The Gold Traders Who Know What They're Doing Are Going Massively Short
The gold traders who know what they're doing, the savvy usually non contrarian gold Commercial Traders, are going massively short. They added a very respectable 17,083 short gold futures and options contracts in the latest report/5 day period ending 9-18-07, and, a massive 52,000+ short gold futures and options contracts in the previous report (possibly the largest weekly change I've ever seen), while also trading long in recent weeks (added 1303 long futures and options contracts in the latest report for the 5 day period ending 9-18-07, and, over 10,000 long futures and options contracts in the previous report), see the last/third data at http://www.cftc.gov/dea/options/deacmxsof.htm.
This jives with HUI/XAU possibly putting in very important countertrend Wave B (of the Wave 2 Cyclical Bear Market since 5-11-06) double top cycle highs 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.
Also, 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.
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.
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
This jives with HUI/XAU possibly putting in very important countertrend Wave B (of the Wave 2 Cyclical Bear Market since 5-11-06) double top cycle highs 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.
Also, 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.
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.
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
4:08 PM
