Larry here. Today’s video update was actually recorded last week due to my travel itinerary. No problem, because on Wednesday, Feb. 29 — after weeks of rallying — gold and silver gave up all their gains in a single day, and they failed to elect any monthly buy signals.
You’ll want to know what it all means. Plus, you’ll want to know what the Dow Industrials are telling you. That market actually did give a monthly buy signal!
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Good morning! This is Larry Edelson with my Uncommon Wisdom video market update for Monday, March 5. I’m actually recording this video update on Wednesday, Feb. 29 due to my travel plans over the next few days.
However, the action that we saw in the markets on Wednesday, Feb. 29 is very significant, and I don’t expect many changes in the intervening days between when I’m recording this video and when you see it on Monday.
The all-important action I’m referring to occurred on Wednesday, Feb. 29 and indeed that being the month-end, it is very, very important action.
Let’s go right to the charts:
First, gold: As you undoubtedly already know and as you can see from this chart, on Wednesday, Feb. 29, the gold market had a $76-$80 down day. The rally failed above this support level here and gold plunged, giving up almost two weeks of gains in a single day.
Now, it’s very likely that gold may rally back to the $1,742 level in this resistance area here. But the action that occurred on Wednesday, Feb. 29 is very significant. Gold did not elect a monthly buy signal. That is very important — after all this rallying over the last month or so that had everybody upset and many others jumping into the gold market, gold did fail to elect a monthly buy signal.
To me and my systems, that indicates that there is still a very, very high probability that we will see gold move back down with the initial support coming in around $1,625, $1,635, and a distinct possibility that we could go into late March/early April testing sub-$1,500 levels.
So, if you’ve acted on any of my advice to take on some short-term bearish speculative positions in the gold market and/or hedged up long-term core gold holdings, I recommend that you hold those bearish positions and hedges because it appears to me that the short-term gold rally is over and we will retest support levels.
The same can be said for silver: Here is the chart of silver. Silver had a massive 6% down day on Feb. 29, again month-end. Interestingly, we were well-above the $35.85 monthly buy signal that I’ve been telling you about.
But on Wednesday, Feb. 29, silver plunged over $2.25, failing to elect that buy signal on a month-end closing basis and putting in an outside reversal day and falling back into this declining wide trend channel that you see here.
So silver, like gold, remains poised now to test at least the $32 level. And once that gives way, we can see sub-$30 levels, at least $28, and maybe even lower going into April.
The interim rally is over here. The long-term bull market in the precious metals is not. The fact that the European Central Bank is printing money now, the Federal Reserve is printing money (and) many other central banks around the globe are printing money does not mean that gold, silver, and precious metals are going to explode to the upside.
Money-printing is a long-term bullish fundamental, but it does not have to be bullish every day of the year they are printing money. That does not mean that gold or silver has to go up.
There are contextual situations and conditions where money-printing can actually be bearish for the metal. And I believe we have that in place right now.
One of the reasons is they’re printing money like crazy to save the banking system in Europe and to save Greece. But Greece is not going to make it. Greece is going to default as sure as I know my own name.
Greece is going to pull out of the European Union and take back its drachma. And as this unfolds over the next 30 to 60 days, yes, the banks might print money like crazy. But again, that doesn’t mean that every day is going to be up for gold and silver. Quite the contrary.
As the euro disintegrates and Greece defaults, you’re going to see savvy investors and not-so-savvy investors run to cash. That’s going to be bullish for the dollar and bearish for just about all commodities out there.
So, again, money-printing doesn’t mean everything has to go up day in and day out. Far from it. You have to know when money-printing is bullish and when it’s not. That’s my take on the fundamentals.
The U.S. dollar: The dollar has been acting weak overall but – lo and behold – on Feb. 29, the dollar did put in an outside reversal day. It is finding support in this level and the next move in the dollar should be higher up to the near 81 level and, if we can get through that, probably to new highs up near 83.50 or 84.
As the dollar moves higher on a flight to safety, overall that will be a bearish tone for commodities, particularly gold and silver.
Dow Industrials: This market has given me a monthly buy signal with the Dow closing above the 12,850 level that I’ve been writing about on Wednesday, Feb. 29. This is a very early signal that the Dow Jones and S&P 500 are going into a long-term new bull market that will find stocks trading substantially higher in the years ahead.
That does not mean you should run out and buy stocks wholesale right now because we got a monthly buy signal. Indeed, I expect some kind of pullback along with metals and along with the general liquidation tone that might take root in the markets over the next few weeks.
But that buy signal in stocks does give you an indication that a new bull market in stocks is near. I expect by 2015-2016 we could see the Dow close to 20,000 if not higher. So there’s plenty of money to be made on the upside there.
Now the focus in the Dow should be on buying dips rather than getting all-out bearish. For now I recommend holding any short-term bearish positions because, as I said, there’s likely to be a pullback in the Dow and I would look to get out of those positions at lower levels and start picking support levels to get positioned for a new bull market in stocks.
Having said that, this is Larry Edelson. I’ll be en route back to Asia over the next couple of days. I will talk to you next week. I will give you an extensive updates on all these markets.