Significant/Severe HUI/NEM/XAU Weakness Is Likely Early On Monday, Followed By A Very Short Term Countertrend Wave B Upcycle
Significant/severe HUI/NEM/XAU weakness is likely early on Monday, followed by a very short term countertrend Wave B upcycle for a day or two, as discussed in the previous post, see http://tradethecycles.blogspot.com/2007/02/huinemxau-very-short-term-elliott-wave.html.
The fact that HUI couldn't "get off it's behind" on Friday (following a sharp decline at the open, normally a significant rebound will occur after such a decline) is a sign that it will be weak early on Monday. It looks like it needs to do an intraday Wave C, because it failed to exceed the early spike's cycle high (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), which points to an intraday Wave B being in effect at session's end, so, it looks like HUI/NEM/XAU will be weak early on Monday (will do an intraday Wave C), and, NEM may fill 43.88 and 43.06, and, the XAU may fill 136.10, before a very short term Wave B upcycle occurs for a day or two.
XAU Implied Volatility points to some weakness on Monday, since it rose +0.86% to 28.020 on 2-2 versus 27.780 on 2-1, while the XAU fell -1.57%, which is a +0.71% rise in complacency (+0.86% + -1.57% = -0.71% decline in the XAU wall of worry = +0.71% rise in complacency).
Signs pointing to a sharp rebound/very short term Wave B upcycle after likely early weakness on Monday are a very sharp rise in Fed Credit during the week ending 1-31-07 (+7.114 Billion, see http://www.federalreserve.gov/releases/h41/Current/) and a modestly bullish NEM Lead Indicator last week at +1.21% versus the XAU. Fed Credit was massive on Thursday ($18.50 Billion, large even for a Thursday) and average on Friday ($4.5 Billion), see http://www.newyorkfed.org/markets/omo/dmm/temp.cfm?SHOWMORE=TRUE, which supports the sharp rebound after early weakness scenario on Monday.
In this post, http://tradethecycles.blogspot.com/2007/02/huis-elliott-wave-count-since-wave-1.html, I discuss HUI's Elliott Wave count since the 5.5 year Wave 1 Cyclical Bull Market peaked on May 11, 2006.
There's been more talk regarding "gold manipulation." Gold (GLD is an ETF that tracks gold, see chart at next link) and HUI/NEM (component of SPX)/XAU tend to be dramatically affected by the S & P 500 (SPX) short term due to program trading, see http://finance.yahoo.com/q/ta?s=%5EHUI&t=2y&l=off&z=l&q=c&p=&a=m26-12-9,p12,fs,w14&c=gld,%5EGSPC.
Note that, in the Spring of 2005 and 2006, in the Winter of 2006, and, in the Fall 2005, S & P 500 weakness (tended to begin ahead of HUI weakness since SPX is the program trading index) led to substantial HUI weakness. Also, in the vicious HUI/XAU decline from early September 2006 until 10-4-06, most of the weakness occurred during two SPX short term downcycles due to program trading, even though SPX was in an intermediate term upcycle.
Gold did 30-35%/year on average in it's 5+ year Wave 1 Cyclical Bull Market from April 2001 until May 2006. Gold nearly doubled from May 2004 until May 2006 (See second chart at http://stockcharts.com/charts/gallery.html?$gold). There's obviously no major manipulation/suppression of gold going on.
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 fact that HUI couldn't "get off it's behind" on Friday (following a sharp decline at the open, normally a significant rebound will occur after such a decline) is a sign that it will be weak early on Monday. It looks like it needs to do an intraday Wave C, because it failed to exceed the early spike's cycle high (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), which points to an intraday Wave B being in effect at session's end, so, it looks like HUI/NEM/XAU will be weak early on Monday (will do an intraday Wave C), and, NEM may fill 43.88 and 43.06, and, the XAU may fill 136.10, before a very short term Wave B upcycle occurs for a day or two.
XAU Implied Volatility points to some weakness on Monday, since it rose +0.86% to 28.020 on 2-2 versus 27.780 on 2-1, while the XAU fell -1.57%, which is a +0.71% rise in complacency (+0.86% + -1.57% = -0.71% decline in the XAU wall of worry = +0.71% rise in complacency).
Signs pointing to a sharp rebound/very short term Wave B upcycle after likely early weakness on Monday are a very sharp rise in Fed Credit during the week ending 1-31-07 (+7.114 Billion, see http://www.federalreserve.gov/releases/h41/Current/) and a modestly bullish NEM Lead Indicator last week at +1.21% versus the XAU. Fed Credit was massive on Thursday ($18.50 Billion, large even for a Thursday) and average on Friday ($4.5 Billion), see http://www.newyorkfed.org/markets/omo/dmm/temp.cfm?SHOWMORE=TRUE, which supports the sharp rebound after early weakness scenario on Monday.
In this post, http://tradethecycles.blogspot.com/2007/02/huis-elliott-wave-count-since-wave-1.html, I discuss HUI's Elliott Wave count since the 5.5 year Wave 1 Cyclical Bull Market peaked on May 11, 2006.
There's been more talk regarding "gold manipulation." Gold (GLD is an ETF that tracks gold, see chart at next link) and HUI/NEM (component of SPX)/XAU tend to be dramatically affected by the S & P 500 (SPX) short term due to program trading, see http://finance.yahoo.com/q/ta?s=%5EHUI&t=2y&l=off&z=l&q=c&p=&a=m26-12-9,p12,fs,w14&c=gld,%5EGSPC.
Note that, in the Spring of 2005 and 2006, in the Winter of 2006, and, in the Fall 2005, S & P 500 weakness (tended to begin ahead of HUI weakness since SPX is the program trading index) led to substantial HUI weakness. Also, in the vicious HUI/XAU decline from early September 2006 until 10-4-06, most of the weakness occurred during two SPX short term downcycles due to program trading, even though SPX was in an intermediate term upcycle.
Gold did 30-35%/year on average in it's 5+ year Wave 1 Cyclical Bull Market from April 2001 until May 2006. Gold nearly doubled from May 2004 until May 2006 (See second chart at http://stockcharts.com/charts/gallery.html?$gold). There's obviously no major manipulation/suppression of gold going on.
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
12:11 PM
