.......Short Term HUI/XAU Versus NEM Elliott Wave Count
The fact that reliable lead indicator NEM is acting well (very short term Wave B made a higher cycle high early today), due to the fact that it probably (very likely because it hit it's primary multi year trendline) entered a 5-6 year Wave 3 Cyclical Bull Market on 10-4-06, see chart 8 at http://www.joefrocks.com/GoldStockCharts.html, is complicating things for timing HUI/XAU. Reliable lead indicator NEM is leading to the upside from a long term perspective by acting well, but, should still lead to the downside short term, which is why right now I'm not looking to go short/buy puts, but may be later in the session or tomorrow.
The NEM Lead Indicator is a bullish +0.68% versus the XAU right now, was a bullish +0.69% yesterday/on 2-7, and, was a modestly bullish +1.21% last W/E 2-2-07. On top of this the Fed infused a massive $19.50 Billion in credit today, which is large even for punch spiking Thursday, see http://www.newyorkfed.org/markets/omo/dmm/temp.cfm?SHOWMORE=TRUE. Also, since putting in what APPEARS to be a very short term Wave B cycle high yesterday at 140.97, closely approaching the upside gap at 141.09, the XAU did a sharp Elliott Wave ABC down up down downcycle that bottomed early today, 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=. The possibility of an upside surprise, in which the XAU fills it's upside gap at 141.09, has to be kept in mind.
The XAU is doing an intraday Elliott Wave 12345 up down up down up upcycle right now, and, it looks like it will peak below yesterday's likely very short term countertrend Wave B cycle high at 140.97, 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, even though at the moment I'm not looking to get my shorts on, I may be later in the session if the lead indicators are bearish.
The NEM Lead Indicator is too bullish right now/recently to go short right now, and, the non NEM dominated HUI has done a two day Elliott Wave down up down downcycle pattern since putting in a very short term Wave B cycle high just after Tuesday'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==, that bottomed early today, so, I'm waiting patiently.
The XAU has downside gaps at 136.10, and 132.09, and, NEM has downside gaps at 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 2-1 (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 10-12%? 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 2-1.
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, and indicates that HUI/XAU's Wave B probably peaked early on 2-1. 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 2-1, 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
The NEM Lead Indicator is a bullish +0.68% versus the XAU right now, was a bullish +0.69% yesterday/on 2-7, and, was a modestly bullish +1.21% last W/E 2-2-07. On top of this the Fed infused a massive $19.50 Billion in credit today, which is large even for punch spiking Thursday, see http://www.newyorkfed.org/markets/omo/dmm/temp.cfm?SHOWMORE=TRUE. Also, since putting in what APPEARS to be a very short term Wave B cycle high yesterday at 140.97, closely approaching the upside gap at 141.09, the XAU did a sharp Elliott Wave ABC down up down downcycle that bottomed early today, 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=. The possibility of an upside surprise, in which the XAU fills it's upside gap at 141.09, has to be kept in mind.
The XAU is doing an intraday Elliott Wave 12345 up down up down up upcycle right now, and, it looks like it will peak below yesterday's likely very short term countertrend Wave B cycle high at 140.97, 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, even though at the moment I'm not looking to get my shorts on, I may be later in the session if the lead indicators are bearish.
The NEM Lead Indicator is too bullish right now/recently to go short right now, and, the non NEM dominated HUI has done a two day Elliott Wave down up down downcycle pattern since putting in a very short term Wave B cycle high just after Tuesday'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==, that bottomed early today, so, I'm waiting patiently.
The XAU has downside gaps at 136.10, and 132.09, and, NEM has downside gaps at 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 2-1 (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 10-12%? 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 2-1.
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, and indicates that HUI/XAU's Wave B probably peaked early on 2-1. 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 2-1, 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
7:27 AM
