The Final Wave C Decline Of HUI/XAU's Wave 2 Cyclical Bear Market Since 5-11-06 Appears To Have Begun
The final Wave C decline of HUI/XAU's Wave 2 Cyclical Bear Market since 5-11-06 appears to have begun,
see http://finance.yahoo.com/q/ta?s=%5EHUI&t=5d&l=off&z=l&q=c&p=&a=m26-12-9,p12,fs,w14&c==. HUI's (and NEM/XAU) countertrend Wave B short term upcycle (began 1-10-07) appears to have peaked early today at 340.09, and, a severe Wave A very short term downcycle (HUI) occurred most of the remainder of the session, with HUI falling -3.21% to 329.16, when a very short term Wave B upcycle appears to have begun late in the session (NEM Lead Indicator = +0.40% versus the XAU today and the WMT Lead Indicator = +0.18% versus SPX today), in which, if you're looking to do so, you probably should short some stock and/or buy some puts (probably tomorrow). The NEM and WMT Lead Indicators should turn bearish again in the very short term Wave B up.
What led to severe weakness today after early strength? The same thing that led to a huge spike upcycle the prior few days, PROGRAM TRADING, with SPX being the key index, 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.
As I said in the prior post, program selling due to SPX (S & P 500) weakness will probably play a huge part in the process of driving HUI/XAU down to their primary trendlines. Notice in the 2 year chart of HUI versus SPX (see http://finance.yahoo.com/q/ta?s=%5EHUI&t=2y&l=off&z=l&q=c&p=&a=m26-12-9,m26-12-9,p12,m26-12-9,p12,fs,m26-12-9,p12,fs,w14&c=%5EGSPC) how SPX weakness in the Spring of 2005 and 2006 as well as September 2005 coincided with substantial/vicious HUI declines, and, though it isn't obvious in the 2 year chart, the worst part by far of HUI/XAU's vicious downcycle from early September 2006 until 10-4-06 coincided with significant SPX weakness (you can click on the 6 month link in the chart at the link above to see that much better).
The Fed pulled the plug on index fund program traders in the most recent week ending 1-24-07, with the largest weekly drop I remember seeing, a -$8.944 Billion decline in Fed credit, see http://www.federalreserve.gov/releases/h41/Current/. This major decline in Fed credit is likely to result in severe HUI/NEM/XAU weakness next week (significant SPX weakness), that probably began early today.
There are many factors screaming weakness right now, and, indicate that a substantial decline is likely during Wave C that probably began early today/Thursday 1-25 (Of HUI/XAU's major downcycle since 12-5-06). Wave C for HUI/XAU is part of a larger Wave C of Wave C/major downcycle since 12-5-06 for HUI/XAU, see charts 2, 3, and 6 at http://www.joefrocks.com/GoldStockCharts.html. The Fed has removed (except for today) the punch bowl the past seven days (http://www.newyorkfed.org/markets/omo/dmm/temp.cfm?SHOWMORE=TRUE). The COT (Commitments Of Traders) data is clearly bearish, since the savvy/non contrarian gold Commercial Traders traded significantly net short, while the clueless/contrarian gold Speculators traded significantly net long, see http://www.cftc.gov/dea/options/deacmxsof.htm. The NEM Lead Indicator was an extremely bearish -2.13% versus the XAU Tuesday and was -0.39% yesterday. The XAU Put/Call Ratio collapsed in recent days to 0.98095 on 1-25 from 0.99928 on 1-24 from 1.05875 on 1-23 from 1.09239 on 1-22. XAU Implied Volatility also collapsed in recent days to 27.030 on 1-24 from 27.220 on 1-23 from 28.390 on 1-22 from 28.690 on 1-19 from 30.050 on 1-18 from 31.470 on 1-17.
The expected upside gap filling scenario discussed on 1-16-07 ("HUI/NEM/XAU began a short term upcycle early last Wednesday, in which they should fill upside gaps at 43.65 and 44 for NEM, and, at 136.95 for the XAU.") and shown in chart 1 at http://www.joefrocks.com/GoldStockCharts.html has occurred, and indicates that HUI/NEM/XAU's Wave B probably peaked early today/Thursday 1-25. Often, important cycle highs/lows will occur shortly after gap filling action is completed. That's why cycle trendlines/channels in concert with Elliott Wave patterns and gaps form the basis/crux of "Trade the Cycles."
The XAU has a downside gap from Tuesday's open at 132.09 and NEM has a downside gap from Tuesday's open at 43.06, in addition to downside gaps at 41.83, 41.09, and at 40.83.
The Fed took their foot off the pedal the past seven days(http://www.newyorkfed.org/markets/omo/dmm/temp.cfm?SHOWMORE=TRUE), with the exception of today's massive $15.50 Billion, with only $4.00 Billion yesterday, $3.50 Billion on Tuesday, $2.00 Billion and $1.75 Billion on Friday and Wednesday 1-17, versus an average of $5-6 Billion/day, and, Thursday 1-18's $11 Billion in Repos, while large, is below the typical $13-14 Billion on punch spiking Thursday (much more on recent Thursdays). Monday's was a relatively average $5.75 Billion in credit.
Going abruptly from massive punch spiking to effectively removing the punch bowl could lead to a vicious decline this week and next week, due to index fund program selling and a much lower level of program buying (program trading accounts for about 70% of the dollar volume on the NYSE).
HUI/NEM/XAU have probably entered a vicious Wave C decline (a few weeks) in which HUI/XAU's Cyclical Bear Market since 5-11-06 (see charts 2, 3, 6, 7, and 9 at http://www.joefrocks.com/GoldStockCharts.html), and, Wave C of NEM's minor intermediate term downcycle since 12-8-06 (see chart 1 at http://www.joefrocks.com/GoldStockCharts.html), should bottom. NEM's cycle low from 10-4-06 at 39.84 should hold, because NEM hit it's primary Secular Bull Market trendline since October 2000, and, hit a major 5% follow through buy signal, see chart 8 at http://www.joefrocks.com/GoldStockCharts.html.
Reliable lead indicator NEM should be in a 5+ year Wave 3 Cyclical Bull Market since 10-4-06's cycle low at 39.84. HUI/XAU are in a Wave 2 Cyclical Bear Market since 5-11-06 (have yet to reach their primary trendlines as discussed in subsequent paragraphs).
The COT (Commitments Of Traders) data is clearly bearish, since the savvy/non contrarian gold Commercial Traders traded significantly net short, while the clueless/contrarian gold Speculators traded significantly net long, see http://www.cftc.gov/dea/options/deacmxsof.htm. The only bullish aspect is the fact that the clueless/contrarian gold Speculators engaged in an unusually large degree of short covering (short position decreased by > 10%), which points to some significant gold strength this week, which isn't surprising since HUI/NEM/XAU showed some strength for much of last week, aside from Thursday's severe decline.
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. 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 7 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 7, 8, and 9 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 7 and 9 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 two and three 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 8 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 $470ish right now, so, gold would be a great buy in the $470-500 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 7 and 9 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 8 at http://www.joefrocks.com/GoldStockCharts.html. ....... http://www.JoeFRocks.com/ .
HUI NEM XAU
see http://finance.yahoo.com/q/ta?s=%5EHUI&t=5d&l=off&z=l&q=c&p=&a=m26-12-9,p12,fs,w14&c==. HUI's (and NEM/XAU) countertrend Wave B short term upcycle (began 1-10-07) appears to have peaked early today at 340.09, and, a severe Wave A very short term downcycle (HUI) occurred most of the remainder of the session, with HUI falling -3.21% to 329.16, when a very short term Wave B upcycle appears to have begun late in the session (NEM Lead Indicator = +0.40% versus the XAU today and the WMT Lead Indicator = +0.18% versus SPX today), in which, if you're looking to do so, you probably should short some stock and/or buy some puts (probably tomorrow). The NEM and WMT Lead Indicators should turn bearish again in the very short term Wave B up.
What led to severe weakness today after early strength? The same thing that led to a huge spike upcycle the prior few days, PROGRAM TRADING, with SPX being the key index, 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.
As I said in the prior post, program selling due to SPX (S & P 500) weakness will probably play a huge part in the process of driving HUI/XAU down to their primary trendlines. Notice in the 2 year chart of HUI versus SPX (see http://finance.yahoo.com/q/ta?s=%5EHUI&t=2y&l=off&z=l&q=c&p=&a=m26-12-9,m26-12-9,p12,m26-12-9,p12,fs,m26-12-9,p12,fs,w14&c=%5EGSPC) how SPX weakness in the Spring of 2005 and 2006 as well as September 2005 coincided with substantial/vicious HUI declines, and, though it isn't obvious in the 2 year chart, the worst part by far of HUI/XAU's vicious downcycle from early September 2006 until 10-4-06 coincided with significant SPX weakness (you can click on the 6 month link in the chart at the link above to see that much better).
The Fed pulled the plug on index fund program traders in the most recent week ending 1-24-07, with the largest weekly drop I remember seeing, a -$8.944 Billion decline in Fed credit, see http://www.federalreserve.gov/releases/h41/Current/. This major decline in Fed credit is likely to result in severe HUI/NEM/XAU weakness next week (significant SPX weakness), that probably began early today.
There are many factors screaming weakness right now, and, indicate that a substantial decline is likely during Wave C that probably began early today/Thursday 1-25 (Of HUI/XAU's major downcycle since 12-5-06). Wave C for HUI/XAU is part of a larger Wave C of Wave C/major downcycle since 12-5-06 for HUI/XAU, see charts 2, 3, and 6 at http://www.joefrocks.com/GoldStockCharts.html. The Fed has removed (except for today) the punch bowl the past seven days (http://www.newyorkfed.org/markets/omo/dmm/temp.cfm?SHOWMORE=TRUE). The COT (Commitments Of Traders) data is clearly bearish, since the savvy/non contrarian gold Commercial Traders traded significantly net short, while the clueless/contrarian gold Speculators traded significantly net long, see http://www.cftc.gov/dea/options/deacmxsof.htm. The NEM Lead Indicator was an extremely bearish -2.13% versus the XAU Tuesday and was -0.39% yesterday. The XAU Put/Call Ratio collapsed in recent days to 0.98095 on 1-25 from 0.99928 on 1-24 from 1.05875 on 1-23 from 1.09239 on 1-22. XAU Implied Volatility also collapsed in recent days to 27.030 on 1-24 from 27.220 on 1-23 from 28.390 on 1-22 from 28.690 on 1-19 from 30.050 on 1-18 from 31.470 on 1-17.
The expected upside gap filling scenario discussed on 1-16-07 ("HUI/NEM/XAU began a short term upcycle early last Wednesday, in which they should fill upside gaps at 43.65 and 44 for NEM, and, at 136.95 for the XAU.") and shown in chart 1 at http://www.joefrocks.com/GoldStockCharts.html has occurred, and indicates that HUI/NEM/XAU's Wave B probably peaked early today/Thursday 1-25. Often, important cycle highs/lows will occur shortly after gap filling action is completed. That's why cycle trendlines/channels in concert with Elliott Wave patterns and gaps form the basis/crux of "Trade the Cycles."
The XAU has a downside gap from Tuesday's open at 132.09 and NEM has a downside gap from Tuesday's open at 43.06, in addition to downside gaps at 41.83, 41.09, and at 40.83.
The Fed took their foot off the pedal the past seven days(http://www.newyorkfed.org/markets/omo/dmm/temp.cfm?SHOWMORE=TRUE), with the exception of today's massive $15.50 Billion, with only $4.00 Billion yesterday, $3.50 Billion on Tuesday, $2.00 Billion and $1.75 Billion on Friday and Wednesday 1-17, versus an average of $5-6 Billion/day, and, Thursday 1-18's $11 Billion in Repos, while large, is below the typical $13-14 Billion on punch spiking Thursday (much more on recent Thursdays). Monday's was a relatively average $5.75 Billion in credit.
Going abruptly from massive punch spiking to effectively removing the punch bowl could lead to a vicious decline this week and next week, due to index fund program selling and a much lower level of program buying (program trading accounts for about 70% of the dollar volume on the NYSE).
HUI/NEM/XAU have probably entered a vicious Wave C decline (a few weeks) in which HUI/XAU's Cyclical Bear Market since 5-11-06 (see charts 2, 3, 6, 7, and 9 at http://www.joefrocks.com/GoldStockCharts.html), and, Wave C of NEM's minor intermediate term downcycle since 12-8-06 (see chart 1 at http://www.joefrocks.com/GoldStockCharts.html), should bottom. NEM's cycle low from 10-4-06 at 39.84 should hold, because NEM hit it's primary Secular Bull Market trendline since October 2000, and, hit a major 5% follow through buy signal, see chart 8 at http://www.joefrocks.com/GoldStockCharts.html.
Reliable lead indicator NEM should be in a 5+ year Wave 3 Cyclical Bull Market since 10-4-06's cycle low at 39.84. HUI/XAU are in a Wave 2 Cyclical Bear Market since 5-11-06 (have yet to reach their primary trendlines as discussed in subsequent paragraphs).
The COT (Commitments Of Traders) data is clearly bearish, since the savvy/non contrarian gold Commercial Traders traded significantly net short, while the clueless/contrarian gold Speculators traded significantly net long, see http://www.cftc.gov/dea/options/deacmxsof.htm. The only bullish aspect is the fact that the clueless/contrarian gold Speculators engaged in an unusually large degree of short covering (short position decreased by > 10%), which points to some significant gold strength this week, which isn't surprising since HUI/NEM/XAU showed some strength for much of last week, aside from Thursday's severe decline.
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. 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 7 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 7, 8, and 9 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 7 and 9 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 two and three 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 8 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 $470ish right now, so, gold would be a great buy in the $470-500 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 7 and 9 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 8 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
1:15 PM
