The Extended Flat NDX/SPX/HUI/XAU Action Probably Points To A Big Decline
The extended flat NDX/SPX/HUI/XAU action in recent sessions probably points to a big decline in most major averages and sector indexes soon, see
http://finance.yahoo.com/q/ta?s=%5Endx&t=5d&l=off&z=l&q=c&p=&a=m26-12-9%2Cp12%2Cfs%2Cw14&c=, because, the extended flat action probably means that it's a larger downcycle than if the flat action was brief.
Wednesday 9-19's early NDX (NASDAQ 100)/SPX (S & P 500) cycle highs (http://finance.yahoo.com/q/ta?s=%5ENDX&t=5d&l=off&z=l&q=c&p=&a=m26-12-9,p12,fs,w14&c=) are probably countertrend Wave B cycle highs for the cycle that began 8-16-07, see http://stockcharts.com/charts/gallery.html?%24ndx. NDX's (NASDAQ 100)/SPX's (S & P 500) countertrend Wave B (from 8-16 to 9-19) now has an obvious Elliott Wave 12345 up down up down up pattern on the daily charts, and, Wave B appears to have peaked early Wednesday/9-19.
The Wave A downcycle for NDX (NASDAQ 100)/SPX (S & P 500) was the decline from the July cycle highs/likely Cyclical Bull Market cycle highs for the cycle that began in October 2002 (see chart 2 at http://www.joefrocks.com/GoldStockCharts.html) to 8-16's cycle lows, see http://stockcharts.com/charts/gallery.html?%24ndx.
The July NDX (NASDAQ 100)/SPX (S & P 500) cycle highs/likely Cyclical Bull Market cycle highs for the cycle that began in October 2002 (see chart 2 at http://www.joefrocks.com/GoldStockCharts.html) held Wednesday 9-19, see http://stockcharts.com/charts/gallery.html?%24ndx, with NDX more closely approaching it's July cycle high than SPX.
If NDX fills (as expected) Tuesday's downside gap at 1983.08 sometime in the next few sessions, see http://finance.yahoo.com/q/ta?s=%5Endx&t=5d&l=off&z=l&q=c&p=&a=m26-12-9%2Cp12%2Cfs%2Cw14&c=, that will probably trigger a 2% follow through sell signal (break 2%+ below the support uptrend line), which will confirm that Wednesday 9-19's cycle high was a countertrend Wave B cycle high for the cycle that began 8-16-07, see http://stockcharts.com/charts/gallery.html?%24ndx.
There was minimal NDX (NASDAQ 100)/SPX (S & P 500) follow through both timewise and pricewise after the huge spike move that occurred in the 25 minutes following Tuesday 9-18's half point rate cut, see http://finance.yahoo.com/q/ta?s=%5Endx&t=5d&l=off&z=l&q=c&p=&a=m26-12-9%2Cp12%2Cfs%2Cw14&c=. The post rate cut rally was basically a half session (about 3-4 hours) blip (probably ended early Wednesday/9-19).
Monday I'll be looking to day trade UltraShort QQQ ProShares (QID), see chart 1 at http://stockcharts.com/charts/gallery.html?qid.
The WMT Lead Indicator is mostly bearish recently, at -0.65% versus SPX (S & P 500) today/on 9-21, at -0.29% versus on 9-20, +0.09% on 9-19, -0.33% on 9-18, at +0.51% on 9-17, at +0.58% on 9-14, at -0.02% on 9-13, at -0.55% on 9-12, at +0.23% on 9-11, at -0.15% on 9-10, at +0.82% on 9-7, at +0.30% on 9-6, at -0.81% on 9-5, -1.81% on 9-4, -0.40% on 8-31, -1.55% on 8-30, -0.37% on 8-29, see http://finance.yahoo.com/q/ta?s=%5EHUI&t=5d&l=on&z=l&q=l&p=&a=m26-12-9,p12,fs,w14&c=wmt,%5EGSPC, which jives with SPX/NDX (http://stockcharts.com/charts/gallery.html?%24ndx) soon entering Wave C of their major downcycle since the July cycle high (probably did on 9-19).
A great sanity check of the Elliott Wave count is the reliable WMT Lead Indicator, which nearly/seemingly always turns bearish ahead of downcycles and bullish ahead of upcycles. For example, the extremely bearish six month WMT Lead Indicator (see http://finance.yahoo.com/q/ta?s=%5EHUI&t=6m&l=off&z=l&q=l&p=&a=m26-12-9,p12,fs,w14&c=wmt,%5EGSPC) jives with NDX/SPX soon entering a big Wave C downcycle (probably did on 9-19), that should bottom well below the Wave A cycle lows that occurred on 8-16-07 for NDX/SPX, see http://stockcharts.com/charts/gallery.html?%24ndx.
Note that in the likely Wave A downcycle from the July cycle high at 1555.90 to Thursday 8-16's cycle low (http://stockcharts.com/charts/gallery.html?%5Espx) that the Wave B up of that downcycle lasted a grand total of only TWO DAYS, which is a clear indication that the downcycle from the July cycle high at 1555.90 to Thursday 8-16's cycle low is probably only a Wave A downcycle.
The dramatic Wave A downcycle from the July cycle high at 1555.90 to 8-16's cycle low at 1370.60 triggered a major 5% follow through sell signal, which indicates that an SPX (S & P 500) Cyclical Bear Market probably began in July after peaking at 1555.90, to see the major sell signal see chart 2 at http://www.joefrocks.com/GoldStockCharts.html.
HUI/XAU's countertrend Wave B of the Wave 2 Cyclical Bear Market since 5-11-06 may have peaked early today/Friday 9-21 (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=), with HUI putting in (potentially) a bearish double top at 402.27, only 0.14% above the Wave 1 Cyclical Bull Market cycle high at 401.69 on 5-11-06, see http://stockcharts.com/charts/gallery.html?%24hui, and, with the XAU putting in (potentially) a bearish double top at 173.17, only 0.85% above the Wave 1 Cyclical Bull Market cycle high at 171.71 on 5-11-06, see http://stockcharts.com/charts/gallery.html?%24xau. The huge spike move since 8-16-07 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 today 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 3-6 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 3-6 months.
The NEM Lead Indicator is SCARY. The NEM Lead Indicator = +0.07% versus the XAU today/on 9-21, -1.46% versus the XAU on 9-20, +0.69% versus the XAU on 9-19, -2.33% versus the XAU 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 -10.79% versus the XAU the past 17 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
http://finance.yahoo.com/q/ta?s=%5Endx&t=5d&l=off&z=l&q=c&p=&a=m26-12-9%2Cp12%2Cfs%2Cw14&c=, because, the extended flat action probably means that it's a larger downcycle than if the flat action was brief.
Wednesday 9-19's early NDX (NASDAQ 100)/SPX (S & P 500) cycle highs (http://finance.yahoo.com/q/ta?s=%5ENDX&t=5d&l=off&z=l&q=c&p=&a=m26-12-9,p12,fs,w14&c=) are probably countertrend Wave B cycle highs for the cycle that began 8-16-07, see http://stockcharts.com/charts/gallery.html?%24ndx. NDX's (NASDAQ 100)/SPX's (S & P 500) countertrend Wave B (from 8-16 to 9-19) now has an obvious Elliott Wave 12345 up down up down up pattern on the daily charts, and, Wave B appears to have peaked early Wednesday/9-19.
The Wave A downcycle for NDX (NASDAQ 100)/SPX (S & P 500) was the decline from the July cycle highs/likely Cyclical Bull Market cycle highs for the cycle that began in October 2002 (see chart 2 at http://www.joefrocks.com/GoldStockCharts.html) to 8-16's cycle lows, see http://stockcharts.com/charts/gallery.html?%24ndx.
The July NDX (NASDAQ 100)/SPX (S & P 500) cycle highs/likely Cyclical Bull Market cycle highs for the cycle that began in October 2002 (see chart 2 at http://www.joefrocks.com/GoldStockCharts.html) held Wednesday 9-19, see http://stockcharts.com/charts/gallery.html?%24ndx, with NDX more closely approaching it's July cycle high than SPX.
If NDX fills (as expected) Tuesday's downside gap at 1983.08 sometime in the next few sessions, see http://finance.yahoo.com/q/ta?s=%5Endx&t=5d&l=off&z=l&q=c&p=&a=m26-12-9%2Cp12%2Cfs%2Cw14&c=, that will probably trigger a 2% follow through sell signal (break 2%+ below the support uptrend line), which will confirm that Wednesday 9-19's cycle high was a countertrend Wave B cycle high for the cycle that began 8-16-07, see http://stockcharts.com/charts/gallery.html?%24ndx.
There was minimal NDX (NASDAQ 100)/SPX (S & P 500) follow through both timewise and pricewise after the huge spike move that occurred in the 25 minutes following Tuesday 9-18's half point rate cut, see http://finance.yahoo.com/q/ta?s=%5Endx&t=5d&l=off&z=l&q=c&p=&a=m26-12-9%2Cp12%2Cfs%2Cw14&c=. The post rate cut rally was basically a half session (about 3-4 hours) blip (probably ended early Wednesday/9-19).
Monday I'll be looking to day trade UltraShort QQQ ProShares (QID), see chart 1 at http://stockcharts.com/charts/gallery.html?qid.
The WMT Lead Indicator is mostly bearish recently, at -0.65% versus SPX (S & P 500) today/on 9-21, at -0.29% versus on 9-20, +0.09% on 9-19, -0.33% on 9-18, at +0.51% on 9-17, at +0.58% on 9-14, at -0.02% on 9-13, at -0.55% on 9-12, at +0.23% on 9-11, at -0.15% on 9-10, at +0.82% on 9-7, at +0.30% on 9-6, at -0.81% on 9-5, -1.81% on 9-4, -0.40% on 8-31, -1.55% on 8-30, -0.37% on 8-29, see http://finance.yahoo.com/q/ta?s=%5EHUI&t=5d&l=on&z=l&q=l&p=&a=m26-12-9,p12,fs,w14&c=wmt,%5EGSPC, which jives with SPX/NDX (http://stockcharts.com/charts/gallery.html?%24ndx) soon entering Wave C of their major downcycle since the July cycle high (probably did on 9-19).
A great sanity check of the Elliott Wave count is the reliable WMT Lead Indicator, which nearly/seemingly always turns bearish ahead of downcycles and bullish ahead of upcycles. For example, the extremely bearish six month WMT Lead Indicator (see http://finance.yahoo.com/q/ta?s=%5EHUI&t=6m&l=off&z=l&q=l&p=&a=m26-12-9,p12,fs,w14&c=wmt,%5EGSPC) jives with NDX/SPX soon entering a big Wave C downcycle (probably did on 9-19), that should bottom well below the Wave A cycle lows that occurred on 8-16-07 for NDX/SPX, see http://stockcharts.com/charts/gallery.html?%24ndx.
Note that in the likely Wave A downcycle from the July cycle high at 1555.90 to Thursday 8-16's cycle low (http://stockcharts.com/charts/gallery.html?%5Espx) that the Wave B up of that downcycle lasted a grand total of only TWO DAYS, which is a clear indication that the downcycle from the July cycle high at 1555.90 to Thursday 8-16's cycle low is probably only a Wave A downcycle.
The dramatic Wave A downcycle from the July cycle high at 1555.90 to 8-16's cycle low at 1370.60 triggered a major 5% follow through sell signal, which indicates that an SPX (S & P 500) Cyclical Bear Market probably began in July after peaking at 1555.90, to see the major sell signal see chart 2 at http://www.joefrocks.com/GoldStockCharts.html.
HUI/XAU's countertrend Wave B of the Wave 2 Cyclical Bear Market since 5-11-06 may have peaked early today/Friday 9-21 (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=), with HUI putting in (potentially) a bearish double top at 402.27, only 0.14% above the Wave 1 Cyclical Bull Market cycle high at 401.69 on 5-11-06, see http://stockcharts.com/charts/gallery.html?%24hui, and, with the XAU putting in (potentially) a bearish double top at 173.17, only 0.85% above the Wave 1 Cyclical Bull Market cycle high at 171.71 on 5-11-06, see http://stockcharts.com/charts/gallery.html?%24xau. The huge spike move since 8-16-07 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 today 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 3-6 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 3-6 months.
The NEM Lead Indicator is SCARY. The NEM Lead Indicator = +0.07% versus the XAU today/on 9-21, -1.46% versus the XAU on 9-20, +0.69% versus the XAU on 9-19, -2.33% versus the XAU 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 -10.79% versus the XAU the past 17 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
1:17 PM
