HUI/XAU Are in A Very Short Term Wave A Down
HUI/XAU are probably in a very short term Wave A downcycle, that's the start of the final Wave C down of their Cyclical Bear Market since 5-11-06 (see chart 1 at http://www.joefrocks.com/GoldStockCharts.html), see http://finance.yahoo.com/q/ta?s=%5Exau&t=5d&l=off&z=l&q=c&p=&a=m26-12-9%2Cp12%2Cfs%2Cw14&c==.
Reliable lead indicator NEM's countertrend Wave B (began 1-10-07) peaked last Friday 2-9-07 at 46.63, see http://finance.yahoo.com/q/ta?s=nem&t=6m&l=off&z=l&q=c&p=&a=m26-12-9%2Cp12%2Cfs%2Cw14&c=. NEM's very short term Wave A down bottomed at 45.09 on Monday 2-12, and, NEM's very short term Wave B peaked with a double top on Wednesday/Thursday at 46.56, which means that NEM entered a very short term Wave C down today, in which NEM should bottom below Monday's Wave A cycle low at 45.09.
It looks like NEM and the XAU will fill downside gaps at 45.34 and at 140.07 early next week. Early on Tuesday HUI/NEM/XAU will probably experience weakness followed by strength, since the NEM Lead Indicator was a bullish +0.50% versus the XAU today and the WMT was a bullish +0.34% versus the S & P 500 today, but turned bearish at session's end, which points to early weakness, see http://finance.yahoo.com/q/ta?s=%5EHUI&t=1d&l=off&z=l&q=l&p=&a=m26-12-9,m26-12-9,p12,m26-12-9,p12,fs,m26-12-9,p12,fs,w14&c=wmt,nem,%5Exau,%5EGSPC.
NEM and the XAU put in bearish double tops on Wednesday and Thursday, and, reliable lead indicator NEM has been in a downtrend since Friday 2-9-07, while the XAU has been in a downtrend since Wednesday (HUI since Thursday), see http://finance.yahoo.com/q/ta?s=%5Exau&t=5d&l=off&z=l&q=c&p=&a=m26-12-9%2Cp12%2Cfs%2Cw14&c=.
It looks like my entry point (Tuesday 2-13) for shorting NEM/buying XAU puts was very close to the countertrend Wave B cycle highs, they occurred early the next day for the XAU and on Friday 2-9-07 for NEM. The lead indicators (NEM, WMT) were very important in keeping me in cash while the Wave B topping process occurred.
HUI/XAU have probably entered the final major Wave C decline of their Wave 2 Cyclical Bear Market (since 5-11-06, new chart 1 at http://www.joefrocks.com/GoldStockCharts.html shows HUI as of last Friday), and, very severe weakness is likely to soon set in for HUI/XAU. Reliable lead indicator NEM entered Wave C of it's minor intermediate term downcycle since 12-8-06 on Friday 2-9-07.
The latest COT data for the 5 day period ending 2-13-07, similar to last week's data, is extremely bearish on an intermediate term cycle basis (weeks/months), but points to some strength in gold next week, see http://www.cftc.gov/dea/options/deacmxsof.htm, since the savvy non contrarian gold Commercial Traders aggressively shorted gold, but also did a significant long trade (points to some strength), that was much smaller than the short selling they engaged in.
The savvy non contrarian gold Commercial Traders engaged in massive long liquidation in the five session period ending 1-30-07 (-17.50% decrease in long position), and, they massively increased their short position in the five session period ending 1-23-07 (nearly 15% increase in short position). The COT data obviously points to a major decline in gold in the near future. The clueless gold Speculators have been trading aggressively net long in recent weeks, which is another very bearish sign. They almost always do the opposite of what the savvy gold Commercial Traders do.
A picture sometimes is worth much more than any number of words can convey. In the latest annotated HUI chart, see chart one at http://www.joefrocks.com/GoldStockCharts.html, one should make the following highly important observations:
1. HUI has a succession of lower cycle highs since putting in a Wave 1 Cyclical Bull Market cycle high on 5-11-06 a bit above 401. They are Wave B of the Wave 2 Cyclical Bear Market, Wave B of Wave C of the Wave 2 Cyclical Bear Market, and, Wave B of Wave C of Wave C (Wave C of Wave C began on 12-5-06) of the Wave 2 Cyclical Bear Market, that appears to have occurred. So, the final Wave C decline of HUI/XAU's Wave 2 Cyclical Bear Market since 5-11-06 has probably begun.
2. Also note that HUI remains way above it's primary Secular Bull Market trendline in effect since November 2000, currently at 200ish. HUI closed at 340.06 on 2-9-07. So, HUI is 140/340 = 41% above it's primary trendline at 2-9's close. Combine that with a succession of lower cycle highs since 5-11-06's Wave 1 Cyclical Bull Market cycle high and an Elliott Wave count that indicates the final Wave C decline of HUI/XAU's Wave 2 Cyclical Bear Market has probably begun, and one has to be very cautious/bearish now.
Amazingly (???, actually they tend to be terrible) most gold writers are bullish now, according to Mark Hulbert, and, from skimming some of the gold writers work.
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
Reliable lead indicator NEM's countertrend Wave B (began 1-10-07) peaked last Friday 2-9-07 at 46.63, see http://finance.yahoo.com/q/ta?s=nem&t=6m&l=off&z=l&q=c&p=&a=m26-12-9%2Cp12%2Cfs%2Cw14&c=. NEM's very short term Wave A down bottomed at 45.09 on Monday 2-12, and, NEM's very short term Wave B peaked with a double top on Wednesday/Thursday at 46.56, which means that NEM entered a very short term Wave C down today, in which NEM should bottom below Monday's Wave A cycle low at 45.09.
It looks like NEM and the XAU will fill downside gaps at 45.34 and at 140.07 early next week. Early on Tuesday HUI/NEM/XAU will probably experience weakness followed by strength, since the NEM Lead Indicator was a bullish +0.50% versus the XAU today and the WMT was a bullish +0.34% versus the S & P 500 today, but turned bearish at session's end, which points to early weakness, see http://finance.yahoo.com/q/ta?s=%5EHUI&t=1d&l=off&z=l&q=l&p=&a=m26-12-9,m26-12-9,p12,m26-12-9,p12,fs,m26-12-9,p12,fs,w14&c=wmt,nem,%5Exau,%5EGSPC.
NEM and the XAU put in bearish double tops on Wednesday and Thursday, and, reliable lead indicator NEM has been in a downtrend since Friday 2-9-07, while the XAU has been in a downtrend since Wednesday (HUI since Thursday), see http://finance.yahoo.com/q/ta?s=%5Exau&t=5d&l=off&z=l&q=c&p=&a=m26-12-9%2Cp12%2Cfs%2Cw14&c=.
It looks like my entry point (Tuesday 2-13) for shorting NEM/buying XAU puts was very close to the countertrend Wave B cycle highs, they occurred early the next day for the XAU and on Friday 2-9-07 for NEM. The lead indicators (NEM, WMT) were very important in keeping me in cash while the Wave B topping process occurred.
HUI/XAU have probably entered the final major Wave C decline of their Wave 2 Cyclical Bear Market (since 5-11-06, new chart 1 at http://www.joefrocks.com/GoldStockCharts.html shows HUI as of last Friday), and, very severe weakness is likely to soon set in for HUI/XAU. Reliable lead indicator NEM entered Wave C of it's minor intermediate term downcycle since 12-8-06 on Friday 2-9-07.
The latest COT data for the 5 day period ending 2-13-07, similar to last week's data, is extremely bearish on an intermediate term cycle basis (weeks/months), but points to some strength in gold next week, see http://www.cftc.gov/dea/options/deacmxsof.htm, since the savvy non contrarian gold Commercial Traders aggressively shorted gold, but also did a significant long trade (points to some strength), that was much smaller than the short selling they engaged in.
The savvy non contrarian gold Commercial Traders engaged in massive long liquidation in the five session period ending 1-30-07 (-17.50% decrease in long position), and, they massively increased their short position in the five session period ending 1-23-07 (nearly 15% increase in short position). The COT data obviously points to a major decline in gold in the near future. The clueless gold Speculators have been trading aggressively net long in recent weeks, which is another very bearish sign. They almost always do the opposite of what the savvy gold Commercial Traders do.
A picture sometimes is worth much more than any number of words can convey. In the latest annotated HUI chart, see chart one at http://www.joefrocks.com/GoldStockCharts.html, one should make the following highly important observations:
1. HUI has a succession of lower cycle highs since putting in a Wave 1 Cyclical Bull Market cycle high on 5-11-06 a bit above 401. They are Wave B of the Wave 2 Cyclical Bear Market, Wave B of Wave C of the Wave 2 Cyclical Bear Market, and, Wave B of Wave C of Wave C (Wave C of Wave C began on 12-5-06) of the Wave 2 Cyclical Bear Market, that appears to have occurred. So, the final Wave C decline of HUI/XAU's Wave 2 Cyclical Bear Market since 5-11-06 has probably begun.
2. Also note that HUI remains way above it's primary Secular Bull Market trendline in effect since November 2000, currently at 200ish. HUI closed at 340.06 on 2-9-07. So, HUI is 140/340 = 41% above it's primary trendline at 2-9's close. Combine that with a succession of lower cycle highs since 5-11-06's Wave 1 Cyclical Bull Market cycle high and an Elliott Wave count that indicates the final Wave C decline of HUI/XAU's Wave 2 Cyclical Bear Market has probably begun, and one has to be very cautious/bearish now.
Amazingly (???, actually they tend to be terrible) most gold writers are bullish now, according to Mark Hulbert, and, from skimming some of the gold writers work.
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
2:12 PM
