What Will Cause The Dramatic HUI/XAU Decline?
What's likely to cause HUI/XAU to fall 30-40%+ in the next 3-6 weeks and hit 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 3 and 5 at http://www.joefrocks.com/GoldStockCharts.html, is a very weak S & P 500 (SPX) that will lead to index fund selling (the computerized program trading that led to the 1987 crash, now computers can't be used after the Dow falls 500 points or whatever the circuit breaker is now).
SPX may have just put in a Wave 5 cycle high for the minor intermediate term upcycle since mid June or should soon do so. It's technical indicators (RSI, MACD, Stochastics, etc.) have a bearish divergence with price/SPX, trending down recently while SPX trended up.
HUI/NEM/XAU's vicious decline from May 11 until June 13 coincided closely with SPX's correction. Many other sectors such as AMEX Oil and Biotech were also weak due to computerized index fund trading. This why when gold bugs talk about a weak stock market/major averages being good for gold/silver stocks I cringe a little, because the negative correlation exists largely on a Secular/very long term/big picture 15-20 year timeframe. For shorter cycles the correlation between HUI/NEM/XAU and SPX is surprisingly positive much of the time. In 2003 for example SPX soared and so did HUI/NEM/XAU, due largely (major factor at least) to "mechanical" computerized index fund buying. HUI/NEM/XAU's vicious decline from early September until October 4 coincided with three SPX short term downcycles, though SPX did trend up during that time.
Please see the previous post at
http://tradethecycles.blogspot.com/2006/11/critical-chart-huis-one-year-chart.html for many more details as to why a vicious 30-40% decline in HUI/XAU is likely in the next 3-6 weeks.
HUI/NEM/XAU should be about to fall off a cliff the next few sessions, which will be the start of Wave A down of the likely 3-6 weekish vicious decline for HUI/XAU. Since 10-4-06 HUI/XAU have rallied toward their Wave 2 Cyclical Bear Market (began 5-11-06) downtrend lines, and, may have entered Wave C of Wave C (Wave C is probably doing an Elliot Wave ABC down up down pattern), in which HUI/XAU may 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 3 and 5 at http://www.joefrocks.com/GoldStockCharts.html.
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
SPX may have just put in a Wave 5 cycle high for the minor intermediate term upcycle since mid June or should soon do so. It's technical indicators (RSI, MACD, Stochastics, etc.) have a bearish divergence with price/SPX, trending down recently while SPX trended up.
HUI/NEM/XAU's vicious decline from May 11 until June 13 coincided closely with SPX's correction. Many other sectors such as AMEX Oil and Biotech were also weak due to computerized index fund trading. This why when gold bugs talk about a weak stock market/major averages being good for gold/silver stocks I cringe a little, because the negative correlation exists largely on a Secular/very long term/big picture 15-20 year timeframe. For shorter cycles the correlation between HUI/NEM/XAU and SPX is surprisingly positive much of the time. In 2003 for example SPX soared and so did HUI/NEM/XAU, due largely (major factor at least) to "mechanical" computerized index fund buying. HUI/NEM/XAU's vicious decline from early September until October 4 coincided with three SPX short term downcycles, though SPX did trend up during that time.
Please see the previous post at
http://tradethecycles.blogspot.com/2006/11/critical-chart-huis-one-year-chart.html for many more details as to why a vicious 30-40% decline in HUI/XAU is likely in the next 3-6 weeks.
HUI/NEM/XAU should be about to fall off a cliff the next few sessions, which will be the start of Wave A down of the likely 3-6 weekish vicious decline for HUI/XAU. Since 10-4-06 HUI/XAU have rallied toward their Wave 2 Cyclical Bear Market (began 5-11-06) downtrend lines, and, may have entered Wave C of Wave C (Wave C is probably doing an Elliot Wave ABC down up down pattern), in which HUI/XAU may 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 3 and 5 at http://www.joefrocks.com/GoldStockCharts.html.
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
Labels: Gold, Gold Stocks, HUI, NEM, Silver, Silver Stocks, XAU
posted by Joe Ferrazzano at
7:29 AM
