...............HUI/NEM/XAU Elliott Wave Count
HUI/NEM/XAU's Elliott Wave count is as follows: A Wave B short term cycle high occurred early last Thursday (for HUI/XAU's major downcycle since 12-5-06, see charts 2 and 3 at http://www.joefrocks.com/GoldStockCharts.html) and a severe (HUI fell -4.62%) 2 day/very short term Wave A down bottomed late yesterday (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==), so, a very short term Wave B up began late yesterday that will probably be/appears anemic/short lived.
The XAU Put/Call Ratio (February expiration) continues to collapse, falling sharply to 0.89941 today/on 1-30 from 0.92554 yesterday/1-29. The Fed has removed the punch bowl the past few weeks (see http://www.newyorkfed.org/markets/omo/dmm/temp.cfm?SHOWMORE=TRUE) after having massively spiked the punch for a few weeks. They added a relatively modest $3.75 Billion Repo today. Their fear of the economic hard landing has subsided for now, and, the prior massive punch spiking didn't help the S & P 500 (SPX) that much, because it was rolling over.
It looks like today will probably be the day when I short some stock (probably the GDX ETF) and buy some XAU puts. HUI/XAU are probably in the final Wave C decline of the Cyclical Bear Market since 5-11-06, the extremely bearish COT data (http://tradethecycles.blogspot.com/2007/01/savvy-non-contrarian-gold-commercial.html), the fact that the Fed has pulled the plug on index fund program traders recently (In the most recent week ending 1-24-07, the largest weekly drop I remember seeing, a -$8.944 Billion decline in Fed credit, see http://www.federalreserve.gov/releases/h41/Current/), the XAU Put/Call Ratio and XAU Implied Volatility have been collapsing, and, the bearish NEM and WMT Lead Indicators at -1.83% versus the XAU and -0.73% versus the S & P 500 (SPX) last week, I'm expecting the bottom to fall out of HUI/XAU soon.
The XAU Put/Call Ratio (February expiration) continues to dramatically collapse (collapsed to 0.89941 today/on 1-30 from 0.92554 on 1-29 from 0.92800 on 1-26 from 0.98095 on 1-25 from 0.99928 on 1-24 from 1.05875 on 1-23 from 1.09239 on 1-22), which is a very bearish sign that indicates XAU options traders don't understand what's going on/are far too bullish/complacent.
The Elliott Wave count for HUI/XAU is probably (very likely) Wave C, not Wave C of Wave A. Revising it doesn't make much difference concerning what's expected to happen, except that it implies that HUI is about to fall 35-41% from Thursday's countertrend Wave B cycle high to 200-220 (primary multi year Secular Bull Market trendline, see chart 7 at http://www.joefrocks.com/GoldStockCharts.html) in the next few weeks, while NEM's cycle low at 39.84 from 10-4-06 should hold, because NEM reached it's primary multi year Secular Bull Market trendline, see chart 8 at http://www.joefrocks.com/GoldStockCharts.html.
How does HUI fall 35-41% (XAU 30-35%) the next few weeks while NEM only falls 10-11%? The answer probably is that Wave C will also do an Elliott Wave ABC down up down pattern, as Wave A just did (from 12-5-06 until 1-10-07, see http://finance.yahoo.com/q/ta?s=%5EHUI&t=6m&l=off&z=l&q=c&p=&a=m26-12-9,p12,fs,w14&c=), and, NEM has to dramatically outperform HUI/XAU the next few weeks during Wave C, just as NEM dramatically underperformed HUI/XAU since it's Wave 1 Cyclical Bull Market cycle high on 1-31-06. Also, NEM's bottom/minor intermediate term cycle low will probably correspond with HUI/XAU's Wave A of Wave C cycle low.
NEM's primary multi year Secular Bull market trendline, see chart 8 at http://www.joefrocks.com/GoldStockCharts.html, should hold, and, HUI/XAU should decline to their primary multi year Secular Bull market trendlines, see charts 7 and 9 at http://www.joefrocks.com/GoldStockCharts.html. The final Wave C decline of HUI/XAU's Wave 2 Cyclical Bear Market probably began early on 1-25.
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 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 on 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 1-26's open at 132.09 and NEM has a downside gap from Tuesday 1-26'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 ten days(http://www.newyorkfed.org/markets/omo/dmm/temp.cfm?SHOWMORE=TRUE), with the exception of Thursday's massive $15.50 Billion, the past 3 days were modest/average ($3.75 Billion, $5.25 Billion and $6 Billion), a modest $4.00 Billion Wednesday 1-24, $3.50 Billion on Tuesday 1-23, $2.00 Billion and $1.75 Billion on Friday 1-19 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 1-22'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 soon (probably began early on 1-25), 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 probably entered a vicious Wave C decline (a few weeks) early on 1-25, 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).
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
The XAU Put/Call Ratio (February expiration) continues to collapse, falling sharply to 0.89941 today/on 1-30 from 0.92554 yesterday/1-29. The Fed has removed the punch bowl the past few weeks (see http://www.newyorkfed.org/markets/omo/dmm/temp.cfm?SHOWMORE=TRUE) after having massively spiked the punch for a few weeks. They added a relatively modest $3.75 Billion Repo today. Their fear of the economic hard landing has subsided for now, and, the prior massive punch spiking didn't help the S & P 500 (SPX) that much, because it was rolling over.
It looks like today will probably be the day when I short some stock (probably the GDX ETF) and buy some XAU puts. HUI/XAU are probably in the final Wave C decline of the Cyclical Bear Market since 5-11-06, the extremely bearish COT data (http://tradethecycles.blogspot.com/2007/01/savvy-non-contrarian-gold-commercial.html), the fact that the Fed has pulled the plug on index fund program traders recently (In the most recent week ending 1-24-07, the largest weekly drop I remember seeing, a -$8.944 Billion decline in Fed credit, see http://www.federalreserve.gov/releases/h41/Current/), the XAU Put/Call Ratio and XAU Implied Volatility have been collapsing, and, the bearish NEM and WMT Lead Indicators at -1.83% versus the XAU and -0.73% versus the S & P 500 (SPX) last week, I'm expecting the bottom to fall out of HUI/XAU soon.
The XAU Put/Call Ratio (February expiration) continues to dramatically collapse (collapsed to 0.89941 today/on 1-30 from 0.92554 on 1-29 from 0.92800 on 1-26 from 0.98095 on 1-25 from 0.99928 on 1-24 from 1.05875 on 1-23 from 1.09239 on 1-22), which is a very bearish sign that indicates XAU options traders don't understand what's going on/are far too bullish/complacent.
The Elliott Wave count for HUI/XAU is probably (very likely) Wave C, not Wave C of Wave A. Revising it doesn't make much difference concerning what's expected to happen, except that it implies that HUI is about to fall 35-41% from Thursday's countertrend Wave B cycle high to 200-220 (primary multi year Secular Bull Market trendline, see chart 7 at http://www.joefrocks.com/GoldStockCharts.html) in the next few weeks, while NEM's cycle low at 39.84 from 10-4-06 should hold, because NEM reached it's primary multi year Secular Bull Market trendline, see chart 8 at http://www.joefrocks.com/GoldStockCharts.html.
How does HUI fall 35-41% (XAU 30-35%) the next few weeks while NEM only falls 10-11%? The answer probably is that Wave C will also do an Elliott Wave ABC down up down pattern, as Wave A just did (from 12-5-06 until 1-10-07, see http://finance.yahoo.com/q/ta?s=%5EHUI&t=6m&l=off&z=l&q=c&p=&a=m26-12-9,p12,fs,w14&c=), and, NEM has to dramatically outperform HUI/XAU the next few weeks during Wave C, just as NEM dramatically underperformed HUI/XAU since it's Wave 1 Cyclical Bull Market cycle high on 1-31-06. Also, NEM's bottom/minor intermediate term cycle low will probably correspond with HUI/XAU's Wave A of Wave C cycle low.
NEM's primary multi year Secular Bull market trendline, see chart 8 at http://www.joefrocks.com/GoldStockCharts.html, should hold, and, HUI/XAU should decline to their primary multi year Secular Bull market trendlines, see charts 7 and 9 at http://www.joefrocks.com/GoldStockCharts.html. The final Wave C decline of HUI/XAU's Wave 2 Cyclical Bear Market probably began early on 1-25.
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 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 on 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 1-26's open at 132.09 and NEM has a downside gap from Tuesday 1-26'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 ten days(http://www.newyorkfed.org/markets/omo/dmm/temp.cfm?SHOWMORE=TRUE), with the exception of Thursday's massive $15.50 Billion, the past 3 days were modest/average ($3.75 Billion, $5.25 Billion and $6 Billion), a modest $4.00 Billion Wednesday 1-24, $3.50 Billion on Tuesday 1-23, $2.00 Billion and $1.75 Billion on Friday 1-19 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 1-22'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 soon (probably began early on 1-25), 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 probably entered a vicious Wave C decline (a few weeks) early on 1-25, 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).
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
7:04 AM
