HUI/XAU's Wave C Short Term Downcycle Since Early Last Thursday
I've been asked to give a brief explanation of Elliott Wave patterns. I'm simply using the 12345 up down up down up pattern for upcycles and the ABC down up down pattern for downcycles. The complicated part is keeping track of/identifying the Elliott Wave patterns within Elliott Wave patterns.
In terms of Elliott Wave theory I'm not really student of it at this point. I know that Wave 3 tends to be larger than Wave 1 and may itself have a relatively large 12345 up down up down up pattern, but I'm no expert in Elliott Wave THEORY. I have become pretty good at using Elliott Wave PATTERNS since I understand cycles.
The reason why the vast majority of "Elliott Wavers" blunder with Elliott Wave patterns is that they will mismatch cycles (minor intermediate term upcycle with a major one for example) and arrive at the wrong count. The reason why I knew that an Elliott Wave 1 Cyclical Bull Market cycle high was due last year for HUI/NEM/XAU, was because a Wave 5 long term upcycle had been in effect, see chart 11 at http://www.joefrocks.com/GoldStockCharts.html.
HUI/XAU's Wave C Short Term Downcycle since early last Thursday is in a very short term Wave C that began early today, 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= (Wave B of Wave A of HUI/XAU's major downcycle since 12-5-06 probably peaked early on Thursday, 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== (Cyclical Bear Market since 5-11-06, see charts 7 and 9 at http://www.joefrocks.com/GoldStockCharts.html), see charts 2 and 3 at http://www.joefrocks.com/GoldStockCharts.html to see that the major downcycle began 12-5-06.)
Since the NEM Lead Indicator was a modestly bullish +0.35% versus the XAU today, the WMT Lead Indicator BECAME bullish intraday today after starting out very bearish (was a modestly bearish -0.19% versus SPX for the session), NEM's upside gap at 44 could get filled (appears very unlikely that it'll get filled right now, but one can't rule it out), AND, most importantly, because NEM was in Wave 4 down of an intraday Elliott Wave 12345 up down up down up upcycle at session's end, I remained in cash today and will look to short (probably the GDX ETF) and buy XAU puts early tomorrow. The NEM and WMT Lead Indicators should be bearish (especially NEM). I'm NOT recommending that anyone do what I do, I'm simply saying what I'm LOOKING to do and MAY do.
NEM's Wave B of it's minor intermediate term downcycle since 12-8-06 probably peaked early today (see chart 1 at http://www.joefrocks.com/GoldStockCharts.html), with NEM filling it's upside gap at 43.65 (see http://finance.yahoo.com/q/ta?s=nem&t=5d&l=off&z=l&q=c&p=&a=m26-12-9%2Cp12%2Cfs%2Cw14&c==).
For those of you who are already short and/or in puts I don't see much need to worry (you'll probably do well). The Walmart (WMT) Lead Indicator turned bearish on Friday at -0.46% versus the S & P 500 (SPX) and was a modestly bearish -0.19% today. Fed Credit (average today, http://www.newyorkfed.org/markets/omo/dmm/temp.cfm?SHOWMORE=TRUE) portends a very sharp drop as discussed on Friday (http://tradethecycles.blogspot.com/2007/01/session-went-much-as-expected.html), and, XAU Implied Volatility also points to severe weakness, as discussed on Saturday (http://tradethecycles.blogspot.com/2007/01/severe-huinemxau-weakness-likely-next.html). The COT (Commitments Of Traders) data also points to weakness this week.
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.
The Fed took their foot off the pedal the past four days(http://www.newyorkfed.org/markets/omo/dmm/temp.cfm?SHOWMORE=TRUE), with only $2.00 Billion and $1.75 Billion on Friday and Wednesday 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). Today'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). Thursday's 4%ish intraday decline by HUI, after putting in a Wave B of Wave A cycle high (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) shortly after the open, jives with the expected behavior of a short term Wave C decline.
HUI/XAU entered a nasty short term Wave C decline early last Thursday (a few days, 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).
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
In terms of Elliott Wave theory I'm not really student of it at this point. I know that Wave 3 tends to be larger than Wave 1 and may itself have a relatively large 12345 up down up down up pattern, but I'm no expert in Elliott Wave THEORY. I have become pretty good at using Elliott Wave PATTERNS since I understand cycles.
The reason why the vast majority of "Elliott Wavers" blunder with Elliott Wave patterns is that they will mismatch cycles (minor intermediate term upcycle with a major one for example) and arrive at the wrong count. The reason why I knew that an Elliott Wave 1 Cyclical Bull Market cycle high was due last year for HUI/NEM/XAU, was because a Wave 5 long term upcycle had been in effect, see chart 11 at http://www.joefrocks.com/GoldStockCharts.html.
HUI/XAU's Wave C Short Term Downcycle since early last Thursday is in a very short term Wave C that began early today, 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= (Wave B of Wave A of HUI/XAU's major downcycle since 12-5-06 probably peaked early on Thursday, 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== (Cyclical Bear Market since 5-11-06, see charts 7 and 9 at http://www.joefrocks.com/GoldStockCharts.html), see charts 2 and 3 at http://www.joefrocks.com/GoldStockCharts.html to see that the major downcycle began 12-5-06.)
Since the NEM Lead Indicator was a modestly bullish +0.35% versus the XAU today, the WMT Lead Indicator BECAME bullish intraday today after starting out very bearish (was a modestly bearish -0.19% versus SPX for the session), NEM's upside gap at 44 could get filled (appears very unlikely that it'll get filled right now, but one can't rule it out), AND, most importantly, because NEM was in Wave 4 down of an intraday Elliott Wave 12345 up down up down up upcycle at session's end, I remained in cash today and will look to short (probably the GDX ETF) and buy XAU puts early tomorrow. The NEM and WMT Lead Indicators should be bearish (especially NEM). I'm NOT recommending that anyone do what I do, I'm simply saying what I'm LOOKING to do and MAY do.
NEM's Wave B of it's minor intermediate term downcycle since 12-8-06 probably peaked early today (see chart 1 at http://www.joefrocks.com/GoldStockCharts.html), with NEM filling it's upside gap at 43.65 (see http://finance.yahoo.com/q/ta?s=nem&t=5d&l=off&z=l&q=c&p=&a=m26-12-9%2Cp12%2Cfs%2Cw14&c==).
For those of you who are already short and/or in puts I don't see much need to worry (you'll probably do well). The Walmart (WMT) Lead Indicator turned bearish on Friday at -0.46% versus the S & P 500 (SPX) and was a modestly bearish -0.19% today. Fed Credit (average today, http://www.newyorkfed.org/markets/omo/dmm/temp.cfm?SHOWMORE=TRUE) portends a very sharp drop as discussed on Friday (http://tradethecycles.blogspot.com/2007/01/session-went-much-as-expected.html), and, XAU Implied Volatility also points to severe weakness, as discussed on Saturday (http://tradethecycles.blogspot.com/2007/01/severe-huinemxau-weakness-likely-next.html). The COT (Commitments Of Traders) data also points to weakness this week.
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.
The Fed took their foot off the pedal the past four days(http://www.newyorkfed.org/markets/omo/dmm/temp.cfm?SHOWMORE=TRUE), with only $2.00 Billion and $1.75 Billion on Friday and Wednesday 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). Today'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). Thursday's 4%ish intraday decline by HUI, after putting in a Wave B of Wave A cycle high (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) shortly after the open, jives with the expected behavior of a short term Wave C decline.
HUI/XAU entered a nasty short term Wave C decline early last Thursday (a few days, 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).
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
1:13 PM
