Gold Action #418Dr. Clive Roffey Back onto terra firma SA. The flights to the UK on the Virgin airbus were terrible. On the way over to the UK the seats were so close together that I could not get my legs in behind the seat. They are OK if you are less than 5 ft 10 ins but if you are taller fly SAA Boeing. On the way back the food was disgusting. So all in all my first time with Virgin was not a great flying experience and in future I will stick to SAA for long hauls!!!!! Now for the good news. Gold has rocketed above the $555 resistance and is on course for my three year target of $610 to $625. When it achieves this level I will have to rethink my long term strategy. I will remain very bullish for the upside potential over the next few years but will need to analyse the immediate picture. I have already detailed that there are further potential counts to $685 and $725 but the data will have to confirm them once the $610 is reached. The picture with the shares is very different. As I have always maintained, the share prices MUST go well ABOVE the previous bull market peaks of mid 2002. So far only Anglogold has achieved this effect whilst the rest are still way behind. I must therefore look at the shares as being in the early stages of a long term bull trend with a substantial upside still to come. On this note I was amused to see the joint CEO of a leading broking firm stating that there was no value in the gold market as the Rand price of gold had not moved. What rubbish!! The key Rand price of gold has appreciated 50% in the past year and is only one day away from an all time new high and still on target for my count to R5400. In a bull phase the shares will outperform the Rand price of gold and in a correction they will underperform. All the data indicates that the shares are starting to appreciate against the Rand price of gold indicating a new bull phase. The silver price has rocketed as expected and is out performing gold, again as often detailed. But the Dow is still vacillating under the 11 500 resistance and failing to make the final decisive breakthrough. If it does break above this seven year resistance then I must look for a further 5000 points on the index. But if it fails then heaven help us, because the share prices certainly will not. What is the connection between Mozart's 'Cosi Fan Tutti', Shakespeare's 'Twelfth Night' and the SA governments aids policy?? They are all a comedy of errors!! The resource market is still alive and charging. Sure we will have a few sharp setbacks but stock market action remains firmly rooted in the resource arena. Forget about general equities, apart from a very few selective stocks. This is not a market for investing in broad based unit trusts; it is a very specific sector orientated market. Finally the oil price has broken above a key resistance level and has signaled its intention of attacking the $80 a barrel level. This will put a dampener on economic growth. Stay with the gold, platinum and resource stocks. This is where the market action is likely to remain going forward.
I have detailed my Elliott count on the gold price for the past five years starting with the huge A-B base pattern that most other analysts mistakenly called the 1-2 first correction. It was not a correction but the second leg of a massive base. It was a typical example of the 'Chinese Torture' base detailed by Prechter in his book on patterns. I have also detailed that the recent correction back to $535 was a minor 7-8 in a nine wave move and that the price would go well above its recent high as it soared into wave 9. This has occurred. What happens when it hits 9?? That is the key question. There are two alternatives. First it can signal a completion of the recent bull market that started in May of last year and have a serious correction back to the $555 level as wave 8 of the main trend. Alternatively it can have a minor correction into a wave 10 and then continue into an even stronger 13 wave extension. At this point of time there is no data that indicates the direction of the alternatives. Studies of the oscillators and divergence will provide the clues. A serious sell divergence at $610 will trigger a trend reversal back to $555 but if the RSI makes a new high at $610 then I would expect to see the strongly bullish 13 wave continuation occur. But the share prices are still way under their 2002 peaks and as I have so often stated, if Elliott wave analysis has any validity, the prices MUST go well above the 2002 peaks. This is not in sight at the moment and my analysis indicates that the shares still have a hell of a lot further upside to come. Thus I would tend towards the 13 wave extension to test $700 rather than a serious correction at $610 back to $555. But we must wait for confirmation from the oscillators and divergence analysis. Apr 2, 2006 'Gold & Silver Penny Stocks' is the sister publication to 'Gold Action' and is produced by Dr. Clive Roffey; croffey@mweb.co.za
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