Stocks, Gold and Silver All Projected to Go Down

Written by William Kurtz, Candle Wave LLC

Dell shares are off nearly 50% in 8 months; Hewlett-Packard is down 73% from April 1, 2010; AMD, which was $27.90 at its high, is now at $2.18; Intel shares are down 25% from May 2012; Apple is almost certainly way past its peak and lost $19.87 today on the way down;  Google has lost $112 (14.5%) in two days; Microsoft’s net declined 22% in the quarter ended September 30. The NASDAQ indexes are down, of course; and the Dow Industrials met a line of overhead resistance for the third time and turned down decisively today, dropping 205 points and leaving behind two “Osaka Clipper” bearish Japanese candlestick reversal warning patterns.

Motorola’s smartphone used (and uses) Google’s “Droid” system.  Google bought Motorola Mobility earlier this year, primarily to gain ownership of Motorola’s patents; but Steve Jobs of Apple long maintained that the “Droid” had been stolen from him.  Now, Motorola Mobility is bleeding money, and patent suits are flying.

Microsoft and the PC makers are hurting because of the drift away from PC’s toward tablets and because buyers are waiting for the availability of Windows 8 before committing to a purchase.  Microsoft is aging now.  It is not as fleet of foot as it once was.  Windows 8 is a “must win” product for Microsoft.

Even Apple, the new “gold standard,” flubbed the dub with Apple Maps, and had to go back to the drawing board after the latest iteration of Apple’s smartphone was brought to market with a deficient application lurking inside. Would this have happened if Steve Jobs were still alive?

Certainly, the electronics champs have serious problems.  One wonders whether this is a “crack” in the entire sector; and if so, whether it is a harbinger of a “crack” in the overall market. The previous new-unemployment claim numbers have been shown to be an anomaly. The progress of deflation is slowly tightening the noose around the economy. There is no amount of counterfeit dollars being poured out by the Fed which will halt the roll of deflation once it begins to gain momentum.   Meanwhile, as the Fed gathers to itself poorer collateral in exchange for the issuance of $40 billion of new paper each month, its own balance sheet becomes less worthy.

I think that my suggestion to “keep a toe in the water to the downside” is working, and will continue to work for the foreseeable future. The Indexes are somewhat oversold now, in the very short term, and bounces could erupt at any time.  Aggressive traders might choose to attempt to play the bounces; but a more conservative plan would be to leave the bounces alone, and to look upon peaks in bounces as good entry points for short-side positions.

The strong falloffs today in Gold and in Silver lend further credence to the belief that both of them have come to subsidiary peaks and have turned down. Gold had advanced to the 61.8% retracement level of the decline from its long-ago top, and appears now to have been rejected. Gold and Silver have been behaving pretty much alike since their respective tops were posted, except that Gold experienced an “echo-mania” which drove it to the 61.8% retracement mark while Silver has lagged behind, having reached only to its 38.2% retracement before being shown the door.

An aside:

[I’ve been trying to make something of this, but so far have failed. Perhaps you can help. Here’s my problem: As between Gold and Silver, Gold led the way Up. The Lone Ranger, as you may recall, always led the way, always rode ahead of Tonto, who lagged behind; but unhappily (for this current exercise) the name of the Lone Ranger’s horse was “Silver” (whose first name was “Hi-Yo”), so already I’m in trouble. The part of Tonto was played by (!) Jay Silverheels. “By rights” (wouldn’t you agree?) a man whose name was “Silverheels” should have ridden a horse named “Silver,” but the Lone Ranger already had dibbies on the name. Consequently, Tonto rode a horse named “Scout,” whose first name was “Get-em-up.”

You can appreciate that the Lone Ranger’s horse having been named “Silver” poses a re-e-e-e-al problem for me, in light of the relative performance of real Gold and of real Silver recently; and I don’t know how to solve it.

Anyway, this prompted me to look up “Jay Silverheels;” and I discovered that his real name was Harold Smith; that he was a real Mohawk Indian (a Canadian); that his father was a Mohawk Chief; that he was a fine wrestler, boxer, and lacrosse player (whence he received the sobriquet “silverheels” because he was so fast); that he appeared in serious parts in many movies (other than in the “Tonto” role); and that he has a Star on the Walk of Fame in
Hollywood].

One of the financial sheets was in a state of high excitation yesterday morning, discussing the inevitability of a sharp rise in the price of Silver for two “reasons:”

1) vast amounts of Silver are being transported from the US to Great Britain;

2) JPMorgan has been manipulating and severely shorting Silver and is going to be caught in a “short squeeze,” whereby the price is bound to rise.

I could be dead wrong; but I don’t buy the stories.  These are not “reasons;” they’re “rationalizations.” I think this is a question of psychology, not reasoning.  My old Webster defines “rationalize” thusly:

“In psychology, to devise superficially rational, or plausible, explanations or excuses for one’s acts, beliefs, desires, etc., usually without being aware that these are not the real motives.”

The bottom line is that I believe that Gold and Silver posted long-term tops long ago; that their operative trends are down; and that those trends will be Down for the foreseeable future. I think that they probably will execute up and down moves in rough lockstep. Gold may begin to pick up relative speed, on the downside, as the Gold echo-mania dissipates. Gold and Silver are
slightly oversold now, so we can expect bounces at any time – but probably not quite yet.  The peaks of bounces should present good shorting opportunities.

Contact William Kurtz: [email protected]

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