Relentless Computerized Program Selling, Like The Terminator
HUI at it's cycle low was down -8.84% 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 Dow Jones Industrials Average was down over 500 points at one point, and, may have triggered a program trading circuit breaker, if it's still 500 points where the computers get shut off.
I couldn't help but wonder about and feel sympathy for the longs today. Today was a great example of the power/relentless nature of program trading, which accounts for about 70% of the dollar volume on the NYSE. This is why Fed Credit, which fuels program trading, is very important.
Note that today's HUI/NEM/XAU massacre coincided with S & P 500 (SPX) weakness due to program trading, 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. SPX strength in recent weeks led to HUI/NEM/XAU upside surprise due to computerized program buying fueled by massive Fed Credit.
NEM/XAU made bearish large likely breakaway gaps to the downside at today's open (HUI makes fewer gaps so I don't usually track them), 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==. So, NEM now has an upside gap at 47.06 and the XAU has an upside gap at 147.75.
Today was probably an important technical breakdown for HUI/XAU, and, to a lesser extent for NEM, which should be in a Wave 3 Cyclical Bull Market since 10-4-06, see chart 8 at http://www.joefrocks.com/GoldStockCharts.html.
The XAU filled it's downside gaps at 145.82 and 136.10 today. NEM filled it's downside gaps at 45.34 and 43.88 today. The XAU has a downside gap at 132.09, and, NEM has downside gaps at 43.06, 41.83, 41.09, and 40.83. The XAU's downside gap at 132.09 and NEM's downside gap at 43.06 will probably get filled tomorrow, then there MIGHT BE a meaningful Wave B type of rebound for a session or two. Let's see what the market looks like tomorrow.
Cycle trendlines/channels used in concert with Elliott Wave patterns and gaps is the basis/crux of "Trade the Cycles."
The NEM Lead Indicator was a very bullish +0.99% versus the XAU today, and, became more bullish toward session's end (http://finance.yahoo.com/q/ta?s=%5EXAU&t=1d&l=off&z=l&q=l&p=&a=&c=%5Ehui,nem), which points to some probably short lived strength early tomorrow. Today's large bearish NEM/XAU breakaway gaps to the downside at the open point to more downside tomorrow.
The WMT Lead Indicator was a slightly bearish -0.12% versus the S & P 500 today, but, became much more bearish toward session's end, see http://finance.yahoo.com/q/ta?s=%5EHUI&t=1d&l=off&z=l&q=l&p=&a=m26-12-9,p12,fs,w14&c=wmt,%5EGSPC.
There's a good chance that a vicious decline has begun, and, that by week's end NEM/XAU will fill downside gaps at 45.34 (filled), 43.88 (filled), 43.06 for NEM, and, at 136.10 (filled), and 132.09 for the XAU. So, I'll probably close out my NEM short/long XAU puts positions by week's end. HUI/XAU might fall 15-20%+ this week.
China crashed yesterday, falling more than 9% I heard. Alan Greenspan warned that a recession might occur this year. The durable goods data was very weak. There were many catalysts for today's "debacle," but, the market, including HUI/NEM/XAU, was simply due to be drubbed in a big way.
When the gold/silver (true for any sector or major index) stock market is at oversold/overbought extremes or is simply exhibiting extreme behavior, as it probably will this week, Williams %R, Lycos Thomson I Watch, and the NEM/WMT Lead Indicators become very important, along with Elliott Wave patterns and cycle trendlines/channels of course. Cycle channels become highly useful at extremes.
Obviously, it's now very likely that 2-23-07's HUI/XAU cycle highs (2-22-07 for reliable lead indicator NEM) are minor intermediate term cycle highs for the cycle that began 1-10-07.
Fed Credit was a large $8 Billion today, was a large $9.50 Billion yesterday, was an average $5.50 Billion on Friday 2-23 (http://www.newyorkfed.org/markets/omo/dmm/temp.cfm?SHOWMORE=TRUE), after a very massive $23.75 Billion on Thursday, and, the weekly Fed Credit data has revealed sharp increases in 3 of the past 4 weeks, see http://www.federalreserve.gov/releases/h41/. The Rollover Barometer is at "unlikely" however because of today's likely breakdown, which means one should/might consider selling short/buying puts now.
The average daily Fed Credit (Repos) in the 5 day period ending 2-21-07 was $7.04 Billion. Fed Credit the past 4 days has already greatly exceeded the 5 day period ending 2-21-07's total of a little more than $35 Billion. Based on the NEM Lead Indicator, which has been very bearish the past two sessions, and Fed Credit, it looks like there will be a substantial decline this week followed by a very sharp rebound late this week or early next week.
Annotated chart 1 at http://www.joefrocks.com/GoldStockCharts.html shows HUI as of 2-9-07 with Elliott Wave count. HUI/XAU are in a major Wave C decline of their Wave 2 Cyclical Bear Market since 5-11-06 (Secular Bull Market since late 2000).
So, HUI/XAU are in a very bearish major Wave C decline, the one year NEM Lead Indicator is very bearish (http://finance.yahoo.com/q/ta?s=%5EXAU&t=1y&l=off&z=m&q=l&p=&a=&c=%5Ehui,nem), the COT (Commitments Of Traders) data has been very bearish the past 6-7 weeks, Lycos Thomson I Watch has been bearish for most of the past 3 weeks (http://thomson.finance.lycos.com/lycos/iwatch/cgi-bin/iw_ticker?t=NEM&range=0&mgp=0&i=2&hdate=&x=9&y=9), the XAU has a bearish declining peaks chart pattern going back to 5-11-06 (HUI's is only slightly better), HUI/XAU are 40-45%+ above their primary Secular Bull Market trendlines, see charts 7 and 9 at http://www.joefrocks.com/GoldStockCharts.html.
Basic technical analysis alone indicates a clearly bearish picture. Would you buy a stock with a declining peaks chart pattern going back over 9 months??? Yet, most gold writers are bullish??? Truth really is stranger than fiction.
The "e mail indicator" is going off lately, with people questioning my system/work. Always happens near important cycle highs.
In the next few months HUI/XAU should decline 40-45%+ to their primary multi year Secular Bull Market trendlines in effect since November/October 2000, see charts 7 and 9 at http://www.joefrocks.com/GoldStockCharts.html. HUI's target range is 200-220 (220 if the primary trendline turns up) and the XAU's is 85-90.
See the last COT data at http://www.cftc.gov/dea/options/deacmxsof.htm. The savvy gold Commercial Traders traded net short, adding to their short position, though not nearly as much as in previous weeks (been going massively short), and, they also traded a respectable long position for the third straight week, benefitting from last week's gold strength.
HUI put in a near perfect slightly higher bearish double top (assuming HUI has peaked) on Friday with the 12-5-06 minor intermediate term cycle high, so, HUI's Elliott Wave count gets reset to Wave A along with NEM's.
HUI and the XAU probably peaked Friday. The 1 day lag between when NEM and HUI/XAU peaked is a sign that an important cycle high occurred.
In the new HUI chart I did the Elliott Wave count indicated that an important peak was imminent, see chart 2 at http://www.joefrocks.com/GoldStockCharts.html.
Massive index fund program trader buying (fueled by Fed Credit) has led to much of the strength in recent weeks (upcycle began 1-10-07 and probably peaked on 2-23-07), propping up SPX/HUI/NEM/XAU (led to a great deal of deceptive rollover action).
HUI/XAU are in Wave C of Wave C of the Wave 2 Cyclical Bear Market since 5-11-06. In the next few months 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 Friday 2-23 for HUI (12-5-06 for the XAU), when minor intermediate term cycle highs occurred, see charts three and four 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 5-6 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
I couldn't help but wonder about and feel sympathy for the longs today. Today was a great example of the power/relentless nature of program trading, which accounts for about 70% of the dollar volume on the NYSE. This is why Fed Credit, which fuels program trading, is very important.
Note that today's HUI/NEM/XAU massacre coincided with S & P 500 (SPX) weakness due to program trading, 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. SPX strength in recent weeks led to HUI/NEM/XAU upside surprise due to computerized program buying fueled by massive Fed Credit.
NEM/XAU made bearish large likely breakaway gaps to the downside at today's open (HUI makes fewer gaps so I don't usually track them), 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==. So, NEM now has an upside gap at 47.06 and the XAU has an upside gap at 147.75.
Today was probably an important technical breakdown for HUI/XAU, and, to a lesser extent for NEM, which should be in a Wave 3 Cyclical Bull Market since 10-4-06, see chart 8 at http://www.joefrocks.com/GoldStockCharts.html.
The XAU filled it's downside gaps at 145.82 and 136.10 today. NEM filled it's downside gaps at 45.34 and 43.88 today. The XAU has a downside gap at 132.09, and, NEM has downside gaps at 43.06, 41.83, 41.09, and 40.83. The XAU's downside gap at 132.09 and NEM's downside gap at 43.06 will probably get filled tomorrow, then there MIGHT BE a meaningful Wave B type of rebound for a session or two. Let's see what the market looks like tomorrow.
Cycle trendlines/channels used in concert with Elliott Wave patterns and gaps is the basis/crux of "Trade the Cycles."
The NEM Lead Indicator was a very bullish +0.99% versus the XAU today, and, became more bullish toward session's end (http://finance.yahoo.com/q/ta?s=%5EXAU&t=1d&l=off&z=l&q=l&p=&a=&c=%5Ehui,nem), which points to some probably short lived strength early tomorrow. Today's large bearish NEM/XAU breakaway gaps to the downside at the open point to more downside tomorrow.
The WMT Lead Indicator was a slightly bearish -0.12% versus the S & P 500 today, but, became much more bearish toward session's end, see http://finance.yahoo.com/q/ta?s=%5EHUI&t=1d&l=off&z=l&q=l&p=&a=m26-12-9,p12,fs,w14&c=wmt,%5EGSPC.
There's a good chance that a vicious decline has begun, and, that by week's end NEM/XAU will fill downside gaps at 45.34 (filled), 43.88 (filled), 43.06 for NEM, and, at 136.10 (filled), and 132.09 for the XAU. So, I'll probably close out my NEM short/long XAU puts positions by week's end. HUI/XAU might fall 15-20%+ this week.
China crashed yesterday, falling more than 9% I heard. Alan Greenspan warned that a recession might occur this year. The durable goods data was very weak. There were many catalysts for today's "debacle," but, the market, including HUI/NEM/XAU, was simply due to be drubbed in a big way.
When the gold/silver (true for any sector or major index) stock market is at oversold/overbought extremes or is simply exhibiting extreme behavior, as it probably will this week, Williams %R, Lycos Thomson I Watch, and the NEM/WMT Lead Indicators become very important, along with Elliott Wave patterns and cycle trendlines/channels of course. Cycle channels become highly useful at extremes.
Obviously, it's now very likely that 2-23-07's HUI/XAU cycle highs (2-22-07 for reliable lead indicator NEM) are minor intermediate term cycle highs for the cycle that began 1-10-07.
Fed Credit was a large $8 Billion today, was a large $9.50 Billion yesterday, was an average $5.50 Billion on Friday 2-23 (http://www.newyorkfed.org/markets/omo/dmm/temp.cfm?SHOWMORE=TRUE), after a very massive $23.75 Billion on Thursday, and, the weekly Fed Credit data has revealed sharp increases in 3 of the past 4 weeks, see http://www.federalreserve.gov/releases/h41/. The Rollover Barometer is at "unlikely" however because of today's likely breakdown, which means one should/might consider selling short/buying puts now.
The average daily Fed Credit (Repos) in the 5 day period ending 2-21-07 was $7.04 Billion. Fed Credit the past 4 days has already greatly exceeded the 5 day period ending 2-21-07's total of a little more than $35 Billion. Based on the NEM Lead Indicator, which has been very bearish the past two sessions, and Fed Credit, it looks like there will be a substantial decline this week followed by a very sharp rebound late this week or early next week.
Annotated chart 1 at http://www.joefrocks.com/GoldStockCharts.html shows HUI as of 2-9-07 with Elliott Wave count. HUI/XAU are in a major Wave C decline of their Wave 2 Cyclical Bear Market since 5-11-06 (Secular Bull Market since late 2000).
So, HUI/XAU are in a very bearish major Wave C decline, the one year NEM Lead Indicator is very bearish (http://finance.yahoo.com/q/ta?s=%5EXAU&t=1y&l=off&z=m&q=l&p=&a=&c=%5Ehui,nem), the COT (Commitments Of Traders) data has been very bearish the past 6-7 weeks, Lycos Thomson I Watch has been bearish for most of the past 3 weeks (http://thomson.finance.lycos.com/lycos/iwatch/cgi-bin/iw_ticker?t=NEM&range=0&mgp=0&i=2&hdate=&x=9&y=9), the XAU has a bearish declining peaks chart pattern going back to 5-11-06 (HUI's is only slightly better), HUI/XAU are 40-45%+ above their primary Secular Bull Market trendlines, see charts 7 and 9 at http://www.joefrocks.com/GoldStockCharts.html.
Basic technical analysis alone indicates a clearly bearish picture. Would you buy a stock with a declining peaks chart pattern going back over 9 months??? Yet, most gold writers are bullish??? Truth really is stranger than fiction.
The "e mail indicator" is going off lately, with people questioning my system/work. Always happens near important cycle highs.
In the next few months HUI/XAU should decline 40-45%+ to their primary multi year Secular Bull Market trendlines in effect since November/October 2000, see charts 7 and 9 at http://www.joefrocks.com/GoldStockCharts.html. HUI's target range is 200-220 (220 if the primary trendline turns up) and the XAU's is 85-90.
See the last COT data at http://www.cftc.gov/dea/options/deacmxsof.htm. The savvy gold Commercial Traders traded net short, adding to their short position, though not nearly as much as in previous weeks (been going massively short), and, they also traded a respectable long position for the third straight week, benefitting from last week's gold strength.
HUI put in a near perfect slightly higher bearish double top (assuming HUI has peaked) on Friday with the 12-5-06 minor intermediate term cycle high, so, HUI's Elliott Wave count gets reset to Wave A along with NEM's.
HUI and the XAU probably peaked Friday. The 1 day lag between when NEM and HUI/XAU peaked is a sign that an important cycle high occurred.
In the new HUI chart I did the Elliott Wave count indicated that an important peak was imminent, see chart 2 at http://www.joefrocks.com/GoldStockCharts.html.
Massive index fund program trader buying (fueled by Fed Credit) has led to much of the strength in recent weeks (upcycle began 1-10-07 and probably peaked on 2-23-07), propping up SPX/HUI/NEM/XAU (led to a great deal of deceptive rollover action).
HUI/XAU are in Wave C of Wave C of the Wave 2 Cyclical Bear Market since 5-11-06. In the next few months 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 Friday 2-23 for HUI (12-5-06 for the XAU), when minor intermediate term cycle highs occurred, see charts three and four 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 5-6 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
1:15 PM
