SPX (S & P 500) Cycles And Elliott Wave Count
SPX (S & P 500) is very important because it's the lead index due to index fund program trading (about 70% of the dollar volume on the NYSE), that the Fed's massive credit fuels (http://www.newyorkfed.org/markets/omo/dmm/temp.cfm?SHOWMORE=TRUE). SPX (S & P 500) has been in a Cyclical Bull Market since October 2002, see http://finance.yahoo.com/q/ta?s=%5EGSPC&t=5y&l=off&z=l&q=c&p=&a=m26-12-9,p12,fs,w14&c==. SPX (S & P 500) began a likely 15-20 year Secular Bear Market/very long term downcycle in March 2000.
Here's the Elliott Wave count for SPX's Cyclical Bull Market Since October 2002 (See 5 year chart at link above):
Wave 1 peaked in March 2004 (SPX correction coincided closely with HUI/NEM/XAU's due to program selling), Wave 2 bottomed in August 2004, Wave 3 peaked in May 2006 (SPX correction coincided closely with HUI/XAU's first vicious decline (began 5-11-06) of their Wave 2 Cyclical Bear Market due to program selling), Wave 4 bottomed in June 2006 (HUI/XAU's first vicious decline (began 5-11-06) of their Wave 2 Cyclical Bear Market bottomed on June 13, 2006 due largely to program buying), and, Wave 5 is peaking in rollover mode now.
Once SPX's Cyclical Bull Market Wave 5 peaks in the near future, that's when all hell will break loose on the downside for HUI/XAU, and, most other sectors, due to program selling.
The S&P/TSX Capped Gold Index gained a slight +0.21% today/Monday 2-19-07, but, trended down, see http://ca.finance.yahoo.com/q/bc?s=%5ESPTTGD&t=5d&l=on&z=l&q=l&c==. S&P/TSX Capped Gold Index didn't even attempt to fill Friday's bearish breakaway gap to the downside above 331, which indicates that it will fill Wednesday's downside gap near 327 in the next session or two. This jives with NEM and the XAU's bearish breakaway gaps to the downside at 46.51 and at 144.64 that occurred on Friday.
NEM and the XAU put in bearish double tops on Wednesday and Thursday, and, reliable lead indicator NEM has been in a downtrend since Friday 2-9-07, while the XAU has been in a downtrend since Wednesday (HUI since Thursday), 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=.
It looks like my entry point (Tuesday 2-13) for shorting NEM/buying XAU puts was very close to the countertrend Wave B cycle highs, they occurred early the next day for the XAU and on Friday 2-9-07 for NEM. The lead indicators (NEM, WMT) were very important in keeping me in cash while the Wave B topping process occurred.
HUI/XAU have probably entered the final major Wave C decline of their Wave 2 Cyclical Bear Market (since 5-11-06, new chart 1 at http://www.joefrocks.com/GoldStockCharts.html shows HUI as of last Friday), and, very severe weakness is likely to soon set in for HUI/XAU. Reliable lead indicator NEM entered Wave C of it's minor intermediate term downcycle since 12-8-06 on Friday 2-9-07.
The latest COT data for the 5 day period ending 2-13-07, similar to last week's data, is extremely bearish on an intermediate term cycle basis (weeks/months), but points to some strength in gold next week, see http://www.cftc.gov/dea/options/deacmxsof.htm, since the savvy non contrarian gold Commercial Traders aggressively shorted gold, but also did a significant long trade (points to some strength), that was much smaller than the short selling they engaged in.
The savvy non contrarian gold Commercial Traders engaged in massive long liquidation in the five session period ending 1-30-07 (-17.50% decrease in long position), and, they massively increased their short position in the five session period ending 1-23-07 (nearly 15% increase in short position). The COT data obviously points to a major decline in gold in the near future. The clueless gold Speculators have been trading aggressively net long in recent weeks, which is another very bearish sign. They almost always do the opposite of what the savvy gold Commercial Traders do.
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 appears to have occurred. So, the final Wave C decline of HUI/XAU's Wave 2 Cyclical Bear Market since 5-11-06 has probably 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 probably begun, and one has to be very cautious/bearish now. Amazingly (???, actually they tend to be terrible) most gold writers are bullish now, according to Mark Hulbert, and, from skimming some of the gold writers work.
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
Here's the Elliott Wave count for SPX's Cyclical Bull Market Since October 2002 (See 5 year chart at link above):
Wave 1 peaked in March 2004 (SPX correction coincided closely with HUI/NEM/XAU's due to program selling), Wave 2 bottomed in August 2004, Wave 3 peaked in May 2006 (SPX correction coincided closely with HUI/XAU's first vicious decline (began 5-11-06) of their Wave 2 Cyclical Bear Market due to program selling), Wave 4 bottomed in June 2006 (HUI/XAU's first vicious decline (began 5-11-06) of their Wave 2 Cyclical Bear Market bottomed on June 13, 2006 due largely to program buying), and, Wave 5 is peaking in rollover mode now.
Once SPX's Cyclical Bull Market Wave 5 peaks in the near future, that's when all hell will break loose on the downside for HUI/XAU, and, most other sectors, due to program selling.
The S&P/TSX Capped Gold Index gained a slight +0.21% today/Monday 2-19-07, but, trended down, see http://ca.finance.yahoo.com/q/bc?s=%5ESPTTGD&t=5d&l=on&z=l&q=l&c==. S&P/TSX Capped Gold Index didn't even attempt to fill Friday's bearish breakaway gap to the downside above 331, which indicates that it will fill Wednesday's downside gap near 327 in the next session or two. This jives with NEM and the XAU's bearish breakaway gaps to the downside at 46.51 and at 144.64 that occurred on Friday.
NEM and the XAU put in bearish double tops on Wednesday and Thursday, and, reliable lead indicator NEM has been in a downtrend since Friday 2-9-07, while the XAU has been in a downtrend since Wednesday (HUI since Thursday), 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=.
It looks like my entry point (Tuesday 2-13) for shorting NEM/buying XAU puts was very close to the countertrend Wave B cycle highs, they occurred early the next day for the XAU and on Friday 2-9-07 for NEM. The lead indicators (NEM, WMT) were very important in keeping me in cash while the Wave B topping process occurred.
HUI/XAU have probably entered the final major Wave C decline of their Wave 2 Cyclical Bear Market (since 5-11-06, new chart 1 at http://www.joefrocks.com/GoldStockCharts.html shows HUI as of last Friday), and, very severe weakness is likely to soon set in for HUI/XAU. Reliable lead indicator NEM entered Wave C of it's minor intermediate term downcycle since 12-8-06 on Friday 2-9-07.
The latest COT data for the 5 day period ending 2-13-07, similar to last week's data, is extremely bearish on an intermediate term cycle basis (weeks/months), but points to some strength in gold next week, see http://www.cftc.gov/dea/options/deacmxsof.htm, since the savvy non contrarian gold Commercial Traders aggressively shorted gold, but also did a significant long trade (points to some strength), that was much smaller than the short selling they engaged in.
The savvy non contrarian gold Commercial Traders engaged in massive long liquidation in the five session period ending 1-30-07 (-17.50% decrease in long position), and, they massively increased their short position in the five session period ending 1-23-07 (nearly 15% increase in short position). The COT data obviously points to a major decline in gold in the near future. The clueless gold Speculators have been trading aggressively net long in recent weeks, which is another very bearish sign. They almost always do the opposite of what the savvy gold Commercial Traders do.
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 appears to have occurred. So, the final Wave C decline of HUI/XAU's Wave 2 Cyclical Bear Market since 5-11-06 has probably 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 probably begun, and one has to be very cautious/bearish now. Amazingly (???, actually they tend to be terrible) most gold writers are bullish now, according to Mark Hulbert, and, from skimming some of the gold writers work.
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
2:12 PM
