Honest Money Gold and Silver Report

Houston We

Have a Liftoff

Wednesday July 18, 2007

Gold closed up 7.70 to $672.10 (+1.16%)

Silver closed up 0.30 to $13.20 (+2.33%)

The Dow was down 96.41

Dollar index down 0.13 to 80.25

Crude Oil up $1.03 to $75.05

10 Year Treasury Note Yield down 0.68 to 50.10 (-1.34%)

Hui Index up 13.90 to 365.10 (+3.96%)

In the recent paper titled The Three Faces of a Gold Stock Breakout I mentioned that two of the three faces were already in place: positive MACD, STO, & RSI readings; and a break above the Hui/Gold ratio trend line.

The third and final face needed for a breakout was the actual break above the upper trend line of the price of the Hui Index. That occurred today as the chart below shows.

However, a couple of caveats are in order. In the same article I mentioned that a break above the trend line doesn't do much good if it isn't sustained. In order to sustain it there will need to be a follow through move upwards on increasing volume; and the biggy would be a test of the breakout level that holds and thus turns what was resistance into support. That is the definitive qualification. So we have a liftoff - let's see if it maintains trajectory.

It was a positive day for both physical gold and the gold stocks, with the gold stocks positively outperforming physical - plus they were both up strongly, so it was a good day all around in gold land.

Also, another strong positive was that the overall market was down pretty hard, yet the gold stocks shrugged it off and rocked on. Very tasty and sweet as they say. The weekly close will be of great interest.

One last caveat - some of the gold and silver stocks are getting a bit into overbought regions/levels, however, we know how that can work. Markets can stay overbought and oversold for longer than we can remain solvent. I wouldn't be surprised if they keep on rockin, nor would I be surprised if they consolidate.

I very much liked the fact that the goldies went up today while the stock market got hit pretty good. That is a definite positive divergence. Plus, I look for the market to get hit a bit more - perhaps not tomorrow or next week - but within short term parameters. Today's action suggests that perhaps the precious metals stocks will not go down with an overall market decline. Time will tell.

Interest rates came down today and thus bonds went up. Oil had a good day, which seems to fly in the face of those who swear the BIS completely controls all markets. We should know soon enough.

Myself, I say you don't spit into the wind and you don't get in the way of the primary trend, and I don't care how much money you have to throw at it.

Stop by our website and check out the complete market wrap, which covers most major markets. There is also a lot of information on gold and silver, not only from an investment point of view, but also from its position as being the mandated monetary system of our Constitution - Silver and Gold Coins as in Honest Weights and Measures.

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