It Looks Like An HUI/NEM/XAU Short Term Countertrend Wave B Upcycle Began Early Today
It looks like an HUI/NEM/XAU short term countertrend Wave B upcycle began 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==. NEM and the XAU filled potential bearish breakaway gaps to the downside, that were created at today's open at 43.02 and at 132.35, otherwise one would have to assume that a short term countertrend Wave B upcycle didn't began early today. NEM/XAU should fill upside gaps at 44.53 and 45.10 for NEM, and, at 136.66 and 139.66 for the XAU, if a short term countertrend Wave B upcycle began early today.
NEM's upside gap at 47.06 and the XAU 's upside gap at 147.75 should be bearish breakaway gaps to the downside that won't get filled until later on, but, since reliable lead indicator NEM probably began a Wave 3 Cyclical Bull Market on 10-4-06, see chart 8 at http://www.joefrocks.com/GoldStockCharts.html, if there is an upside surprise, it should be by NEM.
There should be another good/potentially great opportunity to "get your shorts on" this week. This is obviously a treacherous environment to trade long in, and, one might limit long trades to day trades, if one trades long at all.
Some gold/silver stocks dropped on the order of -10%+ today alone, at their session cycle lows so far. There's a lot of anguish amongst longs today, to put it mildly. One example, Seabridge Gold, SA, hit a cycle low so far at 12.79 versus a close on Friday at 14.62, which was a decline of -12.52% today alone.
Today's extreme volatility is a sign that an HUI/NEM/XAU short term countertrend Wave B upcycle may have begun early today. Volatility tends to peak at/near cycle lows.
There are some clues to surprising strength this week (but probably not a big deal in the big picture sense):
1. The savvy gold Commercial Traders made a surprisingly aggressive long trade of 9857 futures and options contracts (see last data at http://www.cftc.gov/dea/options/deacmxsof.htm).
2. The NEM Lead Indicator was a bullish +0.65% versus the XAU in the second half of Friday's session and is bullish right now. The WMT Lead Indicator was a very bullish +0.97% versus the S & P 500 on Friday 3-2 and is bullish right now.
3. XAU Implied Volatility reveals an unusually large (> 6%) rise in complacency, falling -15.29% to 27.84 on 3-2 from 32.865 on 3-1, despite (normally XAU Implied Volatility rises, revealing a rise in fear, when the XAU plunges) the XAU falling -3.15% on 3-2. The -15.29% + -3.15% = +18.44% rise in complacency (-18.44% decline in XAU wall of worry) points to likely surprising short term strength, followed by a collapse. An unusually large (> 6%) rise in complacency points to short term strength, whereas an unusually large (> 6%) rise in fear points to short term weakness.
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."
HUI/XAU hit minor intermediate term cycle highs (upcycle began 1-10-07) on 2-23-07 (reliable lead indicator NEM on 2-22-07). The very short term Wave A crash bottomed late Tuesday 2-27 for HUI/NEM/XAU. The countertrend Wave B peaked late Wednesday for HUI and earlier on Wednesday for NEM and the NEM dominated XAU. The very short term Wave C probably bottomed early today.
NEM/XAU made bearish large breakaway gaps to the downside at Tuesday 2-27's open (HUI makes fewer gaps so I don't usually track them), 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==. NEM now has upside gaps at 47.06, 45.10, and 44.53, and, the XAU has upside gaps at 147.75, 139.66, and 136.66.
Cycle trendlines/channels used in concert with Elliott Wave patterns and gaps is the basis/crux of "Trade the Cycles."
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).
The Fed added an above average $7.50 Billion in credit today, an average sized $5 Billion in credit on Friday, a massive $17.75 Billion in credit yesterday (punch spiking Thursday) after Wednesday's unusually large (for any day but Thursday) $17.25 Billion, see http://www.newyorkfed.org/markets/omo/dmm/temp.cfm?SHOWMORE=TRUE.
The Fed's weekly data released Thursday (http://www.federalreserve.gov/releases/h41/Current/) indicates that credit rose +$1.75 Billion in the week ending 2-28-07, much less than I thought it would. They show $36.286 in Repos for the week ending 2-28-07, which doesn't jive with $17.25 Billion + $8 Billion + $9.50 Billion + $5.50 Billion + $23.75 Billion = $64 Billion for the five days (http://www.newyorkfed.org/markets/omo/dmm/temp.cfm?SHOWMORE=TRUE). I obviously need to find out why there is such a huge difference between the two totals.
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. That's a lot of Wave Cs!
SHUI/XAU are in a very bearish major Wave C decline, the one year NEM Lead Indicator is very bearish (http://finance.yahoo.com/q/ta?s=%5EXAU&t=1y&l=off&z=m&q=l&p=&a=&c=%5Ehui,nem), the COT (Commitments Of Traders) data has been very bearish the past 7-8 weeks, Lycos Thomson I Watch has been bearish for most of the past 3 weeks (http://thomson.finance.lycos.com/lycos/iwatch/cgi-bin/iw_ticker?t=NEM&range=0&mgp=0&i=2&hdate=&x=9&y=9), 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 over 9 months??? Yet, most gold writers are bullish??? Truth really is stranger than fiction.
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 new 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, propping up SPX/HUI/NEM/XAU (led to a great deal of deceptive rollover action).
HUI/XAU are in Wave C of Wave C of the Wave 2 Cyclical Bear Market since 5-11-06. 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. 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 5-6 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
NEM's upside gap at 47.06 and the XAU 's upside gap at 147.75 should be bearish breakaway gaps to the downside that won't get filled until later on, but, since reliable lead indicator NEM probably began a Wave 3 Cyclical Bull Market on 10-4-06, see chart 8 at http://www.joefrocks.com/GoldStockCharts.html, if there is an upside surprise, it should be by NEM.
There should be another good/potentially great opportunity to "get your shorts on" this week. This is obviously a treacherous environment to trade long in, and, one might limit long trades to day trades, if one trades long at all.
Some gold/silver stocks dropped on the order of -10%+ today alone, at their session cycle lows so far. There's a lot of anguish amongst longs today, to put it mildly. One example, Seabridge Gold, SA, hit a cycle low so far at 12.79 versus a close on Friday at 14.62, which was a decline of -12.52% today alone.
Today's extreme volatility is a sign that an HUI/NEM/XAU short term countertrend Wave B upcycle may have begun early today. Volatility tends to peak at/near cycle lows.
There are some clues to surprising strength this week (but probably not a big deal in the big picture sense):
1. The savvy gold Commercial Traders made a surprisingly aggressive long trade of 9857 futures and options contracts (see last data at http://www.cftc.gov/dea/options/deacmxsof.htm).
2. The NEM Lead Indicator was a bullish +0.65% versus the XAU in the second half of Friday's session and is bullish right now. The WMT Lead Indicator was a very bullish +0.97% versus the S & P 500 on Friday 3-2 and is bullish right now.
3. XAU Implied Volatility reveals an unusually large (> 6%) rise in complacency, falling -15.29% to 27.84 on 3-2 from 32.865 on 3-1, despite (normally XAU Implied Volatility rises, revealing a rise in fear, when the XAU plunges) the XAU falling -3.15% on 3-2. The -15.29% + -3.15% = +18.44% rise in complacency (-18.44% decline in XAU wall of worry) points to likely surprising short term strength, followed by a collapse. An unusually large (> 6%) rise in complacency points to short term strength, whereas an unusually large (> 6%) rise in fear points to short term weakness.
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."
HUI/XAU hit minor intermediate term cycle highs (upcycle began 1-10-07) on 2-23-07 (reliable lead indicator NEM on 2-22-07). The very short term Wave A crash bottomed late Tuesday 2-27 for HUI/NEM/XAU. The countertrend Wave B peaked late Wednesday for HUI and earlier on Wednesday for NEM and the NEM dominated XAU. The very short term Wave C probably bottomed early today.
NEM/XAU made bearish large breakaway gaps to the downside at Tuesday 2-27's open (HUI makes fewer gaps so I don't usually track them), 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==. NEM now has upside gaps at 47.06, 45.10, and 44.53, and, the XAU has upside gaps at 147.75, 139.66, and 136.66.
Cycle trendlines/channels used in concert with Elliott Wave patterns and gaps is the basis/crux of "Trade the Cycles."
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).
The Fed added an above average $7.50 Billion in credit today, an average sized $5 Billion in credit on Friday, a massive $17.75 Billion in credit yesterday (punch spiking Thursday) after Wednesday's unusually large (for any day but Thursday) $17.25 Billion, see http://www.newyorkfed.org/markets/omo/dmm/temp.cfm?SHOWMORE=TRUE.
The Fed's weekly data released Thursday (http://www.federalreserve.gov/releases/h41/Current/) indicates that credit rose +$1.75 Billion in the week ending 2-28-07, much less than I thought it would. They show $36.286 in Repos for the week ending 2-28-07, which doesn't jive with $17.25 Billion + $8 Billion + $9.50 Billion + $5.50 Billion + $23.75 Billion = $64 Billion for the five days (http://www.newyorkfed.org/markets/omo/dmm/temp.cfm?SHOWMORE=TRUE). I obviously need to find out why there is such a huge difference between the two totals.
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. That's a lot of Wave Cs!
SHUI/XAU are in a very bearish major Wave C decline, the one year NEM Lead Indicator is very bearish (http://finance.yahoo.com/q/ta?s=%5EXAU&t=1y&l=off&z=m&q=l&p=&a=&c=%5Ehui,nem), the COT (Commitments Of Traders) data has been very bearish the past 7-8 weeks, Lycos Thomson I Watch has been bearish for most of the past 3 weeks (http://thomson.finance.lycos.com/lycos/iwatch/cgi-bin/iw_ticker?t=NEM&range=0&mgp=0&i=2&hdate=&x=9&y=9), 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 over 9 months??? Yet, most gold writers are bullish??? Truth really is stranger than fiction.
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 new 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, propping up SPX/HUI/NEM/XAU (led to a great deal of deceptive rollover action).
HUI/XAU are in Wave C of Wave C of the Wave 2 Cyclical Bear Market since 5-11-06. 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. 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 5-6 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
7:30 AM
