Probably Very Important HUI/XAU Peaking Action
Reliable lead indicator NEM peaked very early in the session, then put in a near perfect if not perfect bearish double top cycle high late in the session, see http://finance.yahoo.com/q/ta?s=nem&t=5d&l=off&z=l&q=c&p=&a=m26-12-9%2Cp12%2Cfs%2Cw14&c=. If reliable lead indicator NEM fills today's downside gap at 52.34 in the next day or two then the HUI/XAU party/Wave 5 Intermediate Term Upcycle since 8-16-07 will probably turn down in a big way.
Must read http://tradethecycles.blogspot.com/2007/11/huixaus-wave-1-cyclical-bull-market.html, which addresses the long term rollover upcycle since mid June 2006. The HUI/XAU party/Wave 5 Intermediate Term Upcycle since 8-16-07 is probably the third/final Wave 5 of the long term rollover upcycle since mid June 2006. Note how little upside (less than 1% in 10 months, and, peaked at 372.20 in Wave 3 in July 2007, well below the 5-11-06 cycle high at 401.69) occurred from Wave 1's cycle high to Wave 3's cycle high.
The HUI/XAU party/Wave 5 Intermediate Term Upcycle since 8-16-07 (http://stockcharts.com/charts/gallery.html?%24hui) is probably the third/final Wave 5 Intermediate Term Upcycle of the Wave 1 Cyclical Bull Market since late 2000. If so then HUI is probably headed for 220ish in the next year and the XAU is probably headed for 95ish in the next year.
The Wave 1 Cyclical Bull Market since late 2000 ended on 5-11-06 for all practical purposes, since there was no way to know that dramatic rollover action would occur 17 to 18 months later. There's too much risk to be long during rollover cycles, partly because there's no way of knowing that they'll even occur.
Trade the Cycles hit a major 5% sell signal in May 2006, see charts 15 and 18 at http://www.joefrocks.com/GoldStockCharts.html, correctly indicating that HUI/XAU had entered a long 16 month bearish phase, and, should soon enter a Wave 2 Cyclical Bear Market, which is Wave 2 down of the likely 15-20+ year Secular Bull Market since late 2000.
If it wasn't for reliable lead indicator NEM's (http://finance.yahoo.com/q/ta?s=nem&t=5d&l=off&z=l&q=c&p=&a=m26-12-9%2Cp12%2Cfs%2Cw14&c=) huge spike move due to last week's favorable earnings report HUI/XAU would probably already have fallen -10% to -15% or much more if NEM had disappointed.
The HUI/XAU party/rollover Wave 5 intermediate term upcycle since 8-16-07 might soon be over, but, a 2% follow through sell signal must occur before Trade the Cycles indicates that an intermediate term cycle high has probably occurred. One can wait for a sell signal/cycle trendline breakdown or one can use the Elliott Wave count to try to pick a top.
The longer the timeframe the more sense it makes to use trendline buy/sell signals, and, the shorter the timeframe the more sense using the Elliott Wave count makes. Looking for large bearish spikes at cycle highs and large bullish inverse spikes at cycle lows helps a lot also (on candlestick charts).
The NEM Lead Indicator was a bullish +0.61% versus the XAU today, was a very bullish +2.00% versus the XAU yesterday, and, has been very bullish recently (+2.00% on 11-5, +0.58% on 11-2, +1.04% on 11-1, +5.51% on 10-31), thanks largely to NEM's huge 10-12%+ spike move after last week's favorable earnings report. The NEM Lead Indicator should turn bearish very soon/probably tomorrow.
The HUI/XAU cycle highs will also probably be the Wave 1 Cyclical Bull Market since late 2000 peaking in dramatic rollover mode versus 5-11-06's cycle highs at 401.69/171.71, see chart 2 at http://stockcharts.com/charts/gallery.html?%24hui. The huge spike move since 8-16-07 jives completely with the typical huge/final Bull Market Wave 5 spike move.
The recent gold COT (Commitments Of Traders) data is extremely bearish, see the last/third data at http://www.cftc.gov/dea/options/deacmxsof.htm. The savvy non contrarian gold Commercial Traders traded significantly net short in the five day period ending 10-30-07, but, also traded aggressively long, correctly anticipating the recent strength, and, have gone massively short the past eight weeks, adding 27,027 short gold futures and options contracts last week (covered 5567 two weeks ago, added 19,360 three weeks ago, added 16,788 four weeks ago, added 1751 five weeks ago, added 27,946 six weeks ago, added over 17,000 seven weeks ago, and, added a massive 53,207 eight weeks ago), while adding 15,462 (added 9632 two weeks ago, added 5075 three weeks ago, liquidated 192 four weeks ago, liquidated 5492 five weeks ago, liquidated 2977 six weeks ago) long gold futures and options contracts last week.
Yesterday SPX (S & P 500) entered a very short term countertrend Wave B upcycle of a short term Wave C downcycle since 10-24-07, see http://stockcharts.com/charts/gallery.html?%24spx.
SPX (S & P 500) put in a likely Cyclical Bull Market (began October 2002) and minor intermediate term cycle (began 8-16-07) high at 1576.09 on 10-11-07, see http://stockcharts.com/charts/gallery.html?%24spx, versus a modestly lower cycle high in July at 1555.90. A major 5% follow through sell signal occurred for SPX in July, see chart 2 at http://www.joefrocks.com/GoldStockCharts.html.
Notice that the Russell 2000 (RUT, http://stockcharts.com/charts/gallery.html?%24rut) probably peaked in July at 856.48 versus a countertrend Wave B cycle high at 852.06 on 10-11-07, so, RUT is in a substantial Wave C type decline that should bottom well below the Wave A cycle low at 736.00 on 8-16-07. If RUT bottoms at 700ish then it has about 18% to fall from it's countertrend Wave B cycle high at 852.06 on 10-11-07.
The S & P 500 (SPX, http://stockcharts.com/charts/gallery.html?%24spx) is up all of 1.30% from July 2007's cycle high at 1555.90 to 10-11-07's likely Cyclical Bull Market cycle high at 1576.09, thanks to massive Fed credit due to the mortgage/credit crisis. Once the market/SPX breaks down nearly sectors will get whacked. SPX actually broke down a few months ago, hitting a 5% major sell signal, see chart 2 at http://www.joefrocks.com/GoldStockCharts.html, and, the recent strength was rollover action, which was the upcycle/Cyclical Bull Market since October 2002 running out of gas. What was going on in the market was very important peaking action.
The reliable WMT Lead Indicator is extremely bearish, see the six month chart (shows WMT, SPX, HUI relative performance) at 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.
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/potential Cyclical Bull Market cycle high, and, more importantly, that trading SPX long was risky, because, a very important cycle trendline had broken down.
I'll probably update the rockets info tomorrow.
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 basically 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 210-230 for HUI and at 90-95 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
Must read http://tradethecycles.blogspot.com/2007/11/huixaus-wave-1-cyclical-bull-market.html, which addresses the long term rollover upcycle since mid June 2006. The HUI/XAU party/Wave 5 Intermediate Term Upcycle since 8-16-07 is probably the third/final Wave 5 of the long term rollover upcycle since mid June 2006. Note how little upside (less than 1% in 10 months, and, peaked at 372.20 in Wave 3 in July 2007, well below the 5-11-06 cycle high at 401.69) occurred from Wave 1's cycle high to Wave 3's cycle high.
The HUI/XAU party/Wave 5 Intermediate Term Upcycle since 8-16-07 (http://stockcharts.com/charts/gallery.html?%24hui) is probably the third/final Wave 5 Intermediate Term Upcycle of the Wave 1 Cyclical Bull Market since late 2000. If so then HUI is probably headed for 220ish in the next year and the XAU is probably headed for 95ish in the next year.
The Wave 1 Cyclical Bull Market since late 2000 ended on 5-11-06 for all practical purposes, since there was no way to know that dramatic rollover action would occur 17 to 18 months later. There's too much risk to be long during rollover cycles, partly because there's no way of knowing that they'll even occur.
Trade the Cycles hit a major 5% sell signal in May 2006, see charts 15 and 18 at http://www.joefrocks.com/GoldStockCharts.html, correctly indicating that HUI/XAU had entered a long 16 month bearish phase, and, should soon enter a Wave 2 Cyclical Bear Market, which is Wave 2 down of the likely 15-20+ year Secular Bull Market since late 2000.
If it wasn't for reliable lead indicator NEM's (http://finance.yahoo.com/q/ta?s=nem&t=5d&l=off&z=l&q=c&p=&a=m26-12-9%2Cp12%2Cfs%2Cw14&c=) huge spike move due to last week's favorable earnings report HUI/XAU would probably already have fallen -10% to -15% or much more if NEM had disappointed.
The HUI/XAU party/rollover Wave 5 intermediate term upcycle since 8-16-07 might soon be over, but, a 2% follow through sell signal must occur before Trade the Cycles indicates that an intermediate term cycle high has probably occurred. One can wait for a sell signal/cycle trendline breakdown or one can use the Elliott Wave count to try to pick a top.
The longer the timeframe the more sense it makes to use trendline buy/sell signals, and, the shorter the timeframe the more sense using the Elliott Wave count makes. Looking for large bearish spikes at cycle highs and large bullish inverse spikes at cycle lows helps a lot also (on candlestick charts).
The NEM Lead Indicator was a bullish +0.61% versus the XAU today, was a very bullish +2.00% versus the XAU yesterday, and, has been very bullish recently (+2.00% on 11-5, +0.58% on 11-2, +1.04% on 11-1, +5.51% on 10-31), thanks largely to NEM's huge 10-12%+ spike move after last week's favorable earnings report. The NEM Lead Indicator should turn bearish very soon/probably tomorrow.
The HUI/XAU cycle highs will also probably be the Wave 1 Cyclical Bull Market since late 2000 peaking in dramatic rollover mode versus 5-11-06's cycle highs at 401.69/171.71, see chart 2 at http://stockcharts.com/charts/gallery.html?%24hui. The huge spike move since 8-16-07 jives completely with the typical huge/final Bull Market Wave 5 spike move.
The recent gold COT (Commitments Of Traders) data is extremely bearish, see the last/third data at http://www.cftc.gov/dea/options/deacmxsof.htm. The savvy non contrarian gold Commercial Traders traded significantly net short in the five day period ending 10-30-07, but, also traded aggressively long, correctly anticipating the recent strength, and, have gone massively short the past eight weeks, adding 27,027 short gold futures and options contracts last week (covered 5567 two weeks ago, added 19,360 three weeks ago, added 16,788 four weeks ago, added 1751 five weeks ago, added 27,946 six weeks ago, added over 17,000 seven weeks ago, and, added a massive 53,207 eight weeks ago), while adding 15,462 (added 9632 two weeks ago, added 5075 three weeks ago, liquidated 192 four weeks ago, liquidated 5492 five weeks ago, liquidated 2977 six weeks ago) long gold futures and options contracts last week.
Yesterday SPX (S & P 500) entered a very short term countertrend Wave B upcycle of a short term Wave C downcycle since 10-24-07, see http://stockcharts.com/charts/gallery.html?%24spx.
SPX (S & P 500) put in a likely Cyclical Bull Market (began October 2002) and minor intermediate term cycle (began 8-16-07) high at 1576.09 on 10-11-07, see http://stockcharts.com/charts/gallery.html?%24spx, versus a modestly lower cycle high in July at 1555.90. A major 5% follow through sell signal occurred for SPX in July, see chart 2 at http://www.joefrocks.com/GoldStockCharts.html.
Notice that the Russell 2000 (RUT, http://stockcharts.com/charts/gallery.html?%24rut) probably peaked in July at 856.48 versus a countertrend Wave B cycle high at 852.06 on 10-11-07, so, RUT is in a substantial Wave C type decline that should bottom well below the Wave A cycle low at 736.00 on 8-16-07. If RUT bottoms at 700ish then it has about 18% to fall from it's countertrend Wave B cycle high at 852.06 on 10-11-07.
The S & P 500 (SPX, http://stockcharts.com/charts/gallery.html?%24spx) is up all of 1.30% from July 2007's cycle high at 1555.90 to 10-11-07's likely Cyclical Bull Market cycle high at 1576.09, thanks to massive Fed credit due to the mortgage/credit crisis. Once the market/SPX breaks down nearly sectors will get whacked. SPX actually broke down a few months ago, hitting a 5% major sell signal, see chart 2 at http://www.joefrocks.com/GoldStockCharts.html, and, the recent strength was rollover action, which was the upcycle/Cyclical Bull Market since October 2002 running out of gas. What was going on in the market was very important peaking action.
The reliable WMT Lead Indicator is extremely bearish, see the six month chart (shows WMT, SPX, HUI relative performance) at 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.
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/potential Cyclical Bull Market cycle high, and, more importantly, that trading SPX long was risky, because, a very important cycle trendline had broken down.
I'll probably update the rockets info tomorrow.
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 basically 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 210-230 for HUI and at 90-95 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
2:09 PM
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