The Extended Flat SPX (S & P 500) Downtrend In Recent Sessions Points To A Sharp Decline Soon
The extended flat SPX (S & P 500, http://stockcharts.com/charts/gallery.html?%24spx) downtrend in recent sessions points to a sharp decline soon, see http://finance.yahoo.com/q/ta?s=%5Espx&t=5d&l=off&z=l&q=c&p=&a=m26-12-9%2Cp12%2Cfs%2Cw14&c=, because, it's probably the flat segment of a large downcycle.
This means that most indexes/sectors will probably soon be very weak, because, SPX (S & P 500) is the key lead index for program trading (massive 70% or so of the dollar volume on the NYSE), and, most sectors are represented in SPX (S & P 500).
The reliable SPX/market WMT Lead Indicator turned bearish again today, at -0.50% versus SPX (S & P 500), so, tomorrow might bring significant SPX/market weakness.
An SPX (S & P 500) countertrend Wave B cycle high might have occurred at 1549.02 on Monday 10-1-07 versus a likely (needs to establish that a) Cyclical Bull Market cycle high (cycle began October 2002) at 1555.90 in July 2007, see chart 2 at http://www.joefrocks.com/GoldStockCharts.html, since a major 5% follow through sell signal occurred.
SPX and most if not all major averages need to clearly break down before I look to trade them aggressively short. SPX's (S & P 500, http://stockcharts.com/charts/gallery.html?%24spx) support uptrend line since 8-16-07 has to break down, as evidenced by 2%+ follow through to the downside, before I look to aggressively short SPX (S & P 500). Actually, I'm looking aggressively short RUTX (Russell 2000), using the UltraShort Russell 2000 ETF TWM, http://stockcharts.com/charts/gallery.html?twm.
I sold FRPT at 23.805 on 10-2-07 versus a purchase on 7-11-07 at a little under 23.52. I'm looking to/might buy/trade a tiny position in GXPI.OB, a gold penny stock that appears to have put in a major cycle low at 0.06 on 10-1-07, in a short term Wave 2 type pullback, see http://stockcharts.com/charts/gallery.html?gxpi. I might wait for more follow through before buying it, especially since the gold sector is likely to be very weak. Another strong rally tomorrow will probably be enough to convince me to trade a tiny position. Note GXPI.OB's bullish large inverse spike at 0.06, and, the (borderline) buy signal/very strong rally in recent sessions on strong volume. I'm going to limit my rockets trading to tiny positions for now. I'll gradually increase the position size if successful.
Right now the Trade the Cycles picture for HUI, XAU, and gold is very clear, and, I'm looking to short the gold miners ETF GDX, http://stockcharts.com/charts/gallery.html?gdx. 10-2-07's mini crash was a 2%+ sell signal that confirms that the huge spike move that began on 8-16-07 (Wave 5 of Wave B of the Cyclical Bear Market since 5-11-06) peaked on 9-21-07 (cycle highs at 402.27 and 173.17).
HUI completed a very large Elliott Wave ABC down up down Wave A type move early today, that began late on 10-1-07, see http://finance.yahoo.com/q/ta?s=%5EHUI&t=5d&l=on&z=l&q=c&p=&a=m26-12-9,p12,fs,w14&c=. Most of today's action was a countertrend Wave B type upcycle, with the third/final Wave 5 cycle high (of an Elliott Wave 12345 up down up down up pattern) appearing to peak just before session's end, which jives with today's very bearish NEM Lead Indicator, at -1.17% versus the XAU. Note that most of today's strength was an early large Wave 1 spike that was followed by rollover action, which is obviously bearish. I'm going to look to short the gold miners ETF GDX tomorrow, http://stockcharts.com/charts/gallery.html?gdx.
The Elliott Wave count and the bearish long term triple top on 5-11-06/9-21-07/10-1-07 (see next paragraph) strongly suggest that HUI, XAU, and gold entered the final Wave C downcycle (of the Wave 2 Cyclical Bear Market since 5-11-06) on 9-21-07.
HUI and the XAU put in bearish countertrend Wave B double top cycle highs on 9-21-07 at 402.27/173.17 (of the Wave 2 Cyclical Bear Market since 5-11-06, see chart 2 at http://stockcharts.com/charts/gallery.html?%24hui) versus Wave 1 Cyclical Bull Market cycle highs on 5-11-06 at 401.69/171.71, and, 10-1-07's cycle highs at 401.50 and 173.09 form a bearish short term double top and a bearish long term triple top. This jives with the extremely bearish NEM Lead Indicator and the extremely bearish COT (Commitments Of Traders) data (see next two paragraphs). A major gold massacre has probably begun.
The NEM Lead Indicator is BIG TIME SCARY. The NEM Lead Indicator = -1.17% versus the XAU today/on 10-4, +0.37% on 10-3, +1.35% on 10-2, +0.33% on 10-1, -0.41% on 9-28, -2.21% on 9-27, -4.13% on 9-26, +0.40% on 9-25, +2.03% on 9-24, +0.07% 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 -14.23% versus the XAU the past 26 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.
The latest gold COT (Commitments Of Traders) Data (5 day period ending 9-25) is very bearish, see the last/third data at http://www.cftc.gov/dea/options/deacmxsof.htm. The savvy non contrarian gold Commercial Traders continue to go massively short, adding a large 27,946 short gold futures and options contracts (added over 17,000 the prior week and a massive 53,207 the week before that), while liquidating 2977 long gold futures and options contracts.
See Tuesday 9-25's first post at http://tradethecycles.blogspot.com/2007/09/bearish-huge-transitory-huixau-spike.html, and, see http://tradethecycles.blogspot.com/2007/10/this-is-it.html for additional important precious metals sector analysis.
The Wave A downcycle for SPX (S & P 500) was the decline from the July cycle high/likely Cyclical Bull Market cycle high at 1555.90 (cycle began in October 2002), see chart 2 at http://www.joefrocks.com/GoldStockCharts.html, to 8-16's cycle low at 1370.60, see http://stockcharts.com/charts/gallery.html?%24spx.
SPX's (S & P 500) July 2007 cycle high at 1555.90 is a likely Cyclical Bull Market cycle high (cycle began October 2002), see chart 2 at http://www.joefrocks.com/GoldStockCharts.html, since a major 5% follow through sell signal occurred.
The WMT Lead Indicator is mostly bullish recently, but, turned bearish again today, at -0.50% versus SPX (S & P 500) today/on 10-4, at +1.04% on 10-3, at +0.93% on 10-2, at +0.55% on 10-1, at +0.39% on 9-28, at +0.33% on 9-27, at -0.22% on 9-26, at -1.81% on 9-25, at -0.06% on 9-24, at -0.65% on 9-21, at -0.29% 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 (http://stockcharts.com/charts/gallery.html?%24spx) soon entering Wave C of the major downcycle since the July cycle high (might have on 10-1-07).
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 SPX soon entering a big Wave C downcycle (might have on 10-1-07), that should bottom well below the Wave A cycle lows that occurred on 8-16-07 for SPX, see http://stockcharts.com/charts/gallery.html?%24spx.
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.
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 means that most indexes/sectors will probably soon be very weak, because, SPX (S & P 500) is the key lead index for program trading (massive 70% or so of the dollar volume on the NYSE), and, most sectors are represented in SPX (S & P 500).
The reliable SPX/market WMT Lead Indicator turned bearish again today, at -0.50% versus SPX (S & P 500), so, tomorrow might bring significant SPX/market weakness.
An SPX (S & P 500) countertrend Wave B cycle high might have occurred at 1549.02 on Monday 10-1-07 versus a likely (needs to establish that a) Cyclical Bull Market cycle high (cycle began October 2002) at 1555.90 in July 2007, see chart 2 at http://www.joefrocks.com/GoldStockCharts.html, since a major 5% follow through sell signal occurred.
SPX and most if not all major averages need to clearly break down before I look to trade them aggressively short. SPX's (S & P 500, http://stockcharts.com/charts/gallery.html?%24spx) support uptrend line since 8-16-07 has to break down, as evidenced by 2%+ follow through to the downside, before I look to aggressively short SPX (S & P 500). Actually, I'm looking aggressively short RUTX (Russell 2000), using the UltraShort Russell 2000 ETF TWM, http://stockcharts.com/charts/gallery.html?twm.
I sold FRPT at 23.805 on 10-2-07 versus a purchase on 7-11-07 at a little under 23.52. I'm looking to/might buy/trade a tiny position in GXPI.OB, a gold penny stock that appears to have put in a major cycle low at 0.06 on 10-1-07, in a short term Wave 2 type pullback, see http://stockcharts.com/charts/gallery.html?gxpi. I might wait for more follow through before buying it, especially since the gold sector is likely to be very weak. Another strong rally tomorrow will probably be enough to convince me to trade a tiny position. Note GXPI.OB's bullish large inverse spike at 0.06, and, the (borderline) buy signal/very strong rally in recent sessions on strong volume. I'm going to limit my rockets trading to tiny positions for now. I'll gradually increase the position size if successful.
Right now the Trade the Cycles picture for HUI, XAU, and gold is very clear, and, I'm looking to short the gold miners ETF GDX, http://stockcharts.com/charts/gallery.html?gdx. 10-2-07's mini crash was a 2%+ sell signal that confirms that the huge spike move that began on 8-16-07 (Wave 5 of Wave B of the Cyclical Bear Market since 5-11-06) peaked on 9-21-07 (cycle highs at 402.27 and 173.17).
HUI completed a very large Elliott Wave ABC down up down Wave A type move early today, that began late on 10-1-07, see http://finance.yahoo.com/q/ta?s=%5EHUI&t=5d&l=on&z=l&q=c&p=&a=m26-12-9,p12,fs,w14&c=. Most of today's action was a countertrend Wave B type upcycle, with the third/final Wave 5 cycle high (of an Elliott Wave 12345 up down up down up pattern) appearing to peak just before session's end, which jives with today's very bearish NEM Lead Indicator, at -1.17% versus the XAU. Note that most of today's strength was an early large Wave 1 spike that was followed by rollover action, which is obviously bearish. I'm going to look to short the gold miners ETF GDX tomorrow, http://stockcharts.com/charts/gallery.html?gdx.
The Elliott Wave count and the bearish long term triple top on 5-11-06/9-21-07/10-1-07 (see next paragraph) strongly suggest that HUI, XAU, and gold entered the final Wave C downcycle (of the Wave 2 Cyclical Bear Market since 5-11-06) on 9-21-07.
HUI and the XAU put in bearish countertrend Wave B double top cycle highs on 9-21-07 at 402.27/173.17 (of the Wave 2 Cyclical Bear Market since 5-11-06, see chart 2 at http://stockcharts.com/charts/gallery.html?%24hui) versus Wave 1 Cyclical Bull Market cycle highs on 5-11-06 at 401.69/171.71, and, 10-1-07's cycle highs at 401.50 and 173.09 form a bearish short term double top and a bearish long term triple top. This jives with the extremely bearish NEM Lead Indicator and the extremely bearish COT (Commitments Of Traders) data (see next two paragraphs). A major gold massacre has probably begun.
The NEM Lead Indicator is BIG TIME SCARY. The NEM Lead Indicator = -1.17% versus the XAU today/on 10-4, +0.37% on 10-3, +1.35% on 10-2, +0.33% on 10-1, -0.41% on 9-28, -2.21% on 9-27, -4.13% on 9-26, +0.40% on 9-25, +2.03% on 9-24, +0.07% 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 -14.23% versus the XAU the past 26 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.
The latest gold COT (Commitments Of Traders) Data (5 day period ending 9-25) is very bearish, see the last/third data at http://www.cftc.gov/dea/options/deacmxsof.htm. The savvy non contrarian gold Commercial Traders continue to go massively short, adding a large 27,946 short gold futures and options contracts (added over 17,000 the prior week and a massive 53,207 the week before that), while liquidating 2977 long gold futures and options contracts.
See Tuesday 9-25's first post at http://tradethecycles.blogspot.com/2007/09/bearish-huge-transitory-huixau-spike.html, and, see http://tradethecycles.blogspot.com/2007/10/this-is-it.html for additional important precious metals sector analysis.
The Wave A downcycle for SPX (S & P 500) was the decline from the July cycle high/likely Cyclical Bull Market cycle high at 1555.90 (cycle began in October 2002), see chart 2 at http://www.joefrocks.com/GoldStockCharts.html, to 8-16's cycle low at 1370.60, see http://stockcharts.com/charts/gallery.html?%24spx.
SPX's (S & P 500) July 2007 cycle high at 1555.90 is a likely Cyclical Bull Market cycle high (cycle began October 2002), see chart 2 at http://www.joefrocks.com/GoldStockCharts.html, since a major 5% follow through sell signal occurred.
The WMT Lead Indicator is mostly bullish recently, but, turned bearish again today, at -0.50% versus SPX (S & P 500) today/on 10-4, at +1.04% on 10-3, at +0.93% on 10-2, at +0.55% on 10-1, at +0.39% on 9-28, at +0.33% on 9-27, at -0.22% on 9-26, at -1.81% on 9-25, at -0.06% on 9-24, at -0.65% on 9-21, at -0.29% 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 (http://stockcharts.com/charts/gallery.html?%24spx) soon entering Wave C of the major downcycle since the July cycle high (might have on 10-1-07).
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 SPX soon entering a big Wave C downcycle (might have on 10-1-07), that should bottom well below the Wave A cycle lows that occurred on 8-16-07 for SPX, see http://stockcharts.com/charts/gallery.html?%24spx.
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.
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
1:19 PM
