Dr. Clive Roffey
The various markets are at critical crossroads. All the US indexes have again failed to penetrate the previous rally highs. This is an extremely negative environment. Will someone please tell me why, if the US economy is in such great shape, the Dow is 1000 points lower than at the beginning of the year?? The market is never wrong!! It is telling us something about the forthcoming election.
Golds are ready for the next bull run after a minor corrective period over the past two months. The C wave sell off in the gold stocks appears to have run its course and the next upside move should be dynamic. The gold price recently hit $425 and then reacted sharply back to $410. I believe that this was the last repulsion from the critical $430 resistance level. I do not expect to have a major resistance blockage at $430 but expect to see bullion slice right through this level and then use it as a support level for future movement. Above $430 and every chart watcher in the world will turn bullish on gold, even those who have been calling for a correction to $360.
For so long I have advocated that investors should pay more attention the gold share price movement rather than the bullion price. The precious metal shares are ready for a serious upside run through to the New Year. Even the underperforming platinums should join in the celebrations.
The rand price of gold has again reacted downside on the short term currency strength. However the chart data indicates a higher rand gold price to well above R3000 an ounce. This will send the gold stocks into orbit once it is en route to this target. In the meantime I continue to look at the precious metal and resource stocks as the action areas in the market.
I believe that the bullion price has accomplished all the work needed to break above the long 15 year resistance at $430. I am looking for it to slice above this level like a hot knife through butter. The base has been built and has been completed, now for the start of the real bull market in precious metals. This is the stage when suddenly every one turns bullish and it becomes a media event.
Silver looks fantastic and should easily break to new highs and take the silver stocks along with it. Silver has only just started its bull run. This is a brand new bull market reacting off a huge 11 year base pattern. The dip earlier this year was nasty but as I stated at the time, the price would recover and move to new highs, as always happens in a true bull market. And gold and silver are both in true bull markets.
All the technical data continue to confirm that the precious metals and their related stocks will keep on out performing US and global general equities. Stay in gold and silver. Do not be off put by the sudden surges and reactions, this is all part of the volatile precious metal arena.
Finally my penny stock portfolio is up 28% as at Friday's close. I have added two more stocks to the portfolio that have consumed a further $20 000. This brings the total investment to $82 000 out of the original $100 000. Not too bad a return for a month.
ANALYSIS
The Dow is the most critical global chart. If the US economy is in such wonderful shape then why is the Dow 1000 points lower than at the beginning of the year? The markets are never wrong.
Every time the Dow rallies it smacks its head on the underside of the previous peak. This is not a confident market. Any break under the 9850 support will lead to a huge sell off. Watch this space as it will affect the JSE.
ANALYSIS
The same data is apparent on the broader based S&P index. The rallies keep smacking on the underside of the previous rally peak.
There is also a critical support level at 1050 on the S&P. A fall under this support will lead to a severe sell off in US stocks.
Watch this data it is extremely important.
ANALYSIS
The NASDAQ also exhibits the same resistance characteristics. Every rally fails at the under side of the previous rally.
A fall by the NASDAQ under the short term support at 1900 will also lead to a serious period of negative activity.
ANALYSIS
The HUI Goldbugs index also has a resistance level that has impeded further upside progress since the beginning of this month. But there is a huge difference between this data and the US equity index charts. The HUI has a very strong support level underpinning the upside move and bull trend. Even if there is a minor reaction the support level will present an excellent buying opportunity, not a selling zone as in the Dow and S&P.
ANALYSIS
The same data is apparent on the Philadelphia Gold Index (XAU). I am sorry to bore you with repetitive data but it is essential to appreciate the difference in chart data between the gold stocks and the US equities. Golds have a solid support underneath their current bull run whilst the US equities are testing their last ditch support level that will lead to a major collapse if it fails.
ANALYSIS
The Toronto gold index puts the whole picture into perspective. There is a massive support level that blocked the upward thrust of the index for the period since May. Over the past month the index forced its way above this resistance level. During the past few weeks it has pulled back to test the major support level. This is usually a major buying area.
The rest of this analysis is reserved for paid subscribers.
'Gold & Silver Penny Stocks' is the sister publication to 'Gold Action' and is produced by Dr. Clive Roffey.
For FREE trial data contact :-
Dr. Clive Roffey
info@utm.co.za
www.charts.co.za
www.shareaction.co.za
23 October 2004
Email this Article to a Friend 
Printer Friendly Version
