Dr. Clive RoffeyOnce again terrorists strike to destroy the lives of normal people. The London bombing pushed the gold price up from $422 to $428 in an hour. But the moment that New York started trading it knocked it back to $422. It is actions like this that add credence to the manipulation and interference theories.
The indecisive churning in the general market continues and the frustrations increase as this skittish market bounces up one day and then loses the gains during the next trading session. Investor impatience is growing. But when all the annoying dust settles this is a market that is determined by the relative strength data and not individual stock performance.
The G8 has wiped out African debt and doubled aid with the undertaking from African countries that they will pursue democracy and good governance. I wonder which of these two sides will keep its promises?? While the altruists chant for an end to poverty, Ethiopian women are still producing 8 children and complaining that they are dying of starvation. In my opinion the poverty problem is not the responsibility of the G8 but of the African governments and the people procreating. It is about time that the African despots were made accountable for their actions. Accountability seems to be the modern catch phrase and it should be applied to every one, even in the case of poverty.
The precious metals remain in bull trends despite the US $12 hit on the gold price. All the data continues to indicate that the JSE Gold index is likely to continue to out perform the general market equity indexes.
The Euro is very close to its lows against the dollar. I am expecting a trend reversal in the fortunes of the dollar in the near future and a return to weakness. This does not automatically imply that the Rand will strengthen. I remain convinced that the currency has decoupled and will remain one of the weaker global currencies.
The Dow has broken the critical 10400 support level and is bouncing around this major area. If it fails to push above the major overhead resistance at 10 650 in the near future then there is overwhelming evidence for a serious downside period for the US indexes. The problem continues to be the huge six year potential double top pattern that has developed. I become increasingly bearish on the US markets by the day. The global spin off is likely to be nasty and the JSE is unlikely to escape damage despite the supposedly good fundamentals for the general equities and especially the retailers.
Silver remains locked inside its triangular pattern and requires a move above $7.50 to trigger the next bull phase. When triangles resolve they usually do so in a very strong way. So that the next move in precious metals is likely to be powerful.
Platinum broke above its critical $885 resistance for a few days and then pulled back to test this breakout. Another upside move will trigger the charge to test the $1000 level.
The Rand price of gold, the real determinant of South African gold share movement, has hit its major overhead resistance at R2950. It needs a move above this to trigger the next bull phase. This could occur by a strong gold price, continued weak rand or a combination of both. Frankly it does not matter which combination drive the move.
Durban Deep has mapped out a large reverse head and shoulders pattern that indicates a 50% upside from current levels as the next movement. Do not write off this stock, despite all the negativity.
A few weeks ago on the Roffey Review I detailed a downside for the Dollar against the Euro to a level of around €1.19. The above chart shows this level as the horizontal line. But note that all the top oscillators have grouped together for a buy signal and that the RSI is into oversold territory. The implication is that a bounce in the fortunes of the Euro is likely in the near future.
When we transpose to the daily data there is another grouped oscillator buy signal but in addition the RSI in the bottom frame has refused to make a new low with the currency. This implies that a trend reversal is very close at hand and I must look for a period of Euro strength during the next few weeks.
There is a strong overhead resistance at €1.27 and I do not expect any further upside above this level on a bounce.
The short term data on the Rand has been locked inside a flag pattern for the past month and is looking for the next direction. Although I am looking for a period of Dollar weakness against the Euro this does not automatically imply Rand strength. Yesterday's fall under R6.85 implies that the currency is set to weaken further.
The Rand /Dollar has hit up against a long term resistance level at $6.90. But the RSI in the bottom frame has pushed well above the flat resistance level that signalled the domination of the bear trend. In addition there was a divergence signal that indicated a reversal to a weaker rand. This chart looks like continuing upside with the result that the Dollar should continue to strengthen against the Rand, or the Rand weaken against the Dollar.
The $ gold price broke out of its diamond pattern and has since pulled back to test the breakout at $422. I would not like to see a break under $420 as this would severely test the major upside trend. A move back above $430 would confirm the continuation of the upside market.
The Rand price of gold has also hit a long term resistance level at R2950 an ounce. But there is no sign of a grouped oscillator danger signal or of any sell divergences on the RSI. In fact the opposite is true. There has also been an upside break above the 665 resistance level on the long term RSI. This signals that a long term bull market has started and that the bear phase of the past three years has ended.
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Dr. Clive Roffey
11 July 2005
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