Some Early Thoughts - Quadruple Witching Occurred 9-21, Massive Fed Credit, etc.
Some early thoughts: How big a factor behind recent market strength was Friday 9-21's quarterly "Quadruple Witching" futures/options expiration? Combine Quadruple Witching with massive Fed credit (fuels program traders) in recent weeks due to the mortgage/credit crisis ($29 Billion on Thursday 9-20, see http://www.newyorkfed.org/markets/omo/dmm/temp.cfm?SHOWMORE=TRUE) and, much of the recent market strength can be explained.
NDX (NASDAQ 100) took out last Wednesday's cycle high (massive Fed credit is fueling program buying), 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=, and, the July NDX cycle high was taken out today also, so, NDX's Cyclical Bull Market since October 2002 may peak today or this week as opposed to July.
I didn't do NDX's big picture chart, so, I suspect that NDX (NASDAQ 100) didn't hit a major 5% sell signal yet. SPX ( S & P 500) did hit a major 5% sell signal (see chart 2 at http://www.joefrocks.com/GoldStockCharts.html), so, July's likely SPX Cyclical Bull Market cycle high at 1555.90 should hold, and, it looks like it will. Major 5% sell signals are very reliable.
With massive Fed credit upside surprise/rollover action is likely due to strong program buying ($29 Billion on Thursday 9-20, see http://www.newyorkfed.org/markets/omo/dmm/temp.cfm?SHOWMORE=TRUE). The Upside surprise/Rollover Barometer is at "Likely." I need to start using the Upside Surprise/Rollover Barometer again.
It looks like HUI/XAU put in important bearish double top countertrend Wave B cycle highs early on Friday 9-21-07 at 402.27/173.17 versus 5-11-06's Wave 1 Cyclical Bull Market cycle highs at 401.69/171.71, see http://finance.yahoo.com/q/ta?s=%5Ehui&t=5d&l=off&z=l&q=c&p=&a=m26-12-9%2Cp12%2Cfs%2Cw14&c=.
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.
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
NDX (NASDAQ 100) took out last Wednesday's cycle high (massive Fed credit is fueling program buying), 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=, and, the July NDX cycle high was taken out today also, so, NDX's Cyclical Bull Market since October 2002 may peak today or this week as opposed to July.
I didn't do NDX's big picture chart, so, I suspect that NDX (NASDAQ 100) didn't hit a major 5% sell signal yet. SPX ( S & P 500) did hit a major 5% sell signal (see chart 2 at http://www.joefrocks.com/GoldStockCharts.html), so, July's likely SPX Cyclical Bull Market cycle high at 1555.90 should hold, and, it looks like it will. Major 5% sell signals are very reliable.
With massive Fed credit upside surprise/rollover action is likely due to strong program buying ($29 Billion on Thursday 9-20, see http://www.newyorkfed.org/markets/omo/dmm/temp.cfm?SHOWMORE=TRUE). The Upside surprise/Rollover Barometer is at "Likely." I need to start using the Upside Surprise/Rollover Barometer again.
It looks like HUI/XAU put in important bearish double top countertrend Wave B cycle highs early on Friday 9-21-07 at 402.27/173.17 versus 5-11-06's Wave 1 Cyclical Bull Market cycle highs at 401.69/171.71, see http://finance.yahoo.com/q/ta?s=%5Ehui&t=5d&l=off&z=l&q=c&p=&a=m26-12-9%2Cp12%2Cfs%2Cw14&c=.
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.
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
7:10 AM
