NEM Continues To Act Well And HUI/XAU's Wave B Is Peaking In Dramatic Rollover Mode
Reliable lead indicator NEM continues to act well, which makes sense, since it should be in a Wave 3 Cyclical Bull Market since 10-4-06, see chart 8 at http://www.joefrocks.com/GoldStockCharts.html. The question of how NEM only declines 14% or so versus HUI/XAU declining 35-40%+ in the next month or so is probably being answered. I suspect also that NEM's minor intermediate term downcycle since 12-8-06 will bottom well ahead of HUI/XAU's major downcycle since 12-5-06 (Cyclical Bear Market since 5-11-06).
HUI/XAU's Wave B since 1-10-07 is peaking in dramatic rollover mode (thanks to NEM that dominates the XAU (25% of that index) and is the largest component of HUI (probably 15-18% of HUI)) versus having appeared to peak on 2-1-07, which probably doesn't make much difference. HUI/XAU should decline 35-40%+ in the next month or so to their primary multi year Secular Bull Market trendlines, in effect since late 2000, see charts 7 and 9 at http://www.joefrocks.com/GoldStockCharts.html.
With a lot of help from yesterday's massive $19.50 Billion in Fed Credit HUI has spiked about +4.50% from early yesterday until 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==. The final large spike of the Wave B upcycle since 1-10-07 appears to have occurred. Large spikes tend to mark important cycle highs, so, the wait is probably over and the final Wave C decline of HUI/XAU's Cyclical Bear Market since 5-11-06 has probably begun.
Based on HUI/XAU's cycles (final Wave C decline), a very bearish one year NEM Lead Indicator (see http://finance.yahoo.com/q/ta?s=%5EXAU&t=1y&l=off&z=m&q=l&p=&a=&c=%5Ehui,nem), bearish I Watch data the past few weeks (see http://thomson.finance.lycos.com/lycos/iwatch/cgi-bin/iw_ticker?t=NEM&range=7&mgp=0&i=3&hdate=&x=7&y=5), very bearish COT data in recent weeks, and, an S & P 500 that's rolling over peaking (see http://finance.yahoo.com/q/ta?s=%5Espx&t=6m&l=off&z=l&q=c&p=&a=m26-12-9%2Cp12%2Cfs%2Cw14&c==), that should soon lead to massive program selling, the bottom should soon fall out of HUI/XAU in a big way.
The COT data in recent weeks points to a major decline in gold in the near future, since the savvy non contrarian gold Commercial Traders engaged in massive long liquidation last week/five session period ending 1-30-07 (-17.50% decrease in long position), see last data at http://www.cftc.gov/dea/options/deacmxsof.htm, and, they massively increased their short position in the five session period ending 1-23-07 (nearly 15% increase in short position).
I don't know what most of the gold writers are thinking, but they don't have your best interests in mind (they probably have their own best interests in mind or are so complacent/bullish it's pathetic). Good investors/traders have a healthy respect for what the market can do. The cocky/goofy bullishness of too many gold writers tends to indicate how competent they really are.
Gold has failed not only to exceed it's Wave 1 Cyclical Bull market cycle high that occurred at $730ish in May 2006, but, has also failed to exceed the Wave B cycle high at $676ish (if I remember correctly) that occurred shortly thereafter. How much brainpower does it take to realize that's bearish?
Also, gold's primary multi year trendline is at $470ish right now, so, most of those guys/girls don't understand basic technical analysis. Even if gold spiked to 700-800 soon (it won't) it would still make sense for long term investors to wait for gold to fall to it's PRIMARY trendline. The goofy gold writers get cocky/excited near peaks/cycle highs and more cautious near cycle lows, which is obviously BACKWARD.
The XAU has downside gaps at 141.91, 136.10, and 132.09, and, NEM has downside gaps at 45.81, 43.88, 43.06, 41.83, 41.09, and 40.83.
The COT (Commitments Of Traders) data is clearly intermediate term (weeks/months) bearish, because, the savvy non contrarian gold Commercial Traders traded aggressively net short in the five day period ending 1-30-07 (as they did the week before), while the clueless gold Speculators traded aggressively net long, see last data at http://www.cftc.gov/dea/options/deacmxsof.htm.
The massive long liquidation (long position shrank by 17.50%) by the gold Commercial Traders points to gold weakness this week, but, the significant short covering by the gold Commercial Traders points to some strength. The unusually large (> 10% increase) long trade by the gold Speculators points to some strength this week, but, the significant short covering by the gold Speculators points to weakness this week. HUI/NEM/XAU's short term Wave B upcycle from 1-10-07 to 2-1-07 has clearly broken down, see http://finance.yahoo.com/q/ta?s=%5EHUI&t=5d&l=off&z=l&q=b&p=&a=m26-12-9,p12,fs,w14&c=.
HUI/XAU probably entered the final Wave C decline of their Cyclical Bear Market since 5-11-06 early on 2-9 (see http://finance.yahoo.com/q/ta?s=%5EHUI&t=5d&l=on&z=l&q=c&p=&a=m26-12-9,p12,fs,w14&c=). Since NEM hit it's Secular Bull Market primary trendline on 10-4-06 (cycle low at 39.84, see chart 8 at http://www.joefrocks.com/GoldStockCharts.html), while HUI/XAU are in the final Wave C decline of the Cyclical Bear Market since 5-11-06 (see charts 2, 3, 7 and 9 at http://www.joefrocks.com/GoldStockCharts.html), NEM should dramatically outperform HUI/XAU the next few weeks, and, intraday changes in the NEM lead Indicator have become more important in assessing it's indications.
How does HUI fall 35-40% (XAU 30-35%) the next few weeks while NEM only falls 14%? 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 2-9.
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. 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."
HUI/XAU probably entered a vicious Wave C decline (a few weeks) early on 2-9, 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
HUI/XAU's Wave B since 1-10-07 is peaking in dramatic rollover mode (thanks to NEM that dominates the XAU (25% of that index) and is the largest component of HUI (probably 15-18% of HUI)) versus having appeared to peak on 2-1-07, which probably doesn't make much difference. HUI/XAU should decline 35-40%+ in the next month or so to their primary multi year Secular Bull Market trendlines, in effect since late 2000, see charts 7 and 9 at http://www.joefrocks.com/GoldStockCharts.html.
With a lot of help from yesterday's massive $19.50 Billion in Fed Credit HUI has spiked about +4.50% from early yesterday until 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==. The final large spike of the Wave B upcycle since 1-10-07 appears to have occurred. Large spikes tend to mark important cycle highs, so, the wait is probably over and the final Wave C decline of HUI/XAU's Cyclical Bear Market since 5-11-06 has probably begun.
Based on HUI/XAU's cycles (final Wave C decline), a very bearish one year NEM Lead Indicator (see http://finance.yahoo.com/q/ta?s=%5EXAU&t=1y&l=off&z=m&q=l&p=&a=&c=%5Ehui,nem), bearish I Watch data the past few weeks (see http://thomson.finance.lycos.com/lycos/iwatch/cgi-bin/iw_ticker?t=NEM&range=7&mgp=0&i=3&hdate=&x=7&y=5), very bearish COT data in recent weeks, and, an S & P 500 that's rolling over peaking (see http://finance.yahoo.com/q/ta?s=%5Espx&t=6m&l=off&z=l&q=c&p=&a=m26-12-9%2Cp12%2Cfs%2Cw14&c==), that should soon lead to massive program selling, the bottom should soon fall out of HUI/XAU in a big way.
The COT data in recent weeks points to a major decline in gold in the near future, since the savvy non contrarian gold Commercial Traders engaged in massive long liquidation last week/five session period ending 1-30-07 (-17.50% decrease in long position), see last data at http://www.cftc.gov/dea/options/deacmxsof.htm, and, they massively increased their short position in the five session period ending 1-23-07 (nearly 15% increase in short position).
I don't know what most of the gold writers are thinking, but they don't have your best interests in mind (they probably have their own best interests in mind or are so complacent/bullish it's pathetic). Good investors/traders have a healthy respect for what the market can do. The cocky/goofy bullishness of too many gold writers tends to indicate how competent they really are.
Gold has failed not only to exceed it's Wave 1 Cyclical Bull market cycle high that occurred at $730ish in May 2006, but, has also failed to exceed the Wave B cycle high at $676ish (if I remember correctly) that occurred shortly thereafter. How much brainpower does it take to realize that's bearish?
Also, gold's primary multi year trendline is at $470ish right now, so, most of those guys/girls don't understand basic technical analysis. Even if gold spiked to 700-800 soon (it won't) it would still make sense for long term investors to wait for gold to fall to it's PRIMARY trendline. The goofy gold writers get cocky/excited near peaks/cycle highs and more cautious near cycle lows, which is obviously BACKWARD.
The XAU has downside gaps at 141.91, 136.10, and 132.09, and, NEM has downside gaps at 45.81, 43.88, 43.06, 41.83, 41.09, and 40.83.
The COT (Commitments Of Traders) data is clearly intermediate term (weeks/months) bearish, because, the savvy non contrarian gold Commercial Traders traded aggressively net short in the five day period ending 1-30-07 (as they did the week before), while the clueless gold Speculators traded aggressively net long, see last data at http://www.cftc.gov/dea/options/deacmxsof.htm.
The massive long liquidation (long position shrank by 17.50%) by the gold Commercial Traders points to gold weakness this week, but, the significant short covering by the gold Commercial Traders points to some strength. The unusually large (> 10% increase) long trade by the gold Speculators points to some strength this week, but, the significant short covering by the gold Speculators points to weakness this week. HUI/NEM/XAU's short term Wave B upcycle from 1-10-07 to 2-1-07 has clearly broken down, see http://finance.yahoo.com/q/ta?s=%5EHUI&t=5d&l=off&z=l&q=b&p=&a=m26-12-9,p12,fs,w14&c=.
HUI/XAU probably entered the final Wave C decline of their Cyclical Bear Market since 5-11-06 early on 2-9 (see http://finance.yahoo.com/q/ta?s=%5EHUI&t=5d&l=on&z=l&q=c&p=&a=m26-12-9,p12,fs,w14&c=). Since NEM hit it's Secular Bull Market primary trendline on 10-4-06 (cycle low at 39.84, see chart 8 at http://www.joefrocks.com/GoldStockCharts.html), while HUI/XAU are in the final Wave C decline of the Cyclical Bear Market since 5-11-06 (see charts 2, 3, 7 and 9 at http://www.joefrocks.com/GoldStockCharts.html), NEM should dramatically outperform HUI/XAU the next few weeks, and, intraday changes in the NEM lead Indicator have become more important in assessing it's indications.
How does HUI fall 35-40% (XAU 30-35%) the next few weeks while NEM only falls 14%? 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 2-9.
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. 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."
HUI/XAU probably entered a vicious Wave C decline (a few weeks) early on 2-9, 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
7:13 AM
