A Firm SPX (S & P 500) And Elliott Wave Pointed To Some Strength Today
A firm SPX led to HUI/NEM/XAU strength today due to program buying (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), and, Elliott Wave pointed to SOME strength (without the help of program buying/SPX strength it might have just been a double top Wave 5 cycle high), since yesterday's huge spike was Wave 3 up (began late on Monday), then Wave 4 bottomed early today, and, today's strength was the final Wave 5 that may have peaked shortly before the close.
If it hadn't been for some positive earnings news like Yahoo's that boosted the S & P 500 (SPX), there would have been much less HUI/NEM/XAU strength today. Program trading, which accounts for about 70% of the dollar volume on the NYSE, is a huge factor. Given yesterday's very bearish NEM Lead Indicator at -2.13% versus the XAU (was -0.39% today), it's very unlikely that HUI/NEM/XAU would have shown significant strength today without program buying due to SPX strength.
The WMT Lead Indicator, was a very bullish +0.82% versus SPX today, but, became less bullish/more bearish towards session's end, and, was bearish
the prior three sessions (-0.66% on 1-23, -0.19% on 1-22, and -0.46% on 1-19). It should resume being bearish tomorrow and may have done so in the second half of today's session. There was strong WMT sell interest in I Watch today, see http://thomson.finance.lycos.com/lycos/iwatch/cgi-bin/iw_ticker?ticker=wmt.
HUI/XAU's Wave B of Wave A/NEM's Wave B since 1-10-07 is/should be peaking, 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=.
There are many factors screaming weakness right now, and, indicate that a substantial decline is likely during the imminent Wave C short term downcycle (Of Wave A for HUI/XAU's major downcycle since 12-5-06). A short term Wave C for HUI/NEM/XAU will be 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 the punch bowl the past six 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 yesterday and was -0.39% today. The XAU Put/Call Ratio collapsed in recent days to 0.9992782 today/on 1-24 from 1.0587482 on 1-23 from 1.0923882 on 1-22. XAU Implied Volatility also collapsed in recent days to 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/XAU's Wave B of Wave A/NEM's Wave B is probably peaking. 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 yesterday's open at 132.09 and NEM has a downside gap from yesterday's open at 43.06, in addition to downside gaps at 41.83, 41.09, and at 40.83.
So, now the correct strategy is to wait for HUI/NEM/XAU to do a very short term Wave A down (wait for the Wave B short term upcycle (began 1-10-07) to clearly break down and enter Wave C down), and, if you're looking to do so, short some stock and/or buy puts during the very short term Wave B up, in which the NEM and WMT Lead Indicators should be bearish.
The Fed took their foot off the pedal the past six days(http://www.newyorkfed.org/markets/omo/dmm/temp.cfm?SHOWMORE=TRUE), with only $4.00 Billion today, $3.50 Billion yesterday, $2.00 Billion and $1.75 Billion on Friday and Wednesday 1-17, versus an average of $5-6 Billion/day, and, Thursday'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, 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 should soon enter a nasty short term Wave C decline (a few days to a week, so one must be nimble) in which Wave A of HUI/XAU's major downcycle (Wave C of Wave C of the Cyclical Bear Market since 5-11-06) since 12-5-06 (see charts 2 and 3 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
If it hadn't been for some positive earnings news like Yahoo's that boosted the S & P 500 (SPX), there would have been much less HUI/NEM/XAU strength today. Program trading, which accounts for about 70% of the dollar volume on the NYSE, is a huge factor. Given yesterday's very bearish NEM Lead Indicator at -2.13% versus the XAU (was -0.39% today), it's very unlikely that HUI/NEM/XAU would have shown significant strength today without program buying due to SPX strength.
The WMT Lead Indicator, was a very bullish +0.82% versus SPX today, but, became less bullish/more bearish towards session's end, and, was bearish
the prior three sessions (-0.66% on 1-23, -0.19% on 1-22, and -0.46% on 1-19). It should resume being bearish tomorrow and may have done so in the second half of today's session. There was strong WMT sell interest in I Watch today, see http://thomson.finance.lycos.com/lycos/iwatch/cgi-bin/iw_ticker?ticker=wmt.
HUI/XAU's Wave B of Wave A/NEM's Wave B since 1-10-07 is/should be peaking, 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=.
There are many factors screaming weakness right now, and, indicate that a substantial decline is likely during the imminent Wave C short term downcycle (Of Wave A for HUI/XAU's major downcycle since 12-5-06). A short term Wave C for HUI/NEM/XAU will be 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 the punch bowl the past six 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 yesterday and was -0.39% today. The XAU Put/Call Ratio collapsed in recent days to 0.9992782 today/on 1-24 from 1.0587482 on 1-23 from 1.0923882 on 1-22. XAU Implied Volatility also collapsed in recent days to 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/XAU's Wave B of Wave A/NEM's Wave B is probably peaking. 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 yesterday's open at 132.09 and NEM has a downside gap from yesterday's open at 43.06, in addition to downside gaps at 41.83, 41.09, and at 40.83.
So, now the correct strategy is to wait for HUI/NEM/XAU to do a very short term Wave A down (wait for the Wave B short term upcycle (began 1-10-07) to clearly break down and enter Wave C down), and, if you're looking to do so, short some stock and/or buy puts during the very short term Wave B up, in which the NEM and WMT Lead Indicators should be bearish.
The Fed took their foot off the pedal the past six days(http://www.newyorkfed.org/markets/omo/dmm/temp.cfm?SHOWMORE=TRUE), with only $4.00 Billion today, $3.50 Billion yesterday, $2.00 Billion and $1.75 Billion on Friday and Wednesday 1-17, versus an average of $5-6 Billion/day, and, Thursday'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, 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 should soon enter a nasty short term Wave C decline (a few days to a week, so one must be nimble) in which Wave A of HUI/XAU's major downcycle (Wave C of Wave C of the Cyclical Bear Market since 5-11-06) since 12-5-06 (see charts 2 and 3 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
1:21 PM
