...............................Happy New Year!

From http://www.JoeFRocks.com/ !

Freeport-McMoRan Copper & Gold Inc. (FCX) Is Also In The S & P 500 (SPX)

Thanks to Kevin in Phoenix for performing that due diligence:

http://finance.yahoo.com/q/cp?s=%5EGSPC&c=3

Since NEM and SPX work so well as lead indicators we probably don't need to use FCX, but it's good to know it's in SPX. I've noticed that FCX seems to trade like a copper stock and can run counter to gold/silver stocks at times, though that's just a relatively weak observation, not strong research. I haven't closely followed FCX in a while, but it's in my streamer when the market's open. I usually have a lot of stocks in my streamer though. Happy New Year!

The Six Week Plunge That Culminated In Long Term Cycle Lows For HUI, NEM, and the XAU on 5-10-04

coincided very closely with a 6 week plunge by SPX (S & P 500). Also note how other upcycles and downcycles coincide, with SPX tending to lead because it drives index fund gold/silver stock trading:

http://finance.yahoo.com/q/ta?s=%5EXAU&t=2y&l=off&z=l&q=b&p=&a=m26-12-9,m26-12-9,p12,m26-12-9,p12,fs,m26-12-9,p12,fs,w14&c=%5EHUI,NEM,%5EGSPC

The important cycles luckily don't match for SPX and gold/silver stocks (Bear Market/very long term downcycle since March 2000 for SPX and Bull Market/very long term upcycle since Oct/Nov 2000 for HUI, NEM, and the XAU). Most other cycles don't match either. Ciao

......................This Week's Charts Are Available

At http://www.joefrocks.com/GoldStockCharts.html . See NEM's 5 day chart found dated 12-30 that shows it's short term and minor int term upcycle may have peaked. There's also a relative 5 day chart for SPX, HUI, NEM, and the XAU. Notice in the 5 day chart that shows SPX, HUI, NEM, XAU relative performance that NEM outperforming (SPX index funds buying NEM) the XAU leads to strength and underperforming (SPX index funds selling NEM) leads to weakness. Notice that NEM tends to outperform when SPX trends up and underperform when SPX trends down. This is because SPX leads most indices and drives index fund trading because it's the 800 lb gorilla of indices. HUI and the XAU's latest 1 year charts are found toward the bottom. In HUI's 1 year chart dated 12-30 found near the bottom, notice how similar this minor int term cycle is to the prior one, though more post sell signal strength occurred after the latest sell signal because the major int term upcycle is increasing in strength. Ciao.

.......NEM Outperformed The XAU By +0.64% Today

Early weakness followed by strength appears likely next Tuesday. NEM may have finally hit a minor int term cycle high today and has downside gaps at 51.59, 50.45, and at 48.75 that should get filled in the near future. Once again SPX was a major factor today and appears to be a lead indicator for gold/silver stocks and is probably the reason why NEM is such a reliable lead indicator for HUI/XAU. Ciao

NEM Is The Only Gold/Silver Stock In The S & P 500 (SPX)

See http://finance.yahoo.com/q/cp?s=%5EGSPC&c=6

I quickly scanned all 500 and could have missed something, but it appears that NEM is the only gold/silver stock in SPX, which obviously confirms what I believed. Ciao

SPX Weakness Caused SPX And Other Index Funds To Sell NEM (In SPX) And Other Gold/Silver Stocks (Other Indices)

SPX index funds sold NEM early today and other index funds were selling their gold/silver stocks. Minor intermediate term cycle highs appear to have finally occurred yesterday for HUI, NEM, and the XAU.

It's becoming obvious that the reason why NEM is such a good lead indicator for HUI/XAU is because it's the sole gold/silver stock component of SPX (S & P 500), and, since SPX is the 800 lb gorilla of indices, it drives index fund trading, hence SPX is the ultimate lead indicator. Luckily however SPX's cycles don't match gold/silver stocks' cycles. SPX is in a very long term downcycle/primary Bear Market since March 2000 while HUI, NEM, and the XAU are in very long term upcycles/primary Bull Market since October/November 2000. However, SPX obviously has a profound affect on gold/silver stocks' minor int term and short term cycles due to index fund trading.

http://finance.yahoo.com/q/ta?t=5d&s=%5EXAU&l=off&z=l&q=b&a=m26-12-9&a=p12&a=fs&a=w14&c=%5EHUI%2C+NEM&c=%5EGSPC

Rapid very modest % moves in SPX cause rapid significant moves in NEM and other gold/silver stocks in the many indices affected by SPX. Because SPX is probably about to enter the parabolic part of it's monthly downcycle after being very flat, actually rising during much of the gold/silver stock strength in the short term and the minor int term upcycles, SPX should bring an end to the minor int term upcycle since 10-20 for HUI/XAU. It may have ended yesterday.

The NEM Lead Indicator is bullish right now at about +0.50% after being very bearish yesterday at -1.14% vs the XAU. Keep in mind that indicators portend more strength in short term upcycles versus downcycles and of course the monthly cycle has probably turned down or at least rolled over dramatically, so less strength is likely in a monthly downcycle than a monthly upcycle, which is another consideration.

XAU Implied Volatility fell -1.45% to 30.260 on Thursday 12-29 from 30.705 on 12-28 versus a +1.67% rise in the XAU on 12-29, which is a slight (up to 0.24%) 0.22% rise in fear (-1.45% + +1.67% = +0.22%. The XAU wall of worry grew by +0.22%, therefore fear rose by +0.22%) that portends strength/an uptrend during part of Friday 12-30's session.

The XAU Put/Call Ratio fell a significant (0.50-1.99%) 1.06% today to 1.03318 from 1.04425 on 12-29 which portends some weakness today.

The latest COT (Commitments Of Traders) data is bearish, with the non contrarian gold Commercial Traders (data as of 12-20-05) engaging in aggressive long liquidation (sold a large 8157 long futures/options contracts) and doing significant short selling (shorted 4202 futures/options contracts). Ciao

NEM Underperformed The XAU By A Very Bearish -1.13% Today

After a very early spike move NEM traded sideways the remainder of the session while HUI/XAU rose significantly. Minor int term cycle highs may have finally occurred today. The S & P 500 (SPX) fell 5 points during the last hour after being in plus territory nearly the entire session, so SPX is probably leading gold/silver stocks to the downside, which is why SPX component NEM lagged HUI/XAU dramatically today.

Gold/silver stocks followed the zig zags of SPX as usual, though the % moves by SPX are much smaller, so it takes some work to clearly see the relationship on some days. Note that SPX popped early then trended down and so did gold/silver stocks. Remember that SPX tends to lead. Late in the session ^GSPC = SPX trended down ahead of NEM, HUI, XAU and then trended sideways at session's end for about 45 minutes while NEM trended modestly higher and HUI/XAU were in sharper uptrends.

http://finance.yahoo.com/q/ta?s=%5EXAU&t=5d&l=off&z=l&q=b&p=&a=m26-12-9,m26-12-9,p12,m26-12-9,p12,fs,m26-12-9,p12,fs,w14&c=%5Ehui,nem,%5EGSPC

SPX (S & P 500) Had Very Brief Strength Followed By A Downtrend

So did HUI, NEM (in SPX), and the XAU:

http://finance.yahoo.com/q/ta?s=%5EXAU&t=5d&l=off&z=l&q=b&p=&a=m26-12-9,m26-12-9,p12,m26-12-9,p12,fs,m26-12-9,p12,fs,w14&c=%5Ehui,nem,%5EGSPC

Very modest % moves in SPX cause rapid significant moves in NEM and other gold/silver stocks in the many indices affected by SPX. Because SPX is probably about to enter the parabolic part of it's monthly downcycle after being very flat, actually rising during much of the gold/silver stock strength in the short term and the minor int term upcycles, SPX should bring an end to the minor int term upcycle since 10-20 for HUI/XAU. It may have ended just after today's open.

The NEM Lead Indicator is bearish right now at about -0.50% after being very bullish yesterday at +1.04% vs the XAU. Keep in mind that indicators portend more strength in short term upcycles versus downcycles and of course the monthly cycle has probably turned down or at least rolled over dramatically, so less strength is likely in a monthly downcycle than a monthly upcycle, which is another consideration.

XAU Implied Volatility rose +0.74% to 30.705 on Wednesday 12-28 from 30.480 on 12-27 versus a +2.47% rise in the XAU on 12-28, which is a very sharp (3-6%) 3.21% rise in fear (+0.74% + +2.47% = +3.21%. The XAU wall of worry grew by +3.21%, therefore fear rose by +3.21%) that portends strength/an uptrend during part of Thursday 12-29's session.

The XAU Put/Call Ratio fell a sharp (2-2.99%) 2.84% today to 1.04425 from 1.07476 on 12-28 which portends some weakness today.

The latest COT (Commitments Of Traders) data is bearish, with the non contrarian gold Commercial Traders (data as of 12-20-05) engaging in aggressive long liquidation (sold a large 8157 long futures/options contracts) and doing significant short selling (shorted 4202 futures/options contracts). Ciao

NEM's Unfilled Downside Gap At 48.75 From 12-7 Was A Sign

On Tuesday and Wednesday of last week NEM tested it's downside gap at 48.75 (from 12-7) with cycle lows on those days at 48.88 and 48.89. The fact that the downside gap at 48.75 didn't get filled, and, that the NEM Lead Indicator was a very bullish +2.15% two weeks ago and the COT data was also bullish, clearly pointed to a substantial rally. Ironically I was looking to trade XAU Calls long AFTER NEM's downside gap at 48.75 got filled, because often cycle highs or lows occur shortly after gaps get filled, but didn't buy because it didn't get filled, when it was actually a much more bullish sign that it didn't get filled.

So, I'm still in a learning process when it comes to trading a monthly/minor int term cycle long after a sell signal has occurred. Most your profits typically occur pre sell signal because the minor int term cycle is getting stronger/more parabolic and the risk reward ratio is favorable. After a sell signal (in rollover/flattening out mode) one should be trading much more modest positions because risk is much higher after a minor int term cycle sell signal, which occurred on 12-9. The fact that the minor int term/"monthly" cycles are getting longer is complicating things. They're really too long to call monthly cycles now. I'll have to call them minor intermediate term cycles or minor int term cycles to shorten it. Ciao

NEM Outperformed The XAU By A Very Bullish +1.04% Today

Which strongly suggests that HUI and the XAU have more upside, though probably not much. Index funds were major contributors to the recent strength, just as they were major contributors to yesterday's weakness:

http://finance.yahoo.com/q/ta?t=5d&s=%5EXAU&l=off&z=l&q=b&a=m26-12-9&a=p12&a=fs&a=w14&c=%5Ehui%2C+NEM&c=%5EGSPC

This monthly upcycle peaking in rollover mode thanks partly/maybe largely due to index fund buying is exactly what happened in the prior monthly upcycle as I said before.

Notice how NEM led to the upside today which was probably due to index funds buying NEM:

http://finance.yahoo.com/q/ta?s=^XAU&t=1d&l=on&z=m&q=l&p=&a=&c=^hui,nem

SPX's monthly downcycle since 12-14 should soon turn sharply lower, which should end the gold/silver stock monthly upcycle very soon due to index funds selling their gold/silver stocks. SPX fell a few points at session's end which points to weakness/a downtrend early tomorrow for gold/silver stocks that could come after a gap up. It doesn't take much movement in SPX (S & P 500) to move gold/silver stocks because index funds are an enormous market. Ciao.

................................As Flat As It Gets!

HUI may have hit it's monthly cycle high yesterday and is on the very flat part of it's monthly cycle. It's rolling over dramatically after a very sharp rise late last week. Check it out:
http://finance.yahoo.com/q/ta?s=%5EHUI&t=5d&l=off&z=l&q=b&p=&a=m26-12-9,p12,fs,w14&c=

...........Major Intermediate Term Upcycle Channel Surfing

Another way you know that the monthly cycle is peaking is that NEM, XAU, and HUI are at the top of their major int term upcycle channels. Monthly cycle lows occur at or near the bottom of the major int term upcycle channels. NEM's chart dated 12-23 is found 8 charts down and you have to scroll down a ways to get to the XAU's and HUI's charts dated 12-23 that show their major int term upcycle channels.

http://www.joefrocks.com/GoldStockCharts.html

.................................NEM Upside Surprise

NEM just took out yesterday's high at 53, but the important thing is that the monthly cycle is peaking in roll over mode, in similar fashion to what occurred in the prior monthly cycle in late September, I'm NOT a psychic.

This Rebound Is The Monthly Downcycle Beginning Relatively Flat

So, today's rebound fits the nature of cycles. HUI and NEM hit monthly/minor intermediate term cycle highs yesterday and the XAU did so on 12-12. Gold is doing an Elliot Wave B up in a monthly downcycle.

SPX (S & P 500) drives index fund trading and therefore HUI, NEM (in SPX), and the XAU. A lot of yesterday's weakness was due to index funds selling gold/silver stocks and early today they were buying, but it should be a similar day with early very brief strength followed by a downtrend. SPX is in a monthly downcycle since December 14 but hasn't hit a 2% follow through sell signal yet. When SPX goes down or up that leads to weakness or strength in other indices and their corresponding index funds sell or buy their gold/silver stocks and of course SPX index funds sell or buy NEM. See http://finance.yahoo.com/q/ta?t=5d&s=%5EXAU&l=off&z=l&q=b&a=m26-12-9&a=p12&a=fs&a=w14&c=%5Ehui%2C+nem&c=%5EGSPC

The NEM Lead Indicator is bullish right now at about +0.50% after being slightly bearish yesterday at -0.14% vs the XAU. Keep in mind that indicators portend more strength in short term upcycles versus downcycles and of course the monthly cycle has probably turned down or at least rolled over dramatically, so less strength is likely in a monthly downcycle than a monthly upcycle, which is another consideration.

XAU Implied Volatility rose +6.26% to 30.480 on Tuesday 12-27 from 28.685 on 12-23 versus a -0.53% decline in the XAU on 12-27, which is a very sharp (3-6%) 5.73% rise in fear (+6.26% + -0.53% = +5.73%. The XAU wall of worry grew by +5.73%, therefore fear rose by +5.73%) that portends strength/an uptrend during part of Wednesday 12-28's session .

The XAU Put/Call Ratio fell a significant (0.50-1.99%) 1.45% today to 1.07476 from 1.09059 on 12-27 which portends some weakness today.

The latest COT (Commitments Of Traders) data is bearish, with the non contrarian gold Commercial Traders (data as of 12-20-05) engaging in aggressive long liquidation (sold a large 8157 long futures/options contracts) and doing significant short selling (shorted 4202 futures/options contracts). Ciao

...............................Watch That 800 Lb Gorilla!

SPX (S & P 500) drives index fund trading and therefore HUI, NEM (in SPX), and the XAU. See
http://finance.yahoo.com/q/ta?t=5d&s=%5EXAU&l=off&z=l&q=b&a=m26-12-9&a=p12&a=fs&a=w14&c=%5Ehui%2C+nem&c=%5EGSPC

HUI and NEM probably put in monthly/minor int term cycle highs today while the XAU peaked on 12-12. This monthly cycle has been similar to the prior one, where index funds led to monthly cycle highs in rollover mode in late September, then index funds were major contributors to the sharp decline that occurred in the first three weeks of October, until October 20, when HUI and the XAU hit monthly cycle lows.

NEM underperformed the XAU today by -0.14% which points to more weakness tomorrow, as does the fact that VIX, the SPX Volatility Index (gauge of SPX options implied volatility), rose an unusually large 13% or so today which is an unusually large rise in fear that portends near term weakness. The modest strength that SPX had most of last week ended early today, and, SPX's significant decline today led to sharp declines in HUI, NEM, and the XAU from their early highs in plus territory. Relatively modest changes in SPX lead to significant moves in gold/silver stocks because index funds are a huge market. Basically nothing has changed from my latest weekly update and the target ranges for the monthly cycle lows remain unchanged at 240-250 for HUI, 45.50-47.50 for NEM, and 110-115 for the XAU in the next few weeks. Ciao

...........SPX (S & P 500) Takes A Dive, So Do HUI, NEM, and the XAU

Today was a great example of the affect that index funds have on gold/silver stocks. SPX gapped up at the open and had very brief strength, so did HUI, NEM, and the XAU. SPX (S & P 500) takes a dive shortly thereafter, so did HUI, NEM, and the XAU. SPX index funds are probably the largest NEM traders nearly every day. When SPX goes down that leads to weakness in other indices and their corresponding index funds sell their gold/silver stocks. See the chart at
http://finance.yahoo.com/q/ta?t=5d&s=%5EXAU&l=off&z=l&q=b&a=m26-12-9&a=p12&a=fs&a=w14&c=%5Ehui%2C+nem&c=%5EGSPC

.............Index Fund Buying Leads To Early Strength

SPX popped early therefore other indices including HUI, NEM (in SPX), and the XAU popped early, see

http://finance.yahoo.com/q/ta?t=5d&s=%5EXAU&l=off&z=l&q=b&a=m26-12-9&a=p12&a=fs&a=w14&c=%5Ehui%2C+nem&c=%5EGSPC

The dumb money likes to buy early in the day, especially on the first trading day of the week. The upside surprise spike due to index fund buying today changes nothing, so my latest weekly assessment is unchanged. HUI, NEM, and the XAU should experience monthly downcycles, that probably began today, lasting about two weeks and taking HUI, NEM, and the XAU toward their major upcycle trendlines with targets 240-250 for HUI, 45.50-47.50 for NEM, and 110-115 for the XAU. Note that the monthly cycle peaking a few weeks after it appeared to peak, due to index fund buying, as it rolls over dramatically is exactly what happened in the previous monthly cycle. SPX has trended modestly higher during most of the past 5 sessions and it doesn't take much upside or downside in SPX to move the gold/silver stock market since SPX/index funds are a much larger market. Note that the XAU hasn't taken out it's 12-12 high.

The NEM Lead Indicator is bullish right now at about +0.50% after being slightly bullish on Friday at +0.04% vs the XAU. XAU Implied Volatility and the XAU Put/Call Ratio both point to weakness as discussed below. Keep in mind that indicators portend more strength in short term upcycles versus downcycles and of course the monthly cycle has probably turned down or at least rolled over dramatically, so less strength is likely in a monthly downcycle than a monthly upcycle, which is another consideration.

XAU Implied Volatility fell -2.10% to 28.685 on Friday 12-23 from 29.300 on 12-22 versus a -0.08% decline in the XAU on 12-23, which is a sharp (2-2.99%) 2.18% rise in complacency (-2.10% + -0.08% = -2.18%. The XAU wall of worry shrank by -2.18%, therefore complacency rose by +2.18%) that portends weakness/a downtrend during part of Tuesday 12-27's session .

The XAU Put/Call Ratio fell a significant (0.50-1.99%) 1.25% today to 1.09059 from 1.10435 on 12-23 which portends some weakness today.

The latest COT (Commitments Of Traders) data is bearish, with the non contrarian gold Commercial Traders (data as of 12-20-05) engaging in aggressive long liquidation (sold a large 8157 long futures/options contracts) and doing significant short selling (shorted 4202 futures/options contracts). Ciao

................................Weekly Update Ready

At http://www.joefrocks.com/TradetheCycles.html scroll down a few pages past the major averages stuff. See http://www.joefrocks.com/GoldStockCharts.html for all the charts. My home page is http://www.JoeFRocks.com/ Check out the 5 day NEM chart that shows the short term upcycle parabolic trendline sell signal, but, that a straight trendline sell signal hasn't occurred yet. Ciao

........................Disclaimer

Joe Ferrazzano is not a registered investment advisor. Investing in stocks involves risk. Joe Ferrazzano is not a registered broker or dealer. Each investor has to ascertain what percentage if any of one's investments should be allocated to growth stocks or gold/silver stocks. Please see a financial planner, registered investment advisor or at least do your homework and decide what is right for your situation. Growth stocks and gold/silver stocks tend to be extremely volatile which creates opportunities but also can be very painful and risky. Each investor must take complete responsibility for his or her investing actions. Joe Ferrazzano should be considered as one source of information out of many from which to derive a decision on investing.

.......................Merry Christmas!

From http://www.JoeFRocks.com/ !

AMEX OIL INDEX (^XOI) Long Term Cycle High In September

Great news for gas prices and explains why they declined dramatically recently. After a great 2.5 year long term upcycle in which XOI rose from slightly above 400 to slightly below 1100 XOI's long term upcycle parabolic trendline has broken down and had both parabolic and straight trendline sell signals with 5% follow through. Notice the huge spike at the end of the cycle as typically occurs:

http://finance.yahoo.com/q/ta?s=%5EXOI&t=5y&l=off&z=l&q=b&p=&a=m26-12-9,p12,fs,w14&c=

This means that XOI should hit a long term cycle low in the next few weeks/months (it appears to be doing an EW A, B, C downcycle) and it should hit a long term cycle buy signal at about the time that gold/silver stocks hit a long term cycle high, probably this May, so I may trade oil stocks aggressively long when gold/silver stocks are correcting. XOM, Exxon, may be a good lead indicator because it hit a long term cycle low about 6 months prior to XOI and it's huge spike occurred in early 2005 about 6 months before XOI's.

...........................This Week's Charts Are Available

At http://www.joefrocks.com/GoldStockCharts.html . See NEM's 5 day chart found 6 charts down that shows it's short term cycle parabolic trendline sell signal, because there was 1% downside follow through, but a short term cycle straight trendline sell signal didn't occur yet. HUI and the XAU's latest 1 year charts are found toward the bottom. The charts are grouped by NEM, XAU, and HUI. Ciao.

Didn't Quite Get 1% Short Term Cycle Sell Signals Today

But HUI, NEM, and the XAU's short term upcycles clearly appear to have broken down
http://finance.yahoo.com/q/ta?s=%5Exau&t=5d&l=off&z=l&q=b&p=&a=m26-12-9%2Cp12%2Cfs%2Cw14&c= ,
and appear to be on the flat part of a short downcycle that should be Elliot Wave A down. Yes, another Elliot Wave A, B, C correction has probably begun. The COT data released today clearly points to a downturn with the gold commercial traders selling aggressively and doing significant though not overly aggressive shorting http://www.cftc.gov/dea/options/deacmxsof.htm.

NEM slightly outperformed today, but led to the downside late in the session as can be seen at this link http://finance.yahoo.com/q/ta?s=^XAU&t=1d&l=on&z=m&q=l&p=&a=&c=^hui,nem.

Both the NEM Lead Indicator at +2.15% vs the XAU last week and the bullish COT data last week pointed to a substantial rebound that I didn't really anticipate (though I did point out in last weekend's update was a definite possibility), because I thought SPX weakness would lead to gold/silver stock weakness as index funds sold their gold/silver stocks, but SPX was very flat this week and rallied much of the past four days, which added to gold/silver stock strength as did the Barrick/Placer Dome deal.

HUI, NEM, and the XAU Just Did An Elliot Wave A, B, C Downcycle Prior To This Short Term Upcycle AND

They will probably do another one now, which means I'll look to sell my XAU Puts on the Wave A Down, maybe trade XAU Calls on Wave B up, then probably aggressively trade XAU Puts on the Wave C down. NEM and HUI put in slightly higher monthly cycle highs today than those on 12-12 which are nice double tops, and, the XAU's monthly cycle high occurred on 12-12.

NEM has downside gaps to fill at 50.45 from 12-22 and at 48.75 from 12-7 and the XAU has a downside gap at 122.49 from 12-22.

...........Short Term Cycle Sell Signals May Occur Today

In the XAU's 5 day chart, http://finance.yahoo.com/q/ta?s=%5Exau&t=5d&l=off&z=l&q=b&p=&a=m26-12-9%2Cp12%2Cfs%2Cw14&c= , it appears that a short term cycle high occurred early today as it probably did for HUI and NEM. 1% follow through is required for a short term cycle sell signal. One can't rule out a rebound and still higher short term cycle highs until a short term cycle sell signal occurs. NEM is slightly outperforming the XAU right now, so higher short term cycle highs won't be a big surprise.

Reliable lead indicator NEM hit a parabolic short term cycle sell signal early yesterday after rising 6%+ in about one session's time, which foretold (it appears) an imminent short term cycle high. The parabolic trendline of course was the 6% spike move's uptrend line, and, the flatter uptrend after that was the so called straight short term upcycle trendline.

HUI, NEM Monthly Cycle Double Tops And The XAU Put/Call Ratio Collapsed

HUI and NEM have put in slightly lower cycle highs early today and may of course go higher, with the help of index fund buying due to early modest SPX strength, than their "likely" monthly cycle highs on 12-12. 271.71 today vs 271.74 on 12-12 for HUI and 52.44 today vs 52.49 on 12-12 for NEM. The important thing is that after the monthly cycle sell signal occurred on 12-9 (parabolic on 12-7, you should sell between those two sell signals according to my "Trade the Cycles" system) for HUI, NEM, and the XAU it was too risky to trade long, not whether higher cycle highs occurred, because the monthly cycle rolls over dramatically following a sell signal. Sometimes SPX index funds cause a higher monthly cycle high to occur as they probably did in late September when SPX rallied causing SPX index funds to buy NEM and other index funds to buy the gold/silver stocks in their respective indices.

It appears that index funds have a huge influence on gold/silver stocks because they're a huge market and the gold/silver stock market is a relatively small one. It's analogous to an 800 lb gorilla tugging a monkey around. Small % moves in SPX appear to cause significant moves in NEM and other gold/silver stocks which makes sense given how large index funds are relative to the gold/silver stock market.

It appears that NEM may take a dive today and fill it's downside gap at 50.45 created yesterday. The XAU also has a downside gap from yesterday at 122.49. HUI's chart shows a spike up rather than a gap, as it typically does, I don't know why that's the case.

Monthly cycle lows may occur in the next week or two in the 235-245 (HUI), 45-47 (NEM), and 109-114 (XAU) target ranges, based on their major int term upcycle trendlines since 5-16-05.

Modest SPX strength made SPX index funds buy NEM (and made other index funds buy other gold/silver stocks) and therefore led to general gold/silver stock strength early today, which should be short lived. http://finance.yahoo.com/q/ta?s=%5Exau&t=5d&l=off&z=l&q=b&p=&a=m26-12-9%2Cm26-12-9%2Cp12%2Cm26-12-9%2Cp12%2Cfs%2Cm26-12-9%2Cp12%2Cfs%2Cw14&c=%5EGSPC

The NEM Lead Indicator is slightly negative right now after being bullish yesterday at +0.84% vs the XAU. Keep in mind that indicators portend more strength in short term upcycles versus downcycles and of course the monthly cycle has turned down or at least rolled over dramatically, so less strength is likely in a monthly downcycle than a monthly upcycle, which is another consideration.

XAU Implied Volatility fell -1.92% to 29.300 on Thursday 12-22 from 29.875 on 12-21 versus a +2.15% rise in the XAU on 12-22, which is a slight (up to 0.24%) 0.23% rise in fear (-1.92% + +2.15% = +0.23%. The XAU wall of worry grew by 0.23%, therefore fear rose by +0.23%) that portends strength/an uptrend during part of Friday 12-23's session.

The XAU Put/Call Ratio fell an unusually large (> 6%) 11.01% today to 1.10435 from 1.24103 on 12-22 which portends some strength today (an unusually large rise in complacency portends strength), but points to a substantial decline soon because the XAU wall of worry collapsed. Ciao

...........Merry Christmas And Happy Holidays To All!

Peace, love, happiness, fulfillment, joy, etc. to all. God bless you.

Sincerely,

Joe Ferrazzano

Chief Rocker
http://www.JoeFRocks.com/

NEM's Very Flat Uptrend Most Of The Session With An Intraday Double Top

After the very early spike move NEM's uptrend was very flat with a cycle high early on at 52.06 and late cycle high at 52.09 for a bearish double top. Also, the fact that NEM's intraday uptrend was much flatter than HUI or the XAU's indicate's it's probably leading to the downside (bearish NEM Lead Indicator) and should fill it's downside gap at 50.45 in the next day or two.

VIX, the SPX Volatility Index, has collapsed by over 8% the past two days versus modest strength in SPX, which points to a sharp drop soon. Ciao

HUI, NEM, XAU Short Term Cycle Highs May Occur Today

So, they may have entered the sharply declining/parabolic part of the monthly downcycle corresponding to Elliot Wave C down. What you need to remember is that Elliot Wave is secondary to cycle channels/trendlines and that I'm NOT an Elliot Wave expert, I'm merely using the 1, 2, 3, 4, 5 upcycle and A, B, C downcycle patterns. From what little I've read downcycles CAN also be 1, 2, 3, 4, 5, but, cycles and the nature of cycles is primary anyway, you don't need Elliot Wave at all, but it is useful, especially in upcycles with the likely 3 short term upcycles within a monthly/minor int term upcycle. Ciao

..............Barrick And Placer Dome Agree To A Deal

http://biz.yahoo.com/bw/051222/20051222005325.html?.v=1

The COT Data pointed to potentially substantial strength after early weakness this week. Also, the NEM Lead Indicator was very bullish at +2.15% last week.

The COT data is basically bullish with the gold Commercial Traders trading net long and the gold Speculators trading net short, but the unusually large (> 10% increase in long position) long trade by the Commercial Traders points to some short term weakness, but much or all of that indicated weakness has already occurred because the data is as of Tuesday 12-13. The gold Commercial Traders added an unusually large (> 10% increase in long contracts) 11,405 (sold 14,042 the prior week, added 17,312 the prior week) long futures and options contracts and added 2623 (covered 5276 the prior week, added 16,229 the prior week) short futures and options contracts which portends weakness this week (non contrarian indicator), because the unusually large long trade is a short term contrarian indication and the shorting also points to weakness, but the net long increase points to strength following that weakness and most or all of the weakness may have occurred last week because the data is three days stale when released. The gold Speculators (hedge funds and other speculators/traders) sold an unusually large (> 10% decrease in long contracts) 19,247 (added 9102 the prior week, sold 2697 the prior week) long futures and options contracts and covered an unusually large (> 10% decrease in short contracts) 8720 (added 566, 2309 the prior two weeks) short futures and options contracts which portends weakness this week (contrarian indicator), because the unusually large long liquidation is a short term non contrarian indication, but the unusually large short covering points to some strength, and the net short increase points to strength following that weakness and most or all of the weakness may have occurred last week because the data is three days stale when released.

S & P 500 (SPX) Strength Again Leads To Gold/Silver Stock Strength

Due to SPX index funds buying NEM and other index funds buying the gold/silver stocks in their respective indices.

The most important/primary market timing consideration is that HUI, NEM, and the XAU are in monthly/minor int term downcycles since 12-12. HUI, NEM, and the XAU have rallied back to the relatively flat part of their monthly/minor int term downcycle trendlines, which means that the parabolic Elliot Wave C short term downcycle hasn't begun yet as previously thought, but may begin today assuming short term cycle highs occur today. This is a good example of why Elliot Wave and all other tools/indicators are secondary to cycle channels/trendlines. It's easy to assign A, B, C points after a monthly downcycle is completed, but is probably impossible to do consistently real time. The important thing anyway is that a monthly downcycle is in effect and that cycles tend to begin relatively flat and become more parabolic over time, not Elliot Wave as I've said before.

My streamer doesn't show ABX or PDG (or GG which is affected) trading yet, so that may causing NEM's big spike today along with index fund buying. Barrick has apparently extended a formal offer for Placer Dome.

Monthly cycle lows may occur next week in the 235-245 (HUI), 45-47 (NEM), and 109-114 (XAU) target ranges, based on their major int term upcycle trendlines since 5-16-05.SPX strength made SPX index funds buy NEM (and made other index funds buy other gold/silver stocks) and therefore led to general gold/silver stock strength early today, which should be short lived. http://finance.yahoo.com/q/ta?s=%5Exau&t=5d&l=off&z=l&q=b&p=&a=m26-12-9%2Cm26-12-9%2Cp12%2Cm26-12-9%2Cp12%2Cfs%2Cm26-12-9%2Cp12%2Cfs%2Cw14&c=%5EGSPC

The NEM Lead Indicator is unknown right now since the XAU isn't trading yet, after being slightly bullish yesterday at +0.05% vs the XAU. Keep in mind that indicators portend more strength in short term upcycles versus downcycles and of course the monthly cycle has turned down, so less strength is likely in a monthly downcycle than a monthly upcycle, which is another consideration.

XAU Implied Volatility fell -4.86% to 29.875 on Wednesday 12-21 from 31.400 on 12-20 versus a +2.49% rise in the XAU on 12-21, which is a sharp (2-2.99%) 2.37% rise in complacency (-4.86% + +2.49% = -2.37%. The XAU wall of worry shrank by 2.37%, therefore complacency rose by +2.37%) that portends weakness/a downtrend during part of Thursday 12-22's session.

The XAU Put/Call Ratio fell a very sharp (3-6%) 4.34% to 1.24103 today from 1.29733 on 12-21 which is a very sharp rise in complacency that portends some weakness today. Ciao

Looking At HUI, NEM, and the XAU's Monthly Downcycle Channels Since 12-12

There could be significant upside early tomorrow followed by the expected downturn. Ciao.

NEM Outperformed The XAU By A Slight Margin Of +0.05% Today

After hitting the bottom of their monthly downcycle channels late yesterday and the top early on 12-19, HUI, NEM, and the XAU rallied toward the top of their monthly downcycle channels today, with help from SPX which also rallied toward the top of it's monthly downcycle channel today, which led to index funds buying NEM and other gold/silver stocks today. SPX peaked at mid session, a few hours before HUI, NEM, and the XAU, which peaked at session's end, so SPX (S & P 500) appears to be leading to the downside as expected.

It's likely that HUI, NEM, and the XAU will turn down early tomorrow and resume their sharp decline/Elliot Wave C short term downcycle that began on 12-19. SPX has a downside gap below 1260 that it'll probably fill early tomorrow which will add to likely gold/silver stock weakness. Also, VIX, the SPX Volatility Index (gauge of SPX options implied volatility) fell by -3.40% today versus a slight rise in SPX, which is a very sharp rise in complacency that points to SPX weakness during some of tomorrow's session. Ciao

SPX, HUI, NEM, and the XAU Are Rallying To Their Monthly Downcycle Trendlines

SPX, HUI, NEM, and the XAU are rallying to their monthly downcycle declining peaks trendlines, and, this rebound in gold/silver stocks is coinciding with a modest rebound in SPX.

.................SPX Takes a Dive And So Do Gold/Silver Stocks

Now, after early strength the S & P 500 (SPX) is taking a dive and therefore SPX index funds are selling NEM and other index funds are selling the gold/silver stocks in their respective indices. So, early SPX strength led to gold/silver stock strength and now SPX weakness is resulting in gold/silver stock weakness. As I watch NEM versus SPX and SPY (an SPX ETF which is an index fund that's traded like a stock) in my streamer the affect of index fund buying or selling is nearly instantaneous or seems to be at least. The point is that there's not much lag time after SPX takes a dive (or rallies) that gold/silver stocks do because index funds are selling (or buying) them. Ciao

......................I Got My Shorts On

I finally bought some XAU Puts for a short term trade. I had a limit order in modestly below the market and waited about 15 minutes before it got filled. I correctly expected enough strength early today to fill the order. SPX was a great lead indicator that gave me confidence to use a below market order and risk missing this buying opportunity. I was confident that SPX strength would lead to index fund buying of gold/silver stocks and that's exactly what happened.

SPX (S & P 500) Index Funds Are Buying NEM Early Today

Which means that other index funds are buying the gold/silver stocks in their index. SPX is up about 7 points right now. I'm hoping for enough of a pop in the XAU early today to where I'll want to buy some XAU Puts. A significant rally is likely because, thanks to the sharp decline of the prior two days (from the intraday high early on 12-19 in plus territory), HUI, NEM, and the XAU fell from the top of their monthly downcycle channels to the bottom, so they should bounce early today.

The most important thing to keep in mind now is that HUI, NEM, and the XAU entered the Elliot Wave C short term downcycle on 12-19 (of their monthly downcycles that began on 12-12). After a likely rebound today they should experience a dramatic decline during much of the remainder of the week, because this is the parabolic/sharply declining segment of the monthly downcycle. Monthly cycle lows may occur this week or early next week in the 235-245 (HUI), 45-47 (NEM), and 109-114 (XAU) target ranges, based on their major int term upcycle trendlines since 5-16-05.

SPX strength made SPX index funds buy NEM (and made other index funds buy other gold/silver stocks) and therefore led to general gold/silver stock strength early today, which should be short lived. http://finance.yahoo.com/q/ta?s=%5Exau&t=5d&l=off&z=l&q=b&p=&a=m26-12-9%2Cm26-12-9%2Cp12%2Cm26-12-9%2Cp12%2Cfs%2Cm26-12-9%2Cp12%2Cfs%2Cw14&c=%5EGSPC

The NEM Lead Indicator is bearish right now at -0.30% after being bearish yesterday at -0.50% vs the XAU. Keep in mind that indicators portend more strength in short term upcycles versus downcycles and of course the monthly cycle has turned down, so less strength is likely in a monthly downcycle than a monthly upcycle, which is another consideration. Also, this is the nasty parabolic Elliot Wave C short term downcycle where the most weakness occurs, which must be kept in mind when assessing the indicators.

XAU Implied Volatility fell -1.68% to 31.40 on Tuesday 12-20 from 31.935 on 12-19 versus a -1.39% decline in the XAU on 12-20, which is a very sharp (3-6%) 3.07% rise in complacency (-1.68% + -1.39% = -3.07%. The XAU wall of worry shrank by 3.07%, therefore complacency rose by +3.07%) that portends weakness/a downtrend during part of Wednesday 12-21's session.

The XAU Put/Call Ratio rose a significant (0.50-1.99%) 1.04% to 1.29733 today from 1.28392 on 12-20 which is a significant rise in fear that portends some strength today. Ciao

..................NEM Leading To The Downside As Expected

The NEM Lead Indicator was bearish at -0.50% today which jives with continued weakness tomorrow, though it appears there may be brief strength early tomorrow and hopefully an opportunity for me to buy XAU Puts. Monthly cycle lows could occur by week's end or early next week. Ciao

.......................................Buckle Up!

We've gone parabolic on the downside. I missed a brief opportunity to buy XAU Puts after 8 am PST, expecting a little more upside than we got, but this is the nasty parabolic Elliot Wave C short term downcycle, so this plunge isn't too surprising, and, short lived rallies are typical of downcycles. I'll look to get my shorts on (buy XAU Puts) on strength.

...................Indicators Point To Some Strength Today After The Downside Gap Filling Action

The most important thing to keep in mind now is that HUI, NEM, and the XAU entered the Elliot Wave C short term downcycle of their monthly downcycles that began on 12-12. After a likely rebound today they should experience a dramatic decline during much of the remainder of the week, because this is the parabolic/sharply declining segment of the monthly downcycle. Monthly cycle lows may occur this week or early next week in the 235-245 (HUI), 45-47 (NEM), and 109-114 (XAU) target ranges, based on their major int term upcycle trendlines since 5-16-05. I'm looking to "get my shorts on" for a few days by buying XAU Puts today.

Notice that once again early today SPX weakness made SPX index funds sell NEM (and made other index funds sell other gold/silver stocks) and therefore led to general gold/silver stock weakness. http://finance.yahoo.com/q/ta?s=%5Exau&t=5d&l=off&z=l&q=b&p=&a=m26-12-9%2Cm26-12-9%2Cp12%2Cm26-12-9%2Cp12%2Cfs%2Cm26-12-9%2Cp12%2Cfs%2Cw14&c=%5EGSPC

The NEM Lead Indicator is modestly bearish right now at -0.15% after being bullish yesterday at +0.26%. Keep in mind that indicators portend more strength in short term upcycles versus downcycles and of course the monthly cycle has turned down, so less strength is likely in a monthly downcycle than a monthly upcycle, which is another consideration.

XAU Implied Volatility rose +2.19% to 31.935 on Monday 12-19 from 31.250 on 12-16 versus a -0.95% decline in the XAU on 12-19, which is a significant (0.50-1.99%) 1.24% rise in fear (+2.19% + -0.95% = +1.24%. The XAU wall of worry grew by 1.24%, therefore fear rose by +1.24%) that portends strength/an uptrend during part of Tuesday 12-20's session.

The XAU Put/Call Ratio rose a significant (0.50-1.99%) 1.68% to 1.28392 today from 1.26264 on 12-19 which is a significant rise in fear that portends some strength today. Ciao

................NEM Outperformed The XAU By +0.26% Today

There should be some more downside gap filling action early tomorrow, then a significant rebound should occur that will be an opportunity to short or buy puts. I'll be looking to buy XAU Puts. Following that likely significant rebound tomorrow (after early weakness) most of the remainder of the week should see a substantial decline in HUI, NEM, and the XAU, with monthly/minor int term cycle lows occurring probably late this week or early next week (Monday the 26th the US stock market is closed).

Monthly/Minor Intermediate Term Cycle Lows Are Likely In The Next Week

So, Monthly/Minor Intermediate Term Cycle Lows could occur by week's end. The US stock market is open on Friday the 23rd and is closed on Monday the 26th. The NYSE calendar didn't indicate that Friday was a half day, so it appears to be a full session, but I'll check the NASDAQ calendar and see.

In the monthly downcycle it appears that HUI, NEM, and the XAU could, based on their major upcycle trendlines in the latest 1 year charts, fall to 235-245 (HUI), 45-47 (NEM), and 109-114 (XAU).

Some analysts believe (they're guessing and you can't guess this stuff) that a major top has just occurred, which is unlikely because the prior long term cycle highs in December 2003 (HUI, NEM)/January 2004 (XAU) were just exceeded in this minor intermediate/monthly upcycle (258.60 for HUI on 12-2-03, 50.28 for NEM on 12-2-03, and 113.41 for the XAU on 1-6-04), and, using extrapolation with the prior long term cycle highs since the gold/silver stock Bull Market/very long term upcycle began in late 2000, and the fact that the long term cycles have been getting progressively/substantially longer, provides long term cycle high target ranges of 330-350 for HUI, 70-75 for NEM, and 150-160 for the XAU (XAU seems low and may be revised to 160-170) that should be reached in the May 2006 timeframe. If the major intermediate term upcycle trendlines since May 16, 2005 (long term upcycle since May 10, 2004) break down my "Trade the Cycles" system and therefore I will turn bearish. Also, if a major cycle high was occurring, one would expect the gold Commercial Traders to be adding very aggressively (about 30,000-50,000 short futures/options contracts each week as was done near recent major cycle highs) to their short position in recent weeks, yet they've actually had a net long increase the past two weeks (added 2623 short futures/options contracts last week and covered 5276 the prior week) in terms of their short position.

The Monthly/Minor Intermediate Term Downcycle's Elliot Wave B Short Term Upcycle Has Peaked

HUI, NEM, and the XAU have put in lower (and therefore are) Elliot Wave B short term cycle highs early today, which establishes that a monthly downcycle has been in effect since 12-12 as expected. The sharp declines today are a sign that the short term cycle has turned down. I'll wait for a rebound, and, assuming NEM is underperforming the XAU by a wide margin (> -0.50% or close to that at least), I'll look to buy XAU Puts today. Ciao

......................................Down, Down, Down!

SPX just took a dive and guess what, so did NEM and therefore HUI and the XAU due to SPX index funds selling NEM. Also, consider the cascading affect of SPX on other indices such as the NYSE Composite which contains gold/silver stocks such as ABX, AEM, and HL. Other index funds that contain gold/silver stocks will be forced to sell if they have common components with SPX or are simply affected by a general downturn in the major averages. So, it's not just SPX index funds selling NEM, there are other index funds selling other gold/silver stocks at about the same time when SPX declines. In the last few minutes SPX fell about 2 points, a meager -0.16%, yet NEM fell from 51.20 to 50.80 very quickly. Very small % moves in SPX can have a significant affect on HUI, NEM, and the XAU. Ciao.

...............SPX (S & P 500) Index Funds, The 800 Lb Gorilla

SPX index funds are probably the largest NEM traders on most if not all days. Notice that SPX's peaks/troughs usually occur before those of the NEM dominated XAU
http://finance.yahoo.com/q/ta?t=5d&s=%5EXAU&l=off&z=l&q=b&a=m26-12-9&a=p12&a=fs&a=w14&c=&c=%5EGSPC . SPX's minor int term cycle is in the very flat topping area and appears to have peaked last week, which should prevent HUI, NEM, and the XAU from testing last Monday 12-12's likely minor int term cycle highs. So, last Wednesday's short term cycle low was probably the culmination of Elliot Wave A down and an Elliot Wave B short term upcycle of the monthly downcycle is in progress now. This means that a minor int term/monthly cycle low could occur late this week or next week.

The NEM Lead Indicator has been bullish recently at neutral vs the XAU so far today, +2.15% last week, and +1.06% the week before. The NEM Lead Indicator should turn bearish today (was -0.24% on Friday) and a short term cycle high should occur today or tomorrow. Note that the XAU filled it's upside gap at 122.95 (created on 12-14) today and often cycle highs/lows occur shortly after gap filling action.

XAU Implied Volatility fell -3.73% to 31.250 on Friday 12-16 from 32.460 on 12-15 versus a +1.26% rise in the XAU on 12-16, which is a sharp (2-2.99%) 2.47% rise in complacency (-3.73% + +1.26% = -2.47%. The XAU wall of worry shrank by -2.47%, therefore complacency rose by +2.47%) that portends weakness/a downtrend during part of Monday 12-19's session.

The XAU Put/Call Ratio fell an unusually large (> 6%) 7.89% to 1.26264 today from 1.37086 on 12-16 which is an unusually large rise in complacency that portends some strength today.

Once HUI, NEM, and the XAU put in lower cycle highs than 12-12's a monthly downcycle will be confirmed and I'll look to buy XAU Puts. Ciao

..........................................Weekly Update Ready

At http://www.joefrocks.com/TradetheCycles.html scroll down a few pages past the major averages stuff. See http://www.joefrocks.com/GoldStockCharts.html for all the charts. My home page is http://www.JoeFRocks.com/ Check out the 5 day NEM chart that shows SPX's (S & P 500) effect on reliable lead indicator NEM and therefore HUI and the XAU. Ciao

........................Disclaimer

Joe Ferrazzano is not a registered investment advisor. Investing in stocks involves risk. Joe Ferrazzano is not a registered broker or dealer. Each investor has to ascertain what percentage if any of one's investments should be allocated to growth stocks or gold/silver stocks. Please see a financial planner, registered investment advisor or at least do your homework and decide what is right for your situation. Growth stocks and gold/silver stocks tend to be extremely volatile which creates opportunities but also can be very painful and risky. Each investor must take complete responsibility for his or her investing actions. Joe Ferrazzano should be considered as one source of information out of many from which to derive a decision on investing.

..........Day Trading Long On Monday Is Very Risky

Given the 2% follow through monthly cycle sell signal on 12-9, the likely monthly downcycle or at best a monthly upcycle rolling over dramatically, and the bearish NEM Lead Indicator on Friday 12-16 at -0.24%, plus the fact that XAU Implied Volatility portends some weakness on Monday, day trading long on Monday is very risky. There will potentially be a sharp rise on Monday which would be the parabolic part of the monthly downcycle's Elliot Wave B short term upcycle that began late last Wednesday. That sharp rise could consist of a gap up at the open and a relatively brief spike move. The indicators suggest that's a likely scenario.

XAU Implied Volatility fell -3.73% to 31.250 on Friday 12-16 from 32.460 on 12-15 versus a +1.26% rise in the XAU on 12-16, which is a sharp (2-2.99%) 2.47% rise in complacency (-3.73% + +1.26% = -2.47%. The XAU wall of worry shrank by -2.47%, therefore complacency rose by +2.47%) that portends weakness/a downtrend during part of Monday 12-19's session.

Looks Like There's At Least Another Day Or Two Of Upside Left In Elliot Wave B

Before SPX probably plunges and drags NEM and therefore HUI and the XAU with it due to SPX index funds selling NEM. It doesn't look like HUI, NEM, and the XAU will make a higher monthly cycle high in rollover mode as occurred in late September due to SPX strength. This time it looks like SPX weakness will be a major drag on NEM and therefore HUI and the XAU. The good news is that it should speed up the monthly/minor int term cycle process and cause a monthly cycle low to occur sooner.

The short term upcycle is still relatively flat (see link) so Monday may be a sharp rise as it probably enters the parabolic segment.
http://finance.yahoo.com/q/ta?s=%5Exau&t=5d&l=off&z=l&q=b&p=&a=m26-12-9%2Cp12%2Cfs%2Cw14&c=

NEM underperformed the XAU today by -0.24% which isn't enough to suggest that a short term cycle high is imminent, meaning that one probably won't occur early on Monday unless there's a big spike move early on, which is possible and probably more likely on a Monday due to overeager lambs/dumb money potentially rushing in.

VIX fell -0.47% today versus SPX falling slightly which is a significant rise in complacency that points to some SPX weakness on Monday. SPX weakness may be prolonging HUI, NEM, and the XAU's short term upcycle by holding it back due to index funds selling NEM. The COT data is basically bullish with the gold Commercial Traders trading net long and the Speculators trading net short, but the gold Commercial Traders did add significantly to their short position. Ciao

SPX (S & P 500) Index Funds Selling NEM Are Dragging HUI, NEM, And The XAU Down Today

In the chart at the link below you can see that SPX index fund selling of NEM dragged NEM and therefore HUI and the XAU down today, with SPX peaking before them, and, even the short lived rallies in the downtrend coincide:

http://finance.yahoo.com/q/ta?t=5d&s=NEM&l=off&z=l&q=b&a=m26-12-9&a=p12&a=fs&a=w14&c=&c=%5EGSPC

NEM's Very Big Spike Points To A Likely Monthly Cycle High

NEM's monster spike on Monday 12-12 indicates that a monthly cycle high probably occurred that day http://finance.yahoo.com/q/ta?s=NEM&t=3m&l=off&z=l&q=b&p=&a=m26-12-9,p12,fs,w14&c= . The larger the spike the more likely it's an important cycle high, and, a 2% follow through monthly cycle sell signal occurred the session before (on Friday 12-9).

Some analysts believe that a major top has just occurred, which, if you read my weekly updates, http://www.joefrocks.com/TradetheCycles.html (scroll down a few pages past the major averages work), know that's unlikely because the prior long term cycle highs in Dec 2003 (HUI, NEM)/Jan 2004 (XAU) were just exceeded in this minor intermediate/monthly upcycle, and, using extrapolation with the prior long term cycle highs since the gold/silver stock Bull Market began in late 2000, and the fact that the long term cycles have been getting progressively/substantially longer, provides long term cycle high target ranges of 330-350 for HUI, 70-75 for NEM, and 150-160 for the XAU (XAU seems low and may be revised to 160-170) that should be reached in the May 2006 timeframe. If the major int term upcycle trendlines since May 16, 2005 (long term upcycle since May 10, 2004) break down my "Trade the Cycles" system and therefore I will turn bearish. Ciao!

The XAU Has An Upside Gap Created On Wednesday At 122.95

Shortly after the XAU fills it's upside gap at 122.95 (created on Wednesday) this Elliot Wave B short term upcycle (within a monthly downcycle) should peak, so a short term cycle high could occur today. The fact that NEM is underperforming the XAU by -0.25% right now indicates that the short term cycle may be peaking. The NEM Lead Indicator will probably be more bearish than that though if a short term cycle high occurs today. Stay tuned.

Yup, Monthly Downcycle Elliot Wave B Up And SPX (S & P 500) Is Firm

The sharp rise in VIX yesterday vs a slight decline in SPX correctly pointed to some firmness today which is causing SPX index funds to buy NEM. A monthly downcycle Elliot Wave B up short term upcycle or at best a risky post monthly sell signal (occurred last Friday) short term upcycle began yesterday for HUI, NEM, and the XAU. Since both XAU Implied Volatility and the XAU Put/Call Ratio point to weakness today I won't be day trading long and therefore will probably be on the sidelines or may be looking to buy XAU Puts. Also, SPX's strength will probably be very modest and short lived today because SPX's monthly cycle may have peaked a few days ago or at best is very flat and has a downside gap from today's open that probably will get filled today, dragging NEM with it.

I looked to do an overnight trade with XAU Calls yesterday, but the fact that NEM didn't fill it's downside gap at 48.75 from 12-7 but threatened to late in the session, made it tough and scary to trade long in a likely monthly downcycle. I'll be looking to buy XAU Puts to trade the monthly downcycle Elliot Wave C plunge, which will be the sharply declining/parabolic part of the monthly downcycle (when capitulation occurs).

XAU Implied Volatility fell -0.93% to 32.460 yesterday from 32.765 on 12-14 vs a +0.78% rise in the XAU yesterday which is a slight rise in complacency that portends some weakness/a downtrend today.The XAU Put/Call Ratio points to some weakness (a downtrend) today by falling very sharply (3-6%) to 0.90369 from 0.94581 yesterday (December expiration expires today).

The NEM Lead Indicator has been very bullish recently at neutral vs the XAU so far today, +0.30% yesterday, +0.36% on 12-14, +0.38% vs the XAU on 12-13, and +1.46% on Monday on top of +1.06% last week, which, combined with HUI and the XAU's very sharp volatility spikes that began Monday and ended early Tuesday as well as Wednesday's plunge, correctly pointed to a sharp rebound and possibly even a test of Monday's likely monthly cycle highs in the near future. The test seems unlikely right now due to the likelihood of SPX index funds selling NEM the next few days. Ciao

................NEM Outperformed The XAU By +0.19% Today

An Elliot Wave B short term upcycle within a monthly downcycle (or potentially (but probably not) a monthly upcycle rolling over) probably began today because a 1% follow through short term cycle buy signal occurred today for HUI, NEM, and the XAU, but, in a monthly downcycle or following a monthly cycle sell signal (one occurred on 12-9) with a monthly upcycle rolling over, short term upcycles are obviously much riskier for short term trading than in a monthly upcycle prior to a sell signal, so the short term cycle buy signal is a risky one.

The S & P 500 Volatility Index (gauge of SPX options implied volatility) shot up +2.48% vs a -0.141 % drop in SPX which is a sharp rise in fear that points to some strength in SPX tomorrow that should help HUI, NEM, and the XAU, because SPX index funds will be buying NEM if SPX strength occurs.

The NEM Lead Indicator has been very bullish recently at +0.19% vs the XAU today, +0.36% yesterday, +0.38% vs the XAU on 12-13, and +1.46% on Monday on top of +1.06% last week, which, combined with HUI and the XAU's very sharp volatility spikes that began Monday and ended early Tuesday as well as yesterday's plunge, points to a sharp rebound and possibly even a test of Monday's likely monthly cycle highs in the near future. The test seems unlikely right now due to the likelihood of SPX index funds selling NEM the next few days, though some strength is likely tomorrow. Ciao

...........Early Strength Probably Will Be Followed By Weakness

An Elliot Wave B short term upcycle appears to have begun. The XAU Put/Call Ratio correctly pointed to some strength today as discussed earlier and XAU Implied Volatility points to some weakness that may have begun at about noon EST. I may buy some XAU Calls for an overnight trade.

Notice how the S & P 500 (SPX) took a dive today at about the same time as the XAU and it's uptrend began a little before the XAU's http://finance.yahoo.com/q/ta?t=5d&s=%5EXAU&l=off&z=l&q=b&a=m26-12-9&a=p12&a=fs&a=w14&c=&c=%5EGSPC .

Since SPX index funds are the largest traders of NEM they have a huge impact on HUI, NEM, and the XAU since NEM is a reliable lead indicator. SPX appears to have begun a monthly downcycle Elliot Wave A short term downcycle which should prevent HUI, NEM, and the XAU from putting in higher monthly cycle highs.

..................Has A Risky Short Term Upcycle Begun?

HUI, NEM, and the XAU spiked at the open and are rolling over/flattening out as I write this. They have downside gaps created at the open at 252.77, 49.51, and 119.90. If it wasn't for the downside gaps I'd say that an Elliot Wave B short term upcycle of a likely monthly downcycle (or potentially a monthly upcycle rolling over) has probably begun, so I'm waiting to see if the downside gaps get filled before looking to day trade XAU Calls long.

Since SPX appears like it's about to do an Elliot Wave A plunge of an A, B, C monthly downcycle that should prevent HUI, NEM, and the XAU from making higher monthly cycle highs because SPX index funds will be selling NEM, but the fact that the NEM Lead Indicator has been very bullish recently makes things interesting. The timing of SPX's Elliot Wave B up may be important depending on where HUI, NEM, and the XAU are when it begins. It appears, right now at least, that HUI, NEM, and the XAU's monthly cycle highs occurred on Monday and that a headfake higher monthly cycle high due to SPX index funds buying NEM won't occur in this monthly cycle as it did in the previous monthly cycle.

The NEM Lead Indicator has been very bullish recently at +0.30% vs the XAU so far today, +0.36% yesterday, +0.38% vs the XAU on 12-13, and +1.46% on Monday on top of +1.06% last week, which, combined with HUI and the XAU's very sharp volatility spikes that began Monday and ended early Tuesday as well as yesterday's plunge, points to a sharp rebound and possibly even a test of Monday's likely monthly cycle highs in the near future. The test seems unlikely right now due to the likelihood of SPX index funds selling NEM the next few days.

XAU Implied Volatility fell to 32.765 yesterday from 33.82 on 12-13 vs a sharp -2.48% decline in the XAU yesterday which is a very sharp rise in complacency that portends some weakness/a downtrend today.The XAU Put/Call Ratio points to some strength (an uptrend) today by rising very sharply (3-6%) to 0.94581 from 0.90550 yesterday (December expiration). Ciao

HUI and the XAU Fill Downside Gaps From 12-7 And Gold's Positive Correlation With The US Dollar

12-7's downside gaps at 255.82 for HUI and at 119.69 for the XAU were filled today. NEM's downside gap at 48.75 from 12-7 will probably get filled tomorrow, but, either way, a very sharp rebound, which will probably be the monthly downcycle's Elliot Wave B short term upcycle that will culminate with a short term cycle high such that the monthly downcycle's declining peaks downtrend line is relatively flat. Then the final Elliot Wave C plunge should occur which will be the steep/parabolic part of the monthly downcycle. So, I'll probably be looking to day trade long tomorrow once the Elliot Wave B short term upcycle begins.

Gold got whacked today yet the US Dollar fell a significant -0.57. The US Dollar and gold have risen in tandem most of this year with the USD hitting a major cycle low in late 2004 and gold doing so in early February. So, they've obviously enjoyed a significant positive correlation most of this year which is different than the negative correlation that existed last year.

The NEM Lead Indicator was bullish again today at +0.36%, was +0.38% yesterday vs the XAU and +1.46% on Monday (Tuesday and Monday's numbers were reversed earlier) on top of +1.06% last week, which, combined with HUI and the XAU's very sharp volatility spikes that began Monday and ended early Tuesday with another sharp one occurring today, points to a sharp rebound and possibly even a test of Monday's likely monthly cycle highs in the near future. The test seems unlikely right now due to the likelihood of SPX dragging NEM down in the next few days.

So, Monday's cycle highs were probably monthly cycle highs but it's a mute point for monthly cycle traders whether a higher cycle high occurs because the monthly cycle sell signal that occurred last Friday 12-9 indicates that it's too risky to trade aggressively long, so, day trading long or maybe holding a modest position overnight is OK, but being 100% long is far too risky. Ciao

.....................Gap Filling Action And Elliot Wave

12-7's downside gaps at 255.82 for HUI, at 48.75 for NEM, and at 119.69 for the XAU will probably get filled in the next few days. If Monday's cycle highs were monthly cycle highs, as appears likely, then this decline is Elliot Wave A down of the monthly downcycle that should be followed by a very sharp rebound, which will be Elliot Wave B up culminating with a short term cycle high such that the monthly downcycle's declining peaks downtrend line is relatively flat. Then the final Elliot Wave C plunge should occur which will be the steep/parabolic part of the monthly downcycle. Ciao

................The NEM And SPX (S & P 500) Lead Indicators!

In late September when HUI, NEM, and the XAU put in monthly cycle highs on 9-30 after they hit monthly cycle sell signals, therefore were rolling over/flattening out, SPX (S & P 500) was in Elliot Wave B up of an Elliot Wave A, B, C monthly downcycle, which is probably what caused HUI, NEM, and the XAU to headfake up nearly two weeks after it appeared that they had hit monthly cycle highs in the previous monthly cycle, because SPX index funds were buying NEM.

http://finance.yahoo.com/q/ta?t=3m&s=%5EXAU&l=off&z=l&q=b&a=m26-12-9&a=p12&a=fs&a=w14&c=nem%2C+%5Ehui&c=%5EGSPC

In the chart at the link above note that SPX's late September rally coincided with HUI, NEM, and the XAU's, then SPX turned down and so did HUI, NEM, and the XAU. SPX hit a monthly cycle low in early October, about a week before HUI and the XAU (NEM bottomed on 11-4 due to the PDG bid by Barrick), and much of their monthly upcycles coincided. SPX's monthly upcycle is rolling over now as is HUI, NEM, and the XAU's which may have peaked on Monday. The point is that SPX index funds, because they are a huge factor due to buying and selling NEM (NEM is in SPX ), probably make SPX a good lead indicator for gold/silver stocks, though I need to observe and research this more. It may also explain why NEM tends to be such a good lead indicator for HUI and the XAU.

Since SPX appears like it's about to do an Elliot Wave A plunge of an A, B, C monthly downcycle that should drag HUI, NEM, and the XAU down with it. So, right now I don't see HUI, NEM, and the XAU making higher monthly cycle highs because of SPX, but the fact that the NEM Lead Indicator has been very bullish recently makes things interesting. The timing of SPX's Elliot Wave B up may be important depending on how much HUI, NEM, and the XAU have fallen when it begins. It appears, right now at least, that HUI, NEM, and the XAU's monthly cycle highs occurred on Monday and that a headfake higher monthly cycle high due to SPX index funds buying NEM won't occur in this monthly cycle.

The NEM Lead Indicator has been very bullish recently at -0.20% so far today, +1.46% yesterday vs the XAU and +0.38% on Monday on top of +1.06% last week, which, combined with HUI and the XAU's very sharp volatility spikes that began Monday and ended early Tuesday, potentially points to a sharp rebound and possibly even a test of Monday's likely monthly cycle highs in the near future. The test seems unlikely right now due to the likelihood of SPX dragging NEM down.

XAU Implied Volatility fell to 33.820 yesterday from 33.945 on 12-12 vs a slight -0.02% decline in the XAU yesterday which is a modest rise in complacency that correctly portended some weakness today.The XAU Put/Call Ratio correctly pointed to some strength (an uptrend) today by rising to 0.90550 from 0.90467 yesterday. Ciao

............................S & P 500 (SPX) Triple Top

SPX put in a triple top today, and, like HUI, NEM, and the XAU, is in the very flat topping part of it's monthly/minor intermediate term cycle, so, since SPX index funds are the largest NEM traders (NEM being a component of the S & P 500), once SPX breaks down that should drag NEM and therefore HUI and the XAU with it, because SPX index funds will be selling NEM when SPX falls. This should occur by week's end. Ciao

NEM Outperformed The XAU By A Bullish +0.38% Today

The NEM Lead Indicator is very bullish now at +1.46% yesterday vs the XAU and +0.38% today on top of +1.06% last week, which, combined with HUI and the XAU's very sharp volatility spikes that began yesterday and ended early today, points to a sharp rebound tomorrow and possibly even a test of yesterday's cycle highs in the next day or two. I didn't buy Call Options because trading long is very risky right now. The sharp rise could be a very brief spike followed by a plunge tomorrow. From a short term cycle perspective it's risky trading Puts, so I'm in cash now. One needs to wait for the monthly cycle high to clearly be established, and the NEM Lead Indicator is very bullish combined with the very sharp volatility spikes indicate that trading short is far too risky short term. Ciao.

.............................Very Sharp Volatility Spikes!

From yesterday's cycle highs to today's cycle lows HUI fell a very sharp -5.50% or thereabouts and the XAU fell about -4.50%. Those are very respectable volatility spikes that portend strength. Tomorrow should be a sharp rise and maybe a very sharp rise with a chance that new monthly cycle highs may occur in the next day or two (doubtful though). Remember that NEM outperformed by a very bullish +1.46% yesterday and we'll see what it does today. It may outperform again. Ciao!

.............................Downside Gaps To Watch

12-7's downside gaps at 255.82 for HUI, at 48.75 for NEM, and at 119.69 for the XAU should get filled in the next few days.

In the monthly downcycle it appears that HUI, NEM, and the XAU could, based on their major upcycle trendlines in the latest 1 year charts (see first link below, the second link has those charts and many more), fall in the next few weeks to 235-245 (HUI), 45-47 (NEM), and 109-114 (XAU).

At http://www.joefrocks.com/TradetheCycles.html scroll down a few pages past the major averages stuff. See http://www.joefrocks.com/GoldStockCharts.html for all the charts. My home page is http://www.JoeFRocks.com/

....................................Early Gap Filling Action

NEM filled it's downside gap created at yesterday's open early on, and, NEM and the XAU are likely to fill the upside gaps they created at today's open (NEM already has), then put in lower highs than yesterday's likely Elliot Wave 5 short term cycle highs that could also be monthly cycle highs.

Some interesting positives now that indicate a higher monthly cycle high may occur in the next week or so in rollover mode, on the relatively flat part of the monthly cycle's curve, are that the NEM Lead Indicator is very bullish now at +1.46% yesterday and at +0.10% so far today. This points to a sharp rebound today that's occurring as I write this. Until the NEM Lead Indicator turns bearish a substantial decline is unlikely.

Another interesting positive is that XAU Implied Volatility experienced an unusually large (> 6%) rise to 33.945 yesterday from 28.835 on 12-9 which is an unusually large rise in fear that correctly portended some weakness today, but the spike in XAU Implied Volatility typically points to strength in the near future.

The XAU Put/Call Ratio correctly pointed to some strength today by rising to 0.90467 from 0.89875 yesterday.

Long term cycle high targets likely to be achieved in the May 2006 timeframe (based on the fact that the long term cycles have been getting longer) based on extrapolating the previous long term cycle highs since the late 2000 very long term cycle lows are 330-350 for HUI, 70-75 for NEM, and 150-160 for the XAU. The previous long term cycle highs at 258.60 for HUI, 50.28 for NEM, and at 113.41 for the XAU that occurred in Dec 2003/Jan 2004 were just exceeded last week, so it's very unlikely that yesterday's cycle highs or those that may occur in the next week or so are long term cycle highs. Ignore the noise and chatter that's going on (you can't guess this stuff) and stay with a disciplined approach using cycle trendlines. Good luck.

NEM Outperformed The XAU By A Very Bullish +1.46% Today

The XAU closed up an "impressive" +0.033% today! It made an impression alright. There should be a sharp rebound tomorrow that, if lower cycle highs occur than today's, will potentially be a shorting opportunity, but it's very risky to trade in either direction now (long or short) since the monthly cycle is in the flat/sideways topping area, zig zagging like crazy. It's obviously better to let the monthly cycle (HUI, NEM, XAU) resolve itself to the downside before trading short or trading puts. NEM had enormous volume of 20.425 million shares today which is the most since early 2002 when NEM had a session with over 30 million shares, according to ASK Research's chart. Ciao

Huge NEM Volume Of Nearly 18 Million Shares Right Now

Versus 6.50 million shares average daily volume the past three months. A lot of lambs are being slaughtered today. Luckily, the major intermediate term upcycle since May 16, 2005 and the long term upcycle since May 10, 2004 as well as of course the very long term upcycle since late 2000 should bail them out.

.........................The Slaughter Of The Lambs

The dumb money rushed in and had their heads handed to them on gold and silver platters. Wild volatility in recent weeks. The XAU Put/Call Ratio and XAU Implied Volatility both correctly pointed to some weakness today. In the Yahoo 5 day chart (a tool you should be using to gauge cycles, it's real time, but, you have to refresh manually of course), http://finance.yahoo.com/q/ta?s=%5Exau&t=5d&l=off&z=l&q=b&p=&a=m26-12-9%2Cp12%2Cfs%2Cw14&c= , notice the peaks rolling over/flattening out. Gap filling action is going on today also. The XAU filled it's downside gap at 122.94 created at today's open and HUI filled it's downside gap at 261.33. Ciao.

NEM Is Outperforming The XAU By A Very Bullish 2% Right Now

The NEM Lead Indicator is way too bullish to short or trade puts today or even probably tomorrow. Trading long is also very risky due to the short term and monthly cycle sell signals that occurred on Friday. The money market's looking pretty good right now. Ciao.

.............Higher Highs As The Cycle Rolls Over

As strong as the monthly and short term upcycles have been an upside surprise, exceeding Friday's highs, isn't too surprising. I see this early strength largely as dumb money getting excited and chasing this rally. Also, Friday's very sharp plunge was a very respectable volatility spike that portended some strength today. But last week's short term and monthly cycle sell signals indicate that risk is very high right now from a monthly and short term cycle perspective. The indicators and COT data largely point to weakness, except right now NEM is outperforming the XAU by about +0.40% which portends strength for some of today's session and the COT data did point to some strength.

The XAU Put/Call Ratio continues to rise dramatically, which is another major warning sign, rising to 0.89875 today from 0.83370 on Friday, which is an unusually large (> 6%) rise in fear that portends weakness/a downtrend for part of today's session.

XAU Implied Volatility fell -1.14% to 29.835 on Friday 12-9 from 30.180 on 12-8 versus a -1.00% decline in the XAU on 12-9, which is a sharp (2-2.99%) 2.14% rise in complacency (-1.14% + -1.00% = -2.14%. The XAU wall of worry shrank by -2.14%, therefore complacency rose by +2.14%) that portends weakness/a downtrend during part of Monday 12-12's session.

Right now it's very risky trading either long or short, because the monthly and short term upcycles have flattened out/rolled over after an incredible spike move that saw NEM rise +9.18% in a little over one session from early last Tuesday until early Wednesday. If you're looking to make a trade today day trading short or trading puts probably makes the most sense if you're able to do that in your account. NEM is showing surprising strength, partly due to it's major breakout last week and dumb money getting excited. Ciao.

.......................Weekly Update Ready

At http://www.joefrocks.com/TradetheCycles.html scroll down a few pages past the major averages stuff. See http://www.joefrocks.com/GoldStockCharts.html for all the charts. My home page is http://www.JoeFRocks.com/ Check out the 5 day HUI chart that shows it's third/Elliot Wave 5 short term upcycle peaked on 12-9, and, shows the short term and monthly cycle sell signals, which are also shown on HUI's 3 month chart. Ciao

........................Disclaimer

Joe Ferrazzano is not a registered investment advisor. Investing in stocks involves risk. Joe Ferrazzano is not a registered broker or dealer. Each investor has to ascertain what percentage if any of one's investments should be allocated to growth stocks or gold/silver stocks. Please see a financial planner, registered investment advisor or at least do your homework and decide what is right for your situation. Growth stocks and gold/silver stocks tend to be extremely volatile which creates opportunities but also can be very painful and risky. Each investor must take complete responsibility for his or her investing actions. Joe Ferrazzano should be considered as one source of information out of many from which to derive a decision on investing.

........................More Weakness Likely On Monday

The NEM Lead Indicator was bearish at -0.23% on Friday 12-9. XAU Implied Volatility fell -1.14% to 29.835 on Friday 12-9 from 30.180 on 12-8 versus a -1.00% decline in the XAU on 12-9, which is a sharp (2-2.99%) 2.14% rise in complacency (-1.14% + -1.00% = -2.14%. The XAU wall of worry shrank by -2.14%, therefore complacency rose by +2.14%) that portends weakness/a downtrend during part of Monday 12-12's session. The unusually large (> 6%) rise in the XAU Put/Call Ratio (Dec expiration) the past two sessions from 0.62820 to 0.83370 points to a substantial decline in the XAU in the near future because it's an unusually large rise in fear.


The COT data is basically bearish with the gold Commercial Traders trading net short and the gold Speculators trading net long, but the unusually large (> 10% increase in long position) long liquidation by the Commercial Traders points to some short term strength, but some of that strength has already occurred because the data is as of Tuesday 12-6. The gold Commercial Traders sold an unusually large (> 10% decrease in long contracts) 14,042 (added 17,312 the prior week) long futures and options contracts and covered 5276 (added 16,229 the prior week) short futures and options contracts which portends strength this week (non contrarian indicator), because the unusually large long liquidation is a short term contrarian indication and the short covering also points to strength, but the net short increase points to weakness following that strength and most or all of the strength may have occurred last week because the data is three days stale when released. The gold Speculators (hedge funds and other speculators/traders) added 9102 (sold 2697 the prior week) long futures and options contracts and added 566 (added 2309 the prior week) short futures and options contracts which portends weakness this week (contrarian indicator).

..............HUI, NEM, XAU Monthly Cycle Highs Occurred Today

It's very likely that monthly cycle highs occurred today for HUI, NEM, and the XAU. A monthly cycle parabolic trendline sell signal occurred on Wednesday and a straight trendline sell signal occurred today. This will be shown in the 5 day HUI chart in Sunday's weekly update. The very sharp decline from today's session highs (268.98 for HUI) to the session lows (260.73 for HUI) triggered the 2% monthly cycle straight trendline sell signal.

NEM underperformed the XAU by -0.23% today which portends more weakness on Monday. There's no need for monthly or short term cycle traders to panic since there should be a sharp rebound early next week, which will be the monthly downcycle beginning relatively flat, and, keep in mind that many stocks peak after HUI, NEM, and the XAU.

At http://www.joefrocks.com/TradetheCycles.html scroll down a few pages past the major averages stuff to see my weekly update last week. See http://www.joefrocks.com/GoldStockCharts.html for all the charts. My home page is http://www.JoeFRocks.com/ Check out the 5 day HUI chart that shows it's third/Elliot Wave 5 short term upcycle began just before the close on 11-30. Ciao

The Elliot Wave 5 Short Term Upcycle Since November 30 Is Peaking

After the huge spike move from early Tuesday until early Wednesday, HUI, NEM, and the XAU's Elliot Wave 5 short term upcycle since November 30 really had to roll over (see link below), because the rally was amazingly strong for about a session (NEM rose 9.18%!). Short term and potentially monthly cycle highs may occur today or will probably occur in the next day or two. http://finance.yahoo.com/q/ta?s=%5Exau&t=5d&l=off&z=l&q=b&p=&a=m26-12-9%2Cp12%2Cfs%2Cw14&c= NEM is underperforming the XAU by a slight % right now and began to underperform yesterday (by-0.41%) which is a bearish indication. Since a short term and potentially monthly cycle high appears imminent I sold most of my positions yesterday and will probably be completely in cash by session's end.

XAU Implied Volatility fell modestly to 30.180 yesterday from 30.370 on 12-7 vs a +1.80% rise in the XAU yesterday which is a significant rise in fear that portends strength during part of today's session. The XAU Put/Call Ratio rose an unusually large (> 6%) 11.65% to 0.83370 today from 0.74673 yesterday, which is an unusually large rise in fear that portends weakness for part of today's session. The unusually large (> 6%) rise in the XAU Put/Call Ratio the past two sessions from 0.62820 to 0.83370 points to a substantial decline in the XAU in the near future because it's an unusually large rise in fear. Ciao

The Elliot Wave 5 Short Term Upcycle Since November 30 Is Rolling Over

After the huge spike move from early Tuesday until early yesterday, HUI, NEM, and the XAU's Elliot Wave 5 short term upcycle since November 30 really had to roll over (see link below). HUI and the XAU are likely to make a higher high or two in the next few days but short term and potentially monthly cycle highs may have occurred today or will probably occur in the next day or two.

http://finance.yahoo.com/q/ta?s=%5Exau&t=5d&l=off&z=l&q=b&p=&a=m26-12-9%2Cp12%2Cfs%2Cw14&c=

NEM underperformed the XAU by -0.41% today but outperformed late in the session, so early strength is likely tomorrow. Ciao

NEM Is Underperforming The XAU By A Wide Margin Right Now

At -0.80% vs the XAU. It appears that NEM is going to fill it's downside gap created yesterday at 48.75 in the near future. Williams %R is extremely overbought near 0 for the XAU. In the XAU's 5 day chart http://finance.yahoo.com/q/ta?s=%5Exau&t=5d&l=off&z=l&q=b&p=&a=m26-12-9%2Cp12%2Cfs%2Cw14&c= you can see that the monster spike move is rolling over. I sold most of my positions and may be 100% in cash by session's end. The Elliot Wave 5 short term and potentially monthly cycle high probably didn't occur today but it might have. Ciao

................NEM Is Leading To The Upside As Usual

The NEM Lead Indicator was a modestly bearish -0.19% yesterday vs the XAU, was a very bullish +1.28% the day before, was a bullish +0.61% on Monday, was a bullish +1.02% last week, and is leading to the upside again today. Amazingly good indicator. The NEM Lead Indicator should turn very bearish for a few days when the monthly upcycle Elliot Wave 5 short term cycle high and potentially monthly cycle high occurs. So, that fact combined with yesterday's major breakout by NEM (HUI and the XAU have also broken out to new highs for this Bull Market/very long term upcycle since late 2000) points to probably at least two more days of upside.

XAU Implied Volatility fell modestly to 30.370 yesterday from 30.515 on 12-6 vs a +1.91% rise in the XAU yesterday which is a significant rise in fear that portends strength during part of today's session. The XAU Put/Call Ratio rose an unusually large (> 6%) 18.87% to 0.74673 today from 0.62820 yesterday, which is an unusually large rise in fear that usually portends weakness, but, given the major breakout yesterday and how bullish the NEM Lead Indicator is it's difficult to believe that weakness/a downtrend will last long today, but it does point to weakness for some of today's session. Ciao

.........................Constructive Session

After the early gap up/break out spike move there was a nearly two hour sharp correction followed by a modest uptrend the remainder of the session http://finance.yahoo.com/q/ta?s=%5Exau&t=5d&l=off&z=l&q=b&p=&a=m26-12-9%2Cp12%2Cfs%2Cw14&c= , but, the upcycle increased in strength during the last hour so it appears that there will be a firm open tomorrow. NEM underperformed the XAU by a relatively modest -0.19% today. I expect NEM to lead to the upside early tomorrow. Given the major breakout today there should be a few more days of upside as I said earlier today. Ciao.

.....................Volatility Is Our Friend Baby

When you see NEM drop sharply from 50.55 to 49.35ish intraday that's a -2.37% plunge/volatility spike that portends strength in an upcycle (cycles being the most important market timing consideration), because high volatility has a high correlation with fear. Low volatility has a high correlation with complacency. Also, the huge spike move that began yesterday had to correct some. Ciao

.........................NEM Does It Again!

In the monthly upcycle's Elliot Wave 3 short term upcycle NEM rose about 9% in a little over one session. From yesterday's cycle low early in the session at 46.30 to today's early high at 50.55 NEM rose +9.18% in a little over one session, so NEM had another huge 9% one sessionish move in this Elliot Wave 5 short term upcycle. Amazing.

...............................NEM Broke Out

NEM's high so far today is 49.99 and it has experienced a breakout above major resistance since it's long term cycle high at 50.28 on 12-2-03. All indicators portend strength. The NEM Lead Indicator was very bullish at +1.28% yesterday and is about +0.25% today as I write this. XAU Implied Volatility rose slightly to 30.515 yesterday from 30.48 on 12-5 despite a sharp +2.80% rise in the XAU yesterday which is a sharp rise in fear that portends strength during some of today's session. The XAU Put/Call rose very sharply (over 3%) to 0.62820 today from 0.60963 yesterday which portends strength during some of today's session. Since HUI, NEM, and the XAU are very overbought a pullback is likely at some point today, probably in the middle or late in the session. Given the major breakout by NEM the monthly upcycle should have a few more days of upside. Ciao

The NEM Lead Indicator Was a Very Bullish +1.28% Today Vs The XAU

There's probably at least two more days of upside in the monthly upcycle's Elliot Wave 5 short term upcycle. The NEM Lead Indicator was a very bullish +1.28% today vs the XAU after being bullish at +0.61% yesterday and bullish last week at +1.02%. A test of major resistance at 49.50ish for NEM is likely tomorrow. Buckle up!

NEM Takes Out It's Previous Monthly Cycle High!

at 48.20 on Sept 30. Major resistance at the 49.50 area is obviously very important and may be tested in the next day or two. The force is with us gold/silver bugs!

S & P 500's (SPX) Affect On Reliable Lead Indicator NEM and Therefore the Gold/Silver Stock Market

Notice how SPX briefly plunged after a spike open, leading to NEM weakness, because SPX index funds were selling NEM, then, SPX shot up helping NEM. Notice the similarity between NEM and SPX's intraday charts because SPX index funds are probably the largest traders of NEM on any given day. The main difference is that SPX gapped up today while NEM gapped down, otherwise the charts are very similar. It makes sense for me to spend more time analyzing SPX. Ciao

http://finance.yahoo.com/q/ta?s=%5Espx&t=5d&l=off&z=l&q=b&p=&a=m26-12-9%2Cp12%2Cfs%2Cw14&c=

http://finance.yahoo.com/q/ta?s=nem&t=5d&l=off&z=l&q=b&p=&a=m26-12-9%2Cp12%2Cfs%2Cw14&c=

The Gold/Silver Stock Market is Trying to Shake Out the Weak Money

There's been a plunge during part of each of the past three sessions, http://finance.yahoo.com/q/ta?s=%5Exau&t=5d&l=off&z=l&q=b&p=&a=m26-12-9%2Cp12%2Cfs%2Cw14&c= . NEM has been very scary again today hitting 46.30 vs it's short term cycle low at 46.09 just before the close on 11-30. NEM hit 46.22 in each of the prior two sessions. This monthly upcycle Elliot Wave 5 short term upcycle is getting off to a pancake start for NEM. All this corrective activity makes some sense given the prior monster Elliot Wave 3 short term upcycle that saw NEM rise about 9% in a little over one session.

The XAU Put/Call Ratio correctly pointed to some weakness today, falling to 0.60963 today from 0.61040 yesterday. XAU Implied Volatility reveals that a very sharp rise in fear occurred yesterday because it rose +3.55% to 30.480 yesterday from 29.435 on 12-2 vs and despite a +0.17% rise in the XAU yesterday which portends potentially substantial strength today as does the NEM Lead Indicator which was +0.61% vs the XAU yesterday and is about +0.25% today as I write this. Ciao

The NEM Lead Indicator Was Bullish At +0.61% Today Vs The XAU

NEM outperformed by a wide margin of +0.61% today vs the XAU which portends significant and potentially substantial strength tomorrow. People have been asking me when I think this monthly upcycle Elliot Wave 5 short term upcycle will peak. I don't know any more than anyone else because at this point it's difficult to make an educated guess, but it doesn't appear like it will be tomorrow unless there's a very sharp spike move. NEM's previous monthly cycle high at 48.20 on 9-30-05 is well above it's close at 46.84 today, and, this monthly upcycle's cycle high should be well above the previous one at 48.20. You should be using cycle trendlines, and, when they flash sell (break down, 1% follow through for short term upcycles and 2% for monthly upcycles) you sell. I think there's at least 2 days left and maybe much more if NEM breaks above major resistance at 49.50ish. Ciao

………..NEM Scare Again, Hitting 46.22 Again Today

NEM was affected by S & P 500 weakness again today since NEM is in the S & P 500 and SPX index funds were selling early today. NEM’s short term cycle low at 46.09 on 11-30 must hold or the monthly cycle has almost certainly turned down. NEM plunged from an early high at 46.88 to 46.22 providing another big scare similar to Friday’s when it also plunged to 46.22.

The indicators pointed to some weakness today. The NEM Lead Indicator was -0.05% vs. the XAU on Friday, but is about +0.25% vs. the XAU as I write this, which points to strength. XAU Implied Volatility fell -1.09% to 29.435 on Friday 12-2 from 29.760 on 12-1 versus a -1.62% decline in the XAU on 12-2, which is a sharp (2-2.99%) 2.71% rise in complacency (-1.09% + -1.62% = -2.71%. The XAU wall of worry shrank by -2.71%, therefore complacency rose by +2.71%) that portends weakness/a downtrend during part of Monday 12-5's session. The XAU Put/Call Ratio fell to 0.61040 today vs. 0.61331 on Friday which pointed to some weakness today. Ciao.

.......................Weekly Update Ready

At http://www.joefrocks.com/TradetheCycles.html scroll down a few pages past the major averages stuff. See http://www.joefrocks.com/GoldStockCharts.html for all the charts. My home page is http://www.JoeFRocks.com/ Check out the 5 day HUI chart that shows it's third/Elliot Wave 5 short term upcycle began just before the close on 11-30. Ciao

........................Disclaimer
Joe Ferrazzano is not a registered investment advisor. Investing in stocks involves risk. Joe Ferrazzano is not a registered broker or dealer. Each investor has to ascertain what percentage if any of one's investments should be allocated to growth stocks or gold/silver stocks. Please see a financial planner, registered investment advisor or at least do your homework and decide what is right for your situation. Growth stocks and gold/silver stocks tend to be extremely volatile which creates opportunities but also can be very painful and risky. Each investor must take complete responsibility for his or her investing actions. Joe Ferrazzano should be considered as one source of information out of many from which to derive a decision on investing.

A Volatility Spike Occurred On Friday

The high volatility on Friday (see 5 day HUI chart, http://finance.yahoo.com/q/bc?t=5d&l=on&z=m&q=l&p=&a=&c=&s=%5Ehui ) is a sharp volatility spike that has a high correlation with fear, and, assuming that a monthly upcycle remains in effect (cycles being the most important consideration), portends substantial near term strength.

The NEM Lead Indicator Was Bullish Last Week

At +1.02% vs the XAU. -1.67% vs -1.62% for the XAU on 12-2, +2.49% vs +3.08% for the XAU on 12-1, -2.54% vs -2.43% for the XAU on 11-30, -0.55% vs -0.69% for the XAU on 11-29, +1.31% vs -0.32% for the XAU on 11-28.

......................NEM Scare And Bullish COT Data

NEM gave me a big scare as it plunged mid session, appearing like it was going to fill it's downside gap at 46.12 from two days ago. The huge problem with that though was that NEM's short term cycle low two days ago was at 46.09, so if 46.12 got filled that meant 46.09 probably would have been taken out and therefore a short term upcycle wasn't in effect and my assessment of the longer cycles would probably have been flawed, meaning that the monthly upcycle probably had turned down IF NEM took out 46.09. Luckily NEM put in a very short term cycle low at 46.22 then rallied smartly at session's end to 46.70ish before taking a modest plunge to close at 46.48. The bid is 46.51 and the ask is 46.75 after hours right now which is a good sign. NEM slightly underperformed the XAU by -0.05% today, but the gap with the XAU narrowed near session's end which points to strength early on Monday 12-5.

Notice that a sharp rally did occur following the late session very short term cycle low, so XAU Implied Volatility and the XAU Put/Call Ratio did correctly portend strength following the intraday cycle low.

The COT data is basically bullish with the gold Speculators trading net short and the gold Commercial Traders trading net long, but the unusually large (> 10% increase in long position) long trade by the Commercial Traders does point to some weakness, but some of that weakness has already occurred because the data is as of Tuesday 11-29. See http://www.cftc.gov/dea/options/deacmxsof.htm Ciao!

.............Yesterday's Spike Move Is Correcting

One rarely should chase spike moves such as yesterday's and typically would wait for a pullback.
In the XAU's 5 day chart http://finance.yahoo.com/q/ta?s=%5EXAU&t=5d&l=off&z=m&q=b&p=&a=m26-12-9,p12,fs,w14&c= one can see that the XAU is trying to put in an intraday cycle low right now and of course a short term cycle low occurred two days ago literally just before the close.

NEM has been modestly underperforming the XAU early, leading to the downside as usual. If you're looking to buy today you probably should wait for NEM to outperform the XAU, preferably by a wide margin of 0.50%+. But, as I've said before, you have to look at the cycle trendlines for the stocks you're trading. Most gold/silver stocks cycles follow HUI, NEM, and the XAU fairly closely at least as far as monthly cycles are concerned.

This monthly upcycle Elliot Wave 5 short term upcycle that began two days ago should last a few more days and could be a monster lasting over a week if NEM breaks above major resistance a bit below 50 (connect the peaks since the long term cycle high at 50.28 on 12-2-03). At the very least NEM should exceed it's previous monthly cycle high above 48 that occurred on 9-30-05.

XAU Implied Volatility implies strength today, falling modestly to 29.760 yesterday from 29.825 on 11-30 vs a very sharp +3.08% rise in the XAU yesterday, which is a very sharp rise in fear that portends strength today. The XAU Put/Call Ratio fell an unusually large (> 6%) -8.27% today to 0.61331 from 0.66857 on 12-1, which is an unusually large rise in complacency that portends strength today. The most important consideration today though is to wait for an intraday/very short term cycle low to occur. Cycle trendlines are the primary market timing consideration as I've said many times in the weekly updates. Stay tuned and good luck.

NEM Underperformed the XAU by -0.59% Today

So, the NEM Lead Indicator was bearish today and was slightly bearish yesterday at -0.11%. Short term cycle traders like myself should get a chance to buy on weakness probably early tomorrow. Normally I buy before a short term cycle buy signal when there's usually a few hours of sideways action following short term cycle lows, which of course is the short term cycle beginning relatively flat. However, yesterday HUI, NEM, and the XAU bottomed just before the close, so I wasn't able to get in.

In the XAU's 5 day chart http://finance.yahoo.com/q/ta?s=%5EXAU&t=5d&l=off&z=m&q=b&p=&a=m26-12-9,p12,fs,w14&c= one can see that the short term cycle buy signal was a healthy one, with a very sharp rise today and an uptrend that lasted about 4 hours. The intraday cycle rolled over however and trended down the last 2.5 hours or so, and, it appears that a significant plunge will occur early tomorrow, possibly after early strength. Ciao