Elliot Wave 4 Short Term Downcycle Probably In Progress
The second short term cycle high of the monthly upcycle (HUI and the XAU since 10-20-05 and NEM since early November) probably occurred yesterday for HUI/XAU and today right after the open at 47.13 versus 47.12 yesterday for NEM.
Given that NEM continues to outperform today the potential exists for an upside surprise here, meaning that the Wave 3 short term cycle highs may not have occurred yet. A I write this NEM actually has a very slight uptrend since early yesterday. The most likely scenario (80%+ probability) however is that NEM and the XAU fill their downside gaps at 46.05 and 114.29 today or Monday, which would mean that an Elliot Wave 4 short term downcycle is in progress. The likely explanation for NEM's short term cycle is that it hit an Elliot Wave 3 short term cycle high right after the open today at 47.13 versus 47.12 early yesterday, so it's short term upcycle rolled over dramatically the past day and should fill the downside gap at 46.05 very soon.
So, it appears likely that NEM and the XAU will fill downside gaps at 46.05 and 114.29 today or Monday. The NEM Lead Indicator continues to be bullish today since NEM is outperforming the XAU by a wide margin of +0.50% as I write this and was bullish yesterday at +0.35%, so this Elliot Wave 4 short term downcycle will probably be a brief and relatively shallow one, which makes sense cyclewise because HUI and the XAU's monthly upcycle is 4 weeks old and has obviously increased in strength as it should at this point in the monthly upcycle.
Both the XAU Put/Call Ratio, at 0.86572 (November expiration expires today) versus 0.80338 yesterday, which is an unusually large (> 6%) rise in fear that portends weakness today, and XAU Implied Volatility, at 32.065 yesterday versus 32.685 the day before versus a +1.41% rise in the XAU yesterday, which is a significant rise in complacency that portends weakness today since XAU Implied Volatility fell significantly more in % terms yesterday than the XAU rose, point to weakness today.
The reason why the XAU Put/Call Ratio and XAU Implied Volatility didn't work well if at all the past two days is because much of the huge spike move (NEM rose an amazing 9% in a little over one session) this week was due to unwinding of positions due to today's futures/options expiration. Short covering was a major factor as revealed by NEM's unusually large volume of 11.15 million shares on 11-16. Ciao
Given that NEM continues to outperform today the potential exists for an upside surprise here, meaning that the Wave 3 short term cycle highs may not have occurred yet. A I write this NEM actually has a very slight uptrend since early yesterday. The most likely scenario (80%+ probability) however is that NEM and the XAU fill their downside gaps at 46.05 and 114.29 today or Monday, which would mean that an Elliot Wave 4 short term downcycle is in progress. The likely explanation for NEM's short term cycle is that it hit an Elliot Wave 3 short term cycle high right after the open today at 47.13 versus 47.12 early yesterday, so it's short term upcycle rolled over dramatically the past day and should fill the downside gap at 46.05 very soon.
So, it appears likely that NEM and the XAU will fill downside gaps at 46.05 and 114.29 today or Monday. The NEM Lead Indicator continues to be bullish today since NEM is outperforming the XAU by a wide margin of +0.50% as I write this and was bullish yesterday at +0.35%, so this Elliot Wave 4 short term downcycle will probably be a brief and relatively shallow one, which makes sense cyclewise because HUI and the XAU's monthly upcycle is 4 weeks old and has obviously increased in strength as it should at this point in the monthly upcycle.
Both the XAU Put/Call Ratio, at 0.86572 (November expiration expires today) versus 0.80338 yesterday, which is an unusually large (> 6%) rise in fear that portends weakness today, and XAU Implied Volatility, at 32.065 yesterday versus 32.685 the day before versus a +1.41% rise in the XAU yesterday, which is a significant rise in complacency that portends weakness today since XAU Implied Volatility fell significantly more in % terms yesterday than the XAU rose, point to weakness today.
The reason why the XAU Put/Call Ratio and XAU Implied Volatility didn't work well if at all the past two days is because much of the huge spike move (NEM rose an amazing 9% in a little over one session) this week was due to unwinding of positions due to today's futures/options expiration. Short covering was a major factor as revealed by NEM's unusually large volume of 11.15 million shares on 11-16. Ciao
posted by Joe Ferrazzano at
7:04 AM
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