.......Got Early Weakness Followed By A Bounce
Wave C of Wave A of HUI/XAU's major downcycle since 2-23-07 (see chart 1 at http://www.joefrocks.com/GoldStockCharts.html) began last Thursday (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==), and, should soon enter the more parabolic/sharply declining part of the downcycle.
The lead indicators in recent days have been mostly bearish, with the NEM Lead Indicator at a bearish -0.60% versus the XAU on 3-9,+0.03% versus the XAU on 3-8, a bearish -0.74% on 3-7, and, a very bearish -1.25% on 3-6, and, with the WMT Lead Indicator at a very bearish -1.03% versus the S & P 500 on 3-9, a very bearish -0.81% versus the S & P 500 on 3-8, +0.02% on 3-7, and, a bearish -0.35% on 3-6.
NEM should soon fill it's downside gap at 41.83, also watch 41.09 and 40.83, and, the XAU should soon fill it's downside gap at 129.28.
The Elliott Wave count is Wave C of Wave A of HUI/XAU's major downcycle since 2-23-07, and, Wave C of reliable lead indicator NEM's minor intermediate term downcycle since 2-22-07. In HUI's 3 month chart one can see that the countertrend Wave B peaked Thursday (XAU also, NEM on Wednesday, leading as usual), see http://finance.yahoo.com/q/ta?s=%5EHUI&t=3m&l=off&z=l&q=c&p=&a=m26-12-9,p12,fs,w14&c==.
The COT (Commitments Of Traders) data points to gold weakness this week, since the savvy non contrarian gold Commercial Traders engaged in an unusually large (> 10% decrease in short position) degree of short covering (points to weakness) near gold's short term cycle low on Monday 3-5, while the clueless gold Speculators lost their nerve in a very big way, engaging in an unusually large (> 10% decrease in long position) degree of long liquidation near Monday 3-5's short term cycle low, see the last data at http://www.cftc.gov/dea/options/deacmxsof.htm.
The savvy gold Commercial Traders went massively net short for 7-8 weeks (mostly short selling) or more as gold rose to $690ish, then they covered near Monday's cycle low below $640, as gold plunged more than $50, while the clueless gold Speculators went massively net long for 7-8 weeks or more (mostly adding to their long position) and ended up selling near $640. The savvy gold Commercial Traders nailed it, while the hapless gold Speculators (including some "well known" gold writers) got their butts whupped in a very big way. It's no wonder some of the "well known" gold writers don't like the COT data, because it shows just how badly they're getting whupped.
Fed Credit (fuels program trading) for the five day period ending 3-7-07 declined -$1.710 Billion, which points to weakness the next five sessions ending 3-14-07, see http://www.federalreserve.gov/releases/h41/Current/. The Rollover/Upside Surprise Barometer is at "unlikely."
I bought some April 120 XAU puts (XAVPD) on Wednesday at 1.50, and, I shorted some GDX (Gold Miners ETF) at 38.70 on Thursday.The XAU has a downside gap at 129.28. NEM has downside gaps at 41.83, 41.09, and 40.83. NEM/XAU have upside gaps at 44.53, 45.10, and at 47.06 for NEM, and, at 136.66, 139.66, and at 147.75 for the XAU. Cycle trendlines/channels used in concert with Elliott Wave patterns and gaps is the basis/crux of "Trade the Cycles."
It looks like NEM will/may fill all of it's downside gaps in the next few days, and, NEM's minor intermediate term downcycle since 2-22-07 (cycle high at 48.33) should bottom shortly after filling the last downside gap at 40.83 (at 40.50ish). 10-4-06's cycle low at 39.84 should hold, because NEM bounced right at it's primary Secular Bull Market trendline in effect since October 2000, see chart 8 at http://www.joefrocks.com/GoldStockCharts.html, and, hit a 5% follow through major buy signal, indicating that reliable lead indicator NEM probably entered a Wave 3 Cyclical Bull Market on 10-4-06.
A scenario I've discussed many times (but not recently) before is that HUI/XAU's Wave A down of their major downcycle since 2-23-07 should closely coincide with NEM's minor intermediate term cycle low at 40.50ish. Then the Wave B should closely coincide with Wave 1 of a new NEM minor intermediate term upcycle, followed by the final Wave C of HUI/XAU's major downcycle since 2-23-07 probably closely coinciding with Wave 2 down of a new NEM minor intermediate term upcycle.
The XAU has a bearish declining peaks chart pattern going back to 5-11-06 (HUI's is only slightly better), HUI/XAU are 35%ish above their primary Secular Bull Market trendlines, see charts 7 and 9 at http://www.joefrocks.com/GoldStockCharts.html. Basic technical analysis alone indicates a clearly bearish picture. Would you buy a stock with a declining peaks chart pattern going back 10 months??? Yet, most gold writers are (or were until recently) bullish??? Truth really is stranger than fiction.
Note how the gold ETF GLD (and HUI/NEM/XAU) tracks SPX due to program trading, see http://finance.yahoo.com/q/ta?t=5d&s=GLD&l=off&z=l&q=c&a=m26-12-9&a=p12&a=fs&a=w14&c=&c=%5EGSPC. This shows how clueless the manipulation theory gold writers are. There simply aren't any traders who can overcome the huge program trading money, 70% of the dollar volume on the NYSE. Gold did 30-35%/year on average in it's Wave 1 Cyclical Bull Market from April 2001 until May 2006, yet many gold writers harp on gold price suppression by some "cartel."
Tuesday 2-27's Wave A crash was probably an important technical breakdown for HUI/XAU as well as for SPX (S & P 500), and, to a lesser extent for NEM, which should be in a Wave 3 Cyclical Bull Market since 10-4-06, see chart 8 at http://www.joefrocks.com/GoldStockCharts.html. Tuesday 2-27's Wave A crash was probably an important technical breakdown for the stock market in general, meaning the major averages and nearly all sectors except a few defensive ones (despite what most gold "gurus" say gold isn't a safe haven/defensive sector, T Bills and T Bonds are, which run COUNTER to the precious metals sector, which does well in an inflationary rising interest rate environment).
Fed Credit is extremely important because it fuels index fund program traders, that account for about 70% of the dollar volume on the NYSE. Just look at what happened on Tuesday 2-27. THREE out of five hundred SPX components rose. Unreal.
Annotated new chart 1 at http://www.joefrocks.com/GoldStockCharts.html shows HUI as of 3-2-07 with Elliott Wave count. HUI/XAU are in a major Wave C decline of their Wave 2 Cyclical Bear Market since 5-11-06 (Secular Bull Market since late 2000). It's Wave C of Wave C for HUI, and Wave C of Wave C of Wave C for the XAU.
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.
HUI and the XAU peaked Friday 2-23. The 1 day lag between when NEM and HUI/XAU peaked is a sign that an important cycle high occurred. In the HUI chart I did the Elliott Wave count indicated that an important peak was imminent, see chart 2 at http://www.joefrocks.com/GoldStockCharts.html.
Massive index fund program trader buying (fueled by Fed Credit) led to much of the strength in the upcycle that began 1-10-07 and peaked on 2-23-07 (2-22 for NEM), propping up SPX/HUI/NEM/XAU (led to a great deal of deceptive rollover action).
HUI is in Wave C of Wave C of the Wave 2 Cyclical Bear Market since 5-11-06 (The XAU is in Wave C of Wave C of Wave C). In the next few months 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 Friday 2-23 for HUI (12-5-06 for the XAU), when minor intermediate term cycle highs occurred, see charts three and four 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.
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
The lead indicators in recent days have been mostly bearish, with the NEM Lead Indicator at a bearish -0.60% versus the XAU on 3-9,+0.03% versus the XAU on 3-8, a bearish -0.74% on 3-7, and, a very bearish -1.25% on 3-6, and, with the WMT Lead Indicator at a very bearish -1.03% versus the S & P 500 on 3-9, a very bearish -0.81% versus the S & P 500 on 3-8, +0.02% on 3-7, and, a bearish -0.35% on 3-6.
NEM should soon fill it's downside gap at 41.83, also watch 41.09 and 40.83, and, the XAU should soon fill it's downside gap at 129.28.
The Elliott Wave count is Wave C of Wave A of HUI/XAU's major downcycle since 2-23-07, and, Wave C of reliable lead indicator NEM's minor intermediate term downcycle since 2-22-07. In HUI's 3 month chart one can see that the countertrend Wave B peaked Thursday (XAU also, NEM on Wednesday, leading as usual), see http://finance.yahoo.com/q/ta?s=%5EHUI&t=3m&l=off&z=l&q=c&p=&a=m26-12-9,p12,fs,w14&c==.
The COT (Commitments Of Traders) data points to gold weakness this week, since the savvy non contrarian gold Commercial Traders engaged in an unusually large (> 10% decrease in short position) degree of short covering (points to weakness) near gold's short term cycle low on Monday 3-5, while the clueless gold Speculators lost their nerve in a very big way, engaging in an unusually large (> 10% decrease in long position) degree of long liquidation near Monday 3-5's short term cycle low, see the last data at http://www.cftc.gov/dea/options/deacmxsof.htm.
The savvy gold Commercial Traders went massively net short for 7-8 weeks (mostly short selling) or more as gold rose to $690ish, then they covered near Monday's cycle low below $640, as gold plunged more than $50, while the clueless gold Speculators went massively net long for 7-8 weeks or more (mostly adding to their long position) and ended up selling near $640. The savvy gold Commercial Traders nailed it, while the hapless gold Speculators (including some "well known" gold writers) got their butts whupped in a very big way. It's no wonder some of the "well known" gold writers don't like the COT data, because it shows just how badly they're getting whupped.
Fed Credit (fuels program trading) for the five day period ending 3-7-07 declined -$1.710 Billion, which points to weakness the next five sessions ending 3-14-07, see http://www.federalreserve.gov/releases/h41/Current/. The Rollover/Upside Surprise Barometer is at "unlikely."
I bought some April 120 XAU puts (XAVPD) on Wednesday at 1.50, and, I shorted some GDX (Gold Miners ETF) at 38.70 on Thursday.The XAU has a downside gap at 129.28. NEM has downside gaps at 41.83, 41.09, and 40.83. NEM/XAU have upside gaps at 44.53, 45.10, and at 47.06 for NEM, and, at 136.66, 139.66, and at 147.75 for the XAU. Cycle trendlines/channels used in concert with Elliott Wave patterns and gaps is the basis/crux of "Trade the Cycles."
It looks like NEM will/may fill all of it's downside gaps in the next few days, and, NEM's minor intermediate term downcycle since 2-22-07 (cycle high at 48.33) should bottom shortly after filling the last downside gap at 40.83 (at 40.50ish). 10-4-06's cycle low at 39.84 should hold, because NEM bounced right at it's primary Secular Bull Market trendline in effect since October 2000, see chart 8 at http://www.joefrocks.com/GoldStockCharts.html, and, hit a 5% follow through major buy signal, indicating that reliable lead indicator NEM probably entered a Wave 3 Cyclical Bull Market on 10-4-06.
A scenario I've discussed many times (but not recently) before is that HUI/XAU's Wave A down of their major downcycle since 2-23-07 should closely coincide with NEM's minor intermediate term cycle low at 40.50ish. Then the Wave B should closely coincide with Wave 1 of a new NEM minor intermediate term upcycle, followed by the final Wave C of HUI/XAU's major downcycle since 2-23-07 probably closely coinciding with Wave 2 down of a new NEM minor intermediate term upcycle.
The XAU has a bearish declining peaks chart pattern going back to 5-11-06 (HUI's is only slightly better), HUI/XAU are 35%ish above their primary Secular Bull Market trendlines, see charts 7 and 9 at http://www.joefrocks.com/GoldStockCharts.html. Basic technical analysis alone indicates a clearly bearish picture. Would you buy a stock with a declining peaks chart pattern going back 10 months??? Yet, most gold writers are (or were until recently) bullish??? Truth really is stranger than fiction.
Note how the gold ETF GLD (and HUI/NEM/XAU) tracks SPX due to program trading, see http://finance.yahoo.com/q/ta?t=5d&s=GLD&l=off&z=l&q=c&a=m26-12-9&a=p12&a=fs&a=w14&c=&c=%5EGSPC. This shows how clueless the manipulation theory gold writers are. There simply aren't any traders who can overcome the huge program trading money, 70% of the dollar volume on the NYSE. Gold did 30-35%/year on average in it's Wave 1 Cyclical Bull Market from April 2001 until May 2006, yet many gold writers harp on gold price suppression by some "cartel."
Tuesday 2-27's Wave A crash was probably an important technical breakdown for HUI/XAU as well as for SPX (S & P 500), and, to a lesser extent for NEM, which should be in a Wave 3 Cyclical Bull Market since 10-4-06, see chart 8 at http://www.joefrocks.com/GoldStockCharts.html. Tuesday 2-27's Wave A crash was probably an important technical breakdown for the stock market in general, meaning the major averages and nearly all sectors except a few defensive ones (despite what most gold "gurus" say gold isn't a safe haven/defensive sector, T Bills and T Bonds are, which run COUNTER to the precious metals sector, which does well in an inflationary rising interest rate environment).
Fed Credit is extremely important because it fuels index fund program traders, that account for about 70% of the dollar volume on the NYSE. Just look at what happened on Tuesday 2-27. THREE out of five hundred SPX components rose. Unreal.
Annotated new chart 1 at http://www.joefrocks.com/GoldStockCharts.html shows HUI as of 3-2-07 with Elliott Wave count. HUI/XAU are in a major Wave C decline of their Wave 2 Cyclical Bear Market since 5-11-06 (Secular Bull Market since late 2000). It's Wave C of Wave C for HUI, and Wave C of Wave C of Wave C for the XAU.
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.
HUI and the XAU peaked Friday 2-23. The 1 day lag between when NEM and HUI/XAU peaked is a sign that an important cycle high occurred. In the HUI chart I did the Elliott Wave count indicated that an important peak was imminent, see chart 2 at http://www.joefrocks.com/GoldStockCharts.html.
Massive index fund program trader buying (fueled by Fed Credit) led to much of the strength in the upcycle that began 1-10-07 and peaked on 2-23-07 (2-22 for NEM), propping up SPX/HUI/NEM/XAU (led to a great deal of deceptive rollover action).
HUI is in Wave C of Wave C of the Wave 2 Cyclical Bear Market since 5-11-06 (The XAU is in Wave C of Wave C of Wave C). In the next few months 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 Friday 2-23 for HUI (12-5-06 for the XAU), when minor intermediate term cycle highs occurred, see charts three and four 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.
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
7:32 AM
