Remember The Likely HUI/XAU Wave B Scenario
The beauty of "Trade the Cycles" is that it tells us what's likely to happen in Wave B (began 3-14), and, when to exit long positions/look to go short, which is shortly after the last of the upside gaps gets filled. That's why I don't use Fibonacci (or other) price targets. Cycle trendlines/channels used in concert with Elliott Wave patterns and gaps are the basis/crux of "Trade the Cycles."
In the countertrend Wave B since 3-14 NEM will probably fill upside gaps at 44.53, 45.10, and possibly also at 47.06, and, the XAU will probably fill upside gaps at 136.66 and 139.66, but not the one at 147.75, because it's a likely bearish breakaway gap to the downside, and, the XAU would exceed 2-23-07's minor intermediate term cycle high if it filled 147.75. 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= for the XAU's five day chart. So, watch NEM's upside gaps at 44.53, 45.10 (possibly also at 47.06), and, watch the XAU's upside gaps at 136.66 and 139.66.
A likely scenario is that HUI/XAU's Wave B since 3-14 will probably peak shortly after the last of those upside gaps gets filled. NEM's minor intermediate term downcycle and HUI/XAU's Wave A bottomed shortly after the last of the downside gaps (NEM's at 40.83) got filled (about an hour or less later HUI/XAU bottomed), which is why cycle trendlines/channels used in concert with Elliott Wave patterns and gaps are the basis/crux of "Trade the Cycles."
It's very important to exit short positions shortly after downside gap filling action is completed, unless the NEM/WMT lead indicators are very bearish. You'd have to have a very good reason for remaining short after downside gap filling action is completed. The converse is obviously true for exiting long positions after upside gap filling action is completed.
I exited my GDX short position (at 36.70)/long XAU put position within about an hour of the HUI/XAU Wave A cycle low on Wednesday 3-14. If you're looking to short and/or go long some puts, wait for HUI/XAU's spike move/Wave B since 3-14 to clearly break down/do a Wave A type decline (probably shortly after the XAU's upside gap at 139.66 gets filled or whichever one is the last to get filled), then get your shorts on in a countertrend Wave B.
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.
The COT data (http://www.cftc.gov/dea/options/deacmxsof.htm) points to strength accompanied by some weakness next week, because the savvy non contrarian gold Commercial Traders traded net long, while the clueless gold Speculators traded net short. The significant short trade by the savvy gold Commercial Traders points to some weakness.
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. NEM has downside gaps at 41.44 and 42.14, and, the XAU has a downside gap at 129.65.
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 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.
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
In the countertrend Wave B since 3-14 NEM will probably fill upside gaps at 44.53, 45.10, and possibly also at 47.06, and, the XAU will probably fill upside gaps at 136.66 and 139.66, but not the one at 147.75, because it's a likely bearish breakaway gap to the downside, and, the XAU would exceed 2-23-07's minor intermediate term cycle high if it filled 147.75. 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= for the XAU's five day chart. So, watch NEM's upside gaps at 44.53, 45.10 (possibly also at 47.06), and, watch the XAU's upside gaps at 136.66 and 139.66.
A likely scenario is that HUI/XAU's Wave B since 3-14 will probably peak shortly after the last of those upside gaps gets filled. NEM's minor intermediate term downcycle and HUI/XAU's Wave A bottomed shortly after the last of the downside gaps (NEM's at 40.83) got filled (about an hour or less later HUI/XAU bottomed), which is why cycle trendlines/channels used in concert with Elliott Wave patterns and gaps are the basis/crux of "Trade the Cycles."
It's very important to exit short positions shortly after downside gap filling action is completed, unless the NEM/WMT lead indicators are very bearish. You'd have to have a very good reason for remaining short after downside gap filling action is completed. The converse is obviously true for exiting long positions after upside gap filling action is completed.
I exited my GDX short position (at 36.70)/long XAU put position within about an hour of the HUI/XAU Wave A cycle low on Wednesday 3-14. If you're looking to short and/or go long some puts, wait for HUI/XAU's spike move/Wave B since 3-14 to clearly break down/do a Wave A type decline (probably shortly after the XAU's upside gap at 139.66 gets filled or whichever one is the last to get filled), then get your shorts on in a countertrend Wave B.
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.
The COT data (http://www.cftc.gov/dea/options/deacmxsof.htm) points to strength accompanied by some weakness next week, because the savvy non contrarian gold Commercial Traders traded net long, while the clueless gold Speculators traded net short. The significant short trade by the savvy gold Commercial Traders points to some weakness.
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. NEM has downside gaps at 41.44 and 42.14, and, the XAU has a downside gap at 129.65.
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 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.
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
7:07 AM
