SPX (S & P 500), HUI, XAU, Gold Cycles, Elliott Wave, And Gaps
SPX (S & P 500) needs to establish that a countertrend Wave B cycle high occurred at 1,549.02 on Monday 10-1-07 versus a likely (needs to establish that a) Cyclical Bull Market cycle high (cycle began October 2002) occurred 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.
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. Yesterday 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 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. This jives with the extremely bearish NEM Lead Indicator and the extremely bearish COT (Commitments Of Traders) data (keep reading). A major gold massacre has probably begun.
HUI made a huge Wave A down type move at yesterday's open, 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=. Then a Wave B up type move peaked just after today's open, with most of today's action probably being Wave A of a Wave C down type move. A brief Wave B up type move (of a Wave C type move) is likely early tomorrow, during which I'm going to look to short the gold miners ETF GDX, http://stockcharts.com/charts/gallery.html?gdx.
The NEM Lead Indicator is BIG TIME SCARY. The NEM Lead Indicator = +0.37% versus the XAU today/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 -13.06% versus the XAU the past 25 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.
Not surprisingly, massive Fed credit recently (humongous $38 Billion last Thursday 9-27-07 for example), see http://www.newyorkfed.org/markets/omo/dmm/temp.cfm?SHOWMORE=TRUE, led to rollover action due to strong program buying, see http://stockcharts.com/charts/gallery.html?%24spx. On Monday 10-1-07 SPX (S & P 500) took out it's 9-19-07 cycle high at 1538.74 that appeared to be a countertrend Wave B cycle high (cycle began on 8-16-07). SPX's (S & P 500) countertrend Wave B cycle high (cycle began on 8-16-07) might have peaked on 10-1-07.
In the 5 day intraday Yahoo chart, see http://finance.yahoo.com/q/ta?s=%5Espx&t=5d&l=on&z=l&q=c&p=&a=m26-12-9%2Cp12%2Cfs%2Cw14&c=, one can see that on 10-1-07 SPX ( S & P 500) completed an Elliott Wave 12345 up down up down up spike move that began late on Friday 9-28-07, and, it looks like the final/third Wave 5 spike move of the short term upcycle that began on Tuesday 9-25-07.
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, should turn bearish again soon, at +1.04% versus SPX (S & P 500) today/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
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.
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. Yesterday 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 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. This jives with the extremely bearish NEM Lead Indicator and the extremely bearish COT (Commitments Of Traders) data (keep reading). A major gold massacre has probably begun.
HUI made a huge Wave A down type move at yesterday's open, 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=. Then a Wave B up type move peaked just after today's open, with most of today's action probably being Wave A of a Wave C down type move. A brief Wave B up type move (of a Wave C type move) is likely early tomorrow, during which I'm going to look to short the gold miners ETF GDX, http://stockcharts.com/charts/gallery.html?gdx.
The NEM Lead Indicator is BIG TIME SCARY. The NEM Lead Indicator = +0.37% versus the XAU today/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 -13.06% versus the XAU the past 25 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.
Not surprisingly, massive Fed credit recently (humongous $38 Billion last Thursday 9-27-07 for example), see http://www.newyorkfed.org/markets/omo/dmm/temp.cfm?SHOWMORE=TRUE, led to rollover action due to strong program buying, see http://stockcharts.com/charts/gallery.html?%24spx. On Monday 10-1-07 SPX (S & P 500) took out it's 9-19-07 cycle high at 1538.74 that appeared to be a countertrend Wave B cycle high (cycle began on 8-16-07). SPX's (S & P 500) countertrend Wave B cycle high (cycle began on 8-16-07) might have peaked on 10-1-07.
In the 5 day intraday Yahoo chart, see http://finance.yahoo.com/q/ta?s=%5Espx&t=5d&l=on&z=l&q=c&p=&a=m26-12-9%2Cp12%2Cfs%2Cw14&c=, one can see that on 10-1-07 SPX ( S & P 500) completed an Elliott Wave 12345 up down up down up spike move that began late on Friday 9-28-07, and, it looks like the final/third Wave 5 spike move of the short term upcycle that began on Tuesday 9-25-07.
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, should turn bearish again soon, at +1.04% versus SPX (S & P 500) today/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
1:11 PM
