.............The Tsunami That Is Program Trading
An early spike by SPX (S & P 500) spiked HUI/NEM/XAU today, see http://finance.yahoo.com/q/ta?t=5d&s=%5EHUI&l=off&z=l&q=c&a=m26-12-9&a=p12&a=fs&a=w14&c=&c=%5EGSPC. Notice that the same thing happened a week ago on the 19th, and, also on the 20th when HUI's modest spike lagged SPX's some. Due to program trading one must time SPX as well as HUI/NEM/XAU.
Reliable lead indicator NEM has a downside gap from today's open at 45.02 and the XAU has a downside gap from today's open at 138.49. Today's early strength was a third/Wave 5 upcycle of the very short term upcycle that began on Friday, see http://finance.yahoo.com/q/ta?s=%5Exau&t=5d&l=off&z=l&q=c&p=&a=m26-12-9%2Cp12%2Cfs%2Cw14&c==. Note the Elliott Wave 12345 up down up down up upcycle pattern that began on Friday.
It makes sense (this has happened many times) that NEM's Wave A down of it's minor intermediate term downcycle since 12-8-06 (cycle high at 47.80) will bottom after it's first cluster of gaps gets filled (45.73 (filled), 44.88 (filled), 45.02, 44.03), and, it looks like the XAU will bottom shortly after filling it's gaps at 138.49, 138.37 (filled) and 132.67.
A number of gold/silver writers make a habit of discussing "manipulation" of gold (and therefore gold stocks) despite the fact that gold did 30-35% each year in it's Wave 1 Cyclical Bull Market from April 2001 until May 2006. If you had an investment that AVERAGED 30-35% each year for slightly over FIVE years would you be screaming "manipulation" on a regular basis? The fact of the matter is that there is MUCH MORE positive "manipulation" in the form of Fed Credit that fuels massive program trading, which accounts for 45% of the daily trading volume on the NYSE and probably 70% or more of the daily dollar volume (the actual money involved in the trading) on the NYSE. Gold and silver are now securitized in the form of Exchange Traded Mutual Funds (ETFs) now (GLD and IAU are two gold ETFs and SLV is a silver ETF).
In the five day HUI vs SPX (S & P 500) chart one can see how SPX buying or selling has a major impact on HUI, see http://finance.yahoo.com/q/ta?t=5d&s=%5EGSPC&l=off&z=l&q=c&a=m26-12-9&a=p12&a=fs&a=w14&c=%5Ehui. In the five year HUI vs SPX (S & P 500) chart one can see that SPX weakness in mid 2002 and early 2003 led to HUI weakness (see http://finance.yahoo.com/q/ta?s=%5EHUI&t=5y&l=off&z=l&q=l&p=&a=m26-12-9,p12,fs,w14&c=%5EGSPC). Then substantial SPX strength during most of 2003 led to (was a major/huge factor, HUI was in the strong part of a Wave 3 long term upcycle) a great upcycle in HUI. In May 2004 SPX and HUI both experienced substantial corrections. In May/part of June this year SPX and HUI both experienced substantial corrections. In early September of this year the worst part of HUI's vicious correction from early September until October 4 occurred during significant short term SPX weakness thanks to program selling.
Most gold/silver stocks follow SPX, see http://finance.yahoo.com/q/ta?t=5d&s=RGLD&l=off&z=l&q=c&a=m26-12-9&a=p12&a=fs&a=w14&c=&c=%5EGSPC. One can see that RGLD spiked early today and early on the 19th (along with SPX) due to program trading. On a given day might a big short seller weaken a stock? Maybe. But, he has to cover at some point, possibly when program trading leads to a big RGLD spike. Is that short covering (and how about program trading which is HUGE) positive manipulation???
The fact is that program trading is such a huge factor (accounts for 45% of the daily trading volume on the NYSE and probably 70% or more of the daily dollar volume (the actual money involved in the trading) on the NYSE) that manipulation of a stock for even a few days let alone weeks is highly unlikely.
Plus, short selling is LEGAL and simply isn't manipulation any more than going long a stock is upside manipulation. Trading ISN'T manipulation it's part of a free market system. The guys that are constantly talking about manipulation of gold and some gold stocks generally are out to lunch (in some cases literally in the Twilight Zone) and can't time the market to save their lives. They need something to blame for their constant failures.
HUI/XAU are in Wave C of Wave C of the Wave 2 Cyclical Bear Market since 5-11-06. In the next 3-6 weeks HUI/XAU should do exactly what reliable lead indicator NEM has already done, which is to decline to their primary multi-year Secular Bull Market/very long term upcycle trendlines, currently at 200-220ish (could turn up which is why there's a wide range) for HUI and at 85-90ish for the XAU, see charts 6 and 8 at http://www.joefrocks.com/GoldStockCharts.html. NEM did a Wave A down, a Wave B up, then it's Wave C did an ABC down up down pattern, which is exactly what HUI/XAU appear to be doing, with Wave C of Wave C probably having begun Tuesday 12-5, when minor intermediate term cycle highs occurred, see charts one and two at http://www.joefrocks.com/GoldStockCharts.html.
As a long term multi-year investor in any stock, commodity, etc. you want to buy near the primary multi-year Secular Bull Market/very long term upcycle trendline, for example NEM's is at 40ish right now, see chart 7 at http://www.joefrocks.com/GoldStockCharts.html. Therefore, NEM right now would be a great buy in the 40-42 range. Gold's primary multi-year Secular Bull Market/very long term upcycle trendline is at $525ish right now, so, gold would be a great buy in the $525-550 range. When the vast majority of gold writers say it's a great time to buy or are bullish, as they almost always are, it's rarely a good time for long term investors to buy. The vast majority of gold writers couldn't time their way out of a paper bag. They tend to be terrible.
HUI/XAU's Wave 2 Cyclical Bear Market began 5-11-06, see charts 6 and 8 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 7 at http://www.joefrocks.com/GoldStockCharts.html. ....... http://www.JoeFRocks.com/ .
HUI NEM XAU
Reliable lead indicator NEM has a downside gap from today's open at 45.02 and the XAU has a downside gap from today's open at 138.49. Today's early strength was a third/Wave 5 upcycle of the very short term upcycle that began on Friday, see http://finance.yahoo.com/q/ta?s=%5Exau&t=5d&l=off&z=l&q=c&p=&a=m26-12-9%2Cp12%2Cfs%2Cw14&c==. Note the Elliott Wave 12345 up down up down up upcycle pattern that began on Friday.
It makes sense (this has happened many times) that NEM's Wave A down of it's minor intermediate term downcycle since 12-8-06 (cycle high at 47.80) will bottom after it's first cluster of gaps gets filled (45.73 (filled), 44.88 (filled), 45.02, 44.03), and, it looks like the XAU will bottom shortly after filling it's gaps at 138.49, 138.37 (filled) and 132.67.
A number of gold/silver writers make a habit of discussing "manipulation" of gold (and therefore gold stocks) despite the fact that gold did 30-35% each year in it's Wave 1 Cyclical Bull Market from April 2001 until May 2006. If you had an investment that AVERAGED 30-35% each year for slightly over FIVE years would you be screaming "manipulation" on a regular basis? The fact of the matter is that there is MUCH MORE positive "manipulation" in the form of Fed Credit that fuels massive program trading, which accounts for 45% of the daily trading volume on the NYSE and probably 70% or more of the daily dollar volume (the actual money involved in the trading) on the NYSE. Gold and silver are now securitized in the form of Exchange Traded Mutual Funds (ETFs) now (GLD and IAU are two gold ETFs and SLV is a silver ETF).
In the five day HUI vs SPX (S & P 500) chart one can see how SPX buying or selling has a major impact on HUI, see http://finance.yahoo.com/q/ta?t=5d&s=%5EGSPC&l=off&z=l&q=c&a=m26-12-9&a=p12&a=fs&a=w14&c=%5Ehui. In the five year HUI vs SPX (S & P 500) chart one can see that SPX weakness in mid 2002 and early 2003 led to HUI weakness (see http://finance.yahoo.com/q/ta?s=%5EHUI&t=5y&l=off&z=l&q=l&p=&a=m26-12-9,p12,fs,w14&c=%5EGSPC). Then substantial SPX strength during most of 2003 led to (was a major/huge factor, HUI was in the strong part of a Wave 3 long term upcycle) a great upcycle in HUI. In May 2004 SPX and HUI both experienced substantial corrections. In May/part of June this year SPX and HUI both experienced substantial corrections. In early September of this year the worst part of HUI's vicious correction from early September until October 4 occurred during significant short term SPX weakness thanks to program selling.
Most gold/silver stocks follow SPX, see http://finance.yahoo.com/q/ta?t=5d&s=RGLD&l=off&z=l&q=c&a=m26-12-9&a=p12&a=fs&a=w14&c=&c=%5EGSPC. One can see that RGLD spiked early today and early on the 19th (along with SPX) due to program trading. On a given day might a big short seller weaken a stock? Maybe. But, he has to cover at some point, possibly when program trading leads to a big RGLD spike. Is that short covering (and how about program trading which is HUGE) positive manipulation???
The fact is that program trading is such a huge factor (accounts for 45% of the daily trading volume on the NYSE and probably 70% or more of the daily dollar volume (the actual money involved in the trading) on the NYSE) that manipulation of a stock for even a few days let alone weeks is highly unlikely.
Plus, short selling is LEGAL and simply isn't manipulation any more than going long a stock is upside manipulation. Trading ISN'T manipulation it's part of a free market system. The guys that are constantly talking about manipulation of gold and some gold stocks generally are out to lunch (in some cases literally in the Twilight Zone) and can't time the market to save their lives. They need something to blame for their constant failures.
HUI/XAU are in Wave C of Wave C of the Wave 2 Cyclical Bear Market since 5-11-06. In the next 3-6 weeks HUI/XAU should do exactly what reliable lead indicator NEM has already done, which is to decline to their primary multi-year Secular Bull Market/very long term upcycle trendlines, currently at 200-220ish (could turn up which is why there's a wide range) for HUI and at 85-90ish for the XAU, see charts 6 and 8 at http://www.joefrocks.com/GoldStockCharts.html. NEM did a Wave A down, a Wave B up, then it's Wave C did an ABC down up down pattern, which is exactly what HUI/XAU appear to be doing, with Wave C of Wave C probably having begun Tuesday 12-5, when minor intermediate term cycle highs occurred, see charts one and two at http://www.joefrocks.com/GoldStockCharts.html.
As a long term multi-year investor in any stock, commodity, etc. you want to buy near the primary multi-year Secular Bull Market/very long term upcycle trendline, for example NEM's is at 40ish right now, see chart 7 at http://www.joefrocks.com/GoldStockCharts.html. Therefore, NEM right now would be a great buy in the 40-42 range. Gold's primary multi-year Secular Bull Market/very long term upcycle trendline is at $525ish right now, so, gold would be a great buy in the $525-550 range. When the vast majority of gold writers say it's a great time to buy or are bullish, as they almost always are, it's rarely a good time for long term investors to buy. The vast majority of gold writers couldn't time their way out of a paper bag. They tend to be terrible.
HUI/XAU's Wave 2 Cyclical Bear Market began 5-11-06, see charts 6 and 8 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 7 at http://www.joefrocks.com/GoldStockCharts.html. ....... http://www.JoeFRocks.com/ .
HUI NEM XAU
Labels: Gold, Gold Stocks, HUI, NEM, Silver, Silver Stocks, SPX, XAU
posted by Joe Ferrazzano at
7:28 AM
