Warren Buffett Moves on Bank of America, Risk on Trade Moves Gold Lower

Gold prices continued to plummet this morning as news of Warren Buffett buying 5 billion dollars worth of troubled Bank of America preferred stock hit the news wires. Rumors were already supporting the equity markets as traders suspect Federal Reserve Chairman Ben S. Bernanke may announce steps to boost the economy in his speech tomorrow from Jackson Hole in effect putting the risk trade back on in equities.

Gold was sharply lower in overnight trading and has broken out below the 20 day moving average crossing at 1740.60 as it consolidates some of this year's rally. Stochastics and the RSI have turned bearish signaling that sideways to lower prices are possible near term.

Closes below the 20 day moving average crossing at 1740.60 would confirm that a short term top has been posted while opening the door for additional weakness in to early September. Closes above the 10 day moving average crossing at 1796.10 would signal that a short term low has likely been posted.

First resistance is the 10 day moving average crossing at 1790.10. Second resistance is Tuesday's high crossing at 1915.00. First support is the overnight low crossing at 1701.70. Second support is the 38% retracement level of this year's rally crossing at 1686.80. Gold pivot point for Thursdays trading is 1788.60.

Just Three More Days To The Debt Deadline and What is Warren Buffetts Solution?

Just three more days to the debt deadline. I’m guessing that it is an artificial deadline made up for political reasons. I am positive that this is just an arbitrary date that some policy wonk came up with to get everyone up in arms about doing something with the debt.

I believe Warren Buffett had the best idea on how to end our debt problems. Here is what Warren had to say: “I could end the deficit in five minutes. You just pass a law that says that anytime there is a deficit of more than 3% of GDP, all sitting members of Congress are ineligible for re-election.” Way to go Warren!!!

Well, we have made it to the last day of the trading week and the last day of the trading month. The equity markets are, as of this writing, sharply lower for the week and also the month. Gold and Silver on the other hand, are sharply higher for the week and the month.

As we have been indicating, we felt the equity markets were rolling over to the downside. Technically we are getting closer to pulling the trigger on our major monthly Trade Triangle which sets the trend for the equity markets.

Now let’s take a look at what the markets are telling us and the direction they’re taking on this last trading day of the month.

S&P 500

Monthly Trade Triangles for Long Term Trends = Positive
Weekly Trade Triangles for Intermediate Term Trends = Negative
Daily Trade Triangles for Short Term Trends = Negative
Combined Strength of Trend Score = – 70
Looking at the monthly S&P 500 index chart, a close around current levels would be the lowest close we’ve seen in this index for the past 6 months. The monthly PSAR comes in at 1256. As we have stated many times before, this is a line in the sand level that if broken would indicate further downside action.

SILVER (SPOT)

Monthly Trade Triangles for Long Term Trends = Positive
Weekly Trade Triangles for Intermediate Term Trends = Positive
Daily Trade Triangles for Short Term Trends = Negative
Combined Strength of Trend Score = + 85
Silver is closing out the month with a gain of over 15%. The action continues to be positive and we expect this market to trade to the $43 level basis the spot market.

GOLD (SPOT)

Monthly Trade Triangles for Long Term Trends = Positive
Weekly Trade Triangles for Intermediate Term Trends = Positive
Daily Trade Triangles for Short Term Trends = Positive
Combined Strength of Trend Score = + 100
In July, gold moved up over 8% and in doing so hit new all-time highs against the US dollar. The trend remains positive with all of our Trade Triangles positive and we have an intermediate target zone between $1640 and $1650.

CRUDE OIL (SEPTEMBER)

Monthly Trade Triangles for Long Term Trends = Negative
Weekly Trade Triangles for Intermediate Term Trends = Positive
Daily Trade Triangles for Short Term Trends = Negative
Combined Strength of Trend Score = – 75
For the month of July, crude oil closed essentially unchanged. We still feel that this market is building an energy field to move higher. We want to closely watch this market in the coming days and weeks and look for a turn to the upside.

DOLLAR INDEX

Monthly Trade Triangles for Long Term Trends = Positive
Weekly Trade Triangles for Intermediate Term Trends = Negative
Daily Trade Triangles for Short Term Trends = Positive
Combined Strength of Trend Score = – 55
The dollar index was essentially flat during the month of July with a loss of 0.62%. For the last four months, this index has been moving sideways unable to break out of its trading range. Eventually you will see this change and a stronger trend developing.

REUTERS/JEFFERIES CRB COMMODITY INDEX

Monthly Trade Triangles for Long Term Trends = Negative
Weekly Trade Triangles for Intermediate Term Trends = Positive
Daily Trade Triangles for Short Term Trends = Negative
Combined Strength of Trend Score = – 75

One of the reasons we eye this particular index so carefully and closely is because it is the indicator of inflation and deflation. In the month of July, this index closed up over 1%. The 350 level is the key level down to watch on the upside.

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