Interesting And Deceptive NEM/HUI/XAU Action
I feel sorry for gold/silver bugs who're short term bullish, because this action is very deceptive or at least unclear to most of them. What's probably occurring is that reliable lead indicator NEM's big gap up to 46.25 from 45.27 on Wednesday, when monthly cycle highs probably occurred for HUI/NEM/XAU early on (update: HUI is probably peaking today, which makes sense since it is much less influenced by NEM than the XAU is, and would therefore tend to lag the XAU and reliable lead indicator NEM. NEM dominates the XAU at about 25% weighting for that index, versus HUI where it's only about 12% I think), is a mini/short term breakaway gap and not a major breakaway gap that would imply that HUI/XAU's Wave 2 Cyclical Bear Market since 5-11-06 has ended. This is probably just another very good test of the Wednesday's likely monthly cycle highs (NEM hit 46.80 so far versus 46.89 on Wednesday and HUI hit 327.03 versus 327.36, see 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=). This is probably simply the flat choppy/topping/retest part of the monthly cycle.
With my "Trade the Cycles" system I wait for HUI/NEM/XAU to fall in excess of 5% in the 2-4 session Wave A short term downcycle before looking to short/buy puts during Wave B up, so, I wouldn't have gotten faked out by this action anyway, but, since NEM is such a good lead indicator for gold/silver stocks and had a large potentially important breakaway gap to the upside on Wednesday (XAU's was a breakaway candidate but not as good/large as NEM's), I would have waited for NEM to fill it's downside gap at 45.27 before looking to short/buy puts.
So, one must wait for reliable lead indicator NEM to fill it's downside gap at 45.27 to confirm that NEM didn't experience a major breakout, and, with my "Trade the Cycles" system I wait for HUI/NEM/XAU to fall in excess of 5% in the 2-4 session Wave A short term downcycle before looking to short/buy puts during Wave B up anyway.
Yesterday's NEM Lead Indicator was slightly bearish at -0.20% versus the XAU, see http://finance.yahoo.com/q/ta?s=%5EXAU&t=5d&l=off&z=m&q=l&p=&a=&c=%5Ehui,nem, and, it became clearly bearish in the second half of the session, which portends weakness today after the early strength.
The monthly cycle since 10-4-06 is probably the start of the 3-6 monthish Wave B up of HUI/XAU's Wave 2 Cyclical Bear Market since 5-11-06, see the first chart 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
With my "Trade the Cycles" system I wait for HUI/NEM/XAU to fall in excess of 5% in the 2-4 session Wave A short term downcycle before looking to short/buy puts during Wave B up, so, I wouldn't have gotten faked out by this action anyway, but, since NEM is such a good lead indicator for gold/silver stocks and had a large potentially important breakaway gap to the upside on Wednesday (XAU's was a breakaway candidate but not as good/large as NEM's), I would have waited for NEM to fill it's downside gap at 45.27 before looking to short/buy puts.
So, one must wait for reliable lead indicator NEM to fill it's downside gap at 45.27 to confirm that NEM didn't experience a major breakout, and, with my "Trade the Cycles" system I wait for HUI/NEM/XAU to fall in excess of 5% in the 2-4 session Wave A short term downcycle before looking to short/buy puts during Wave B up anyway.
Yesterday's NEM Lead Indicator was slightly bearish at -0.20% versus the XAU, see http://finance.yahoo.com/q/ta?s=%5EXAU&t=5d&l=off&z=m&q=l&p=&a=&c=%5Ehui,nem, and, it became clearly bearish in the second half of the session, which portends weakness today after the early strength.
The monthly cycle since 10-4-06 is probably the start of the 3-6 monthish Wave B up of HUI/XAU's Wave 2 Cyclical Bear Market since 5-11-06, see the first chart 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
7:29 AM
