Reliable Lead Indicator NEM Failed To Fill Yesterday's Upside Gap At 46.26
Reliable lead indicator NEM tried (early today) and failed to fill yesterday's upside gap (bearish breakaway gap to the downside) at 46.26, with a cycle high at 46.06, 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==.
Downside gap filling action is likely to occur today, in which NEM fills 45.34 and the XAU probably fills 136.10. NEM should bottom well below 2-12's very short term Wave A cycle low at 45.09 per Elliott Wave (very short term Wave B double top at 46.56 last week after the Wave B cycle high at 46.63 on 2-9-07). Watch NEM's downside gap at 43.88. If NEM closely approaches 43.88 it'll probably fill it, but, I doubt 43.88 gets filled until later/after the expected bounce (once 45.34 and 136.10 get filled). I'm more confident today that the XAU will fill 136.10, shortly after which I'll LOOK to (probably will but may not) close out my NEM short/long XAU puts positions, with an eye to get my shorts back on a day or two later (using Elliott Wave patterns, lead indicators).
XAU Implied Volatility FELL yesterday to 24.975 from 25.215 on 2-16, despite a -1.77% decline in the XAU, which points to potentially/likely severe XAU weakness today, because of the sharp rise in complacency.
The XAU has downside gaps at 136.10, and 132.09, and, upside gaps at 144.64 and 143.12, and, NEM has downside gaps at 45.34, 43.88, 43.06, 41.83, 41.09, and 40.83, and, upside gaps at 46.51 and 46.26. 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 yesterday, and, the Walmart (WMT) Lead Indicator was a "super" bullish +3.39% versus the S & P 500 (SPX) yesterday, which obviously supports the bounce scenario. Lycos Thomson I Watch was relatively bullish yesterday for NEM (http://thomson.finance.lycos.com/lycos/iwatch/cgi-bin/iw_ticker?ticker=nem) and for GFI (http://thomson.finance.lycos.com/lycos/iwatch/cgi-bin/iw_ticker?ticker=gfi), with some late session sell interest coming in that supports the downside gap filling action scenario. The story yesterday was the huge sell interest for Walmart (WMT), see http://thomson.finance.lycos.com/lycos/iwatch/cgi-bin/iw_ticker?ticker=wmt.
Given NEM and the XAU's bearish breakaway gaps to the downside the prior two sessions one has to keep in mind the possibility of the bottom falling out now also, but, the lead indicators and Lycos Thomson I Watch indicate that probably won't happen yet. Also, the savvy gold Commercial Traders made a significant long trade in the 5 session period ending 2-13-07 (see last data at http://www.cftc.gov/dea/options/deacmxsof.htm), and, the Fed has been spiking the punch (http://www.newyorkfed.org/markets/omo/dmm/temp.cfm?SHOWMORE=TRUE).
HUI/XAU's final major Wave C decline of the Wave 2 Cyclical Bear market (since 5-11-06) began on Wednesday 2-14-07 for the XAU and on Thursday 2-15-07 for HUI, 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==. See chart 1 for HUI's Elliott Wave count as of 2-9-07, see http://www.joefrocks.com/GoldStockCharts.html. Reliable lead indicator NEM entered Wave C of it's minor intermediate term downcycle since 12-8-06 on 2-9-07.
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 occurred on 2-15-07. So, the final Wave C decline of HUI/XAU's Wave 2 Cyclical Bear Market since 5-11-06 has 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 begun, and one has to be very cautious/bearish 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
Downside gap filling action is likely to occur today, in which NEM fills 45.34 and the XAU probably fills 136.10. NEM should bottom well below 2-12's very short term Wave A cycle low at 45.09 per Elliott Wave (very short term Wave B double top at 46.56 last week after the Wave B cycle high at 46.63 on 2-9-07). Watch NEM's downside gap at 43.88. If NEM closely approaches 43.88 it'll probably fill it, but, I doubt 43.88 gets filled until later/after the expected bounce (once 45.34 and 136.10 get filled). I'm more confident today that the XAU will fill 136.10, shortly after which I'll LOOK to (probably will but may not) close out my NEM short/long XAU puts positions, with an eye to get my shorts back on a day or two later (using Elliott Wave patterns, lead indicators).
XAU Implied Volatility FELL yesterday to 24.975 from 25.215 on 2-16, despite a -1.77% decline in the XAU, which points to potentially/likely severe XAU weakness today, because of the sharp rise in complacency.
The XAU has downside gaps at 136.10, and 132.09, and, upside gaps at 144.64 and 143.12, and, NEM has downside gaps at 45.34, 43.88, 43.06, 41.83, 41.09, and 40.83, and, upside gaps at 46.51 and 46.26. 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 yesterday, and, the Walmart (WMT) Lead Indicator was a "super" bullish +3.39% versus the S & P 500 (SPX) yesterday, which obviously supports the bounce scenario. Lycos Thomson I Watch was relatively bullish yesterday for NEM (http://thomson.finance.lycos.com/lycos/iwatch/cgi-bin/iw_ticker?ticker=nem) and for GFI (http://thomson.finance.lycos.com/lycos/iwatch/cgi-bin/iw_ticker?ticker=gfi), with some late session sell interest coming in that supports the downside gap filling action scenario. The story yesterday was the huge sell interest for Walmart (WMT), see http://thomson.finance.lycos.com/lycos/iwatch/cgi-bin/iw_ticker?ticker=wmt.
Given NEM and the XAU's bearish breakaway gaps to the downside the prior two sessions one has to keep in mind the possibility of the bottom falling out now also, but, the lead indicators and Lycos Thomson I Watch indicate that probably won't happen yet. Also, the savvy gold Commercial Traders made a significant long trade in the 5 session period ending 2-13-07 (see last data at http://www.cftc.gov/dea/options/deacmxsof.htm), and, the Fed has been spiking the punch (http://www.newyorkfed.org/markets/omo/dmm/temp.cfm?SHOWMORE=TRUE).
HUI/XAU's final major Wave C decline of the Wave 2 Cyclical Bear market (since 5-11-06) began on Wednesday 2-14-07 for the XAU and on Thursday 2-15-07 for HUI, 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==. See chart 1 for HUI's Elliott Wave count as of 2-9-07, see http://www.joefrocks.com/GoldStockCharts.html. Reliable lead indicator NEM entered Wave C of it's minor intermediate term downcycle since 12-8-06 on 2-9-07.
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 occurred on 2-15-07. So, the final Wave C decline of HUI/XAU's Wave 2 Cyclical Bear Market since 5-11-06 has 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 begun, and one has to be very cautious/bearish 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
7:15 AM
