Dr. Clive Roffey
Once the judgment of an effective 15 years in jail for Schaik was announced there was the predictable outcry from the hard line left wing addicts that the sentence was far too harsh and that the judge was the real villain of the piece. What these people conveniently forget is that this was not a civil action but a case brought by the STATE against Schaik with dramatic implications of fraud and corruption involving Zuma, the already anointed prospective President. As the ANC has over a two thirds majority in Parliament they are effectively the STATE. Thus the net effect is that the ANC has implicated one of its own leaders in significant fraud and corruption actions. In the maneuvering of African political chess it is your move Mr. Mbeki, and the clock is running. What transpires next may well determine the attitudes of foreign investors towards South Africa and either confirm our position as a true democracy or dump us on the scrap heap as just another banana republic that white washes (is that a politically correct phrase?) its favourite sons.
The most interesting market event for me was bullion's break above the $422 level that I detailed in the last issue. This in my work constitutes a serious upside breakout. The price rose to $427 and then pulled back to $423 to retest the solidity of the breakout. Friday's surge to $427 has triggered a serious upside move to at least $485 by the end of the year.
As gold was breaking above $422 the silver price confirmed the upside by also breaking out of the triangular pattern that I have often detailed and which has held the price in check for the past year. But the key chart remains the platinum price. A move above the major resistance at $880 will trigger a charge to $1000. The precious metal markets are brewing up for a serious upside charge.
In total contrast the equity markets are hovering in uncertainty. The Dow is a typical example. It opens over 100 points up but by the end of the session has lost nearly all this move. This continued daily opening surge and eventual loss scenario is just not symptomatic of bull market behaviour. It smacks of nervousness and uncertainty. This is reflected in the trading pattern of the Dow for the past few weeks. It has a serious resistance at 10650 and a support at 10450. A move under 10450 will be catastrophic and lead to a serious bear market. Perhaps this is what the bullish data on the precious metals is anticipating.
Meanwhile my analysis if the important Rand price of gold is smack on target. I was looking for a move to R2920 after the break above R2700. The price hit R2905 and has since consolidated. The next upside target is R3200 an ounce and this will really set the producers alight, especially the more marginal Harmony and Durban Deep miners.
In the same vein as the Dow the general market share prices on the JSE are brewing up for a serious sell off. The massive seven month top patterns in the banking and retail sectors are quite frightening and I am expecting a serious sell off to start any time now. There are some hyper-critical support levels throughout the whole market that are about to be really tested. If they fail it will be one of the finest shorting opportunities that we have seen since 1998.
Platinum remains trading inside the flat top triangle. It has moved right into the apex of the pattern on both the metal price and the RSI in the bottom frame. An upside break will trigger a charge to at least $1000 an ounce for this precious and industrial metal. The platinum stocks are already showing real strength in their recent stock price performance.
Silver over the same period has mapped out a triangular pattern. The price is really pushing to break upside out of the triangular pattern. There is a minor resistance at $7.50 but a move above this will not only trigger a charge to $10 for the silver price but also confirm the upside potential for both the platinum and gold charts.
All the precious metal charts are working in concert to confirm a potentially fierce upside breakout.
Gold bullion has reacted back to the main support level. But the key to this data is the RSI oscillator in the bottom chart. It has a well defined downtrend line and a break above this will signal a very fast upside charge in the bullion price off the current base pattern. A break in the RSI will lead to a really strong move in the gold price.
The gold price in rand has broken upside out of its own triangular long term pattern on the weekly price data. But it has also broken well above the major resistance level that has limited the price upsides over the past year. In addition there is a serious upside break in the RSI. This RSI break has dramatic implications. First it signalled a strong upside move but also signals the transition from a break into a bull market phase. There is no sign of any grouped oscillator danger or potential sell divergences. Go for the ride.
Palladium is also brewing for a resurgence of price movement. It has a serious support level at $180 and a triangular pattern from which an upside break above $210 will trigger a serious trend reversal. Also note that the RSI has a resistance level that, once broken, will confirm a powerful upside potential.
Aluminium had a rising wedge pattern that resulted in the classic vertical sell off back to the start of the wedge formation. But note that the RSI in the bottom frame has mapped out a classic reverse divergence in which the RSI has made a substantial new low under its recent lows but that the price has refused to confirm this low. This implies that there is still further upside to come. This bullish signal indicates that after the recent consolidation in the base metals there is likely to be a further price surge.
For FREE trial data contact :-
Dr. Clive Roffey
info@utm.co.za
www.charts.co.za
www.shareaction.co.za
12 June 2005
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