Gold Action
Dr. Clive Roffey
I becoming increasing annoyed at politicians from so called under-developed countries attempting to lay the blame for the poverty in their lands on the doorstep of the industrialized nations. Poverty is, and always has been, part of mankind's history, regrettable though that may be. But the last fifty years has seen an unprecedented increase in this form of human suffering. The blame for this lies with the countries concerned, and not the developed world. The average number of children per female in Europe is 1.6 but in the poverty stricken nations it averages over 5 per female with some countries up to 7 children per female. This irresponsible and uncontrolled procreation is the sole cause of poverty. More and more children pumped into an overloaded system deplete the natural resources and especially the environment as families scrabble to find shelter and enough to eat. It also stretches free medicine, social service and education to the limit in countries that can afford these luxuries.

Laying this problem at the feet of industrialized nations is nothing more than attempted emotional blackmail that covers up the unwillingness of the politicians in the countries with poverty to address their accelerating birth rates. When did you last hear of a politician decrying the huge procreation rate and proposing measures to stem the flow of infants? This subject is far too hot for politicians to handle and they hide behind the convenient maternal apron of tribal tradition. Handing out welfare to high people growth countries is merely a panacea and ignores the root problem. Politicians in these countries should be forced by the industrialized nations to take steps to control their birth rates. China did it, why cannot other countries take steps to control population growth instead of continuously entreating the West with their begging bowls and emotional blackmail? Thursday's Star newspaper lead headline in Johannesburg detailed a major police clampdown on street beggars. The same philosophy needs to be put into practice on a large scale with irresponsible procreation. It is a wonderful system that allows parents to have as many children as they like, then abrogate their parental responsibilities and blame the government for not looking after them. Whereas social handouts to underprivileged parents of children may be altruistically laudable it merely encourages more children into the system. A family with six children can live well above the breadline on the handouts for these children.

I believe that politicians in the poverty ridden nations should take responsibility for their national welfare and not strip their Treasury's coffers for their own benefit whilst running to Europe and attempting to place the emotional blame for poverty on better organized economies.

Back to the markets. All the resource stocks are all making serious upside breaks out of their bearish trading patterns of the past three years. I continue to look for the resources arena to produce the results for 2005.

On The JSE the gold sector has been inside a huge set of base formations since July last year. Falling wedges, broadening patterns, double bottoms and delayed fulcrums have developed on these stocks during this period. All these base patterns are associated with divergence and grouped oscillator buy signals. I believe that resources, including the gold and platinum stocks, are breaking upside into a new major bull market.

The Rand has weakened above the R6.12 resistance level that I have previously detailed and has triggered further potential weakness to R6.60. There were numerous negative comments about the gold sector and DRD in particular. The share ignored this and went up on the JSE. When stocks ignore dire news it is time to buy and not be sucked into old news negativity.

The 5-6 correction took the form of an Elliott flat top a-b-c pattern. Applying Fibonacci to this data we find that the ensuing up move to$455 was 1.618 times the fall in the 5-6 correction.

The correction from the $455 top in November to the current $414 level is a 50% retracement of the bull run from May to November. But in addition there is a buy divergence on the oscillator. I am not sure what degree of correction is the move from x to y. But I believe that it is likely to be the first minor correction in the move from 6 to 7.

I compare the JSE Resources index with the JSE Gold index. From 2000 to April 2002 both indexes were in a bull market and mirrored each others rises and falls inside this bull trend. Since April 2002 they have gone their different ways. This is a classic Elliott Wave scenario.

Bull trends are fairly standard and reproducible with their five wave formats. But corrective phases can occur in numerous different ways. Elliott has the standard Zig-Zag, Flat and Irregular tops, plus the compound double and treble Zig-Zags. In traditional charting there are flags, triangles, rectangles, head and shoulders, broadening patterns etc. However when the correction has ended in one chart it implies that all similar charts will also have ended their correction, irrespective of the type.

In the above chart the JSE Resources index has mapped out the easily recognizable triangular pattern to which I have referred in many previous analyses. I have also detailed the flag pattern on the JSE Gold index and also previously discussed the various flag patterns on all the gold shares, including DRD.

Note that in the above triangular and flag patterns all the smaller trend changes occurred at the same time in both charts. The only time in which a variation appears is from November last year to date. The resources chart has moved up whilst the gold chart has made a new low. This is not a sudden divergence of movement but a signal that the gold data is mapping out an irregular bottom that, once complete will lead to the gold stocks playing a dynamic catch up.

The bottom line is that all my data indicates that the resource stocks are all making major upside breaks out of their three year formations. This implies that the triangular bear market correction since April 2002 has ended and resource stocks have started a major new bull market phase that should take the prices well above the previous April 2002 highs.

It also implies that the gold stocks are also at the end of their three year bear phase and ready to reverse into a brand new bull market in which the prices should recover to well above their previous April 2002 highs.

For FREE trial data contact :-

Dr. Clive Roffey
info@utm.co.za
www.charts.co.za
www.shareaction.co.za

6 February 2005