A Bearish Huge Transitory HUI/XAU Spike Occurred Last Thursday
In HUI's 5 day intraday chart, 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=, one can see the bearish huge very brief spike (not a healthy rally, very likely important peaking action) that occurred at last Thursday's open, due in large part to the Fed's massive $29 Billion credit infusion early last Thursday, that led to strong program buying, see http://www.newyorkfed.org/markets/omo/dmm/temp.cfm?SHOWMORE=TRUE, that caused HUI/XAU to slightly exceed their 5-11-06 Wave 1 Cyclical Bull Market cycle highs.
It looks like Friday's early cycle highs at 402.27 for HUI (see chart 2 at http://stockcharts.com/charts/gallery.html?%24hui to see double top at 401.69 on 5-11-06/402.27 on 9-21-07) and at 173.17 for the XAU (versus 171.71 on 5-11-06) are countertrend Wave B bearish double top cycle highs for the Wave 2 Cyclical Bear Market since 5-11-06.
The huge spike move from 8-16-07 until 9-21-07 is typical of what happens near very important cycle highs.
While Wave B cycle highs technically should be below the "ultimate" cycle highs, the market isn't an exact science (definitely a science though), indexes' components are changed periodically, and, often cycle highs will occur in dramatic rollover mode, that's very similar to a countertrend Wave B upcycle (basically the same as a Wave B when double tops occur, which is what might have happened Friday 9-21 with HUI/XAU). The point being that, if one was in a basket of HUI or XAU components, the time to sell was in May 2006 not September 2007.
HUI/XAU should head down to their primary multi year Secular Bull Market (since late 2000) trendlines at 220ish and 90ish in the next 6-12+ months, see charts 7 and 9 at http://www.joefrocks.com/GoldStockCharts.html. Gold should head down to it's primary multi year Secular Bull Market (since April 2001) trendline at $475-500 in the next 6-12+ months.
HUI/XAU/gold's Wave 1 Cyclical Bull Market from late 2000 (April 2001 for gold) until 5-11-06 was largely due to the inflationary real estate/mortgage/credit boom from 2002-2006. I don't see where the next inflationary economic cycle will come from that would drive gold much higher.
The real estate/mortgage/credit bust will last for years. The stock market's (SPX) Cyclical Bull Market that began in October 2002 is toast as of July 2007, see chart 2 at http://www.joefrocks.com/GoldStockCharts.html. Where's the next inflationary economic cycle going to come from? It appears that HUI/XAU/gold's Wave 2 Cyclical Bear Market since 5-11-06 could last longer than expected.
The NEM Lead Indicator is SCARY. The NEM Lead Indicator = +2.03% versus the XAU on 9-24, +0.07% versus the XAU on 9-21, -1.46% on 9-20, +0.69% on 9-19, -2.33% on 9-18, -0.53% on 9-17, +0.12% on 9-14, -1.34% on 9-13,+0.02% on 9-12, +0.25% on 9-11, -0.69% on 9-10, +0.42% on 9-7, -1.39% on 9-6, +0.06% on 9-5, -1.81% on 9-4, -0.98% on 8-31, -0.03% on 8-30, -1.86% on 8-29 = an extremely bearish -8.76% versus the XAU the past 18 sessions, see six month NEM Lead Indicator at http://finance.yahoo.com/q/ta?s=%5EXAU&t=6m&l=off&z=l&q=l&p=&a=&c=%5Ehui,nem.
Fundamentally, the current deflationary real estate/mortgage bust is a major negative for gold, just as the inflationary real estate/mortgage boom from 2002-2006 was a major positive for gold, coinciding with gold's Wave 1 Cyclical Bull Market from April 2001 until May 2006. Gold does well in inflationary economic cycles and gold does poorly in deflationary economic cycles, which is pretty basic stuff that a true gold analyst would understand.
Cycle trendlines/channels used in concert with Elliott Wave patterns and gaps are the basis/crux of "Trade the Cycles." "Gaps action" is very important.
If one decides to trade volatile stocks/ETFs obviously paper trade for a while or trade very modest positions at first.
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. Gold's primary multi-year Secular Bull Market/very long term upcycle trendline is at $475ish right now, so, gold would be a great buy in the $475-500 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. The primary Secular Bull Market trendlines since late 2000 are at 200-220 for HUI and at 85-90 for the XAU. Those are the targets for where the Cyclical Bear Market will bottom. NEM's Wave 2 Cyclical Bear Market began on 1-31-06. ....... http://www.JoeFRocks.com/ .
HUI NEM XAU
It looks like Friday's early cycle highs at 402.27 for HUI (see chart 2 at http://stockcharts.com/charts/gallery.html?%24hui to see double top at 401.69 on 5-11-06/402.27 on 9-21-07) and at 173.17 for the XAU (versus 171.71 on 5-11-06) are countertrend Wave B bearish double top cycle highs for the Wave 2 Cyclical Bear Market since 5-11-06.
The huge spike move from 8-16-07 until 9-21-07 is typical of what happens near very important cycle highs.
While Wave B cycle highs technically should be below the "ultimate" cycle highs, the market isn't an exact science (definitely a science though), indexes' components are changed periodically, and, often cycle highs will occur in dramatic rollover mode, that's very similar to a countertrend Wave B upcycle (basically the same as a Wave B when double tops occur, which is what might have happened Friday 9-21 with HUI/XAU). The point being that, if one was in a basket of HUI or XAU components, the time to sell was in May 2006 not September 2007.
HUI/XAU should head down to their primary multi year Secular Bull Market (since late 2000) trendlines at 220ish and 90ish in the next 6-12+ months, see charts 7 and 9 at http://www.joefrocks.com/GoldStockCharts.html. Gold should head down to it's primary multi year Secular Bull Market (since April 2001) trendline at $475-500 in the next 6-12+ months.
HUI/XAU/gold's Wave 1 Cyclical Bull Market from late 2000 (April 2001 for gold) until 5-11-06 was largely due to the inflationary real estate/mortgage/credit boom from 2002-2006. I don't see where the next inflationary economic cycle will come from that would drive gold much higher.
The real estate/mortgage/credit bust will last for years. The stock market's (SPX) Cyclical Bull Market that began in October 2002 is toast as of July 2007, see chart 2 at http://www.joefrocks.com/GoldStockCharts.html. Where's the next inflationary economic cycle going to come from? It appears that HUI/XAU/gold's Wave 2 Cyclical Bear Market since 5-11-06 could last longer than expected.
The NEM Lead Indicator is SCARY. The NEM Lead Indicator = +2.03% versus the XAU on 9-24, +0.07% versus the XAU on 9-21, -1.46% on 9-20, +0.69% on 9-19, -2.33% on 9-18, -0.53% on 9-17, +0.12% on 9-14, -1.34% on 9-13,+0.02% on 9-12, +0.25% on 9-11, -0.69% on 9-10, +0.42% on 9-7, -1.39% on 9-6, +0.06% on 9-5, -1.81% on 9-4, -0.98% on 8-31, -0.03% on 8-30, -1.86% on 8-29 = an extremely bearish -8.76% versus the XAU the past 18 sessions, see six month NEM Lead Indicator at http://finance.yahoo.com/q/ta?s=%5EXAU&t=6m&l=off&z=l&q=l&p=&a=&c=%5Ehui,nem.
Fundamentally, the current deflationary real estate/mortgage bust is a major negative for gold, just as the inflationary real estate/mortgage boom from 2002-2006 was a major positive for gold, coinciding with gold's Wave 1 Cyclical Bull Market from April 2001 until May 2006. Gold does well in inflationary economic cycles and gold does poorly in deflationary economic cycles, which is pretty basic stuff that a true gold analyst would understand.
Cycle trendlines/channels used in concert with Elliott Wave patterns and gaps are the basis/crux of "Trade the Cycles." "Gaps action" is very important.
If one decides to trade volatile stocks/ETFs obviously paper trade for a while or trade very modest positions at first.
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. Gold's primary multi-year Secular Bull Market/very long term upcycle trendline is at $475ish right now, so, gold would be a great buy in the $475-500 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. The primary Secular Bull Market trendlines since late 2000 are at 200-220 for HUI and at 85-90 for the XAU. Those are the targets for where the Cyclical Bear Market will bottom. NEM's Wave 2 Cyclical Bear Market began on 1-31-06. ....... http://www.JoeFRocks.com/ .
HUI NEM XAU
Labels: Gold, Gold Stocks, HUI, NEM, Silver, Silver Stocks, SPX, XAU
posted by Joe Ferrazzano at
8:33 AM
