.............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
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
posted by Joe Ferrazzano at
6:43 AM
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