When the change in the reading for Gold occurred, we explained about this measure. Indicators are designed to achieve different goals. Some popular ones are constructed in ways to give short-term traders timely entry into and exit from markets. Other measures are designed to suggest the overall attractiveness of a market. The Long-Term Momentum Model is designed for two purposes. First, it does not give many signals as it tries to identify trends of longer duration. As shown in the chart, last positive signal was in 2003 when Silver was breaking out of the long lateral trading pattern in which had been trapped. Second, this measure lags and serves kind of like a slap in the face. The measure says, "Wake up, the trend has changed. Have you?" Every signal this indicator gives is not perfect timing. However, in use across markets it has a far superior record to that of the guesses of most humans.

Now despite this note of optimism, do not buy without some consideration of the level of enthusiasm in the day's trading. When lots of excitement is obvious, back off. Wait for a day when the funds are not buying. Do not buy on days with news that pushes Gold and Silver up dramatically. In other words, the rule is buy low and smart when the market is over sold.

Momentum is one dimension of our Investment Policy Matrix, and can be found across the top. The other dimension is relative value, and that is shown in the left-hand column. Our goal is to find a market that is under valued and the long-term momentum is positive. US$ Silver seems to be in that position. Investors should become buyers of Silver on price weakness. Please, do not buy at the high for a day. That does not help. Tactical trading techniques can help you identify prices at which to buy.

Your Eternal Optimist;

Ned W. Schmidt, CFA,CEBS

Click to email me: nwschmidt@earthlink.net

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