New Annotated HUI Chart With Elliott Wave Count
I did a new annotated HUI chart with Elliott Wave count, see chart 1 at http://www.joefrocks.com/GoldStockCharts.html. A nearly perfect bearish double top minor intermediate term cycle high occurred on 2-23-07 at 362.58, versus a cycle high at 362.53 on 12-5-06, that's Wave B of Wave C of HUI/XAU's Wave 2 Cyclical Bear Market since 5-11-06.
Note that HUI has a clearly bearish chart pattern since the Wave 2 Cyclical Bear Market began on 5-11-06, (putting in a nearly perfect bearish double top on 2-23-07). HUI is about 38% above it's primary Secular Bull Market trendline in effect since November 2000. Basic technical analysis clearly indicates a bearish picture. So much for gold "gurus."
How much brainpower does it take to realize that the extreme volatility of the precious metals sector makes timing entry/exit points very important, even for very long term (7+ years) investors. NEM, a blue chip gold stock obviously, is below where it was at December 2003's cycle high of 50+, well over 3 years later. Beware of gold "gurus." Most of them have become hazardous to your wealth, if they ever weren't hazardous to your wealth.
The COT data is very bearish the past 7-8 weeks, with the savvy gold Commercial Traders going massively net short, while also taking advantage of gold strength much of that time, with significant long trades the past 4 weeks (see last data at http://www.cftc.gov/dea/options/deacmxsof.htm).
The one year NEM Lead Indicator is extremely bearish, see http://finance.yahoo.com/q/ta?s=%5EXAU&t=1y&l=off&z=l&q=l&p=&a=&c=%5Ehui,nem.
A Wave A type of short term downcycle has occurred since 2-23-07 (probably Wave A of Wave A (HUI/XAU) of the major downcycle that began on 2-23-07), in which HUI declined -11.31%, with most of the decline obviously occurring during Tuesday 2-27's very short term Wave A crash.
A Wave B/countertrend type of short term upcycle probably began mid session on Friday (http://finance.yahoo.com/q/ta?s=%5EHUI&t=5d&l=on&z=l&q=c&p=&a=m26-12-9,p12,fs,w14&c=), in which NEM/XAU should fill their upside gaps at 44.53 and 45.10 for NEM, and, at 136.66 and 139.66 for the 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 are some clues to surprising strength next 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. The WMT Lead Indicator was a very bullish +0.97% versus the S & P 500 on Friday 3-2.
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.
If there's weakness or flat strength early on Monday I may day trade XAU calls long, but I rarely day trade, so it's doubtful. Also, being a countertrend trade, it's risky. The bottom line is that there should be another good/potentially great opportunity to "get your shorts on" next week.
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'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
Note that HUI has a clearly bearish chart pattern since the Wave 2 Cyclical Bear Market began on 5-11-06, (putting in a nearly perfect bearish double top on 2-23-07). HUI is about 38% above it's primary Secular Bull Market trendline in effect since November 2000. Basic technical analysis clearly indicates a bearish picture. So much for gold "gurus."
How much brainpower does it take to realize that the extreme volatility of the precious metals sector makes timing entry/exit points very important, even for very long term (7+ years) investors. NEM, a blue chip gold stock obviously, is below where it was at December 2003's cycle high of 50+, well over 3 years later. Beware of gold "gurus." Most of them have become hazardous to your wealth, if they ever weren't hazardous to your wealth.
The COT data is very bearish the past 7-8 weeks, with the savvy gold Commercial Traders going massively net short, while also taking advantage of gold strength much of that time, with significant long trades the past 4 weeks (see last data at http://www.cftc.gov/dea/options/deacmxsof.htm).
The one year NEM Lead Indicator is extremely bearish, see http://finance.yahoo.com/q/ta?s=%5EXAU&t=1y&l=off&z=l&q=l&p=&a=&c=%5Ehui,nem.
A Wave A type of short term downcycle has occurred since 2-23-07 (probably Wave A of Wave A (HUI/XAU) of the major downcycle that began on 2-23-07), in which HUI declined -11.31%, with most of the decline obviously occurring during Tuesday 2-27's very short term Wave A crash.
A Wave B/countertrend type of short term upcycle probably began mid session on Friday (http://finance.yahoo.com/q/ta?s=%5EHUI&t=5d&l=on&z=l&q=c&p=&a=m26-12-9,p12,fs,w14&c=), in which NEM/XAU should fill their upside gaps at 44.53 and 45.10 for NEM, and, at 136.66 and 139.66 for the 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 are some clues to surprising strength next 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. The WMT Lead Indicator was a very bullish +0.97% versus the S & P 500 on Friday 3-2.
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.
If there's weakness or flat strength early on Monday I may day trade XAU calls long, but I rarely day trade, so it's doubtful. Also, being a countertrend trade, it's risky. The bottom line is that there should be another good/potentially great opportunity to "get your shorts on" next week.
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'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
1:26 PM
