US Stocks Hammered, Gold and Silver Soar: April 11, 2012

The Dow lost over 200 points yesterday in its worst day of selling for the year with the sell-off accelerating as the $%#$ that has hit the fan is finally starting to stick in investors minds. The slowing economic growth, no Fed stimulus, a cooling China, failing US recovering, and the eurozone’s debt crisis sent investors flying for safety.

For once, the market makes sense. Why?  Because volumes were up heavy on the selling, instead of vapor fumes from the last bull run, telling us the prior bull run had no clothes and this selling is the real deal.  Not that we needed to know that, since insider selling a week ago was at it’s highest in years, telling us those who worked inside those companies really believed the bull run was smoke and mirrors.

But also because gold and silver, which have been recently falling on a flight to safety and worries about risk (opposite of what it should be), both soared today with gold gaining almost $20 an oz and silver almost $.50 an oz. The fact that the market is making sense and behaving correctly on a heavy sell-off intimates this is likely the Real McCoy.  Oil is struggling to hold $101 a barrel, but the S&P fell below its 50-day moving average which is a very bearish technical event models will be selling on.  The S&P lost 23.61 points or 1.71% and the Dow is down 1.65%, both down about 4% off the highs.

Across the pond, European shares are also down almost 7% from their highs, respectively suggesting this sell-off is spreading.

Gold Gains Heavily, Tests Dynamic Resistance

Perhaps the price manipulation is over short-term for gold, but the shiny metal gained strongly against the USD yesterday, up almost $20 after holding the $1630 support level. Price action has closed just below the daily 20ema and dynamic resistance above which has been a harbinger for bulls as of late.

If price action can close above this dynamic resistance tomorrow, then we will likely see price challenge the $1680 and $1700 figures in the near term and would likely be witnessing the beginning of an anticipated bull run in metals as they have always been a hedge, not so much against risk and a flight to quality, but bad economic governing which seems to be the expressed currency and method of the US and Europe which (other than China) dominate the economic landscape.

We may see some aggressive selling short-term in the London open or during the upcoming London session, so any dips down to $1640/30 should be considered good buying opportunities to target the aforementioned upside levels as the break below $1630 six days ago is now looking like a false break and possible bear trap so we expect more upside.