.................XAU Options Traders Don't Get It
XAU options traders have been very complacent since the XAU hit a minor intermediate term cycle high on 12-5-06 (see charts 1 and 2 at http://www.joefrocks.com/GoldStockCharts.html that show HUI which also peaked on 12-5-06). Even most good traders don't understand what's going on now. Here's the XAU Put/Call Ratio data:
0.74823 on 12-22, 0.78590 on 12-21, 0.78619 on 12-20, 0.82153 on 12-19, 0.75789 on 12-18, 0.63657 on 12-15 (January), 0.99706 on 12-15 (December expired), 0.97423 on 12-14, 0.97093 on 12-13, 0.97321 on 12-12, 0.95966 on 12-11, 0.98969 on 12-8, 1.00086 on 12-7, 1.00627 on 12-6, 0.97946 on 12-5.
Since 12-5-06 the XAU Put/Call Ratio has fallen from 0.97946 to 0.74823 on 12-22-06, despite a substantial decline in the XAU, which is obviously a very bearish sign. One wants to see a GREATER percentage RISE in the XAU Put/Call Ratio than the XAU's decline, which would indicate that fear is creeping into the XAU, but, the XAU Put/Call Ratio has fallen as if the XAU was rising, which is a very bad/bearish sign.
XAU Implied Volatility tells a similar story, with weakness meaning that the sum of the XAU's and XAU Implied Volatility's percentage changes was negative (complacency crept in) and strength means that fear crept in (the sum was positive):
26.200 on 12-22 weakness (portends some significant weakness on Tuesday 12-26), 26.450 on 12-21 weakness, 26.415 on 12-20 weakness, 26.190 on 12-19 weakness, 27.120 on 12-18 severe weakness, 28.240 on 12-15 weakness, 28.895 on 12-14 weakness, 30.175 on 12-13 weakness, 31.010 on 12-12 weakness, 31.035 on 12-11 strength, 30.690 on 12-8 weakness, 30.385 on 12-7 weakness, 31.285 on 12-6 weakness, 31.230 on 12-5 weakness.
This extreme complacency jives with the expected scenario that HUI/XAU will literally crash in the next 3-6 weeks (because they're in Wave C of Wave C of a Cyclical Bear Market) and decline to their primary Secular Bull Market/very long term upcycle trendlines in effect since November (HUI)/October (XAU) 2000 (see charts 6 and 8 at http://www.joefrocks.com/GoldStockCharts.html ), and, conclude the Wave 2 Cyclical Bear Market that began on 5-11-06.
Here's some great news, HUI/XAU's Wave 3 Cyclical Bull Market will probably last 6-7 years, since Elliott Wave 1 lasted 5.5 years and Wave 3 tends to be longer and stronger than Wave 1. Upcycles tend to increase over time, but often will weaken/flatten out/roll over as they peak.
NEM has a bearish double top at 47.80 on 12-8 and 47.77 on 12-15, with 47.80 on 12-8 being a minor intermediate term cycle high for the cycle that began on 10-4-06. The next few sessions may bring brutal declines. For anyone to suggest that you shouldn't seriously consider taking profits now means they don't understand what's going on.
HUI could fall all the way to 200ish in the next few weeks (it's Secular Bull Market PRIMARY trendline, see chart 6 at http://www.joefrocks.com/GoldStockCharts.html), with much of that decline probably due to program selling related to SPX (S & P 500) weakness, notice how HUI has been following SPX the past 5 sessions, 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.
Many gold/silver stocks are likely to decline 30-40-50%+ FROM HERE in the next few weeks. You need to determine where the Secular Bull Market PRIMARY trendline is for your gold/silver stocks, see charts 6, 7, and 8 at http://www.joefrocks.com/GoldStockCharts.html for examples. I haven't seen a single gold/silver writer who understands that a Cyclical Bear Market is in effect right now.
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
0.74823 on 12-22, 0.78590 on 12-21, 0.78619 on 12-20, 0.82153 on 12-19, 0.75789 on 12-18, 0.63657 on 12-15 (January), 0.99706 on 12-15 (December expired), 0.97423 on 12-14, 0.97093 on 12-13, 0.97321 on 12-12, 0.95966 on 12-11, 0.98969 on 12-8, 1.00086 on 12-7, 1.00627 on 12-6, 0.97946 on 12-5.
Since 12-5-06 the XAU Put/Call Ratio has fallen from 0.97946 to 0.74823 on 12-22-06, despite a substantial decline in the XAU, which is obviously a very bearish sign. One wants to see a GREATER percentage RISE in the XAU Put/Call Ratio than the XAU's decline, which would indicate that fear is creeping into the XAU, but, the XAU Put/Call Ratio has fallen as if the XAU was rising, which is a very bad/bearish sign.
XAU Implied Volatility tells a similar story, with weakness meaning that the sum of the XAU's and XAU Implied Volatility's percentage changes was negative (complacency crept in) and strength means that fear crept in (the sum was positive):
26.200 on 12-22 weakness (portends some significant weakness on Tuesday 12-26), 26.450 on 12-21 weakness, 26.415 on 12-20 weakness, 26.190 on 12-19 weakness, 27.120 on 12-18 severe weakness, 28.240 on 12-15 weakness, 28.895 on 12-14 weakness, 30.175 on 12-13 weakness, 31.010 on 12-12 weakness, 31.035 on 12-11 strength, 30.690 on 12-8 weakness, 30.385 on 12-7 weakness, 31.285 on 12-6 weakness, 31.230 on 12-5 weakness.
This extreme complacency jives with the expected scenario that HUI/XAU will literally crash in the next 3-6 weeks (because they're in Wave C of Wave C of a Cyclical Bear Market) and decline to their primary Secular Bull Market/very long term upcycle trendlines in effect since November (HUI)/October (XAU) 2000 (see charts 6 and 8 at http://www.joefrocks.com/GoldStockCharts.html ), and, conclude the Wave 2 Cyclical Bear Market that began on 5-11-06.
Here's some great news, HUI/XAU's Wave 3 Cyclical Bull Market will probably last 6-7 years, since Elliott Wave 1 lasted 5.5 years and Wave 3 tends to be longer and stronger than Wave 1. Upcycles tend to increase over time, but often will weaken/flatten out/roll over as they peak.
NEM has a bearish double top at 47.80 on 12-8 and 47.77 on 12-15, with 47.80 on 12-8 being a minor intermediate term cycle high for the cycle that began on 10-4-06. The next few sessions may bring brutal declines. For anyone to suggest that you shouldn't seriously consider taking profits now means they don't understand what's going on.
HUI could fall all the way to 200ish in the next few weeks (it's Secular Bull Market PRIMARY trendline, see chart 6 at http://www.joefrocks.com/GoldStockCharts.html), with much of that decline probably due to program selling related to SPX (S & P 500) weakness, notice how HUI has been following SPX the past 5 sessions, 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.
Many gold/silver stocks are likely to decline 30-40-50%+ FROM HERE in the next few weeks. You need to determine where the Secular Bull Market PRIMARY trendline is for your gold/silver stocks, see charts 6, 7, and 8 at http://www.joefrocks.com/GoldStockCharts.html for examples. I haven't seen a single gold/silver writer who understands that a Cyclical Bear Market is in effect right now.
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
7:46 AM
