Reliable Lead Indicator NEM Has A Short Term Downcycle Channel
Since hitting a bearish Wave B triple top at 46.86 on 11-9, reliable lead indicator NEM has a short term downcycle channel, see http://finance.yahoo.com/q/ta?s=nem&t=6m&l=off&z=l&q=c&p=&a=m26-12-9%2Cp12%2Cfs%2Cw14&c== (today's candle isn't shown yet). Note that NEM has been in a downtrend/monthly downcycle for over two weeks, since hitting a monthly cycle high at 46.89 on 11-1. This is another sign that supports the HUI/XAU vicious decline scenario. NEM hit resistance near the top of it's monthly downcycle channel on Tuesday, Wednesday, and today.
Reliable lead indicator NEM completed Wave A down of it's Wave C short term downcycle yesterday (Thursday 11-9's cycle high at 46.86 was a bearish Wave B triple top, see chart 1 at http://www.joefrocks.com/GoldStockCharts.html), hitting a Wave A of Wave C cycle low at 44.41. This means that NEM should now be in Wave C of Wave C, because it's Wave B up (of Wave C) peaked yesterday.
So, NEM should soon experience a substantial decline and approach it's Wave 2 Cyclical Bear Market cycle low at 39.84 that occurred on 10-4-06. Since reliable lead indicator NEM should now be in a five yearish Wave 3 Cyclical Bull Market (see chart 2 at http://www.joefrocks.com/GoldStockCharts.html), the cycle low at 39.84 should hold. NEM approaching 39.84 makes sense cyclewise, because NEM's Wave 3 Cyclical Bull Market uptrend should begin relatively flat.
The fact that NEM is probably about to experience a substantial decline means that HUI/XAU should also. NEM's Wave C of Wave C should coincide with Wave C of Wave A for HUI/XAU. Then, once NEM hits a monthly cycle low, it's Wave 1 short term upcycle should coincide with HUI/XAU's Wave B up, then NEM's Wave 2 short term downcycle should coincide with HUI/XAU's Wave C down, in which their Wave 2 Cyclical Bear Market since 5-11-06 should bottom.
The very bearish COT (Commitments Of Traders) data for the 5 session period ending 11-7-06(http://www.cftc.gov/dea/options/deacmxsof.htm) and the very bearish one year NEM Lead Indicator (see next link) suggest that a vicious decline is likely in the near future (may have begun on 11-9-06, when HUI/XAU hit monthly cycle highs for the monthly cycle that began on 10-4-06, see http://finance.yahoo.com/q/ta?s=%5EXAU&t=1y&l=off&z=m&q=l&p=&a=&c=%5Ehui,nem).
The non contrarian gold Commercial Traders added an unusually large (> 10% increase in their short position) 25,249 short futures and options contracts, which is possibly the largest (at least one of the largest) short trade they've made in over a year. The contrarian/clueless gold Speculators added an unusually large (> 10% increase in their long position) 14,552 long futures and options contracts. These very large trades are very bearish on an intermediate term (weeks/months) basis, but, point to some strength short term.
The XAU Put/Call Ratio (November expiration) has spiked in recent days (to
1.06158 today from 1.03993 on 11-15, 0.98463 on 11-14, 0.94133 on 11-13, 0.90824 on 11-10, 0.90426 on 11-9, 0.87587 on 11-8, 0.81823 on 11-7), which is an unusually large rise in fear that correctly portended weakness.
Given that HUI/XAU rallied toward their Wave 2 Cyclical Bear Market (began 5-11-06) downtrend lines in the latest monthly upcycle, 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), HUI/XAU may be about to experience a vicious 3-6 weekish 30-40% decline that should mark the end of their Wave 2 Cyclical Bear Market (began 5-11-06). They should decline to or at least approach their Secular Bull Market/very long term upcycle trendlines at 200ish for HUI (the trendline could turn up to 220ish since HUI is more parabolic/volatile than the XAU) and at 90ish for the XAU, see charts 2 and 4 at http://www.joefrocks.com/GoldStockCharts.html.
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 2 and 4 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 3 at http://www.joefrocks.com/GoldStockCharts.html. ....... http://www.JoeFRocks.com/ .
HUI NEM XAU
Reliable lead indicator NEM completed Wave A down of it's Wave C short term downcycle yesterday (Thursday 11-9's cycle high at 46.86 was a bearish Wave B triple top, see chart 1 at http://www.joefrocks.com/GoldStockCharts.html), hitting a Wave A of Wave C cycle low at 44.41. This means that NEM should now be in Wave C of Wave C, because it's Wave B up (of Wave C) peaked yesterday.
So, NEM should soon experience a substantial decline and approach it's Wave 2 Cyclical Bear Market cycle low at 39.84 that occurred on 10-4-06. Since reliable lead indicator NEM should now be in a five yearish Wave 3 Cyclical Bull Market (see chart 2 at http://www.joefrocks.com/GoldStockCharts.html), the cycle low at 39.84 should hold. NEM approaching 39.84 makes sense cyclewise, because NEM's Wave 3 Cyclical Bull Market uptrend should begin relatively flat.
The fact that NEM is probably about to experience a substantial decline means that HUI/XAU should also. NEM's Wave C of Wave C should coincide with Wave C of Wave A for HUI/XAU. Then, once NEM hits a monthly cycle low, it's Wave 1 short term upcycle should coincide with HUI/XAU's Wave B up, then NEM's Wave 2 short term downcycle should coincide with HUI/XAU's Wave C down, in which their Wave 2 Cyclical Bear Market since 5-11-06 should bottom.
The very bearish COT (Commitments Of Traders) data for the 5 session period ending 11-7-06(http://www.cftc.gov/dea/options/deacmxsof.htm) and the very bearish one year NEM Lead Indicator (see next link) suggest that a vicious decline is likely in the near future (may have begun on 11-9-06, when HUI/XAU hit monthly cycle highs for the monthly cycle that began on 10-4-06, see http://finance.yahoo.com/q/ta?s=%5EXAU&t=1y&l=off&z=m&q=l&p=&a=&c=%5Ehui,nem).
The non contrarian gold Commercial Traders added an unusually large (> 10% increase in their short position) 25,249 short futures and options contracts, which is possibly the largest (at least one of the largest) short trade they've made in over a year. The contrarian/clueless gold Speculators added an unusually large (> 10% increase in their long position) 14,552 long futures and options contracts. These very large trades are very bearish on an intermediate term (weeks/months) basis, but, point to some strength short term.
The XAU Put/Call Ratio (November expiration) has spiked in recent days (to
1.06158 today from 1.03993 on 11-15, 0.98463 on 11-14, 0.94133 on 11-13, 0.90824 on 11-10, 0.90426 on 11-9, 0.87587 on 11-8, 0.81823 on 11-7), which is an unusually large rise in fear that correctly portended weakness.
Given that HUI/XAU rallied toward their Wave 2 Cyclical Bear Market (began 5-11-06) downtrend lines in the latest monthly upcycle, 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), HUI/XAU may be about to experience a vicious 3-6 weekish 30-40% decline that should mark the end of their Wave 2 Cyclical Bear Market (began 5-11-06). They should decline to or at least approach their Secular Bull Market/very long term upcycle trendlines at 200ish for HUI (the trendline could turn up to 220ish since HUI is more parabolic/volatile than the XAU) and at 90ish for the XAU, see charts 2 and 4 at http://www.joefrocks.com/GoldStockCharts.html.
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 2 and 4 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 3 at http://www.joefrocks.com/GoldStockCharts.html. ....... http://www.JoeFRocks.com/ .
HUI NEM XAU
posted by Joe Ferrazzano at
7:34 AM
