Two New Charts - SPX (S & P 500) And Computerized Program Trading
The high negative correlation between the major averages and HUI/NEM/XAU is largely on a Secular/very long term cycle/15-20 year basis. For the shorter cycles the correlation becomes increasingly positive, see chart two at http://www.joefrocks.com/GoldStockCharts.html. On the five day chart one can see how similar HUI's chart is to SPX's (S & P 500), with SPX leading HUI by about three hours due to index fund program trading. Since HUI is lagging SPX by about three hours on the five day intraday chart, it looks like HUI will be weak early on Monday, based on the effect of SPX/programmed index fund trading.
Due to computer programmed index fund trading SPX has a huge effect on HUI/NEM/XAU and most other sector indices (this caused the 1987 crash, but circuit breakers are used now). In chart one at http://www.joefrocks.com/GoldStockCharts.html notice that significant SPX weakness triggered/coincided closely (led HUI) with the worst part (by far) of the latest vicious decline that occurred from early September until October 4.
SPX also experienced a substantial multi-week correction at the same time that the first vicious HUI/XAU correction occurred, from May 11 until June 13, see http://finance.yahoo.com/q/ta?s=%5EHUI&t=2y&l=off&z=l&q=c&p=&a=m26-12-9,m26-12-9,p12,m26-12-9,p12,fs,m26-12-9,p12,fs,w14&c=%5EGSPC. Note in chart one at http://www.joefrocks.com/GoldStockCharts.html the times when SPX triggered substantial HUI weakness during the past three months.
Since SPX has trended down since 11-22-06 (may have hit a minor intermediate term cycle high on 11-22-06) and experienced a significant decline last Monday 11-27, HUI and NEM/XAU are probably about to experience substantial weakness, and, the vicious decline that HUI/XAU's cycles suggest should occur, may begin. HUI/XAU might have hit a minor intermediate term cycle high early on Friday 12-1-06, so, the final Wave C of Wave C of their Wave 2 Cyclical Bear Market since 5-11-06 may have begun.
HUI/NEM/XAU should be about to fall off a cliff the next few sessions, which will be Wave A down of the likely 3-6 weekish vicious 30-45%+ decline for HUI/XAU. Since 10-4-06 HUI/XAU have rallied beyond (another reason one must understand cycles, it's very likely to be a major fakeout) their Wave 2 Cyclical Bear Market (began 5-11-06) downtrend lines, but, 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 30-45%+ 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 5 and 7 at http://www.joefrocks.com/GoldStockCharts.html.
HUI/XAU's Wave 2 Cyclical Bear Market began 5-11-06, see charts 5 and 7 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 6 at http://www.joefrocks.com/GoldStockCharts.html. ....... http://www.JoeFRocks.com/ .
HUI NEM XAU
Due to computer programmed index fund trading SPX has a huge effect on HUI/NEM/XAU and most other sector indices (this caused the 1987 crash, but circuit breakers are used now). In chart one at http://www.joefrocks.com/GoldStockCharts.html notice that significant SPX weakness triggered/coincided closely (led HUI) with the worst part (by far) of the latest vicious decline that occurred from early September until October 4.
SPX also experienced a substantial multi-week correction at the same time that the first vicious HUI/XAU correction occurred, from May 11 until June 13, see http://finance.yahoo.com/q/ta?s=%5EHUI&t=2y&l=off&z=l&q=c&p=&a=m26-12-9,m26-12-9,p12,m26-12-9,p12,fs,m26-12-9,p12,fs,w14&c=%5EGSPC. Note in chart one at http://www.joefrocks.com/GoldStockCharts.html the times when SPX triggered substantial HUI weakness during the past three months.
Since SPX has trended down since 11-22-06 (may have hit a minor intermediate term cycle high on 11-22-06) and experienced a significant decline last Monday 11-27, HUI and NEM/XAU are probably about to experience substantial weakness, and, the vicious decline that HUI/XAU's cycles suggest should occur, may begin. HUI/XAU might have hit a minor intermediate term cycle high early on Friday 12-1-06, so, the final Wave C of Wave C of their Wave 2 Cyclical Bear Market since 5-11-06 may have begun.
HUI/NEM/XAU should be about to fall off a cliff the next few sessions, which will be Wave A down of the likely 3-6 weekish vicious 30-45%+ decline for HUI/XAU. Since 10-4-06 HUI/XAU have rallied beyond (another reason one must understand cycles, it's very likely to be a major fakeout) their Wave 2 Cyclical Bear Market (began 5-11-06) downtrend lines, but, 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 30-45%+ 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 5 and 7 at http://www.joefrocks.com/GoldStockCharts.html.
HUI/XAU's Wave 2 Cyclical Bear Market began 5-11-06, see charts 5 and 7 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 6 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
9:43 AM
