Dr. Clive RoffeyMore black comedy statements about AIDS. Church groups are now advising their members that it is bad to have fizzy drinks such as Coke as it affects AIDS. When will this government come out with a total campaign that it is unprotected sex that causes AIDS and put a stop to all these old wives tales that are so popular among the majority of our population?
Meanwhile the gold price has broken above the critical $625 breakout area. The move above this should now trigger the target of $685. The Rand continues to bounce around the R7.18 level to the US currency. A break back above R7.30 will trigger a weakening to test the R8 level. But the main currency chart remains the Euro / $ picture. This sideways churning pattern needs a break above $1.29 to trigger the upside breakout situation and send the dollar plummeting to at least $1.43 to the Euro. This is the key to the next move in the gold market.
Once of the triggers to this potential dollar weakness is the set of serious sell divergence signals that are appearing across all the main US general equity indexes and in most of the European indexes as well. Whilst these global indexes have moved to new recent highs their respective oscillators have refused to mirror this movement and have failed to make new peaks. This is setting up a classic divergence sell situation.
The latter part of last week saw a sudden dumping of resource stocks as a general belief set in that the resource run had ended. This was typical of the final sell off leg of a long term correction. As far as I am concerned the resources bull run has only just started and has a long way to go, and I am talking in years, not weeks!!!!
Stay with this resources market. All the metal prices and their related stocks are ready for another bull run and in addition the other resource stocks such as SAPPI, Tongaat and Illovo should be included in long term portfolios.
One of the leading indicators of the gold market is the action of the highly geared penny stocks and resource shares. Most of the North American penny stocks have built huge bases that are ready for lift off and this will not occur on a falling gold price. But locally the resource stock Witsgold has had a major upside breakout into a new bull phase and this is indicating a more positive view of the gold shares going forward. Monday's bounce in the gold share prices saw several strong candlestick buy signals being mapped out by the leading gold and platinum shares. These are all trend reversal signals and indicate a major buying area.
But one of the most interesting aspects of the data is that relating to the CRB index. For the past few months the grains, as expected, have dramatically out performed the CRB index. But all the metals, precious and base, have charts that are indicating that they will again assume the performance leadership. This is not a sell for grains but rather a new bull run in metal prices.
The oil price has formed a solid base at the $58 level and a break back above $62 on Brent Crude will trigger a potential run to attack the previous highs.
One of the keys to the future of the gold market is the New Gold index. This has been trading inside a triangular pattern for the past six months. It needs a break above the R46 level to confirm the move into the new bull trend.
Meanwhile the JSE Gold index tested the lower trend of the huge diamond pattern and immediately bounced off this level. This index needs a break above the 3000 level to trigger the next upside charge. In both cases of the New Gold triangle and JSE Gold index diamond there is likely to be a dynamic upside catapult out of these high tension formations.
Even though the two gold indexes are ready to break out, this chart of the Euro / $ remains the key to global movement over the next phase. There is a strong short term resistance at $1.29 and a break above this will trigger a deluge of Dollar ditching. I have a count on this data to $1.43 against the Euro. This really is the key to the global markets going forward.
The $ / Rand and its falling wedge have been detailed on several occasions in the daily data. But in addition to the falling wedge there is a classic reverse divergence continuation buy signal as the currency has failed to match the new lows made by the RSI. This implies that there is at least one more up move to weakness still to come on this chart.
The Dow has a potential sell divergence as both the MACD and RSI have refused to follow the index to its recent new highs. This effect is evident on all the main US indexes as well as most of the leading European indexes. It is a warning shot that this is not a global buying area for general equities.
Aluminium broke upside off its base and has since pulled back to test the breakout. This is a classic buying area for chart watchers. In addition the RSI has dipped under its lower Bollinger Band that is also a basic buying area signal. I am looking for a major trend reversal in all metals at this point of time to attack the recent highs and to eventually push to all time new highs.
I rate metals as a LONG TERM bull market.
Brent Crude Oil is forming a major base and looking for the upside breakout to signal a trend reversal. Like the metals, once through the short term resistance I must look for an attack on the previous major peaks.
The gold price is shown relative to the CRB index. IN line with the lower gold price the relative strength chart has also dipped but has formed a short term resistance level. The interesting aspect of this data is the very positive picture of the RSI on the relative strength in the top frame. It has already broken upside and is ready to move to the upper levels. This indicates that the $gold price is likely to out perform the CRB index going forward.
The Palladium price has formed a huge triangular pattern on both its price in the lower frame and relative to the CRB in the middle frame. The top RSI has also formed a strong triangular pattern. The relative strength chart is ready to break upside and into a new bull trend both in price and performance.
The JSE Gold index is shown with its long term Elliott wave detail. The huge I-II correction ended in mid 2005 and large wave III commenced. The recent correction in the shape of a diamond since the start of this year is the relatively minor 1-2 with bull market legs 3 and 5 still to come. But the main aspect of this data is that the sell off wave C has NOT fallen under the low of wave A. This indicates a very weak correction and heralds a strong forward move once the correction has ended. I believe that we are into the trend reversal stage at this point of time and that all gold shares are major LONG TERM, not just trading, BUYS.
When we put the relative strength of the gold index against the JSE Overall index in blue in the middle frame we note that it corrected in the same manner as the main index. But that the recent 1-2 correction became a classic flat top correction on the blue relative strength. The c wave has ended and I must look for a new major bull trend in relative strength especially as the RSI in the top frame has a divergence buy signal for the relative strength chart. This is very BULLISH data.
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Dr. Clive Roffey
23 November 2006
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