I'm Looking To Short GDX, The Gold Miners ETF, And, SPX Might Have Put In A Bearish Double Top Cycle High on Friday With July's Cycle High
Later on I discuss SPX and rockets. There are (what appear to be) some very good trading opportunities in a number of low priced stocks like SPKL.OB (Spicy Pickle Fast Casual Restaurants), VG (Vonage), GXPI.OB, MGH, and others.
After an early plunge HUI had a modest uptrend the rest of today's session, see http://finance.yahoo.com/q/ta?s=%5EHUI&t=1d&l=off&z=l&q=c&p=&a=m26-12-9,p12,fs,w14&c=, and, the NEM (-0.06% versus the XAU today/on 10-8) and WMT (+0.10% versus SPX today/on 10-8) Lead Indicators were near neutral, so, I didn't short GDX (http://stockcharts.com/charts/gallery.html?gdx), the Gold Miners ETF today, but, it's likely that I will tomorrow.
Looking at HUI's daily chart, see http://stockcharts.com/charts/gallery.html?%24hui, one can see that, after putting in a bearish double top cycle high on 10-1-07 at 401.50 with 9-21-07's very important countertrend Wave B cycle high at 402.27 (Cyclical Bear market since 5-11-06), HUI did a very short term Wave A downcycle that bottomed on Thursday, a countertrend Wave B type upcycle probably peaked on Friday, so, HUI is probably in a very short term Wave C downcycle.
I'm looking to short GDX (http://stockcharts.com/charts/gallery.html?gdx), the Gold Miners ETF, to catch the parabolic/sharply declining part of the very short term Wave C downcycle, in which HUI should bottom well below Thursday's Wave A cycle low at 376.42 and GDX should bottom well below 42.87.
The Elliott Wave count and the bearish long term triple top on 5-11-06/9-21-07/10-1-07 strongly suggest that HUI, XAU (10-5's cycle high at 172.91 is a long term quadruple top and a short term triple top), and gold entered the final Wave C downcycle (of the Wave 2 Cyclical Bear Market since 5-11-06) on 9-21-07.
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).
The NEM Lead Indicator is BIG TIME SCARY. The NEM Lead Indicator = -0.06% versus the XAU on 10-8, -0.57% on 10-5, -1.17% 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 -14.86% versus the XAU the past 28 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 recent gold COT (Commitments Of Traders) Data 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 relatively modest 1751 (27,946 two weeks ago) short gold futures and options contracts (added over 17,000 three weeks ago and a massive 53,207 four weeks ago), while liquidating 5492 (2977 the prior week) long gold futures and options contracts.
See http://tradethecycles.blogspot.com/2007/10/major-warning-gold-to-get-annihilated.html, 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.
SPX (S & P 500, http://stockcharts.com/charts/gallery.html?%24spx) exceeded the July cycle high by +0.39% on Friday, so, if Friday's cycle high ends up being a Cyclical Bull Market cycle high or nearly so, for the cycle that began in October 2002, then SPX's (S & P 500) 5% major sell signal, see chart 2 at http://www.joefrocks.com/GoldStockCharts.html, will be a good one. Friday's SPX (S & P 500) cycle high might end up being a bearish double top with the July cycle high, and, might be the final Cyclical Bull Market cycle high, for the cycle that began in October 2002.
The point of sell signals is much more to indicate that risk has increased dramatically than it is to be a psychic nailing every cycle high. Double and even triple tops are fairly common, as is rollover action with modestly, and, much less frequently (especially for major 5% sell signals), sometimes substantially higher cycle highs occurring. SPX's (S & P 500) 5% major sell signal, see chart 2 at http://www.joefrocks.com/GoldStockCharts.html, indicated that July's cycle high at 1555.90 was a likely Cyclical Bull Market cycle high and that trading SPX long was risky because a very important cycle trendline had broken down.
Due to Friday's good economic data and massive Fed credit in recent weeks due to the mortgage/credit crisis, see http://www.newyorkfed.org/markets/omo/dmm/temp.cfm?SHOWMORE=TRUE, the Fed added $28 Billion on 10-4-07, SPX (S & P 500, http://stockcharts.com/charts/gallery.html?%24spx) barely took out the July Cycle high that was a likely Cyclical Bull Market cycle high, for the cycle that began in October 2002.
The WMT Lead Indicator turned bearish again Thursday, at -0.50% versus SPX (S & P 500), was modestly bearish Friday at -0.14% versus SPX, and, was a slightly bullish +0.10% today/10-8, see http://finance.yahoo.com/q/ta?s=%5EHUI&t=1d&l=off&z=l&q=l&p=&a=,p12,fs,w14&c=wmt,%5EGSPC.
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 experiencing a substantial decline/Elliott Wave ABC down up down monthly downcycle, see http://stockcharts.com/charts/gallery.html?%24spx, and, a much larger downcycle is likely also, since SPX's (S & P 500) Cyclical Bull Market cycle high might have occurred Friday 10-5-07 at 1561.91.
I'm looking to do some very modest (at first) rockets trading:
Spicy Pickle® fast casual restaurants (SPKL.OB, http://finance.yahoo.com/q?s=spkl.ob) appears to be a good penny stock to trade, see http://stockcharts.com/charts/gallery.html?spkl. Today's rally was probably a Wave B of Wave C move of an Elliott Wave ABC down up down monthly downcycle, with Wave B peaking at 1.12 and Wave A bottoming at 0.92. I'm looking for Wave C to bottom at roughly 0.75ish. I'll probably bottom pick SPKL.OB at 0.75ish if a bullish large inverse spike occurs and volume is high.
Vonage, VG (http://stockcharts.com/charts/gallery.html?vg), settled the patent lawsuit with Sprint, which is why the stock exploded on huge volume today, hitting a major 5% follow through buy signal, which indicates that the recent cycle low at 0.89 is very likely a Cyclical Bear Market cycle low.
VG gapped up to 1.56 from 1.15 at Friday's close. The downside gap at 1.15 is a likely bullish breakaway gap. VG is in a short term Wave 3 upcycle that might have peaked late today, see http://finance.yahoo.com/q/ta?s=vg&t=5d&l=off&z=l&q=c&p=&a=m26-12-9%2Cp12%2Cfs%2Cw14&c=. VG should soon do a short term Wave 4 downcycle for a few days, that will probably have an Elliott Wave ABC down up down pattern visible on the daily chart (http://stockcharts.com/charts/gallery.html?vg). Especially if the downside gap at 1.15 created at today 10-8's open doesn't get filled (is a bullish breakaway gap), I'll look to trade a tiny VG position for a few days to catch the short term Wave 5 upcycle.
As discussed previously 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. Also, MGH looks good after it's corrects, see http://tradethecycles.blogspot.com/2007/10/mgh-china-goldsilverbase-metals-play.html.
I might wait for even more follow through before looking to buy GXPI.OB in a short term Wave 2 pullback, especially since the gold sector is likely to be very weak. Another strong rally on Tuesday will definitely 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.
And you gold manipulation theorists, I'm still waiting to hear from you! See http://tradethecycles.blogspot.com/2007/10/to-gold-manipulation-theorists.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/ .
Labels: Gold, Gold Stocks, HUI, NEM, Silver, Silver Stocks, SPX, XAU
posted by Joe Ferrazzano at
1:14 PM
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