The Short Term Downcycle Is Still Relatively Flat

After hitting a third/Wave 5 short term cycle high (for the monthly upcycle since 10-4-06) shortly after the open yesterday, HUI/NEM/XAU have a relatively flat declining peaks downtrend (see http://finance.yahoo.com/q/ta?s=%5EHUI&t=5d&l=off&z=l&q=c&p=&a=m26-12-9,p12,fs,w14&c==), which suggests that there will be a sharp decline soon/probably today.

Update: Just after I published this post NEM took out yesterday's early cycle high, but, is probably just rolling over dramatically and won't change what I discuss here that much, if NEM's cycle high today is only modestly above yesterday's. Rollover action occurs in probably most monthly upcycles, so, it's not surprising.

HUI/XAU plunged early yesterday, which was probably Wave A down of the short term downcycle's Wave A down (might be Wave A down of a monthly downcycle), then did Wave B up during mid session, and, were in Wave C toward session's end, which points to a plunge today at some point. After that plunge, which will complete what is probably Wave A down of the short term downcycle, some strength is likely because it'll be Wave B up of the short term downcycle, which jives with yesterday's bullish NEM Lead Indicator at +0.54% versus the XAU, which portends some strength today.

The fact that yesterday's short term cycle highs for HUI/XAU were the third/Wave 5 cycle highs of the monthly upcycle since 10-4-06 indicates that trading long is risky now. A fourth rollover/relatively flat short term upcycle often occurs in which the monthly upcycle peaks in rollover mode, but, it's obviously much riskier to trade it, because it might not even occur, and, if it occurs it usually does so as the monthly upcycle rolls over/flattens out dramatically.

XAU Implied Volatility and the XAU Put/Call Ratio both indicate that there's too much risk to trade long right now, because XAU Implied Volatility has collapsed recently, which is a very sharp rise in complacency that portends weakness (that may have begun), from 39.400 on 10-19 to 34.985 yesterday, and, the XAU Put/Call Ratio reveals an unusually large (> 6%) rise in fear by XAU options traders, since it rose from 1.01039 yesterday to 1.13974 today (November expiration).

It probably makes a lot of sense to wait for a monthly cycle low to occur in the next week or two before looking to trade gold/silver stocks long. There should be an Elliot Wave ABC down up down pattern to the monthly downcycle, with each Wave (Elliot Waves are upcycles or downcycles) lasting about 2-4 sessions.

The monthly cycle since 10-4-06 is the start of the 3-6 monthish Wave B up of HUI/XAU's Wave 2 Cyclical Bear Market since 5-11-06. NEM's Wave 2 Cyclical Bear Market that began on 1-31-06 ended on 10-4-06 at 39.84, so, reliable lead indicator NEM is probably in a 5 yearish Wave 3 Cyclical Bull Market since 10-4-06, see chart 3 at http://www.joefrocks.com/GoldStockCharts.html ........ http://www.JoeFRocks.com/

HUI NEM XAU