........................HUI/XAU Upside Surprise
HUI/XAU took out Monday's cycle high that looked like a monthly cycle high, but, NEM's cycle high from 11-1 at 46.89 has held, and, the rebound since yesterday's cycle low should be Wave B up of NEM's monthly downcycle. The NEM Lead Indicator is a very bearish -1.05% versus the XAU right now (-0.15% and -0.61% the prior two sessions), which means that NEM is probably doing a Wave B upcycle and hasn't started a new monthly upcycle. Also, NEM declined less than 5%, which would be very modest for an entire monthly downcycle. NEM was due to rebound after dropping nearly 5% in it's Wave A short term downcycle from 11-1 until yesterday's cycle low, so a rebound made sense.
Today is a great example of why one needs to wait for HUI/XAU to fall more than 5%/clearly do Wave A down before looking to short/buy puts, if one trades short. Now that HUI/XAU have surprised to the upside the monthly downcycle (possibly 3-6 week vicious decline) Elliot Wave count will have to be restarted for HUI/XAU.
It's difficult to envision (at the moment) the vicious HUI/XAU decline that the very bearish one year NEM Lead Indicator indicates is likely, see http://finance.yahoo.com/q/ta?s=%5EXAU&t=1y&l=off&z=m&q=l&p=&a=&c=%5Ehui,nem. Since reliable lead indicator NEM should have started a 5 yearish Wave 3 Cyclical Bull Market on 10-4-06, see chart 4 at http://www.joefrocks.com/GoldStockCharts.html, NEM should only decline at most about 17% from it's monthly cycle high at 46.89 on 11-1-06, while HUI/XAU would fall about 30-40%.
This means that many components of HUI/XAU would have to fall well over 30-40%, since NEM is by far the largest component of the XAU the last time I checked and is the second largest component of HUI I think. HUI's Secular Bull Market/very long term upcycle is currently at 200ish, so, if that very important/primary uptrendline for HUI doesn't turn up/increase in strength, HUI could fall about 40%. Even if it turns up a 30-35% decline is still likely.
HUI/XAU have rallied toward their Wave 2 Cyclical Bear Market (began 5-11-06) downtrend lines, and, appear to be about to enter Wave C of Wave C (Wave C is probably doing an Elliot Wave ABC down up down pattern), so, since reliable lead indicator NEM probably completed it's Wave 2 Cyclical Bear Market (began 1-31-06) on 10-4-06 at 39.84, it makes sense that HUI/XAU are about to experience a vicious decline, that should mark the end of their Wave 2 Cyclical Bear Market, because they've rallied toward their Wave 2 Cyclical Bear Market downtrend lines.
The other scenario is the 2 weekish monthly downcycle scenario where HUI/XAU drop 8-15%. If the vicious decline scenario occurs short term there should soon be some big down days of 3-5%+. It should make itself obvious.
HUI/XAU's Wave 2 Cyclical Bear Market began 5-11-06, see charts 3 and 5 at http://www.joefrocks.com/GoldStockCharts.html. 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 4 at http://www.joefrocks.com/GoldStockCharts.html. ....... http://www.JoeFRocks.com/ .
HUI NEM XAU
Today is a great example of why one needs to wait for HUI/XAU to fall more than 5%/clearly do Wave A down before looking to short/buy puts, if one trades short. Now that HUI/XAU have surprised to the upside the monthly downcycle (possibly 3-6 week vicious decline) Elliot Wave count will have to be restarted for HUI/XAU.
It's difficult to envision (at the moment) the vicious HUI/XAU decline that the very bearish one year NEM Lead Indicator indicates is likely, see http://finance.yahoo.com/q/ta?s=%5EXAU&t=1y&l=off&z=m&q=l&p=&a=&c=%5Ehui,nem. Since reliable lead indicator NEM should have started a 5 yearish Wave 3 Cyclical Bull Market on 10-4-06, see chart 4 at http://www.joefrocks.com/GoldStockCharts.html, NEM should only decline at most about 17% from it's monthly cycle high at 46.89 on 11-1-06, while HUI/XAU would fall about 30-40%.
This means that many components of HUI/XAU would have to fall well over 30-40%, since NEM is by far the largest component of the XAU the last time I checked and is the second largest component of HUI I think. HUI's Secular Bull Market/very long term upcycle is currently at 200ish, so, if that very important/primary uptrendline for HUI doesn't turn up/increase in strength, HUI could fall about 40%. Even if it turns up a 30-35% decline is still likely.
HUI/XAU have rallied toward their Wave 2 Cyclical Bear Market (began 5-11-06) downtrend lines, and, appear to be about to enter Wave C of Wave C (Wave C is probably doing an Elliot Wave ABC down up down pattern), so, since reliable lead indicator NEM probably completed it's Wave 2 Cyclical Bear Market (began 1-31-06) on 10-4-06 at 39.84, it makes sense that HUI/XAU are about to experience a vicious decline, that should mark the end of their Wave 2 Cyclical Bear Market, because they've rallied toward their Wave 2 Cyclical Bear Market downtrend lines.
The other scenario is the 2 weekish monthly downcycle scenario where HUI/XAU drop 8-15%. If the vicious decline scenario occurs short term there should soon be some big down days of 3-5%+. It should make itself obvious.
HUI/XAU's Wave 2 Cyclical Bear Market began 5-11-06, see charts 3 and 5 at http://www.joefrocks.com/GoldStockCharts.html. 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 4 at http://www.joefrocks.com/GoldStockCharts.html. ....... http://www.JoeFRocks.com/ .
HUI NEM XAU
posted by Joe Ferrazzano at
9:30 AM
