The NEM Lead Indicator Was a Very Bearish -1.55% Vs the XAU Today

So, downside gap filling action is likely the next few days and the major upcycle's (since 5-16-05) Elliot Wave 4 correction may have finally begun, which will catch a lot of people off guard. There will be a lot of talk about a major top, which should be wrong, because Elliot Wave 5 and a 400-450 HUI (long term cycle high) should lie ahead in about 6 to 9 months. I'll probably revise the long term cycle high target ranges upward because HUI nearly reached 350 today.

..........Big Spikes Tend To Occur At Cycle Highs

and the more important the cycle high the bigger the spike tends to be. In the face of a very bearish NEM Lead Indicator at -4.36% vs the XAU two weeks ago, the gold Commercial Traders shorting over 11,000 futures/options contracts two weeks ago, and 1-18's 2% monthly cycle sell signal, how could one trade long overnight/multi-day merely based on 1-26's massive $23 Billion in Repos? I guess I might have done a day trade long on 1-26 if Fed Credit wasn't such a new indicator for me, but that's about it. As a gold/silver stock trader, risk has been very high in recent days, both for trading long and short.

..................Yes, Elliot Wave 4 Is Upon Us

After a brief surreal spike SPX weakness has led to gold/silver stock weakness due to index fund selling. The NEM lead Indicator at +0.92% vs the XAU yesterday correctly pointed to brief strength today, as did today's XAU Put/Call Ratio and Implied Volatility. This is the monthly upcycle's (since 12-20-05) Elliot Wave 5 short term upcycle, which means a monthly cycle high is occurring that's probably also the major upcycle's (since 5-16-05) Elliot Wave 3 minor intermediate term cycle (since 10-20-05 for HUI/XAU) high, so, a Wave 4 likely 20-30% two monthish correction is probably upon us. 1-18's 2% monthly cycle sell signal was a good one even though Elliot Wave predicted another Wave 5 short term upcycle. The 2% monthly cycle sell signal on 1-18 indicated that risk is too high to be long after 1-18. Wave 5 would probably have been an anemic, short lived, and therefore risky short term upcycle with average Fed Credit. Thursday 1-26's $23 Billion in Repos led to this latest spike move, but it's too risky to be aggressively long now as a monthly cycle trader. If your monthly upcycle trading positions normally total $100,000 for example, after a 2% monthly cycle sell signal they might total $20,000 or so if you trade long at all. Fed spiking has probably added 15-20% to this major upcycle's (since 5-16-05) Elliot Wave 3. Because the long term upcycle since 5-10-04 and this major upcycle since 5-16-05 are so strong now, gold/silver stocks respond very well to the Fed's spiking.

Wave 4 could last about two months and the declines could exceed 25%, based on what happened in the prior parabolic major upcycle's Wave 4 that lasted 7 weeks, the XAU fell -25.11% and HUI fell -26.59%. Since the long term cycles are getting longer, the correction could be even longer and deeper.

Federal Reserve Bank Credit for the week ending 1-25 fell -$4.476 Billion, see http://www.federalreserve.gov/releases/h41/Current/ , which portends a very sharp decline soon. Gaps complement cycles, so often you know what's likely to happen because of them. NEM and the XAU appear to be headed toward the downside gaps created at today's open.

The XAU Put/Call Ratio rose modestly today which correctly portended some strength. XAU Implied Volatility also portended strength today. The NEM Lead Indicator is a very bearish -1.30% right now versus the XAU after being a bullish +0.92% yesterday and +0.23% on Friday.
See http://www.joefrocks.com/TradetheCycles.html for the weekly update. Scroll down a few pages past the major averages work to see the gold/silver stock work. See http://www.joefrocks.com/GoldStockCharts.html for all the charts. My home page is http://www.JoeFRocks.com/ I hope you'll take the time to e mail your friends re this Blog and my site/work/system. This will help to keep my work free, because the more visitors I get the more advertising $ I make. I have a long way to go but have made significant progress in recent months. Thank you.

There should be downside gap filling this week since the major upcycle's Elliot Wave 3 for HUI and the XAU should turn down and NEM underperformed the XAU two weeks ago by a very bearish -4.36% and last week by -0.14%. Wave 4 is likely to last 4 to 10 weeks and have declines greater than 20%. The previous parabolic major upcycle's Wave 4 down lasted 7 weeks and the XAU fell -25.11%, from 82.89 on 1-24-03 to 62.08 on 3-13-03 (same timeframe!), then a double bottom occurred about two weeks later, so it was a long correction and a very flat start to Wave 5 in the previous parabolic major upcycle.

Today's Fed Credit so far is a small $2.75 Billion 1 day Repo after a 2 day $5 Billion Repo and a 1 day $3.75 Billion repo yesterday, a relatively modest $5.75 Billion 3 day Repo on Friday, a very large $13 Billion 1 day Repo and a large $10 Billion 14 day Repo on Thursday, a respectable +$7 Billion on Wednesday ( http://www.newyorkfed.org/markets/omo/dmm/temp.cfm ), a respectable +$7 Billion on 1-24, and a large $10.00 Billion 1 day Repo on Monday 1-23. Federal Reserve Bank Credit appears to be a very reliable short term cycle indicator (based on backtesting) when it has a substantial weekly change or a very large daily change, but cycles are the primary consideration by far. See http://www.joefrocks.com/GoldStockCharts.html for HUI and NEM's latest 1 year charts that show the Elliot Wave Points.

NEM has downside gaps to fill at 60.91 from 1-31, at 59.20 from 1-30, at 56.97 from 1-25, at 53.40 from 1-3, at 51.59 from 12-28, at 50.45 from 12-22, and at 48.75 from 12-7, and, the XAU has downside gaps at 149.68 from 1-31, at 146.79 from 1-30, at 141.29 from 1-25, at 137.64 from 1-19, at 135.39 from 1-6, at 128.03 from 1-3, at 124.36 from 12-28, and at 122.49 from 12-22. Often cycle highs or lows will occur shortly after gaps get filled, so one needs to track gaps closely. If gaps don't get filled that can be a bearish or bullish sign, as occurred recently when NEM twice closely approached (daily cycle lows at 48.88 and 48.89) but didn't fill it's downside gap at 48.75, then the recent explosive rally occurred.

http://finance.yahoo.com/q/ta?s=%5EGSPC&t=5d&l=off&z=l&q=b&p=&a=m26-12-9,m26-12-9,p12,m26-12-9,p12,fs,m26-12-9,p12,fs,w14&c=NEM,%5EXAU,%5EHUI SPX drives index funds which have a profound affect on the short term/weekly and monthly movements of many sectors, including gold/silver stocks. Rapid very modest % moves in SPX generally cause rapid significant moves in NEM and other gold/silver stocks in the many indices affected by SPX. The largest traders of NEM and other gold/silver stocks found in the various indexes are index fund traders, AND, they tend to trade at THE SAME TIME or nearly so, which is huge. The cycles are vastly different for gold/silver stocks and SPX since gold/silver stocks are in a very long term upcycle since Oct/Nov 2000 and SPX is in a very long term downcycle since March 2000.

XAU Implied Volatility rose +1.61% to 34.990 on Monday 1-30 from 34.435 on 1-27 versus a +1.97% rise in the XAU on 1-30, which is a very sharp (3-6%) +3.58% rise in fear (+1.61% + +1.97% = +3.58%. The XAU wall of worry grew by +3.58%, therefore fear rose by +3.58%) that portends strength/an uptrend during part of Tuesday 1-31's session.

The XAU Put/Call Ratio rose a modest (0.25-0.49%) +0.44% today to 1.20815 from 1.20280 on 1-30 which correctly portended some strength today because it's a modest (0.25-0.49%) rise in fear.

The latest COT data (as of 1-24-06) is bullish short term since the gold Commercial Traders traded net long and the gold Speculators traded net short, both of which portend strength for at least part of this week, but the data is three days old when released, so most of the strength may have occurred last week, and the Commercial Traders only added a modest 343 long contracts, and, covered a large number of short contracts. They also were surprised (as I was) by last week's strength due to the Fed's massive lending, because they added a large 11,306 short contracts the prior week in anticipation of substantial weakness. The gold Commercial Traders added 343 (added 10,554, 13,289, 6357 the prior three weeks, sold 1381, 8157 the prior two weeks) long futures and options contracts and covered a large 8435 (added 11,306, 4626, 3299 the prior three weeks, covered 2036 the prior week, added 4202, 2623 the prior two weeks) short futures and options contracts which portends strength this week (non contrarian indicator), but most of the strength may have occurred last week because the data is three days old when released, and the very modest long trade suggests that caution is in order. The gold Speculators (hedge funds and other speculators/traders) sold 6157 (added 5541, 2975, 1521 the prior three weeks, sold 3988, 5112, 19,247 the prior three weeks) long futures and options contracts and added 1783 (added 3743, 9445, 5824 the prior three weeks, covered 1535, 7432, 8720 the prior three weeks) short futures and options contracts which portends strength this week (contrarian indicator). The most important consideration in timing any market is the cycle channels/trendlines (see charts).

Looks Like The Monthly Upcycle's Elliot Wave 5 Cycle High Is Occurring

Looking at a 3 month AskResearch.com chart of the XAU, a monthly upcycle (since 12-20-05) Elliot Wave 1 short term cycle high occurred on January 3, a monthly upcycle Elliot Wave 3 short term cycle high occurred in mid January, and a monthly upcycle Elliot Wave 5 cycle high is occurring now, and is probably also the major upcycle's (since 5-16-05) Elliot Wave 3 cycle high.

NEM Outperformed The XAU By +0.92% Today BUT

HUI, NEM, and the XAU are very overbought. A lot of today's strength may have been unwinding of positions/short covering ahead of tomorrow's Fed meeting. It definitely seems like an important cycle high is in the process of occurring, which probably is the major upcycle's (since 5-16-05) Elliot Wave 3 cycle high. A 20-30% correction lasting 4-10 weeks, probably Wave 4, is likely to begin very soon. As a trader there's far too much risk to be long right now, even though the NEM Lead Indicator portends a potentially sharp rise tomorrow. The uncertainty of the Fed meeting is also obviously a major negative right now.

...................................NEM Is Soaring

NEM is soaring and I haven't seen news yet. It took out 1-17's cycle high at 60.34, so Wave 3 lives until proven otherwise. This could be the final big spike of the major upcycle's Elliot Wave 3.

HUI and the XAU Made Slightly Higher Highs So Far Today

And NEM made a run at it's 1-17 cycle high but failed so far. It looks like NEM's 1-17's cycle high will hold, which means that NEM has probably entered it's Elliot Wave 4 down for the major upcycle since 5-16-05, but Elliot Wave 3 has been a monster cycle, so we just have to wait for it to clearly break down. HUI and the XAU may have finally hit Wave 3 (began 10-20-05) minor int term cycle highs today because their uptrend is very flat since Friday.

Wave 4 could last about two months and the declines could exceed 25%, based on what happened in the prior parabolic major upcycle's Wave 4 that lasted 7 weeks, the XAU fell -25.11% and HUI fell -26.59%. Since the long term cycles are getting longer, this correction could be even longer and deeper.

Federal Reserve Bank Credit for the week ending 1-25 fell -$4.476 Billion, see http://www.federalreserve.gov/releases/h41/Current/ , which portends a very sharp decline the next few days. Gaps complement cycles, so often you know what's likely to happen because of them. NEM and the XAU appear to be headed toward the downside gaps created at today's open.

The XAU Put/Call Ratio rose significantly today which correctly portended some strength. XAU Implied Volatility portends weakness today. The NEM Lead Indicator is a bullish +0.35% right now versus the XAU after being a bullish +0.23% on Friday. A 2% monthly cycle sell signal occurred on Wednesday 1-18.

See http://www.joefrocks.com/TradetheCycles.html for the weekly update. Scroll down a few pages past the major averages work to see the gold/silver stock work. See http://www.joefrocks.com/GoldStockCharts.html for all the charts. My home page is http://www.JoeFRocks.com/ I hope you'll take the time to e mail your friends re this Blog and my site/work/system. This will help to keep my work free, because the more visitors I get the more advertising $ I make. I have a long way to go but have made significant progress in recent months. Thank you.

There should be downside gap filling this week since the major upcycle's Elliot Wave 3 for HUI and the XAU should turn down and NEM underperformed the XAU two weeks ago by a very bearish -4.36% and last week by -0.14%. Wave 4 is likely to last 4 to 10 weeks and have declines greater than 20%. The previous parabolic major upcycle's Wave 4 down lasted 7 weeks and the XAU fell -25.11%, from 82.89 on 1-24-03 to 62.08 on 3-13-03 (same timeframe!), then a double bottom occurred about two weeks later, so it was a long correction and a very flat start to Wave 5 in the previous parabolic major upcycle.

Today's Fed Credit so far is a 2 day $5 Billion Repo and a 1 day $3.75 Billion repo after a relatively modest $5.75 Billion 3 day Repo on Friday, a very large $13 Billion 1 day Repo and a large $10 Billion 14 day Repo on Thursday, a respectable +$7 Billion on Wednesday ( http://www.newyorkfed.org/markets/omo/dmm/temp.cfm ), a respectable +$7 Billion on 1-24, and a large $10.00 Billion 1 day Repo last Monday. Federal Reserve Bank Credit appears to be a very reliable short term cycle indicator (based on backtesting) when it has a substantial weekly change or a very large daily change, but cycles are the primary consideration by far. See http://www.joefrocks.com/GoldStockCharts.html for HUI and NEM's latest 1 year charts that show the Elliot Wave Points.

NEM has downside gaps to fill at 59.20 from 1-30, at 56.97 from 1-25, at 53.40 from 1-3, at 51.59 from 12-28, at 50.45 from 12-22, and at 48.75 from 12-7, and, the XAU has downside gaps at 146.79 from 1-30, at 141.29 from 1-25, at 137.64 from 1-19, at 135.39 from 1-6, at 128.03 from 1-3, at 124.36 from 12-28, and at 122.49 from 12-22. Often cycle highs or lows will occur shortly after gaps get filled, so one needs to track gaps closely. If gaps don't get filled that can be a bearish or bullish sign, as occurred recently when NEM twice closely approached (daily cycle lows at 48.88 and 48.89) but didn't fill it's downside gap at 48.75, then the recent explosive rally occurred.

http://finance.yahoo.com/q/ta?s=%5EGSPC&t=5d&l=off&z=l&q=b&p=&a=m26-12-9,m26-12-9,p12,m26-12-9,p12,fs,m26-12-9,p12,fs,w14&c=NEM,%5EXAU,%5EHUI SPX drives index funds which have a profound affect on the short term/weekly and monthly movements of many sectors, including gold/silver stocks. Rapid very modest % moves in SPX generally cause rapid significant moves in NEM and other gold/silver stocks in the many indices affected by SPX. The largest traders of NEM and other gold/silver stocks found in the various indexes are index fund traders, AND, they tend to trade at THE SAME TIME or nearly so, which is huge. The cycles are vastly different for gold/silver stocks and SPX since gold/silver stocks are in a very long term upcycle since Oct/Nov 2000 and SPX is in a very long term downcycle since March 2000.

XAU Implied Volatility fell -1.39% to 34.435 on Friday 1-27 from 34.920 on 1-26 versus a +0.55% rise in the XAU on 1-27, which is a significant (0.50-1.99%) +0.84% rise in complacency (-1.39% + +0.55% = -0.84%. The XAU wall of worry shrank by -0.84%, therefore complacency rose by +0.84%) that portends weakness/a downtrend during part of Monday 1-30's session

The XAU Put/Call Ratio rose a significant (0.50-1.99%) +0.63% today to 1.20280 from 1.19527 on 1-27 which correctly portended some strength today because it's a significant (0.50-1.99%) rise in fear.

The latest COT data (as of 1-24-06) is bullish short term since the gold Commercial Traders traded net long and the gold Speculators traded net short, both of which portend strength for at least part of this week, but the data is three days old when released, so most of the strength may have occurred last week, and the Commercial Traders only added a modest 343 long contracts, and, covered a large number of short contracts. They also were surprised (as I was) by last week's strength due to the Fed's massive lending, because they added a large 11,306 short contracts the prior week in anticipation of substantial weakness. The gold Commercial Traders added 343 (added 10,554, 13,289, 6357 the prior three weeks, sold 1381, 8157 the prior two weeks) long futures and options contracts and covered a large 8435 (added 11,306, 4626, 3299 the prior three weeks, covered 2036 the prior week, added 4202, 2623 the prior two weeks) short futures and options contracts which portends strength this week (non contrarian indicator), but most of the strength may have occurred last week because the data is three days old when released, and the very modest long trade suggests that caution is in order. The gold Speculators (hedge funds and other speculators/traders) sold 6157 (added 5541, 2975, 1521 the prior three weeks, sold 3988, 5112, 19,247 the prior three weeks) long futures and options contracts and added 1783 (added 3743, 9445, 5824 the prior three weeks, covered 1535, 7432, 8720 the prior three weeks) short futures and options contracts which portends strength this week (contrarian indicator). The most important consideration in timing any market is the cycle channels/trendlines (see charts below).

See http://www.joefrocks.com/TradetheCycles.html for the weekly update. Scroll down a few pages past the major averages work to see the gold/silver stock work. See http://www.joefrocks.com/GoldStockCharts.html for all the charts. My home page is http://www.JoeFRocks.com/ I hope you'll take the time to e mail your friends re this Blog and my site/work/system. This will help to keep my work free, because the more visitors I get the more advertising $ I make. I have a long way to go but have made significant progress in recent months. Thank you.

................................Weekly Update Ready

At http://www.joefrocks.com/TradetheCycles.html scroll down a few pages past the major averages work to see the gold/silver stock work. See the latest 1 year charts dated 1-27-06 that show the likely Elliot Wave points for the major upcycle since 5-16-05 and, very important, see NEM's 1 year chart dated 1-20-06 that shows how I arrived at 9-30-05 being the Wave 1 cycle high, which is how I arrived at the Elliot Wave Points for the major upcycle since 5-16-05.

See http://www.joefrocks.com/GoldStockCharts.html for all the charts. My home page is http://www.JoeFRocks.com/ I hope you'll take the time to e mail your friends re this Blog and my site/work/system. This will help to keep my work free, because the more visitors I get the more advertising $ I make. I have a long way to go but have made significant progress in recent months. Thank you. Ciao

........................Disclaimer

Joe Ferrazzano is not a registered investment advisor. Investing in stocks involves risk. Joe Ferrazzano is not a registered broker or dealer. Each investor has to ascertain what percentage if any of one's investments should be allocated to growth stocks or gold/silver stocks. Please see a financial planner, registered investment advisor or at least do your homework and decide what is right for your situation. Growth stocks and gold/silver stocks tend to be extremely volatile which creates opportunities but also can be very painful and risky. Each investor must take complete responsibility for his or her investing actions. Joe Ferrazzano should be considered as one source of information out of many from which to derive a decision on investing.

..............................New Charts Uploaded

See http://www.joefrocks.com/GoldStockCharts.html Check out the latest 1 year charts for the major upcycle's (since 5-16-05) likely Elliot Wave points. See the HUI 5 day chart for last week's action. The major upcycle's (since 5-16-05) Elliot Wave 3 may have peaked early on Friday for HUI/XAU, while reliable lead indicator NEM probably peaked on 1-17-06, leading to the downside.

See http://www.joefrocks.com/TradetheCycles.html for last week's weekly update. Scroll down a few pages past the major averages work to see the gold/silver stock work. My home page is http://www.JoeFRocks.com/ I hope you'll take the time to e mail your friends re this Blog and my site/work/system. This will help to keep my work free, because the more visitors I get the more advertising $ I make. I have a long way to go but have made significant progress in recent months. Thank you.

The Latest COT Data (as of 1-24-06) is Cautiously Bullish Short Term

The latest COT data (as of 1-24-06) is bullish short term since the gold Commercial Traders traded net long and the gold Speculators traded net short, both of which portend strength for at least part of this week, but the data is three days old when released, so most of the strength may have occurred last week, and the Commercial Traders only added a modest 343 long contracts, and, covered a large number of short contracts. They also were surprised (as I was) by last week's strength due to the Fed's massive lending, because they had added a large 11,306 short contracts the prior week in anticipation of substantial weakness. The gold Commercial Traders added 343 (added 10,554, 13,289, 6357 the prior three weeks, sold 1381, 8157 the prior two weeks, added 11,405 the prior week, sold 14,042 the prior week) long futures and options contracts and covered a large 8435 (added 11,306, 4626, 3299 the prior three weeks, covered 2036 the prior week, added 4202, 2623 the prior two weeks) short futures and options contracts which portends strength this week (non contrarian indicator), but most of the strength may have occurred last week because the data is three days old when released, and the very modest long trade suggests that caution is in order. The gold Speculators (hedge funds and other speculators/traders) sold 6157 (added 5541, 2975, 1521 the prior three weeks, sold 3988, 5112, 19,247 the prior three weeks, added 9102 the prior week, sold 2697 the prior week) long futures and options contracts and added 1783 (added 3743, 9445, 5824 the prior three weeks, covered 1535, 7432, 8720 the prior three weeks) short futures and options contracts which portends strength this week (contrarian indicator). The most important consideration in timing any market is the cycle channels/trendlines (see charts below).

http://www.JoeFRocks.com/ My home page.

...............What $23 Billion In Repos Can Do

The $23 Billion In Repos yesterday led to a very sharp rally ( see http://finance.yahoo.com/q/ta?s=%5EHUI&t=5d&l=off&z=m&q=b&p=&a=,fs,w14&c= ) where HUI/XAU significantly exceeded 1-17's cycle highs, but, they may have finally put in Elliot Wave 3 minor int term cycle highs today or are about to, and NEM did so on 1-17. The upside surprise was courtesy of the Fed, so, to the extent that they control the short term cycles of the stock market by providing index fund traders with short term trading loans, there's no way to call tops, which is really a futile game anyway.

1-18's 2% monthly cycle sell signal did correctly indicate that there was too much risk to trade long from a monthly cycle perspective.

NEM outperformed the XAU by +0.23% today, so some strength is likely on Monday. http://www.JoeFRocks.com/

If HUI, NEM, XAU Put In Lower Intraday Cycle Highs

Than those that occurred early on that will confirm that the major upcycle's (since 5-16-05) Elliot Wave 4 down began early today for HUI/XAU and on 1-17-06 for NEM. It doesn't look like today's early cycle highs will be taken out, so, welcome to Elliot Wave 4 down!

Gold/Silver Stocks Fell Off A Cliff After An Early Spike Move

NEM filled it's upside gap at 58.85 from 1-18 and even threatened to make a run at it's 1-17 cycle high above 60, but it looks like that cycle high will hold and that NEM's major upcycle (since 5-16-05) Elliot Wave 4 down began on 1-17-06. Often important cycle highs/lows occur after a gap has been filled, and that appears to be the case today. After that gap got filled early today NEM fell from a high at 59.70 to a low so far at 58.23, which is a -2.46% decline in about 10 minutes.

HUI/XAU probably finally hit major upcycle (since 5-16-05) Wave 3 cycle highs today. Yesterday's massive $23 Billion in Repos and the 5 prior days $50.50 Billion from the Fed was the factor that led to most of the upside after 1-17's HUI/XAU cycle highs. See http://www.newyorkfed.org/markets/omo/dmm/temp.cfm?SHOWMORE=TRUE

However, Federal Reserve Bank Credit for the week ending 1-25 fell -$4.476 Billion, see http://www.federalreserve.gov/releases/h41/Current/ , which portends a very sharp decline the next few days, that appears to have begun after today's early spike move.

Gaps complement cycles, so often you know what's likely to happen because of them. NEM and the XAU appear to be headed toward downside gaps at 56.97 and 141.29 created on 1-25.

The XAU Put/Call Ratio fell dramatically today, which was an unusually large rise in complacency that correctly portended very brief strength, but the lower fear level also points to weakness soon, because it's a much more complacent level. XAU Implied Volatility also correctly portended some strength today. The NEM Lead Indicator is a bearish -0.65% right now versus the XAU after being a bearish-0.27% yesterday, a slightly bullish +0.05% on Wednesday, a bearish -0.33% on 1-24, and a slightly bullish +0.18% on Monday. A 2% monthly cycle sell signal occurred on Wednesday 1-18. If Elliot Wave 3 minor int term cycle highs occurred for HUI/XAU today, then there's probably 4-10 weeks and greater than 20% downside from the cycle highs, corresponding to the major upcycle's (since 5-16-05) Wave 4. NEM hit a Wave 3 cycle high on 1-17, leading to the downside because it's a component of the S & P 500 (SPX), which drives index fund trading.

See http://www.joefrocks.com/TradetheCycles.html for the weekly update. Scroll down a few pages past the major averages work to see the gold/silver stock work. See http://www.joefrocks.com/GoldStockCharts.html for all the charts. My home page is http://www.JoeFRocks.com/ I hope you'll take the time to e mail your friends re this Blog and my site/work/system. This will help to keep my work free, because the more visitors I get the more advertising $ I make. I have a long way to go but have made significant progress in recent months. Thank you.

There should be downside gap filling next week since the major upcycle's Elliot Wave 3 for HUI and the XAU should turn down and NEM underperformed the XAU last week by a very bearish -4.36%. Wave 4 is likely to last 4 to 10 weeks and have declines greater than 20%. The previous parabolic major upcycle's Wave 4 down lasted 7 weeks and the XAU fell -25.11%, from 82.89 on 1-24-03 to 62.08 on 3-13-03 (same timeframe!), then a double bottom occurred about two weeks later, so it was a long correction and a very flat start to Wave 5 in the previous parabolic major upcycle.

Today's Fed Credit so far is a relatively modest $5.75 Billion 3 day Repo after a very large $13 Billion 1 day Repo and a large $10 Billion 14 day Repo yesterday, a respectable +$7 Billion on Wednesday ( http://www.newyorkfed.org/markets/omo/dmm/temp.cfm ), a respectable +$7 Billion on 1-24, and a large $10.00 Billion 1 day Repo on Monday, which has had the effect of propping up more than spiking. Federal Reserve Bank Credit appears to be a very reliable short term cycle indicator (based on backtesting) when it has a substantial weekly change or a very large daily change, but cycles are the primary consideration by far. See http://www.joefrocks.com/GoldStockCharts.html for HUI and NEM's latest 1 year charts that show the Elliot Wave Points.

NEM has downside gaps to fill at 56.97 from 1-25, at 53.40 from 1-3, at 51.59 from 12-28, at 50.45 from 12-22, and at 48.75 from 12-7, and, the XAU has downside gaps at 141.29 from 1-25, at 137.64 from 1-19, at 135.39 from 1-6, at 128.03 from 1-3, at 124.36 from 12-28, and at 122.49 from 12-22. Often cycle highs or lows will occur shortly after gaps get filled, so one needs to track gaps closely. If gaps don't get filled that can be a bearish or bullish sign, as occurred recently when NEM twice closely approached (daily cycle lows at 48.88 and 48.89) but didn't fill it's downside gap at 48.75, then the recent explosive rally occurred.

http://finance.yahoo.com/q/ta?s=%5EGSPC&t=5d&l=off&z=l&q=b&p=&a=m26-12-9,m26-12-9,p12,m26-12-9,p12,fs,m26-12-9,p12,fs,w14&c=NEM,%5EXAU,%5EHUI SPX drives index funds which have a profound affect on the short term/weekly and monthly movements of many sectors, including gold/silver stocks. Rapid very modest % moves in SPX generally cause rapid significant moves in NEM and other gold/silver stocks in the many indices affected by SPX. The largest traders of NEM and other gold/silver stocks found in the various indexes are index fund traders, AND, they tend to trade at THE SAME TIME or nearly so, which is huge. The cycles are vastly different for gold/silver stocks and SPX since gold/silver stocks are in a very long term upcycle since Oct/Nov 2000 and SPX is in a very long term downcycle since March 2000.

XAU Implied Volatility fell -0.74% to 34.920 on Thursday 1-26 from 35.180 on 1-25 versus a +1.37% rise in the XAU on 1-26, which is a significant (0.50-1.99%) +0.63% rise in fear (-0.74% + +1.37% = +0.63%. The XAU wall of worry grew by +0.63%, therefore fear rose by +0.63%) that correctly portended strength/an uptrend during part of Friday 1-27's session.

The XAU Put/Call Ratio fell an unusually large (> 6%) -10.30% today to 1.19527 from 1.33250 on 1-26 which correctly portended some strength today because it's an unusually large (> 6%) rise in complacency.

The latest COT data (as of 1-17-06) is bearish short term since the gold Commercial Traders traded an unusually large long position and the gold Speculators traded an unusually large short position, both of which portend weakness for at least part of this week. Keep in mind that the data is three days old when released. The gold Commercial Traders added an unusually large (> 10% increase in long contracts) 10,554 (added 13,289, 6357 the prior two weeks, sold 1381, 8157 the prior two weeks, added 11,405 the prior week, sold 14,042 the prior week) long futures and options contracts and added a large 11,306 (added 4626, 3299 the prior two weeks, covered 2036 the prior week, added 4202, 2623 the prior two weeks) short futures and options contracts which portends weakness this week (non contrarian indicator), because the unusually large long trade is a short term contrarian indication and the aggressive short selling also points to weakness. The gold Speculators (hedge funds and other speculators/traders) added 5541 (added 2975, 1521 the prior two weeks, sold 3988, 5112, 19,247 the prior three weeks, added 9102 the prior week, sold 2697 the prior week) long futures and options contracts and added an unusually large (> 10% increase in short contracts) 3743 (added 9445, 5824 the prior two weeks, covered 1535, 7432, 8720 the prior three weeks) short futures and options contracts which portends weakness this week (contrarian indicator), because the unusually large short selling is a short term non contrarian indication. The most important consideration in timing any market is the cycle channels/trendlines (see charts).

See http://www.joefrocks.com/TradetheCycles.html for the weekly update. Scroll down a few pages past the major averages work to see the gold/silver stock work. See http://www.joefrocks.com/GoldStockCharts.html for all the charts. My home page is http://www.JoeFRocks.com/ I hope you'll take the time to e mail your friends re this Blog and my site/work/system. This will help to keep my work free, because the more visitors I get the more advertising $ I make. I have a long way to go but have made significant progress in recent months. Thank you.

Federal Reserve Bank Credit Fell By -$4.476 Billion The Week Ending 1-25-06

Which means that HUI, NEM, and the XAU are likely to be very weak the next few days. HUI/XAU may have finally hit major upcycle (since 5-16-05) Elliot Wave 3 minor int term cycle highs today, while NEM probably did so on 1-17-06, leading to the downside as usual.

(Federal Reserve Bank Credit for the week ending 1-25 fell -$4.476 Billion, see http://www.federalreserve.gov/releases/h41/Current/ )

NEM missed it's upside gap by 3 Cents, peaking at 58.82 late in the session and closed at 58.74. NEM obviously may fill it's upside gap at 58.85 (from 1-18) early tomorrow.

NEM underperformed the XAU by -0.27% today, so weakness is likely tomorrow, and reliable lead indicator NEM had a relatively flat uptrend the past two days. http://www.JoeFRocks.com/

NEM Is Trying To Fill It's Upside Gap At 58.85 From 1-18

and appears to have failed again with a peak so far at 58.77, but the Fed's massive $23 Billion in Repos today on top of a massive $50.50 Billion the week ending yesterday is fueling index fund traders, which has caused HUI and the XAU to make higher Wave 3 cycle highs today. NEM's peak above 60 on 1-17 appears safe even with the massive punch spiking by the Fed. Ciao http://www.JoeFRocks.com/

......................NEM, XAU Gap Filling Action

Gaps complement cycles, so often you know what's likely to happen because of them. NEM and the XAU may fill (XAU did) upside gaps created today at 58.10 and 144.02. Then, NEM and the XAU appear to be headed toward downside gaps at 57.96 and 141.29 created yesterday. Once those gaps get filled some strength is likely because the XAU Put/Call Ratio shot up today again and XAU Implied Volatility also portends strength. The NEM Lead Indicator is a bearish -0.65% right now versus the XAU after being a slightly bullish +0.05% yesterday, a bearish -0.33% on 1-24, and a slightly bullish +0.18% on Monday. A 2% monthly cycle sell signal occurred on Wednesday 1-18.

If yesterday was the Elliot Wave 3 minor int term cycle high for HUI/XAU, then there's probably 4-10 weeks and greater than 20% downside from those cycle highs, corresponding to the major upcycle's (since 5-16-05) Wave 4. If yesterday was the Wave 3 cycle high for HUI/XAU it's one day off from when the prior parabolic major upcycle (the strong part of the prior long term upcycle) hit a Wave 3 cycle high on 1-24-03 at 82.89. NEM tried and failed again early yesterday to fill it's upside gap a bit below 59, which is a bearish indication. It failed the last 3 days last week to do so. It appears that NEM hit a Wave 3 cycle high on 1-17, leading to the downside because it's a component of the S & P 500 (SPX), which drives index fund trading.

See http://www.joefrocks.com/TradetheCycles.html for the weekly update. Scroll down a few pages past the major averages work to see the gold/silver stock work. See http://www.joefrocks.com/GoldStockCharts.html for all the charts. My home page is http://www.JoeFRocks.com/ I hope you'll take the time to e mail your friends re this Blog and my site/work/system. This will help to keep my work free, because the more visitors I get the more advertising $ I make. I have a long way to go but have made significant progress in recent months. Thank you.

There should be downside gap filling this week since the major upcycle's Elliot Wave 3 for HUI and the XAU should turn down and NEM underperformed the XAU last week by a very bearish -4.36%. Wave 4 is likely to last 4 to 10 weeks and have declines greater than 20%. The previous parabolic major upcycle's Wave 4 down lasted 7 weeks and the XAU fell -25.11%, from 82.89 on 1-24-03 to 62.08 on 3-13-03 (same timeframe!), then a double bottom occurred about two weeks later, so it was a long correction and a very flat start to Wave 5 in the previous parabolic major upcycle.

Today's Fed Credit so far is very large $13 Billion 1 day Repo and a large $10 Billion 14 day Repo after a respectable +$7 Billion yesterday ( http://www.newyorkfed.org/markets/omo/dmm/temp.cfm ), a respectable +$7 Billion on 1-24, and a large $10.00 Billion 1 day Repo on Monday, which has had the effect of propping up more than spiking. Federal Reserve Bank Credit appears to be a very reliable short term cycle indicator (based on backtesting) when it has a substantial weekly change or a very large daily change, but cycles are the primary consideration by far.

A very sharp decline in gold/silver stocks began yesterday for HUI/XAU that probably is the major upcycle's (since 5-16-05) Elliot Wave 4 down. See http://www.joefrocks.com/GoldStockCharts.html for HUI and NEM's latest 1 year charts that show the Elliot Wave Points.

NEM has downside gaps to fill at 56.97 from 1-25, at 53.40 from 1-3, at 51.59 from 12-28, at 50.45 from 12-22, and at 48.75 from 12-7, and, the XAU has downside gaps at 141.29 from 1-25, at 137.64 from 1-19, at 135.39 from 1-6, at 128.03 from 1-3, at 124.36 from 12-28, and at 122.49 from 12-22. Often cycle highs or lows will occur shortly after gaps get filled, so one needs to track gaps closely. If gaps don't get filled that can be a bearish or bullish sign, as occurred recently when NEM twice closely approached (daily cycle lows at 48.88 and 48.89) but didn't fill it's downside gap at 48.75, then the recent explosive rally occurred. NEM's failure to fill an upside gap near 59 during 4 sessions recently is a bearish indication.

http://finance.yahoo.com/q/ta?s=%5EGSPC&t=5d&l=off&z=l&q=b&p=&a=m26-12-9,m26-12-9,p12,m26-12-9,p12,fs,m26-12-9,p12,fs,w14&c=NEM,%5EXAU,%5EHUI SPX drives index funds which have a profound affect on the short term/weekly and monthly movements of many sectors, including gold/silver stocks. Rapid very modest % moves in SPX generally cause rapid significant moves in NEM and other gold/silver stocks in the many indices affected by SPX. The largest traders of NEM and other gold/silver stocks found in the various indexes are index fund traders, AND, they tend to trade at THE SAME TIME or nearly so, which is huge. The cycles are vastly different for gold/silver stocks and SPX since gold/silver stocks are in a very long term upcycle since Oct/Nov 2000 and SPX is in a very long term downcycle since March 2000.

XAU Implied Volatility fell -0.11% to 35.180 on Wednesday 1-25 from 35.220 on 1-24 versus a +1.93% rise in the XAU on 1-25, which is a significant (0.50-1.99%) +1.82% rise in fear (-0.11% + +1.93% = +1.82%. The XAU wall of worry grew by +1.82%, therefore fear rose by +1.82%) that portends strength/an uptrend during part of Thursday 1-26's session.

The XAU Put/Call Ratio rose a very sharp (3-6%) +4.63% today to 1.33250 from 1.27358 on 1-25 which portends some strength today because it's a very sharp rise in fear.

The latest COT data (as of 1-17-06) is bearish short term since the gold Commercial Traders traded an unusually large long position and the gold Speculators traded an unusually large short position, both of which portend weakness for at least part of this week. Keep in mind that the data is three days old when released. The gold Commercial Traders added an unusually large (> 10% increase in long contracts) 10,554 (added 13,289, 6357 the prior two weeks, sold 1381, 8157 the prior two weeks, added 11,405 the prior week, sold 14,042 the prior week) long futures and options contracts and added a large 11,306 (added 4626, 3299 the prior two weeks, covered 2036 the prior week, added 4202, 2623 the prior two weeks) short futures and options contracts which portends weakness this week (non contrarian indicator), because the unusually large long trade is a short term contrarian indication and the aggressive short selling also points to weakness. The gold Speculators (hedge funds and other speculators/traders) added 5541 (added 2975, 1521 the prior two weeks, sold 3988, 5112, 19,247 the prior three weeks, added 9102 the prior week, sold 2697 the prior week) long futures and options contracts and added an unusually large (> 10% increase in short contracts) 3743 (added 9445, 5824 the prior two weeks, covered 1535, 7432, 8720 the prior three weeks) short futures and options contracts which portends weakness this week (contrarian indicator), because the unusually large short selling is a short term non contrarian indication. The most important consideration in timing any market is the cycle channels/trendlines (see charts).

See http://www.joefrocks.com/TradetheCycles.html for the weekly update. Scroll down a few pages past the major averages work to see the gold/silver stock work. See http://www.joefrocks.com/GoldStockCharts.html for all the charts. My home page is http://www.JoeFRocks.com/ I hope you'll take the time to e mail your friends re this Blog and my site/work/system. This will help to keep my work free, because the more visitors I get the more advertising $ I make. I have a long way to go but have made significant progress in recent months. Thank you.

Reliable Lead Indicator NEM Has Trended Down Since 1-17-06

NEM appears to have put in it's Wave 3 minor int term cycle high on 1-17 vs possibly today for HUI/XAU, leading to the downside. HUI/XAU were able to take out their 1-17 cycle highs with the help of a massive $50.50 Billion in Fed Credit (in the form of Repos) the past week, which fueled index fund traders. See
http://www.newyorkfed.org/markets/omo/dmm/temp.cfm?SHOWMORE=TRUE

Once again today NEM failed to fill it's upside gap a bit below 59, which is a bearish indication.

NEM and the XAU look like they may fill today's downside gaps tomorrow. NEM outperformed the XAU by a slight +0.05% today which doesn't point to much strength tomorrow. Looking at the 5 day chart below you'll see that the session cycle high occurred just after the open, so today's tone really was weakness after the very early gap up at the open/spike move:

http://finance.yahoo.com/q/ta?s=%5Exau&t=5d&l=off&z=l&q=b&p=&a=m26-12-9%2Cp12%2Cfs%2Cw14&c=

A very sharp decline in gold/silver stocks should soon begin (may have today) that probably is the major upcycle's (since 5-16-05) Elliot Wave 4 down. See http://www.joefrocks.com/GoldStockCharts.html for HUI and NEM's latest 1 year charts that show the Elliot Wave Points.

NEM has downside gaps to fill at 56.97 from 1-25, at 53.40 from 1-3, at 51.59 from 12-28, at 50.45 from 12-22, and at 48.75 from 12-7, and, the XAU has downside gaps at 141.29 from 1-25, at 137.64 from 1-19, at 135.39 from 1-6, at 128.03 from 1-3, at 124.36 from 12-28, and at 122.49 from 12-22.

See http://www.joefrocks.com/TradetheCycles.html for the weekly update. Scroll down a few pages past the major averages work to see the gold/silver stock work. See http://www.joefrocks.com/GoldStockCharts.html for all the charts. My home page is http://www.JoeFRocks.com/ I hope you'll take the time to e mail your friends re this Blog and my site/work/system. This will help to keep my work free, because the more visitors I get the more advertising $ I make. I have a long way to go but have made significant progress in recent months. Thank you.

......HUI/XAU Modestly Exceed 1-17's Cycle Highs!

Which means that, if today is the Elliot Wave 3 minor int term cycle high for HUI/XAU, then there's probably 4-10 weeks of downside and greater than 20% downside from here in the major upcycle's (since 5-16-05) Wave 4. The XAU Put/Call Ratio shot up today, correctly portending a sharp but brief rise that's probably the last gasp of HUI and the XAU's Wave 3 since 10-20-05. If today is the cycle high it's one day off from when the prior parabolic major upcycle (the strong part of the prior long term upcycle) hit a Wave 3 cycle high on 1-24-03 at 82.89. NEM tried and failed again early today to fill it's upside gap a bit below 59, which is a bearish indication. It failed the last 3 days last week to do so. It appears that NEM hit a Wave 3 cycle high on 1-17, leading to the downside because it's a component of the S & P 500 (SPX), which drives index fund trading.

There should be downside gap filling this week since the major upcycle's Elliot Wave 3 for HUI and the XAU should turn down and NEM underperformed the XAU last week by a very bearish -4.36%. Wave 4 is likely to last 4 to 10 weeks and have declines greater than 20%. The previous parabolic major upcycle's Wave 4 down lasted 7 weeks and the XAU fell -25.11%, from 82.89 on 1-24-03 to 62.08 on 3-13-03 (same timeframe!), then a double bottom occurred about two weeks later, so it was a long correction and a very flat start to Wave 5 in the previous parabolic major upcycle.

The XAU Put/Call Ratio points to some strength today which was probably just the early spike move, but XAU Implied Volatility points to some potentially substantial weakness today which has set in as I write this. The NEM Lead Indicator is a slightly bearish -0.16% right now versus the XAU after being a bearish -0.33% yesterday and a slightly bullish +0.18% on Monday. A 2% monthly cycle sell signal occurred on Wednesday 1-18.

Today's Fed Credit so far is a respectable +$7 Billion ( http://www.newyorkfed.org/markets/omo/dmm/temp.cfm ) after a respectable +$7 Billion yesterday and a large $10.00 Billion 1 day Repo on Monday, which has had the effect of propping up more than spiking. Federal Reserve Bank Credit appears to be a very reliable short term cycle indicator (based on backtesting) when it has a substantial weekly change or a very large daily change, but cycles are the primary consideration by far.

A very sharp decline in gold/silver stocks should soon begin (may have today)that probably is the major upcycle's (since 5-16-05) Elliot Wave 4 down. See http://www.joefrocks.com/GoldStockCharts.html for HUI and NEM's latest 1 year charts that show the Elliot Wave Points.

NEM has downside gaps to fill at 56.97 from 1-25, at 53.40 from 1-3, at 51.59 from 12-28, at 50.45 from 12-22, and at 48.75 from 12-7, and, the XAU has downside gaps at 141.29 from 1-25, at 137.64 from 1-19, at 135.39 from 1-6, at 128.03 from 1-3, at 124.36 from 12-28, and at 122.49 from 12-22. Often cycle highs or lows will occur shortly after gaps get filled, so one needs to track gaps closely. If gaps don't get filled that can be a bearish or bullish sign, as occurred recently when NEM twice closely approached (daily cycle lows at 48.88 and 48.89) but didn't fill it's downside gap at 48.75, then the recent explosive rally occurred. NEM's failure to fill an upside gap near 59 during 4 sessions recently is a bearish indication.

http://finance.yahoo.com/q/ta?s=%5EGSPC&t=5d&l=off&z=l&q=b&p=&a=m26-12-9,m26-12-9,p12,m26-12-9,p12,fs,m26-12-9,p12,fs,w14&c=NEM,%5EXAU,%5EHUI SPX drives index funds which have a profound affect on the short term/weekly and monthly movements of many sectors, including gold/silver stocks. Rapid very modest % moves in SPX generally cause rapid significant moves in NEM and other gold/silver stocks in the many indices affected by SPX. The largest traders of NEM and other gold/silver stocks found in the various indexes are index fund traders, AND, they tend to trade at THE SAME TIME or nearly so, which is huge. The cycles are vastly different for gold/silver stocks and SPX since gold/silver stocks are in a very long term upcycle since Oct/Nov 2000 and SPX is in a very long term downcycle since March 2000.

XAU Implied Volatility fell -3.95% to 35.220 on Tuesday 1-24 from 36.670 on 1-23 versus a -0.09% decline in the XAU on 1-24, which is a very sharp (3-6%) +4.04% rise in complacency (-3.95% + -0.09% = -4.04%. The XAU wall of worry shrank by -4.04%, therefore complacency rose by +4.04%) that portends weakness/a downtrend during part of Wednesday 1-25's session.

The XAU Put/Call Ratio rose a very sharp (3-6%) +5.18% today to 1.27358 from 1.22175 on 1-24 which correctly portended some brief early strength today because it's a very sharp rise in fear.

The latest COT data (as of 1-17-06) is bearish short term since the gold Commercial Traders traded an unusually large long position and the gold Speculators traded an unusually large short position, both of which portend weakness for at least part of this week. Keep in mind that the data is three days old when released. The gold Commercial Traders added an unusually large (> 10% increase in long contracts) 10,554 (added 13,289, 6357 the prior two weeks, sold 1381, 8157 the prior two weeks, added 11,405 the prior week, sold 14,042 the prior week) long futures and options contracts and added a large 11,306 (added 4626, 3299 the prior two weeks, covered 2036 the prior week, added 4202, 2623 the prior two weeks) short futures and options contracts which portends weakness this week (non contrarian indicator), because the unusually large long trade is a short term contrarian indication and the aggressive short selling also points to weakness. The gold Speculators (hedge funds and other speculators/traders) added 5541 (added 2975, 1521 the prior two weeks, sold 3988, 5112, 19,247 the prior three weeks, added 9102 the prior week, sold 2697 the prior week) long futures and options contracts and added an unusually large (> 10% increase in short contracts) 3743 (added 9445, 5824 the prior two weeks, covered 1535, 7432, 8720 the prior three weeks) short futures and options contracts which portends weakness this week (contrarian indicator), because the unusually large short selling is a short term non contrarian indication. The most important consideration in timing any market is the cycle channels/trendlines (see charts).

See http://www.joefrocks.com/TradetheCycles.html for the weekly update. Scroll down a few pages past the major averages work to see the gold/silver stock work. See http://www.joefrocks.com/GoldStockCharts.html for all the charts. My home page is http://www.JoeFRocks.com/ I hope you'll take the time to e mail your friends re this Blog and my site/work/system. This will help to keep my work free, because the more visitors I get the more advertising $ I make. I have a long way to go but have made significant progress in recent months. Thank you.

Some Gold/Silver Stocks That Have Smoked In This Major Upcycle Since 5-16-05

Check out what some of the better performing gold/silver stocks have done since 5-16-05:

http://finance.yahoo.com/q/bc?s=AEM,AUY,DEZ,EGO,FRG,MNG,MRB,NTO,NXG,OZN,RGLD,WTZ

Not recommendations of course because I'm not a stock analyst, I provide market timing info to the general public. Right now, assuming Elliot Wave 4 down began on 1-17-06 for HUI, NEM, and the XAU, you'd want to wait for an Elliot Wave 5 minor int term cycle low that may be more than 20% below 1-17's cycle highs and could take 4-10 weeks from 1-17-06. See my latest update for details:

At http://www.joefrocks.com/TradetheCycles.html . Scroll down a few pages past the major averages work to see the gold/silver stock work. See http://www.joefrocks.com/GoldStockCharts.html for all the charts. My home page is http://www.JoeFRocks.com/ I hope you'll take the time to e mail your friends re this Blog and my site/work/system. This will help to keep my work free, because the more visitors I get the more advertising $ I make. I have a long way to go but have made significant progress in recent months. Thank you.

NEM Underperformed The XAU By -0.33% Today

NEM failed twice today (early and late in the session) to fill the upside gap at 57.21 created at the open, which is another bearish sign in addition to failing to fill it's upside gap near 59 during the last three sessions last week.

Fed Credit so far this week is a respectable +$7 Billion 1 day Repo today ( http://www.newyorkfed.org/markets/omo/dmm/temp.cfm ) after a large $10.00 Billion 1 day Repo yesterday, which has had the effect of propping up more than spiking, which is a sign that more weakness is to come, as is 1-18's 2% sell signal, a very bearish NEM Lead Indicator last week at -4.36% vs the XAU (was -0.33% today and +0.18% yesterday), and of course NEM's inability to fill two upside gaps recently.

Federal Reserve Bank Credit appears to be a very reliable short term cycle indicator (based on backtesting) when it has a substantial weekly change or a large daily change, but cycles are the primary consideration by far. A very sharp decline in gold/silver stocks began on 1-17-06 that probably is the major upcycle's (since 5-16-05) Elliot Wave 4 down. See http://www.joefrocks.com/GoldStockCharts.html for HUI and NEM's latest 1 year charts that show the Elliot Wave Points.

An E Mail I Sent To A Well Known Letter Writer

"If the S & P 500 (SPX) crashed 10% in the matter of a few days or even a few weeks (which would of course be a correction not a crash), NEM, FCX (both in SPX) and gold/silver stocks in general would also crash due to index fund traders mechanically selling the gold/silver stocks in their indexes. You're correct that the big picture is a gold Bull (since late 2000 for gold stocks) vs a major averages Bear since March 2000. The major cycles are vastly different, the minor gold/silver stock cycles are profoundly affected by SPX due to index fund trading. SPX drives the action in many indexes, so many gold/silver stocks are affected.

Some examples: Gold/silver stocks recent minor int term upcycle since 10-20-05 for HUI/XAU coincided closely with SPX's, which began about a week earlier. HUI/XAU's correction in Sept/Oct 2005 coincided closely with SPX's. In 2003 SPX rose dramatically and so did HUI/XAU. In April/May 2004 when HUI/XAU had a 6 week sharp correction it coincided closely with SPX's correction. In July 2004 HUI/XAU had another correction that coincided with SPX's. A true brief crash in SPX WILL crash gold stocks, and, even a correction will drag gold stocks down due to index fund selling. Later this year when SPX has a dramatic correction, so will HUI/XAU. Index funds are a huge factor now. Thank you."

NEM and the XAU Are Trying To Fill Today's Upside Gaps

There should be downside gap filling this week since the major upcycle's Elliot Wave 3 minor int term cycle high occurred last Tuesday 1-17 for HUI, NEM, and the XAU and NEM underperformed the XAU last week by a very bearish -4.36%. Wave 4 is likely to last 4 to 8 weeks and have declines greater than 20%. The previous parabolic major upcycle's Wave 4 down lasted 7 weeks and the XAU fell -25.11%, from 82.89 on 1-24-03 to 62.08 on 3-13-03 (same timeframe!), then a double bottom occurred about two weeks later, so it was a long correction and a very flat start to Wave 5 in the previous parabolic major upcycle.

The XAU Put/Call Ratio points to weakness but XAU Implied Volatility points to some strength today, with that strength probably being the early upside gap filling (trying to) action. The NEM Lead Indicator is a bearish -0.35% right now versus the XAU after being a slightly bullish +0.18% yesterday. Major upcycle (since 5-16-05) Elliot Wave 3 cycle highs probably occurred on Tuesday for HUI/NEM/XAU, because a 2% minor int term cycle sell signal occurred on Wednesday 1-18, which are important though not major/final cycle highs.

Today's Fed Credit so far is a respectable +$7 Billion ( http://www.newyorkfed.org/markets/omo/dmm/temp.cfm ) after a large $10.00 Billion 1 day Repo yesterday, which has had the effect of propping up more than spiking. Federal Reserve Bank Credit appears to be a very reliable short term cycle indicator (based on backtesting) when it has a substantial weekly change or a very large daily change, but cycles are the primary consideration by far. A very sharp decline in gold/silver stocks has begun that probably is the major upcycle's (since 5-16-05) Elliot Wave 4 down. See http://www.joefrocks.com/GoldStockCharts.html for HUI and NEM's latest 1 year charts that show the Elliot Wave Points.

NEM has downside gaps to fill at 53.40 from 1-3, at 51.59 from 12-28, at 50.45 from 12-22, and at 48.75 from 12-7, and, the XAU has downside gaps at 137.64 from 1-19, at 135.39 from 1-6, at 128.03 from 1-3, at 124.36 from 12-28, and at 122.49 from 12-22. Often cycle highs or lows will occur shortly after gaps get filled, so one needs to track gaps closely. If gaps don't get filled that can be a bearish or bullish sign, as occurred recently when NEM twice closely approached (daily cycle lows at 48.88 and 48.89) but didn't fill it's downside gap at 48.75, then the recent explosive rally occurred. NEM's failure to fill an upside gap near 59 during 3 sessions last week was a bearish indication.

http://finance.yahoo.com/q/ta?s=%5EGSPC&t=5d&l=off&z=l&q=b&p=&a=m26-12-9,m26-12-9,p12,m26-12-9,p12,fs,m26-12-9,p12,fs,w14&c=NEM,%5EXAU,%5EHUI SPX drives index funds which have a profound affect on the short term/weekly and monthly movements of many sectors, including gold/silver stocks. Rapid very modest % moves in SPX generally cause rapid significant moves in NEM and other gold/silver stocks in the many indices affected by SPX. The largest traders of NEM and other gold/silver stocks found in the various indexes are index fund traders, AND, they tend to trade at THE SAME TIME or nearly so, which is huge. The cycles are vastly different for gold/silver stocks and SPX since gold/silver stocks are in a very long term upcycle since Oct/Nov 2000 and SPX is in a very long term downcycle since March 2000.

XAU Implied Volatility rose +2.12% to 36.670 on Monday 1-23 from 35.910 on 1-20 versus a +0.92% rise in the XAU on 1-23, which is a very sharp (3-6%) +3.04% rise in fear (+2.12% + +0.92% = +3.04%. The XAU wall of worry grew by +3.04%, therefore fear rose by +3.04%) that portends strength/an uptrend during part of Tuesday 1-24's session.

The XAU Put/Call Ratio fell a significant (0.50-1.99%) -1.31% today to 1.22175 from 1.23803 on 1-23 which portends some weakness today because it's a significant rise in complacency.

The latest COT data (as of 1-17-06) is bearish short term since the gold Commercial Traders traded an unusually large long position and the gold Speculators traded an unusually large short position, both of which portend weakness for at least part of this week. Keep in mind that the data is three days old when released. The gold Commercial Traders added an unusually large (> 10% increase in long contracts) 10,554 (added 13,289, 6357 the prior two weeks, sold 1381, 8157 the prior two weeks, added 11,405 the prior week, sold 14,042 the prior week) long futures and options contracts and added a large 11,306 (added 4626, 3299 the prior two weeks, covered 2036 the prior week, added 4202, 2623 the prior two weeks) short futures and options contracts which portends weakness this week (non contrarian indicator), because the unusually large long trade is a short term contrarian indication and the aggressive short selling also points to weakness. The gold Speculators (hedge funds and other speculators/traders) added 5541 (added 2975, 1521 the prior two weeks, sold 3988, 5112, 19,247 the prior three weeks, added 9102 the prior week, sold 2697 the prior week) long futures and options contracts and added an unusually large (> 10% increase in short contracts) 3743 (added 9445, 5824 the prior two weeks, covered 1535, 7432, 8720 the prior three weeks) short futures and options contracts which portends weakness this week (contrarian indicator), because the unusually large short selling is a short term non contrarian indication. The most important consideration in timing any market is the cycle channels/trendlines (see charts).

See http://www.joefrocks.com/TradetheCycles.html for the weekly update. Scroll down a few pages past the major averages work to see the gold/silver stock work. See http://www.joefrocks.com/GoldStockCharts.html for all the charts. My home page is http://www.JoeFRocks.com/ I hope you'll take the time to e mail your friends re this Blog and my site/work/system. This will help to keep my work free, because the more visitors I get the more advertising $ I make. I have a long way to go but have made significant progress in recent months. Thank you.

.......Three Indicators Pointed To Strength Today

Fed Credit, which was a large +$10 Billion today, the XAU Put/Call Ratio and XAU Implied Volatility all pointed to strength, with the NEM Lead Indicator correctly pointing to a sharp drop early. Notice how a large Fed Credit increase once again led to strength? Without the Fed's +$10 Billion Repo I think today would have been far worse and SPX, HUI, NEM, and the XAU probably would have closed down.

NEM outperformed the XAU by a slight margin of +0.18% today which doesn't point to much upside tomorrow.

See the weekly update at http://www.joefrocks.com/TradetheCycles.html and scroll down a few pages past the major averages work to see the gold/silver stock work. See HUI and NEM's 1 year charts dated 1-20-06 that show the likely Elliot Wave points for the major upcycle since 5-16-05 and see the 3 month XAU chart dated 1-20-06. See http://www.joefrocks.com/GoldStockCharts.html for all the charts. My home page is http://www.JoeFRocks.com/ I hope you'll take the time to e mail your friends re this Blog and my site/work/system. This will help to keep my work free, because the more visitors I get the more advertising $ I make. I have a long way to go but have made significant progress in recent months. Thank you. Ciao

...............Early Strength Due To SPX Strength Didn't Last

SPX (S & P 500) early strength led to index fund buying and thus gold/silver stock early strength today that didn't last. There should be more downside gap filling this week since the major upcycle's Elliot Wave 3 minor int term cycle high occurred last Tuesday 1-17 for HUI, NEM, and the XAU and NEM underperformed the XAU last week by a very bearish -4.36%. Wave 4 is likely to last 4 to 8 weeks and have declines greater than 20%. The previous parabolic major upcycle's Wave 4 down lasted 7 weeks and the XAU fell -25.11%, from 82.89 on 1-24-03 to 62.08 on 3-13-03 (same timeframe!), then a double bottom occurred about two weeks later, so it was a long correction and a very flat start to Wave 5 in the previous parabolic major upcycle.

The XAU Put/Call Ratio and XAU Implied Volatility both point to some strength today, though most of that strength may have occurred in the first few minutes of the session. The NEM Lead Indicator is a bearish -0.55% right now versus the XAU. Major upcycle (since 5-16-05) Elliot Wave 3 cycle highs probably occurred on Tuesday for HUI/NEM/XAU, because a 2% minor int term cycle sell signal occurred on Wednesday 1-18, which are important though not major/final cycle highs.

Today's Fed Credit so far is a large $10.00 Billion 1 day Repo. Federal Reserve Bank Credit appears to be a very reliable short term cycle indicator (based on backtesting) when it has a substantial weekly change or a very large daily change, but cycles are the primary consideration by far. A very sharp decline in gold/silver stocks has begun that probably is the major upcycle's (since 5-16-05) Elliot Wave 4 down. See http://www.joefrocks.com/GoldStockCharts.html for HUI and NEM's latest 1 year charts that show the Elliot Wave Points.

NEM has downside gaps to fill at 53.40 from 1-3, at 51.59 from 12-28, at 50.45 from 12-22, and at 48.75 from 12-7, and, the XAU has downside gaps at 137.64 from 1-19, at 135.39 from 1-6, at 128.03 from 1-3, at 124.36 from 12-28, and at 122.49 from 12-22. Often cycle highs or lows will occur shortly after gaps get filled, so one needs to track gaps closely. If gaps don't get filled that can be a bearish or bullish sign, as occurred recently when NEM twice closely approached (daily cycle lows at 48.88 and 48.89) but didn't fill it's downside gap at 48.75, then the recent explosive rally occurred. NEM's failure to fill an upside gap near 59 was a bearish indication.

http://finance.yahoo.com/q/ta?s=%5EGSPC&t=5d&l=off&z=l&q=b&p=&a=m26-12-9,m26-12-9,p12,m26-12-9,p12,fs,m26-12-9,p12,fs,w14&c=NEM,%5EXAU,%5EHUI SPX drives index funds which have a profound affect on the short term/weekly and monthly movements of many sectors, including gold/silver stocks. Rapid very modest % moves in SPX generally cause rapid significant moves in NEM and other gold/silver stocks in the many indices affected by SPX. The largest traders of NEM and other gold/silver stocks found in the various indexes are index fund traders, AND, they tend to trade at THE SAME TIME or nearly so, which is huge. The cycles are vastly different for gold/silver stocks and SPX since gold/silver stocks are in a very long term upcycle since Oct/Nov 2000 and SPX is in a very long term downcycle since March 2000.

XAU Implied Volatility rose +1.44% to 35.910 on Friday 1-20 from 35.400 on 1-19 versus a -1.23% decline in the XAU on 1-20, which is a slight (up to 0.24%) +0.21% rise in fear (+1.44% + -1.23% = +0.21%. The XAU wall of worry grew by +0.21%, therefore fear rose by +0.21%) that portends strength/an uptrend during part of Monday 1-23's session.

The XAU Put/Call Ratio fell an unusually large (> 6%) -13.11% today to 1.23803 from 1.42489 on 1-20 which portends some strength today because it's an unusually large (> 6%) rise in complacency.

The latest COT data (as of 1-17-06) is bearish short term since the gold Commercial Traders traded an unusually large long position and the gold Speculators traded an unusually large short position, both of which portend weakness for at least part of this week. Keep in mind that the data is three days old when released. The gold Commercial Traders added an unusually large (> 10% increase in long contracts) 10,554 (added 13,289, 6357 the prior two weeks, sold 1381, 8157 the prior two weeks, added 11,405 the prior week, sold 14,042 the prior week) long futures and options contracts and added a large 11,306 (added 4626, 3299 the prior two weeks, covered 2036 the prior week, added 4202, 2623 the prior two weeks) short futures and options contracts which portends weakness this week (non contrarian indicator), because the unusually large long trade is a short term contrarian indication and the aggressive short selling also points to weakness. The gold Speculators (hedge funds and other speculators/traders) added 5541 (added 2975, 1521 the prior two weeks, sold 3988, 5112, 19,247 the prior three weeks, added 9102 the prior week, sold 2697 the prior week) long futures and options contracts and added an unusually large (> 10% increase in short contracts) 3743 (added 9445, 5824 the prior two weeks, covered 1535, 7432, 8720 the prior three weeks) short futures and options contracts which portends weakness this week (contrarian indicator), because the unusually large short selling is a short term non contrarian indication. The most important consideration in timing any market is the cycle channels/trendlines (see charts).

See http://www.joefrocks.com/TradetheCycles.html for the weekly update. Scroll down a few pages past the major averages work to see the gold/silver stock work. See http://www.joefrocks.com/GoldStockCharts.html for all the charts. My home page is http://www.JoeFRocks.com/ I hope you'll take the time to e mail your friends re this Blog and my site/work/system. This will help to keep my work free, because the more visitors I get the more advertising $ I make. I have a long way to go but have made significant progress in recent months. Thank you.

................................Weekly Update Ready

At http://www.joefrocks.com/TradetheCycles.html scroll down a few pages past the major averages work to see the gold/silver stock work. See HUI and NEM's 1 year charts dated 1-20-06 that shows the likely Elliot Wave points for the major upcycle since 5-16-05 and see the 3 month XAU chart dated 1-20-06. See http://www.joefrocks.com/GoldStockCharts.html for all the charts. My home page is http://www.JoeFRocks.com/ I hope you'll take the time to e mail your friends re this Blog and my site/work/system. This will help to keep my work free, because the more visitors I get the more advertising $ I make. I have a long way to go but have made significant progress in recent months. Thank you. Ciao

........................Disclaimer

Joe Ferrazzano is not a registered investment advisor. Investing in stocks involves risk. Joe Ferrazzano is not a registered broker or dealer. Each investor has to ascertain what percentage if any of one's investments should be allocated to growth stocks or gold/silver stocks. Please see a financial planner, registered investment advisor or at least do your homework and decide what is right for your situation. Growth stocks and gold/silver stocks tend to be extremely volatile which creates opportunities but also can be very painful and risky. Each investor must take complete responsibility for his or her investing actions. Joe Ferrazzano should be considered as one source of information out of many from which to derive a decision on investing.

Why 9-30-05 Was The Major Upcyle's Wave 1 Cycle High

See http://www.joefrocks.com/GoldStockCharts.html and in NEM's latest 1 year chart dated 1-20-06 (about 12 charts down) note the nice Elliot Wave 1, 2, 3, 4, 5 minor int term upcycle from 5-16-05 until 9-30-05. That's why I say 9-30-05 was the major upcycle's Elliot Wave 1 cycle high. Ciao.

.........................New Cycle Definitions!

Hooya! Per Elliot Wave there are three minor intermediate term upcycles in each major intermediate term upcycle, see http://www.joefrocks.com/GoldStockCharts.html for HUI and NEM's latest 1 year charts that show the Elliot Wave Points and see the XAU 3 year chart dated 5-16-05. There are Elliot Wave 1, 3, and 5 minor intermediate term upcycles and there are two minor intermediate term downcycles, the Elliot Wave 2 and 4 minor intermediate term downcycles.

Each minor intermediate term upcycle may be comprised of more than one monthly cycle if a 2% sell signal occurs followed by a 2% buy signal for a new monthly cycle buy signal. The monthly cycle has been resurrected! The monster upcycle that began on 12-20-05 was a monthly NOT a minor intermediate term upcycle. The Elliot Wave 3 minor intermediate term upcycles began on 10-20-05 for HUI/XAU and on 11-4-05 for NEM, and, ended last Tuesday 1-17. 2% sell signals occurred on Wednesday 1-18. Active traders should always act on 2% sell signals, because there's judgment involved in calling the three Elliot Wave minor intermediate term cycle highs that occur in a major intermediate term upcycle. Investors will of course wait for a 5% major cycle sell signal (5% follow through after the major upcycle's channel breaks down) in the major upcycle's third Elliot Wave 5 minor intermediate term upcycle (Wave 4 down began last Tuesday). Ciao!

The NEM Lead Indicator Was A Very Bearish -1.29% Vs The XAU Today

After being a very bearish -2.09% vs the XAU yesterday. More downside gap filling is likely early next week. NEM filled it's downside gap at 56.66 from 1-6 today. NEM tried to fill it's upside gap below 59 from Wednesday again today, and failed for the third straight day, which was a correctly bearish indication.

NEM has downside gaps to fill at 53.40 from 1-3, at 51.59 from 12-28, at 50.45 from 12-22, and at 48.75 from 12-7, and, the XAU has downside gaps at 137.64 from 1-19, at 135.39 from 1-6, at 128.03 from 1-3, at 124.36 from 12-28, and at 122.49 from 12-22. Often cycle highs or lows will occur shortly after gaps get filled, so one needs to track gaps closely. If gaps don't get filled that can be a bearish or bullish sign, as occurred recently when NEM twice closely approached (daily cycle lows at 48.88 and 48.89) but didn't fill it's downside gap at 48.75, then the recent explosive rally occurred.

.......NEM Tried To Fill It's Upside Gap Below 59

And failed for the third straight day which is a bearish sign. HUI, NEM, and the XAU are on the flat topping part of their minor int term cycles and it appears that Tuesday's cycle highs will be the highs for this minor int term cycle since late December. HUI and the XAU are putting in double tops if today's early cycle high is the session high. SPX's weakness early on led to a sharp drop in gold/silver stocks after early strength due to index funds selling their gold/silver stocks. Today is a good example that SPX's cycles are different than gold/silver stocks, because SPX was down early but gold/silver stocks were up.

NEM is underperforming the XAU right now by bearish margin of about -0.60%, after a very bearish margin of -2.09% yesterday, which screams weakness. The XAU Put/Call Ratio portends some weakness and XAU Implied Volatility correctly point to some strength today. Major upcycle (since 5-16-05) Elliot Wave 3 cycle highs probably occurred on Tuesday for HUI/NEM/XAU, which are important though not major/final cycle highs. A 2% minor int term cycle sell signal occurred on Wednesday.

Today's Fed Credit so far is a relatively modest $5.50 Billion 3 day Repo after a huge $13.00 Billion 1 day Repo and a 14 day $8 Billion Repo yesterday. Federal Reserve Bank Credit appears to be a very reliable short term cycle indicator (based on backtesting), and, last week was a very modest weekly rise which indicates that gold/silver stocks probably won't surprise to the upside until the next minor int term upcycle. A decline in gold/silver stocks has begun that probably is the major upcycle's (since 5-16-05) Elliot Wave 4 down. See http://www.joefrocks.com/GoldStockCharts.html for HUI and NEM's latest 1 year charts that show the Elliot Wave Points.

NEM has downside gaps to fill at 56.66 from 1-6, at 53.40 from 1-3, at 51.59 from 12-28, at 50.45 from 12-22, and at 48.75 from 12-7, and, the XAU has downside gaps at 137.64 from 1-19, at 135.39 from 1-6, at 128.03 from 1-3, at 124.36 from 12-28, and at 122.49 from 12-22. Often cycle highs or lows will occur shortly after gaps get filled, so one needs to track gaps closely. If gaps don't get filled that can be a bearish or bullish sign, as occurred recently when NEM twice closely approached (daily cycle lows at 48.88 and 48.89) but didn't fill it's downside gap at 48.75, then the recent explosive rally occurred.

http://finance.yahoo.com/q/ta?s=%5EGSPC&t=5d&l=off&z=l&q=b&p=&a=m26-12-9,m26-12-9,p12,m26-12-9,p12,fs,m26-12-9,p12,fs,w14&c=NEM,%5EXAU,%5EHUI SPX drives index funds which have a profound affect on the short term/weekly and monthly movements of many sectors, including gold/silver stocks. Rapid very modest % moves in SPX generally cause rapid significant moves in NEM and other gold/silver stocks in the many indices affected by SPX. The largest traders of NEM and other gold/silver stocks found in the various indexes are index fund traders, AND, they tend to trade at THE SAME TIME or nearly so, which is huge. The cycles are vastly different for gold/silver stocks and SPX since gold/silver stocks are in a very long term upcycle since Oct/Nov 2000 and SPX is in a very long term downcycle since March 2000.

XAU Implied Volatility fell -2.02% to 35.400 on Thursday 1-19 from 36.130 on Wednesday 1-18 versus a +3.08% rise in the XAU on 1-19, which is a significant (0.50-1.99%) +1.06% rise in fear (-2.02% + +3.08% = +1.06%. The XAU wall of worry grew by +1.06%, therefore fear rose by +1.06%) that portends strength/an uptrend during part of Friday 1-20's session.

The XAU Put/Call Ratio fell a sharp (2-2.99%) -2.08% today to 1.20422 from 1.17922 on 1-19 which portends some weakness today because it's a sharp (2-2.99%) rise in complacency.

The latest COT data (as of 1-10-06) is bearish short term since the gold Commercial Traders traded an unusually large long position and the gold Speculators traded an unusually large short position, both of which portend weakness for at least part of this week. The data is three days old when released. The gold Commercial Traders added an unusually large (> 10% increase in long contracts) 13,289 long futures and options contracts (added the prior week, sold 1381, 8157 the prior two weeks, added 11,405 the prior week, sold 14,042 the prior week) and added 4626 short futures and options contracts (added 3299 the prior week, covered 2036 the prior week, added 4202, 2623 the prior two weeks) which portends weakness this week (non contrarian indicator), because the unusually large long trade is a short term contrarian indication and the significant short selling also points to some weakness. The gold Speculators (hedge funds and other speculators/traders) added 2975 (added 1521 the prior week, sold 3988, 5112, 19,247 the prior three weeks, added 9102 the prior week) long futures and options contracts and added an unusually large (> 10% increase in short contracts) 9445 (added 5824 the prior week, covered 1535, 7432, 8720 the prior three weeks) short futures and options contracts which portends weakness this week (contrarian indicator), because the unusually large short selling is a short term non contrarian indication. The most important consideration in timing any market is the cycle channels/trendlines (see charts).

See http://www.joefrocks.com/TradetheCycles.html for the weekly update. Scroll down a few pages past the major averages work to see the gold/silver stock work. See http://www.joefrocks.com/GoldStockCharts.html for all the charts. My home page is http://www.JoeFRocks.com/ I hope you'll take the time to e mail your friends re this Blog and my site/work/system. This will help to keep my work free, because the more visitors I get the more advertising $ I make. I have a long way to go but have made significant progress in recent months. Thank you.

................................Gaps Theory

If gaps don't get filled that can be a bearish or bullish sign, as occurred recently when NEM twice closely approached (daily cycle lows at 48.88 and 48.89) but didn't fill it's downside gap at 48.75, then the recent monster rally occurred.

Reliable lead indicator NEM created an upside gap yesterday a bit below 59 that it failed to fill it yesterday (came close) and today, which is a sign that NEM will probably continue lower tomorrow, from it's late session downtrend on Thursday.

Federal Reserve Bank Credit Grew By Only +$562 MIllion The Week Ending 1-18-06

Repurchase agreements (Repos) fell by -$822 Million the week ending 1-18-06. See http://www.federalreserve.gov/releases/h41/Current/ This is a neutral indication, and, it appears that today's massive +$21 Billion in Repos was largely factored into the market today. NEM underperformed the XAU by a very bearish -2.09% today which portends substantial weakness tomorrow.

That weakness has in fact already begun, because the XAU trended down during the last 2+ hours of the session. The XAU should fill it's downside gap at 137.64 (that was created at today's open) in the next day or two.

The assessment remains unchanged that HUI, NEM, and the XAU began Elliot Wave 4 down of their major upcycle (since 5-16-05) early on Tuesday. Yesterday a 2% minor int term cycle sell signal occurred. Elliot Wave 4 down of the major upcycle should do a down, up, down Elliot Wave A, B, C minor int term downcycle comprised of 2 short term downcycles and 1 short term upcycle. This is still the minor int term downcycle's Wave A short term downcycle. Ciao

Massive Fed Credit Today Propping Up The Market

The Fed's massive $21 Billion in Repos today is ratcheting up SPX and many indexes. The XAU could even fill an upside gap near 142 then weakness should set in soon thereafter. NEM is underperforming the XAU by a very wide margin of roughly -2.00% which portends weakness soon.

............................Early Strength Won't Last

SPX (S & P 500) early strength led to index fund buying and thus gold/silver stock early strength today that probably won't last because NEM is underperforming the XAU right now by a very bearish margin of about -2.00%, which screams weakness. There should be more downside gap filling today then maybe a rebound will occur. The XAU Put/Call Ratio and XAU Implied Volatility both point to weakness today, so all three indicators portend weakness, the NEM Lead Indicator being the third indicator (for new readers who may not know).

Major upcycle (since 5-16-05) Elliot Wave 3 cycle highs probably occurred on Tuesday for HUI/NEM/XAU, because a 2% minor int term cycle sell signal occurred yesterday, which are important though not major/final cycle highs.

Today's Fed Credit so far is a huge $13.00 Billion 1 day Repo and a 14 day $8 Billion Repo. This is the third consecutive Thursday with massive lending. Federal Reserve Bank Credit appears to be a very reliable short term cycle indicator (based on backtesting) when it has a substantial change, and, last week was a huge weekly decline which correctly pointed to substantial weakness in gold/silver stocks this week. Index fund traders have much less ammo now. A very sharp decline in gold/silver stocks has begun that probably is the major upcycle's (since 5-16-05) Elliot Wave 4 down. See http://www.joefrocks.com/GoldStockCharts.html for HUI and NEM's latest 1 year charts that show the Elliot Wave Points.

NEM has downside gaps to fill at 56.66 from 1-6, at 53.40 from 1-3, at 51.59 from 12-28, at 50.45 from 12-22, and at 48.75 from 12-7, and, the XAU has downside gaps at 137.64 from 1-19, at 135.39 from 1-6, at 128.03 from 1-3, at 124.36 from 12-28, and at 122.49 from 12-22. Often cycle highs or lows will occur shortly after gaps get filled, so one needs to track gaps closely. If gaps don't get filled that can be a bearish or bullish sign, as occurred recently when NEM twice closely approached (daily cycle lows at 48.88 and 48.89) but didn't fill it's downside gap at 48.75, then the recent explosive rally occurred.

http://finance.yahoo.com/q/ta?s=%5EGSPC&t=5d&l=off&z=l&q=b&p=&a=m26-12-9,m26-12-9,p12,m26-12-9,p12,fs,m26-12-9,p12,fs,w14&c=NEM,%5EXAU,%5EHUI SPX drives index funds which have a profound affect on the short term/weekly and monthly movements of many sectors, including gold/silver stocks. Rapid very modest % moves in SPX generally cause rapid significant moves in NEM and other gold/silver stocks in the many indices affected by SPX. The largest traders of NEM and other gold/silver stocks found in the various indexes are index fund traders, AND, they tend to trade at THE SAME TIME or nearly so, which is huge. The cycles are vastly different for gold/silver stocks and SPX since gold/silver stocks are in a very long term upcycle since Oct/Nov 2000 and SPX is in a very long term downcycle since March 2000.

XAU Implied Volatility fell -0.28% to 36.130 on Wednesday 1-18 from 36.230 on Tuesday 1-17 versus a -3.05% decline in the XAU on 1-18, which is a very sharp (3-6%) +3.33% rise in complacency (-0.28% + -3.05% = -3.33%. The XAU wall of worry shrank by -3.33%, therefore complacency rose by +3.33%) that portends weakness/a downtrend during part of Thursday 1-19's session.

The XAU Put/Call Ratio rose an unusually large (> 6%) +9.61% today to 1.20422 from 1.09869 on 1-18 which portends some weakness today because it's an unusually large (> 6%) rise in fear.

The latest COT data (as of 1-10-06) is bearish short term since the gold Commercial Traders traded an unusually large long position and the gold Speculators traded an unusually large short position, both of which portend weakness for at least part of this week. The data is three days old when released. The gold Commercial Traders added an unusually large (> 10% increase in long contracts) 13,289 long futures and options contracts (added the prior week, sold 1381, 8157 the prior two weeks, added 11,405 the prior week, sold 14,042 the prior week) and added 4626 short futures and options contracts (added 3299 the prior week, covered 2036 the prior week, added 4202, 2623 the prior two weeks) which portends weakness this week (non contrarian indicator), because the unusually large long trade is a short term contrarian indication and the significant short selling also points to some weakness. The gold Speculators (hedge funds and other speculators/traders) added 2975 (added 1521 the prior week, sold 3988, 5112, 19,247 the prior three weeks, added 9102 the prior week) long futures and options contracts and added an unusually large (> 10% increase in short contracts) 9445 (added 5824 the prior week, covered 1535, 7432, 8720 the prior three weeks) short futures and options contracts which portends weakness this week (contrarian indicator), because the unusually large short selling is a short term non contrarian indication. The most important consideration in timing any market is the cycle channels/trendlines (see charts).

See http://www.joefrocks.com/TradetheCycles.html for the weekly update. Scroll down a few pages past the major averages work to see the gold/silver stock work. See http://www.joefrocks.com/GoldStockCharts.html for all the charts. My home page is http://www.JoeFRocks.com/ I hope you'll take the time to e mail your friends re this Blog and my site/work/system. This will help to keep my work free, because the more visitors I get the more advertising $ I make. I have a long way to go but have made significant progress in recent months. Thank you.

Welcome To The Major Upcycle's (SInce 5-16-05) Elliot Wave 4 Down

2% follow through sell signals occurred today for HUI, NEM, and the XAU, which indicates that minor intermediate term cycle highs occurred yesterday, that appear to be cycle highs for the major upcycle's Elliot Wave 3. See http://www.joefrocks.com/GoldStockCharts.html for HUI and NEM's latest 1 year charts that show the Elliot Wave Points.

SPX weakness was a major factor today because it resulted in index funds dumping gold/silver stocks. NEM and FCX are in SPX. FCX was down about -5% today and NEM was down -2.73%. A multi-week correction has probably begun that's likely to be a 15% or greater decline from the cycle highs, and probably corresponds to the major upcycle's Elliot Wave 4 down.

NEM filled it's downside gap at 57.96 from 1-13 today and the XAU filled it's downside gap at 137.59 from 1-13 today. 56.66 from 1-6 and 135.39 from 1-6 may get filled tomorrow.

NEM has downside gaps to fill at 56.66 from 1-6, at 53.40 from 1-3, at 51.59 from 12-28, at 50.45 from 12-22, and at 48.75 from 12-7, and, the XAU has downside gaps at 135.39 from 1-6, at 128.03 from 1-3, at 124.36 from 12-28, and at 122.49 from 12-22.

NEM outperformed the XAU by +0.32% today which doesn't point to a sustained/meaningful rally tomorrow. More downside gap filling is likely tomorrow then there could be a significant rally.

The Fed's lending was a miniscule +$2.250 Billion Repo today, so there was no attempted bailout. Yesterday's massive +$16.750 Billion worked briefly to boost the market, but basically was a failed bailout which pointed to today's weakness. http://www.newyorkfed.org/markets/omo/dmm/temp.cfm

There was very strong sell interest in NEM again today. It's been that way for over a week:
http://thomson.finance.lycos.com/lycos/iwatch/cgi-bin/iw_ticker?ticker=nem