Severe HUI/NEM/XAU Weakness Likely Next Week
Severe HUI/NEM/XAU weakness (after likely early strength on Monday) is likely next week for a variety of reasons, the most important consideration being the short term Wave C downcycle that began shortly after Thursday's open (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==), the major downcycle for HUI/XAU since 12-5-06 (see charts 2 and 3 at http://www.joefrocks.com/GoldStockCharts.html), which is Wave C of Wave C of the Cyclical Bear Market since 5-11-06 (chart 6 shows HUI in late November when Wave B of Wave C was in effect, see http://www.joefrocks.com/GoldStockCharts.html). Reliable lead indicator NEM is in a minor intermediate term downcycle since 12-8-06 and a Wave 3 Cyclical Bull market since 10-4-06, see charts 1 and 8 at http://www.joefrocks.com/GoldStockCharts.html.
The short term Wave C downcycle that began shortly after Thursday's open (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==) was doing a very short term Wave B up on Friday that will (HUI/XAU) probably peak early on Monday (NEM may have peaked on Friday, but could try to fill upside gaps at 43.65 and 44), as indicated by the NEM Lead Indicator and the very short term Elliott Wave count (see http://tradethecycles.blogspot.com/2007/01/session-went-much-as-expected.html).
After probably brief strength early on Monday severe weakness should set in, because it'll be Wave C of a short term Wave C, and, XAU Implied Volatility (see http://www.ivolatility.com/options.j?ticker=xau:&R=1&period=12&chart=2)portends severe weakness, because it collapsed dramatically in recent days relative to the XAU. XAU Implied Volatility has fallen -8.83%, from 31.470 on 1-17 to 28.690 on 1-19, versus the XAU rising +0.11% in those three sessions, so, the XAU wall of worry has collapsed by -8.72%, which points to severe weakness early next week.
The WMT Lead Indicator was a bearish -0.46% versus SPX (S & P 500) on Friday, and, 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 next week, which isn't surprising since HUI/NEM/XAU showed some strength for much of this week, aside from Thursday's severe decline.
The Fed took their foot off the pedal the past three 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).
Going abruptly from massive punch spiking to effectively removing the punch bowl could lead to a vicious decline 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). 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/NEM/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
The short term Wave C downcycle that began shortly after Thursday's open (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==) was doing a very short term Wave B up on Friday that will (HUI/XAU) probably peak early on Monday (NEM may have peaked on Friday, but could try to fill upside gaps at 43.65 and 44), as indicated by the NEM Lead Indicator and the very short term Elliott Wave count (see http://tradethecycles.blogspot.com/2007/01/session-went-much-as-expected.html).
After probably brief strength early on Monday severe weakness should set in, because it'll be Wave C of a short term Wave C, and, XAU Implied Volatility (see http://www.ivolatility.com/options.j?ticker=xau:&R=1&period=12&chart=2)portends severe weakness, because it collapsed dramatically in recent days relative to the XAU. XAU Implied Volatility has fallen -8.83%, from 31.470 on 1-17 to 28.690 on 1-19, versus the XAU rising +0.11% in those three sessions, so, the XAU wall of worry has collapsed by -8.72%, which points to severe weakness early next week.
The WMT Lead Indicator was a bearish -0.46% versus SPX (S & P 500) on Friday, and, 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 next week, which isn't surprising since HUI/NEM/XAU showed some strength for much of this week, aside from Thursday's severe decline.
The Fed took their foot off the pedal the past three 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).
Going abruptly from massive punch spiking to effectively removing the punch bowl could lead to a vicious decline 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). 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/NEM/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
9:48 AM
