involve inherent risk and not all positions are suitable for each individual. Check with your licensed financial advisor or broker prior to taking any action.

Copyright © 2006-2008 Joe Nicholson

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