The XAU Might Have Put In A Nearly Perfect Bearish Double Top
The XAU might have put in a nearly perfect bearish countertrend Wave B (since 3-14-07) double top cycle high at 148.07 versus 2-23-07's cycle high at 148.11, and, filled it's upside gap at 147.75. Reliable lead indicator NEM tried and so far failed to fill it's upside gap at 45.10 today, with a cycle high so far at 45.05, that looks like it might be today's cycle high and possibly a Wave 3 short term cycle high for the monthly upcycle since 3-14-07 (cycle low at 40.53). I sold the rest of my NEM April 45 calls (NEMDI) at 0.50 versus a basis of 0.77.
Having thought about this "upside surprise" some today, this is what I originally expected to happen, because NEM was recently so close (low 40s) to it's primary multi year Secular Bull Market trendline in effect since October 2000 (Wave 2 Cyclical Bear Market ended at 39.84 on 10-4-06), see chart 8 at http://www.joefrocks.com/GoldStockCharts.html. The path of least resistance was obviously up, but, the action has been very deceptive, with NEM reversing course (looked like a funky long Wave 2) and looking like it was going to fill it's downside gap at 41.44.
I haven't talked about the XAU Put/Call Ratio much recently, but, it correctly pointed to strength on Friday, rising to 1.29243 on 4-13 (April expiration) from 1.26931 on 4-12, and, it correctly pointed to weakness on Thursday, dropping to 1.26931 on 4-12 from 1.29900 on 4-11. Today's sharp decline to 1.24443 from 1.29243 on 4-13 points to potentially severe weakness today.
This is what's happening cyclewise:
HUI's intermediate term upcycle that began on 10-4-06 and appeared to peak on 12-5-06 at 362.53 is peaking in a "very dramatic", very flat, very long timeframe manner (http://finance.yahoo.com/q/ta?s=%5Ehui&t=1y&l=off&z=l&q=c&p=&a=m26-12-9%2Cp12%2Cfs%2Cw14&c==), with a slightly higher nearly perfect bearish double top occurring on 2-23-07 at 362.58, and, with another probably modestly higher cycle high occurring now/possibly today at 367.81, which is less than 1.50% above the previous two cycle highs. So far this is about as anemic/flat a rollover action as you'll ever see. This is probably the mother of all sucker's rallies. I can't wait to see the headlines/"analysis" from the clueless gold gurus that are always bullish.
The XAU still has an obviously bearish (unless you're a gold "guru") declining peaks pattern going back to 5-11-06 (http://finance.yahoo.com/q/ta?s=%5EXAU&t=1y&l=off&z=l&q=c&p=&a=m26-12-9,p12,fs,w14&c==).
NEM is in a Wave 3 short term upcycle of a monthly upcycle since 3-14-07, as opposed to a funky Wave 2 down, and, filled it's upside gap at 44.53 on Friday.
The picture remains very bearish, a very important cycle high is in the process of occurring. The COT data is very bearish on an intermediate term cycle basis (http://www.cftc.gov/dea/options/deacmxsof.htm) and has been the past 5-6 weeks+, I Watch remains bearish (http://iwp.thomsonfn.com/tfspro/iwatch/cgi-bin/iw_ticker?ticker=nem), and, the 1 year NEM Lead Indicator (http://finance.yahoo.com/q/ta?s=%5EXAU&t=1y&l=off&z=l&q=l&p=&a=&c=%5Ehui,nem) is very bearish.
Cycles indicate that a big decline is coming. HUI/XAU are 45%+ above their primary multi year trendlines (Secular Bull Market since late 2000), see charts 7 and 9 at http://www.joefrocks.com/GoldStockCharts.html. There's no way in hell that HUI's super anemic uptrend of recent months is bullish, it's actually extremely flat lengthy rollover action since 12-5-06's cycle high. There's no way in hell that the XAU's downtrend since 5-11-06 (Wave 2 Cyclical Bear Market for HUI/XAU, Wave 2 down of the Secular Bull Market since late 2000) is bullish.
The savvy non contrarian gold Commercial Traders made an unusually large (> 10% increase in short position) short trade in the 5 day period ending 4-10-07 (http://www.cftc.gov/dea/options/deacmxsof.htm), which correctly pointed to strength this week, and, points to some next week as well. The clueless gold Speculators went massively long, probably near an important cycle high.
Thomson I Watch is bullish so far today for NEM but should turn bearish again (http://iwp.thomsonfn.com/tfspro/iwatch/cgi-bin/iw_ticker?ticker=nem), is bearish so far today for GFI (http://iwp.thomsonfn.com/tfspro/iwatch/cgi-bin/iw_ticker?ticker=gfi), and for WMT (http://iwp.thomsonfn.com/tfspro/iwatch/cgi-bin/iw_ticker?ticker=wmt).
In the next week or two the XAU should fill downside gaps at 143.58, 133.31 and possibly also at 129.65, and, NEM should fill it's downside gaps at 43.57 (filled), 43.45 (filled), 43.34, 42.89, and at 41.44. The XAU should bottom at 133ish or 129ish and NEM should bottom at 42.50ish or 41ish, shortly after filling 42.89 and maybe 41.44 (monthly cycle low at 40.53 occurred on 3-14-07).
Fed Credit (fuels index fund program traders) for the 5 day period ending 4-11-07 fell a sharp -$2.823 Billion (http://www.federalreserve.gov/releases/h41/Current/), so, the Rollover/Upside Surprise Barometer is at "Unlikely." The sharp drop in Fed Credit points to severe weakness for the 5 day period ending 4-18-07.
I bought XAU April 130 puts (XAVPF) on 3-28 at 1.20, and, I doubled up at 0.55 for an average cost/basis of 0.875, and, will look to exit shortly after the gap filling action is completed in the next few days. I shorted GLD, the gold ETF, at 65.61 on 3-29, which will probably bottom at 63.50ish in the next few days, shortly after filling a downside gap at 63.98 (there are also downside gaps at 62.26 and 60.63). I sold all my NEM April 45 calls (NEMDI) at 0.50 versus a basis of 0.77.
One usually will exit trading positions shortly after gap filling action is completed, unless there are very good reasons for remaining in the position(s). Cycle trendlines/channels used in concert with Elliott Wave patterns and gaps are the basis/crux of "Trade the Cycles."
NEM has upside gaps at 45.10 and at 47.06. NEM has downside gaps at 43.34, 42.89 and 41.44, and, the XAU has downside gaps at 143,58, 133.31 and 129.65. WMT has an upside gap at 49.98, and, a downside gap at 46.21.
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.
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."
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.
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
Having thought about this "upside surprise" some today, this is what I originally expected to happen, because NEM was recently so close (low 40s) to it's primary multi year Secular Bull Market trendline in effect since October 2000 (Wave 2 Cyclical Bear Market ended at 39.84 on 10-4-06), see chart 8 at http://www.joefrocks.com/GoldStockCharts.html. The path of least resistance was obviously up, but, the action has been very deceptive, with NEM reversing course (looked like a funky long Wave 2) and looking like it was going to fill it's downside gap at 41.44.
I haven't talked about the XAU Put/Call Ratio much recently, but, it correctly pointed to strength on Friday, rising to 1.29243 on 4-13 (April expiration) from 1.26931 on 4-12, and, it correctly pointed to weakness on Thursday, dropping to 1.26931 on 4-12 from 1.29900 on 4-11. Today's sharp decline to 1.24443 from 1.29243 on 4-13 points to potentially severe weakness today.
This is what's happening cyclewise:
HUI's intermediate term upcycle that began on 10-4-06 and appeared to peak on 12-5-06 at 362.53 is peaking in a "very dramatic", very flat, very long timeframe manner (http://finance.yahoo.com/q/ta?s=%5Ehui&t=1y&l=off&z=l&q=c&p=&a=m26-12-9%2Cp12%2Cfs%2Cw14&c==), with a slightly higher nearly perfect bearish double top occurring on 2-23-07 at 362.58, and, with another probably modestly higher cycle high occurring now/possibly today at 367.81, which is less than 1.50% above the previous two cycle highs. So far this is about as anemic/flat a rollover action as you'll ever see. This is probably the mother of all sucker's rallies. I can't wait to see the headlines/"analysis" from the clueless gold gurus that are always bullish.
The XAU still has an obviously bearish (unless you're a gold "guru") declining peaks pattern going back to 5-11-06 (http://finance.yahoo.com/q/ta?s=%5EXAU&t=1y&l=off&z=l&q=c&p=&a=m26-12-9,p12,fs,w14&c==).
NEM is in a Wave 3 short term upcycle of a monthly upcycle since 3-14-07, as opposed to a funky Wave 2 down, and, filled it's upside gap at 44.53 on Friday.
The picture remains very bearish, a very important cycle high is in the process of occurring. The COT data is very bearish on an intermediate term cycle basis (http://www.cftc.gov/dea/options/deacmxsof.htm) and has been the past 5-6 weeks+, I Watch remains bearish (http://iwp.thomsonfn.com/tfspro/iwatch/cgi-bin/iw_ticker?ticker=nem), and, the 1 year NEM Lead Indicator (http://finance.yahoo.com/q/ta?s=%5EXAU&t=1y&l=off&z=l&q=l&p=&a=&c=%5Ehui,nem) is very bearish.
Cycles indicate that a big decline is coming. HUI/XAU are 45%+ above their primary multi year trendlines (Secular Bull Market since late 2000), see charts 7 and 9 at http://www.joefrocks.com/GoldStockCharts.html. There's no way in hell that HUI's super anemic uptrend of recent months is bullish, it's actually extremely flat lengthy rollover action since 12-5-06's cycle high. There's no way in hell that the XAU's downtrend since 5-11-06 (Wave 2 Cyclical Bear Market for HUI/XAU, Wave 2 down of the Secular Bull Market since late 2000) is bullish.
The savvy non contrarian gold Commercial Traders made an unusually large (> 10% increase in short position) short trade in the 5 day period ending 4-10-07 (http://www.cftc.gov/dea/options/deacmxsof.htm), which correctly pointed to strength this week, and, points to some next week as well. The clueless gold Speculators went massively long, probably near an important cycle high.
Thomson I Watch is bullish so far today for NEM but should turn bearish again (http://iwp.thomsonfn.com/tfspro/iwatch/cgi-bin/iw_ticker?ticker=nem), is bearish so far today for GFI (http://iwp.thomsonfn.com/tfspro/iwatch/cgi-bin/iw_ticker?ticker=gfi), and for WMT (http://iwp.thomsonfn.com/tfspro/iwatch/cgi-bin/iw_ticker?ticker=wmt).
In the next week or two the XAU should fill downside gaps at 143.58, 133.31 and possibly also at 129.65, and, NEM should fill it's downside gaps at 43.57 (filled), 43.45 (filled), 43.34, 42.89, and at 41.44. The XAU should bottom at 133ish or 129ish and NEM should bottom at 42.50ish or 41ish, shortly after filling 42.89 and maybe 41.44 (monthly cycle low at 40.53 occurred on 3-14-07).
Fed Credit (fuels index fund program traders) for the 5 day period ending 4-11-07 fell a sharp -$2.823 Billion (http://www.federalreserve.gov/releases/h41/Current/), so, the Rollover/Upside Surprise Barometer is at "Unlikely." The sharp drop in Fed Credit points to severe weakness for the 5 day period ending 4-18-07.
I bought XAU April 130 puts (XAVPF) on 3-28 at 1.20, and, I doubled up at 0.55 for an average cost/basis of 0.875, and, will look to exit shortly after the gap filling action is completed in the next few days. I shorted GLD, the gold ETF, at 65.61 on 3-29, which will probably bottom at 63.50ish in the next few days, shortly after filling a downside gap at 63.98 (there are also downside gaps at 62.26 and 60.63). I sold all my NEM April 45 calls (NEMDI) at 0.50 versus a basis of 0.77.
One usually will exit trading positions shortly after gap filling action is completed, unless there are very good reasons for remaining in the position(s). Cycle trendlines/channels used in concert with Elliott Wave patterns and gaps are the basis/crux of "Trade the Cycles."
NEM has upside gaps at 45.10 and at 47.06. NEM has downside gaps at 43.34, 42.89 and 41.44, and, the XAU has downside gaps at 143,58, 133.31 and 129.65. WMT has an upside gap at 49.98, and, a downside gap at 46.21.
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.
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."
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.
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
7:57 AM
