Sitting and Waiting

by JDH on June 4, 2011

Last week I mentioned that it’s interesting to watch market manipulation action. Let’s again start with the Dow (click on charts to enlarge):

Last week everything looked great, with the Dow holding about the 50 day moving average. Wednesday’s big drop put us way below that level, and Friday’s close at 12,104 puts us right back to the same level we were at on April 18. What gives?

If you believe the markets are manipulated, I assume you therefore believe that the Big Boyz are crapping the market to prove the need for QE3. “Look”, they will say, “when QE2 was going everything was great, but now that it’s about to end the market is crashing, so we need to do QE3, stat!”

I would assume that we will see a short term bounce from here, because that’s how it works, but beyond that, who knows.

While the Dow drops, gold remains strong, and is quietly making it’s way to new highs.

Clearly someone is buying (presumably investors who are taking their money out of the Dow, and out of US dollars, and putting it into something more valuable).

As for silver, it’s not looking as good.

The question for silver is this: do we retest the lows and drop below $34, or do we break out of this consolidation range by going above $38? I don’t know, but when one of those two things happens we will have a much better idea of the future.

Gold and silver stocks appear to be in base building formations, so those of you with an appetite for risk could consider increasing your positions.

Me? I’m on the sidelines, watching. My gut tells me that the summer is a weak time, so a further retest of the lows is likely. Another 2008 style crash would present fantastic buying opportunities, so for now I will sit on the sidelines and wait for such an opportunity.

I may miss it, but I can sleep at night, and for now, that’s good enough for me.

Thanks for reading, and see you next week.