-- Posted Wednesday, 28 October 2009 | Digg This Article
| | Source: GoldSeek.com
Rick’s Picks
Wednesday October 28, 2009
“Phenomenally accurate forecasts”
We’ve grown so used to forecasting with blandly mechanical detachment that it can be jolting when our instincts struggle to take over, as they did when Goldman Sachs shares dove without warning on October 15. Considering the firm’s stock chart by-the-numbers, we expected higher prices. Had the charts failed to warn us of an important top? To be sure, our strong preference for technical analysis over fundamentals comes from having gotten ambushed too many times when we followed fact and logic into a dark alley. Still, when Goldman gapped $5 lower on the opening that day, we sensed that something had changed. Since then, our unease has only grown. The bank stocks have continued to fall, although not yet severely enough to be called a crash; and gold has reversed direction as well, albeit more gently than the banks. From an all-time high of $1070 on October 15, the Comex December contract has eased to $1033, yesterday’s low, representing a total decline of a little more than three percent.
But the real attention-grabber has been the U.S. dollar, which has rallied less than two percent off recent lows. That’s not much of a rally, we know, but when it is the dollar that is doing the rallying, it is a true man-bites-dog story. Just this week, the greenback launched from a saucer-shaped bottom that had been forming on the intraday charts for the last two weeks. This caused the NYBOT Dollar Index to hit a high yesterday of 76.32, but if it goes just a but further, exceeding a Hidden Pivot target of ours at 76.68, that would strongly imply the rally’s got legs.
A Dubious IOU
As we might have expected, the dollar’s upward progress has seized the attention of the multitudes who have been waiting for “something” to happen. Some observers see the rally as a flight to safety -- a notion that we find hard to believe, considering the dollar’s intrinsic worthlessness. Much as we dislike slinging ad hominems around, we can only conclude that those who think of the dollar as a safe haven are rank imbeciles with the reasoning power of a doorknob. Note to all of you: The dollar is no longer money; it is at best an IOU of highly dubious value.
Gold bulls’ take on the rising dollar turns the argument 180 degrees around. They see it as just another routine blip in a bear market that has a long, long way to go. We are in this camp ourselves, albeit with our own, purely technical, reasons for expecting an interim low in the Dollar Index around 72.93, about 4.3% below yesterday’s settlement price. That would be ugly, but hardly a crash. We also are allowing for the possibility of a short-squeeze that could briefly lift an otherwise worthless dollar into the stratosphere. It would be brought on by the inability of debtors to raise cash when some epic financial crisis has made it impossible for them to roll short-term obligations.
Coming back to the question of whether “something has changed,” we believe it has, and that its main symptom will be felt more and moire acutely as an ebbing of trust in the banking system. This trust was so egregiously misplaced to begin with that it seems almost a given that it will vanish overnight. Will you be ready?
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Information and commentary contained herein comes from sources believed to be reliable, but this cannot be guaranteed. Past performance should not b construed as an indicator of future results, so let the buyer beware. Rick's Picks does not provide investment advice to individuals, nor act as an investment advisor, nor individually advocate the purchase or sale of any security or investment. From time to time, its editor may hold positions in issues referred to in this service, and he may alter or augment them at any time. Investments recommended herein should be made only after consulting with your investment advisor, and only after reviewing the prospectus or financial statements of the company. Rick's Picks reserves the right to use e-mail endorsements and/or profit claims from its subscribers for marketing purposes. All names will be kept anonymous and only subscribers’ initials will be used unless express written permission has been granted to the contrary. All Contents © 2009, Rick Ackerman. All Rights Reserved. www.rickackerman.com
-- Posted Wednesday, 28 October 2009 | Digg This Article | Source: GoldSeek.com
