An Important Week Looms

It's Saturday afternoon in the U.S. and The Turd is ready for some football. However, it is Saturday, which means its time to review the longer-term charts to search for clues as to the week ahead.
Before we get there though, please take time to visit Eric King's site this weekend. First of all, you must read this: http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2011/1/7_James_Turk_-_New_Buyers_Taking_on_Silver_Shorts_is_Very_Bullish.html
And this:
http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2011/1/6_Jim_Rickards_-_Gold_Standard_Coming,_Feds_Hoenig_Correct.html
Then, you absolutely must take the time to listen to this:
http://www.kingworldnews.com/kingworldnews/Broadcast/Entries/2011/1/8_John_Embry.html
And this, paying particular attention to the segment with my buddy, Trader Dan:
http://kingworldnews.com/kingworldnews/Broadcast/Broadcast.html

Also, be sure to check Harvey's weekend update. Please take time to read it. Pay particular attention to the section that discusses the open interest numbers in silver, the section that discusses the COT numbers and the section that includes Ted Butler's comments on the EE short positions.
http://harveyorgan.blogspot.com/

OK, on to the charts. Frankly, I struggled for a while trying to determine the order in which to present them to you. To clearly demonstrate my version of cause-and-effect, the sequence matters. With that in mind, here is the almighty dollar, presented in 12-hour form which takes us back to late September 2010:

As all of our commodities, including the PMs, are currently dollar-denominated, you can always expect dollar strength and weakness to be the primary driver of trends. Other factors such as weather (grains) and the EE (PMs) are secondary drivers. Note that the USDX has been in a rather tight, 3-point range for some time now. Also note that strength in the dollar corresponds to general weakness in the following commodity charts. Since we are nearing the top of the range, we can expect the entire commodity sector to improve shortly, provided we don't break out higher through 82.

Next is crude oil. This is very important because the PMs often draw strength or weakness from changes in the price of crude. I personally believe this is foolhardy as the concept is based on the notion that the PMs are simply an inflation hedge, which they are not, and this has been proven over time. However, not everyone sees it this way and thus crude and the PMs are often positively correlated. Its is clear to see that crude needs to stay above $87 otherwise we risk heading back toward $82. A move lower would be good for average, everyday folks but not so good for us PM bulls.

OK, let's look at the grains. These charts look quite similar as they are both benefiting from some wild weather. Droughts some places, floods in others. Either way, both rest upon trend lines and need to move higher next week. As mentioned above, a weaker dollar will help their cause.

Are you getting the feeling that next week is important? Me, too. Wait till you see this next chart. This is 12-hour silver. Do you recall the chart the showed BoS defense lines built about $1.50 apart? They started at $25, then went to $26.50 and then $28. We hoped that $29.50 would be next but it failed this week. That makes $28 hugely significant. It is vital that $28 holds.

Lastly, here's gold. I saved it for last because, frankly, it looks terrible. Well, maybe not terrible. More like lousy or yucky. If you wanted to be pessimistic, you could say there's a head-and shoulders here and the beginning of an "umbrella" like we saw in the USDX the last week of December. Yikes! Let's not be too pessimistic, though, because in the PMs I strongly believe in the fundamentals, not the technicals. Instead, let's just admit that gold is stuck in a $100 range, bordered by 1325 and 1425. In the near term, it is quite obvious that gold needs to hold 1360-65. Two consecutive closes below there will send it to at least 1340 if not the bottom of the range.

OK, that's it. In summation, next week is a big week in determining the short and intermediate trends in the entire PM/commodity complex. The key will be the dollar. It needs to stay below 82.
On a side note, don't think for a minute that TPTB aren't aware of this, too. Do not be surprised if the headlines come Monday or Tuesday are all Euro-negative/$-positive (Spain, Portugal, etc). I firmly believe, as does Santa, that the entire "EU Contagion" story is drummed up and rolled out every time the Fed needs some dollar strength. Let's watch and see if this pattern plays out again.

Time for some football:
New Orleans  27                 NY Jets   24
Seattle             17                 Indy        20

Turd out. More tomorrow.


Saturday Evening Update:
I am deeply saddened and disturbed by the events today in Arizona. I am also deeply troubled by the immediate, political aftermath. No one, other than a close personal friend of the shooter can truly know his motives at this point. Yet, because the primary target was a democrat congresswoman, some, including The Great Douchebag Krugman, are already assigning blame to everyone from Glenn Beck and Rush Limbaugh to Fox News. This absolutely sickens me. Our country is being torn to shreds by agenda-promoting, political hacks whose lack of decency know no bounds.
In 1981, John Hinckley shot Ronald Reagan. In the hours following, I don't recall anyone blaming Tip O'Neill, ABC News and Walter Mondale for inspiring him. Its a good thing no one did because we soon found out that the mentally-ill Hinckley was simply trying to impress a chick. I trust we will soon discover that the shooter in Arizona also suffers from mental illness.
The real loser in all of this are the American people. I truly fear that this will be an "Archduke Ferdinand" moment for civil liberty, freedom and representative government. Beginning tomorrow, will you have more access to your congressman or less? Will your 2nd Amendment rights be more secure or less. Will your voice of political dissent be louder or more muzzled?
Whether or not you reside in The United States of America, you should pray for our country tonight.