Sunday, August 14, 2011

The Looming Support

This week's test of support is far and away the most important support test ever seen on US equities.  If Dow 11k fails to hold, the event could trigger a watershed of selling.  It would mean the President's Working Group has a new plan in mind other than holding up the markets.  It would mean the Greatest Depression would be secure in name.

If equities hold on Monday, it would mean support has tested and held three times, which is the number I look for when analyzing support levels.  It will take Tuesday to know, since markets have such a global market and either Asia or Europe could sell it off.  So if equities hold through Tuesday trading, look for consolidation in the 11k range.

This would be perfect for QE 3, for II do not think that QE 3 can be announced as a solution to falling (or rather failing) markets.  If markets continue to slide, then it shows stimuluses and quantitative easings have not worked.  Yet if it holds, then it will be "needed" so as "to keep the recovery on track".

Gold sold off like I thought it would, even though it went way higher than II thought.  Silver has been at the least a safe haven amidst the turmoil.  Oil has traded with equities.

One reason I think prices of these goods will continue to rise is that they, oil and gold, have peaked production.  I think the market follows these goods, and this while fiat fails as a store of wealth.  That is why in the end I think that the rise of precious metals and oil is in the bag, while fiat fails.  And while fiat fails equities become more expensive.  Could the Dow trade even with gold?  Yes, and it will.  But at what price.  Does it matter?  Dow 11k, gold $11k, once again, does it matter?

And this will likely be the end result.  Gold will equal the Dow again like it had until the early '80s.  Oil will rise, but higher gold prices could stem the gains.  Yet silver trades 1:1 with oil, and if gold goes higher so will silver, because both define money.  This is why I see not only higher gold, and silver, but also oil, for the trend together.  Oh, and never forget platinum.  She is there with them, too.

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