..................Yes, Elliot Wave 4 Is Upon Us
After a brief surreal spike SPX weakness has led to gold/silver stock weakness due to index fund selling. The NEM lead Indicator at +0.92% vs the XAU yesterday correctly pointed to brief strength today, as did today's XAU Put/Call Ratio and Implied Volatility. This is the monthly upcycle's (since 12-20-05) Elliot Wave 5 short term upcycle, which means a monthly cycle high is occurring that's probably also the major upcycle's (since 5-16-05) Elliot Wave 3 minor intermediate term cycle (since 10-20-05 for HUI/XAU) high, so, a Wave 4 likely 20-30% two monthish correction is probably upon us. 1-18's 2% monthly cycle sell signal was a good one even though Elliot Wave predicted another Wave 5 short term upcycle. The 2% monthly cycle sell signal on 1-18 indicated that risk is too high to be long after 1-18. Wave 5 would probably have been an anemic, short lived, and therefore risky short term upcycle with average Fed Credit. Thursday 1-26's $23 Billion in Repos led to this latest spike move, but it's too risky to be aggressively long now as a monthly cycle trader. If your monthly upcycle trading positions normally total $100,000 for example, after a 2% monthly cycle sell signal they might total $20,000 or so if you trade long at all. Fed spiking has probably added 15-20% to this major upcycle's (since 5-16-05) Elliot Wave 3. Because the long term upcycle since 5-10-04 and this major upcycle since 5-16-05 are so strong now, gold/silver stocks respond very well to the Fed's spiking.
Wave 4 could last about two months and the declines could exceed 25%, based on what happened in the prior parabolic major upcycle's Wave 4 that lasted 7 weeks, the XAU fell -25.11% and HUI fell -26.59%. Since the long term cycles are getting longer, the correction could be even longer and deeper.
Federal Reserve Bank Credit for the week ending 1-25 fell -$4.476 Billion, see http://www.federalreserve.gov/releases/h41/Current/ , which portends a very sharp decline soon. Gaps complement cycles, so often you know what's likely to happen because of them. NEM and the XAU appear to be headed toward the downside gaps created at today's open.
The XAU Put/Call Ratio rose modestly today which correctly portended some strength. XAU Implied Volatility also portended strength today. The NEM Lead Indicator is a very bearish -1.30% right now versus the XAU after being a bullish +0.92% yesterday and +0.23% on Friday.
See http://www.joefrocks.com/TradetheCycles.html for the weekly update. Scroll down a few pages past the major averages work to see the gold/silver stock work. See http://www.joefrocks.com/GoldStockCharts.html for all the charts. My home page is http://www.JoeFRocks.com/ I hope you'll take the time to e mail your friends re this Blog and my site/work/system. This will help to keep my work free, because the more visitors I get the more advertising $ I make. I have a long way to go but have made significant progress in recent months. Thank you.
There should be downside gap filling this week since the major upcycle's Elliot Wave 3 for HUI and the XAU should turn down and NEM underperformed the XAU two weeks ago by a very bearish -4.36% and last week by -0.14%. Wave 4 is likely to last 4 to 10 weeks and have declines greater than 20%. The previous parabolic major upcycle's Wave 4 down lasted 7 weeks and the XAU fell -25.11%, from 82.89 on 1-24-03 to 62.08 on 3-13-03 (same timeframe!), then a double bottom occurred about two weeks later, so it was a long correction and a very flat start to Wave 5 in the previous parabolic major upcycle.
Today's Fed Credit so far is a small $2.75 Billion 1 day Repo after a 2 day $5 Billion Repo and a 1 day $3.75 Billion repo yesterday, a relatively modest $5.75 Billion 3 day Repo on Friday, a very large $13 Billion 1 day Repo and a large $10 Billion 14 day Repo on Thursday, a respectable +$7 Billion on Wednesday ( http://www.newyorkfed.org/markets/omo/dmm/temp.cfm ), a respectable +$7 Billion on 1-24, and a large $10.00 Billion 1 day Repo on Monday 1-23. Federal Reserve Bank Credit appears to be a very reliable short term cycle indicator (based on backtesting) when it has a substantial weekly change or a very large daily change, but cycles are the primary consideration by far. See http://www.joefrocks.com/GoldStockCharts.html for HUI and NEM's latest 1 year charts that show the Elliot Wave Points.
NEM has downside gaps to fill at 60.91 from 1-31, at 59.20 from 1-30, at 56.97 from 1-25, at 53.40 from 1-3, at 51.59 from 12-28, at 50.45 from 12-22, and at 48.75 from 12-7, and, the XAU has downside gaps at 149.68 from 1-31, at 146.79 from 1-30, at 141.29 from 1-25, at 137.64 from 1-19, at 135.39 from 1-6, at 128.03 from 1-3, at 124.36 from 12-28, and at 122.49 from 12-22. Often cycle highs or lows will occur shortly after gaps get filled, so one needs to track gaps closely. If gaps don't get filled that can be a bearish or bullish sign, as occurred recently when NEM twice closely approached (daily cycle lows at 48.88 and 48.89) but didn't fill it's downside gap at 48.75, then the recent explosive rally occurred.
http://finance.yahoo.com/q/ta?s=%5EGSPC&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=NEM,%5EXAU,%5EHUI SPX drives index funds which have a profound affect on the short term/weekly and monthly movements of many sectors, including gold/silver stocks. Rapid very modest % moves in SPX generally cause rapid significant moves in NEM and other gold/silver stocks in the many indices affected by SPX. The largest traders of NEM and other gold/silver stocks found in the various indexes are index fund traders, AND, they tend to trade at THE SAME TIME or nearly so, which is huge. The cycles are vastly different for gold/silver stocks and SPX since gold/silver stocks are in a very long term upcycle since Oct/Nov 2000 and SPX is in a very long term downcycle since March 2000.
XAU Implied Volatility rose +1.61% to 34.990 on Monday 1-30 from 34.435 on 1-27 versus a +1.97% rise in the XAU on 1-30, which is a very sharp (3-6%) +3.58% rise in fear (+1.61% + +1.97% = +3.58%. The XAU wall of worry grew by +3.58%, therefore fear rose by +3.58%) that portends strength/an uptrend during part of Tuesday 1-31's session.
The XAU Put/Call Ratio rose a modest (0.25-0.49%) +0.44% today to 1.20815 from 1.20280 on 1-30 which correctly portended some strength today because it's a modest (0.25-0.49%) rise in fear.
The latest COT data (as of 1-24-06) is bullish short term since the gold Commercial Traders traded net long and the gold Speculators traded net short, both of which portend strength for at least part of this week, but the data is three days old when released, so most of the strength may have occurred last week, and the Commercial Traders only added a modest 343 long contracts, and, covered a large number of short contracts. They also were surprised (as I was) by last week's strength due to the Fed's massive lending, because they added a large 11,306 short contracts the prior week in anticipation of substantial weakness. The gold Commercial Traders added 343 (added 10,554, 13,289, 6357 the prior three weeks, sold 1381, 8157 the prior two weeks) long futures and options contracts and covered a large 8435 (added 11,306, 4626, 3299 the prior three weeks, covered 2036 the prior week, added 4202, 2623 the prior two weeks) short futures and options contracts which portends strength this week (non contrarian indicator), but most of the strength may have occurred last week because the data is three days old when released, and the very modest long trade suggests that caution is in order. The gold Speculators (hedge funds and other speculators/traders) sold 6157 (added 5541, 2975, 1521 the prior three weeks, sold 3988, 5112, 19,247 the prior three weeks) long futures and options contracts and added 1783 (added 3743, 9445, 5824 the prior three weeks, covered 1535, 7432, 8720 the prior three weeks) short futures and options contracts which portends strength this week (contrarian indicator). The most important consideration in timing any market is the cycle channels/trendlines (see charts).
Wave 4 could last about two months and the declines could exceed 25%, based on what happened in the prior parabolic major upcycle's Wave 4 that lasted 7 weeks, the XAU fell -25.11% and HUI fell -26.59%. Since the long term cycles are getting longer, the correction could be even longer and deeper.
Federal Reserve Bank Credit for the week ending 1-25 fell -$4.476 Billion, see http://www.federalreserve.gov/releases/h41/Current/ , which portends a very sharp decline soon. Gaps complement cycles, so often you know what's likely to happen because of them. NEM and the XAU appear to be headed toward the downside gaps created at today's open.
The XAU Put/Call Ratio rose modestly today which correctly portended some strength. XAU Implied Volatility also portended strength today. The NEM Lead Indicator is a very bearish -1.30% right now versus the XAU after being a bullish +0.92% yesterday and +0.23% on Friday.
See http://www.joefrocks.com/TradetheCycles.html for the weekly update. Scroll down a few pages past the major averages work to see the gold/silver stock work. See http://www.joefrocks.com/GoldStockCharts.html for all the charts. My home page is http://www.JoeFRocks.com/ I hope you'll take the time to e mail your friends re this Blog and my site/work/system. This will help to keep my work free, because the more visitors I get the more advertising $ I make. I have a long way to go but have made significant progress in recent months. Thank you.
There should be downside gap filling this week since the major upcycle's Elliot Wave 3 for HUI and the XAU should turn down and NEM underperformed the XAU two weeks ago by a very bearish -4.36% and last week by -0.14%. Wave 4 is likely to last 4 to 10 weeks and have declines greater than 20%. The previous parabolic major upcycle's Wave 4 down lasted 7 weeks and the XAU fell -25.11%, from 82.89 on 1-24-03 to 62.08 on 3-13-03 (same timeframe!), then a double bottom occurred about two weeks later, so it was a long correction and a very flat start to Wave 5 in the previous parabolic major upcycle.
Today's Fed Credit so far is a small $2.75 Billion 1 day Repo after a 2 day $5 Billion Repo and a 1 day $3.75 Billion repo yesterday, a relatively modest $5.75 Billion 3 day Repo on Friday, a very large $13 Billion 1 day Repo and a large $10 Billion 14 day Repo on Thursday, a respectable +$7 Billion on Wednesday ( http://www.newyorkfed.org/markets/omo/dmm/temp.cfm ), a respectable +$7 Billion on 1-24, and a large $10.00 Billion 1 day Repo on Monday 1-23. Federal Reserve Bank Credit appears to be a very reliable short term cycle indicator (based on backtesting) when it has a substantial weekly change or a very large daily change, but cycles are the primary consideration by far. See http://www.joefrocks.com/GoldStockCharts.html for HUI and NEM's latest 1 year charts that show the Elliot Wave Points.
NEM has downside gaps to fill at 60.91 from 1-31, at 59.20 from 1-30, at 56.97 from 1-25, at 53.40 from 1-3, at 51.59 from 12-28, at 50.45 from 12-22, and at 48.75 from 12-7, and, the XAU has downside gaps at 149.68 from 1-31, at 146.79 from 1-30, at 141.29 from 1-25, at 137.64 from 1-19, at 135.39 from 1-6, at 128.03 from 1-3, at 124.36 from 12-28, and at 122.49 from 12-22. Often cycle highs or lows will occur shortly after gaps get filled, so one needs to track gaps closely. If gaps don't get filled that can be a bearish or bullish sign, as occurred recently when NEM twice closely approached (daily cycle lows at 48.88 and 48.89) but didn't fill it's downside gap at 48.75, then the recent explosive rally occurred.
http://finance.yahoo.com/q/ta?s=%5EGSPC&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=NEM,%5EXAU,%5EHUI SPX drives index funds which have a profound affect on the short term/weekly and monthly movements of many sectors, including gold/silver stocks. Rapid very modest % moves in SPX generally cause rapid significant moves in NEM and other gold/silver stocks in the many indices affected by SPX. The largest traders of NEM and other gold/silver stocks found in the various indexes are index fund traders, AND, they tend to trade at THE SAME TIME or nearly so, which is huge. The cycles are vastly different for gold/silver stocks and SPX since gold/silver stocks are in a very long term upcycle since Oct/Nov 2000 and SPX is in a very long term downcycle since March 2000.
XAU Implied Volatility rose +1.61% to 34.990 on Monday 1-30 from 34.435 on 1-27 versus a +1.97% rise in the XAU on 1-30, which is a very sharp (3-6%) +3.58% rise in fear (+1.61% + +1.97% = +3.58%. The XAU wall of worry grew by +3.58%, therefore fear rose by +3.58%) that portends strength/an uptrend during part of Tuesday 1-31's session.
The XAU Put/Call Ratio rose a modest (0.25-0.49%) +0.44% today to 1.20815 from 1.20280 on 1-30 which correctly portended some strength today because it's a modest (0.25-0.49%) rise in fear.
The latest COT data (as of 1-24-06) is bullish short term since the gold Commercial Traders traded net long and the gold Speculators traded net short, both of which portend strength for at least part of this week, but the data is three days old when released, so most of the strength may have occurred last week, and the Commercial Traders only added a modest 343 long contracts, and, covered a large number of short contracts. They also were surprised (as I was) by last week's strength due to the Fed's massive lending, because they added a large 11,306 short contracts the prior week in anticipation of substantial weakness. The gold Commercial Traders added 343 (added 10,554, 13,289, 6357 the prior three weeks, sold 1381, 8157 the prior two weeks) long futures and options contracts and covered a large 8435 (added 11,306, 4626, 3299 the prior three weeks, covered 2036 the prior week, added 4202, 2623 the prior two weeks) short futures and options contracts which portends strength this week (non contrarian indicator), but most of the strength may have occurred last week because the data is three days old when released, and the very modest long trade suggests that caution is in order. The gold Speculators (hedge funds and other speculators/traders) sold 6157 (added 5541, 2975, 1521 the prior three weeks, sold 3988, 5112, 19,247 the prior three weeks) long futures and options contracts and added 1783 (added 3743, 9445, 5824 the prior three weeks, covered 1535, 7432, 8720 the prior three weeks) short futures and options contracts which portends strength this week (contrarian indicator). The most important consideration in timing any market is the cycle channels/trendlines (see charts).
posted by Joe Ferrazzano at
8:26 AM
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