Extreme Fear, HUI/NEM/XAU, S & P 500 (SPX), NASDAQ 100 (NDX) Thoughts
The XAU Put/Call Ratio for the April expiration is at 1.76716 on 3-16 versus 0.82650 for the expired March expiration, which is one of the highest levels of fear I've seen, and, points to a substantial/dramatic decline soon.
Short term HUI/XAU are in Wave B up (since 3-14) of their major downcycle since 2-23-07 (see chart 1 at http://www.joefrocks.com/GoldStockCharts.html), and, are in Wave 3 up of Wave B since late Friday, 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==. Reliable lead indicator NEM is probably in Wave 3 up of a big Wave 1 short term upcycle (of a monthly upcycle), as opposed to Wave 3 of a monthly upcycle that I said previously.
Short term NEM will probably outperform HUI/XAU to the upside after hitting a likely minor intermediate term cycle low at 40.53 on 3-14, see http://finance.yahoo.com/q/ta?s=nem&t=6m&l=off&z=l&q=c&p=&a=m26-12-9%2Cp12%2Cfs%2Cw14&c==. Connect the six year cycle low at 39.84 on 10-4-06 with 3-14-07's cycle low at 40.53 and you have NEM's Wave 3 Cyclical Bull Market trendline. Note in the chart at the link above NEM's large inverse spikes that occurred on 10-4-06 and 3-14-07, that tend occur at major cycle lows.
The S & P 500 (SPX) and the NASDAQ 100 (NDX) probably hit very important Cyclical Bull Market cycle highs in late February, for the Cyclical Bull Market that began in October 2002, see http://finance.yahoo.com/q/ta?s=%5Espx&t=5y&l=off&z=l&q=c&p=&a=m26-12-9%2Cp12%2Cfs%2Cw14&c==. The large upcycle since mid 2006 for the S & P 500 (SPX) was probably the final/third Wave 5 spike move of the Cyclical Bull Market that began in October 2002.
Since late February SPX/NDX have probably done a Wave A type downcycle (see http://finance.yahoo.com/q/ta?s=%5EGSPC&t=6m&l=off&z=l&q=c&p=&a=m26-12-9,p12,fs,w14&c==) that bottomed on 3-14 at nearly the same time as HUI/NEM/XAU (NEM lead HUI/XAU by 35 minutes) due to program trading, and, assuming lower cycle highs occur in the next few weeks (confirming that a Wave B up type rebound occurred) than late February's cycle highs, that will confirm that SPX/NDX entered a Cyclical Bear Market in late February.
When/if Wave C occurs for SPX/NDX (beginning some time in the next few weeks) that's probably when a vicious Wave C waterfall type decline will occur for HUI/XAU due to automated computer program selling, and, a lesser but still substantial decline should occur for reliable lead indicator NEM, which is probably in a Wave 3 Cyclical Bull Market since 10-4-06's cycle low at 39.84.
In the next few months HUI/XAU should decline 40-45%+ (from 2-23-07's minor intermediate term cycle highs) 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.
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.
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
Short term HUI/XAU are in Wave B up (since 3-14) of their major downcycle since 2-23-07 (see chart 1 at http://www.joefrocks.com/GoldStockCharts.html), and, are in Wave 3 up of Wave B since late Friday, 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==. Reliable lead indicator NEM is probably in Wave 3 up of a big Wave 1 short term upcycle (of a monthly upcycle), as opposed to Wave 3 of a monthly upcycle that I said previously.
Short term NEM will probably outperform HUI/XAU to the upside after hitting a likely minor intermediate term cycle low at 40.53 on 3-14, see http://finance.yahoo.com/q/ta?s=nem&t=6m&l=off&z=l&q=c&p=&a=m26-12-9%2Cp12%2Cfs%2Cw14&c==. Connect the six year cycle low at 39.84 on 10-4-06 with 3-14-07's cycle low at 40.53 and you have NEM's Wave 3 Cyclical Bull Market trendline. Note in the chart at the link above NEM's large inverse spikes that occurred on 10-4-06 and 3-14-07, that tend occur at major cycle lows.
The S & P 500 (SPX) and the NASDAQ 100 (NDX) probably hit very important Cyclical Bull Market cycle highs in late February, for the Cyclical Bull Market that began in October 2002, see http://finance.yahoo.com/q/ta?s=%5Espx&t=5y&l=off&z=l&q=c&p=&a=m26-12-9%2Cp12%2Cfs%2Cw14&c==. The large upcycle since mid 2006 for the S & P 500 (SPX) was probably the final/third Wave 5 spike move of the Cyclical Bull Market that began in October 2002.
Since late February SPX/NDX have probably done a Wave A type downcycle (see http://finance.yahoo.com/q/ta?s=%5EGSPC&t=6m&l=off&z=l&q=c&p=&a=m26-12-9,p12,fs,w14&c==) that bottomed on 3-14 at nearly the same time as HUI/NEM/XAU (NEM lead HUI/XAU by 35 minutes) due to program trading, and, assuming lower cycle highs occur in the next few weeks (confirming that a Wave B up type rebound occurred) than late February's cycle highs, that will confirm that SPX/NDX entered a Cyclical Bear Market in late February.
When/if Wave C occurs for SPX/NDX (beginning some time in the next few weeks) that's probably when a vicious Wave C waterfall type decline will occur for HUI/XAU due to automated computer program selling, and, a lesser but still substantial decline should occur for reliable lead indicator NEM, which is probably in a Wave 3 Cyclical Bull Market since 10-4-06's cycle low at 39.84.
In the next few months HUI/XAU should decline 40-45%+ (from 2-23-07's minor intermediate term cycle highs) 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.
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.
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
12:53 PM
