Weak Cycles, XAU Implied Volatility And the NEM/WMT Lead Indicators Point To Likely Severe HUI/XAU/Gold Weakness On Monday
Weak cycles, XAU Implied Volatility, and the NEM/WMT Lead Indicators point to likely severe HUI/XAU/Gold weakness on Monday:
First of all, HUI/XAU are in the final Wave C (Wave C began in late November for HUI and last Tuesday for the XAU) decline of the Wave A intermediate term downcycle since 11-7-07, see http://stockcharts.com/charts/gallery.html?%24hui.
HUI appears to be in Wave A of Wave C of Wave C (the XAU's in Wave A of Wave C), see http://finance.yahoo.com/q/ta?s=%5EHUI&t=5d&l=off&z=l&q=c&p=&a=m26-12-9,p12,fs,w14&c=, since this downcycle since late Tuesday's Fed rate decision hasn't had a 1 to 3 day countertrend Wave B rebound/upcycle. So, there should be another shorting opportunity after this one.
Secondly, XAU Implied Volatility points to likely severe weakness on Monday, since it fell very sharply (-3.31%) on Friday, to 38.860 from 40.190 on Thursday, despite a -1.61% decline in the XAU (XAU Implied Volatility/fear normally rises in response to weakness), which is a very sharp +4.92% rise in complacency that points to likely severe XAU weakness on Monday (-3.31% + -1.61% = -4.92% decline in the XAU wall of worry = a very sharp +4.92% rise in complacency).
Since HUI/XAU are in the final Wave C (Wave C began in late November for HUI and last Tuesday for the XAU) decline/downcycle of the Wave A intermediate term downcycle since 11-7-07 (http://stockcharts.com/charts/gallery.html?%24xau) they are very weak cyclewise, which means that the severe weakness indicated by XAU Implied Volatility could be unusually severe, due to the very weak picture cyclewise right now.
Also, both lead indicators were bearish on Friday, though not overly so. The NEM Lead Indicator was -0.46% versus the XAU on 12-14 and the WMT Lead Indicator was -0.08% versus SPX (S & P 500) on 12-14.
Additionally, the gold COT (Commitments Of Traders) data is bearish again in the latest report (5 day period ending 12-11-07), because, the savvy non contrarian gold Commercial Traders traded significantly net short, see the third/last data at http://www.cftc.gov/dea/options/deacmxsof.htm.
Looking at the 5 day intraday charts of HUI and gold (GLD, gold ETF) it looks like there might be a good shorting opportunity/entry point on Monday, see http://finance.yahoo.com/q/ta?s=%5EHUI&t=5d&l=off&z=l&q=c&p=&a=m26-12-9,p12,fs,w14&c= and http://finance.yahoo.com/q/ta?s=gld&t=5d&l=off&z=l&q=c&p=&a=m26-12-9%2Cp12%2Cfs%2Cw14&c=, unless a sharp decline occurs at the open, and, even if there is a sharp decline at the open there still may be a shorting opportunity, one has to watch the NEM and WMT Lead Indicators on an intraday basis, see http://finance.yahoo.com/q/ta?s=^XAU&t=1d&l=on&z=m&q=l&p=&a=&c=^hui,nem and http://finance.yahoo.com/q/ta?s=%5EHUI&t=1d&l=off&z=l&q=l&p=&a=m26-12-9,p12,fs,w14&c=wmt,%5EGSPC.
Gold's bearish picture is much easier to see in the charts in Euro and Australian Dollar terms (http://www.the-privateer.com/chart/g-multi.html), since gold in those stronger currencies put in a countertrend Wave B bearish double top in early November with the 5-11-06 cycle highs (the November 2007 cycle high might be modestly higher than May 2006's, but, the bearish double top is very similar to a Wave B cycle high, which is why I called it a Wave B cycle high), versus gold in US Dollar and Japanese Yen terms peaking in rollover mode versus the 5-11-06 cycle highs.
Gold's primary Secular Bull Market multi year trendline since April 2001 is at $500ish in US Dollar terms right now, so, gold should bottom at $490 to $520 in the next year or so.
HUI/XAU put in likely Wave 1 Cyclical Bull Market and intermediate term (cycle began 8-16-07) cycle highs on 11-7-07, see http://stockcharts.com/charts/gallery.html?%24hui.
The monetary inflation due to the real estate/mortgage/credit boom from 2002 until early/mid 2006 (and the stock market Cyclical Bull Market from October 2002 until 10-11-07 for SPX (S & P 500) was another major factor) was the primary factor that drove gold's Wave 1 Cyclical Bull Market from April 2001 until November 7, 2007.
Gold began to flounder after the 5-11-06 cycle high at $730, and, didn't exceed that cycle high until October 2007, due to the monetary inflation created by the Fed in order to fight the mortgage/credit crisis.
The current monetary deflation due to the real estate/mortgage/credit bust and SPX's (S & P 500) Cyclical Bear Market should result in a gold Bear market.
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.
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 $490ish right now, so, gold would be a great buy in the $490-520 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 Wave 2 Cyclical Bear Market will bottom. ....... http://www.JoeFRocks.com/ .
HUI NEM XAU
First of all, HUI/XAU are in the final Wave C (Wave C began in late November for HUI and last Tuesday for the XAU) decline of the Wave A intermediate term downcycle since 11-7-07, see http://stockcharts.com/charts/gallery.html?%24hui.
HUI appears to be in Wave A of Wave C of Wave C (the XAU's in Wave A of Wave C), see http://finance.yahoo.com/q/ta?s=%5EHUI&t=5d&l=off&z=l&q=c&p=&a=m26-12-9,p12,fs,w14&c=, since this downcycle since late Tuesday's Fed rate decision hasn't had a 1 to 3 day countertrend Wave B rebound/upcycle. So, there should be another shorting opportunity after this one.
Secondly, XAU Implied Volatility points to likely severe weakness on Monday, since it fell very sharply (-3.31%) on Friday, to 38.860 from 40.190 on Thursday, despite a -1.61% decline in the XAU (XAU Implied Volatility/fear normally rises in response to weakness), which is a very sharp +4.92% rise in complacency that points to likely severe XAU weakness on Monday (-3.31% + -1.61% = -4.92% decline in the XAU wall of worry = a very sharp +4.92% rise in complacency).
Since HUI/XAU are in the final Wave C (Wave C began in late November for HUI and last Tuesday for the XAU) decline/downcycle of the Wave A intermediate term downcycle since 11-7-07 (http://stockcharts.com/charts/gallery.html?%24xau) they are very weak cyclewise, which means that the severe weakness indicated by XAU Implied Volatility could be unusually severe, due to the very weak picture cyclewise right now.
Also, both lead indicators were bearish on Friday, though not overly so. The NEM Lead Indicator was -0.46% versus the XAU on 12-14 and the WMT Lead Indicator was -0.08% versus SPX (S & P 500) on 12-14.
Additionally, the gold COT (Commitments Of Traders) data is bearish again in the latest report (5 day period ending 12-11-07), because, the savvy non contrarian gold Commercial Traders traded significantly net short, see the third/last data at http://www.cftc.gov/dea/options/deacmxsof.htm.
Looking at the 5 day intraday charts of HUI and gold (GLD, gold ETF) it looks like there might be a good shorting opportunity/entry point on Monday, see http://finance.yahoo.com/q/ta?s=%5EHUI&t=5d&l=off&z=l&q=c&p=&a=m26-12-9,p12,fs,w14&c= and http://finance.yahoo.com/q/ta?s=gld&t=5d&l=off&z=l&q=c&p=&a=m26-12-9%2Cp12%2Cfs%2Cw14&c=, unless a sharp decline occurs at the open, and, even if there is a sharp decline at the open there still may be a shorting opportunity, one has to watch the NEM and WMT Lead Indicators on an intraday basis, see http://finance.yahoo.com/q/ta?s=^XAU&t=1d&l=on&z=m&q=l&p=&a=&c=^hui,nem and http://finance.yahoo.com/q/ta?s=%5EHUI&t=1d&l=off&z=l&q=l&p=&a=m26-12-9,p12,fs,w14&c=wmt,%5EGSPC.
Gold's bearish picture is much easier to see in the charts in Euro and Australian Dollar terms (http://www.the-privateer.com/chart/g-multi.html), since gold in those stronger currencies put in a countertrend Wave B bearish double top in early November with the 5-11-06 cycle highs (the November 2007 cycle high might be modestly higher than May 2006's, but, the bearish double top is very similar to a Wave B cycle high, which is why I called it a Wave B cycle high), versus gold in US Dollar and Japanese Yen terms peaking in rollover mode versus the 5-11-06 cycle highs.
Gold's primary Secular Bull Market multi year trendline since April 2001 is at $500ish in US Dollar terms right now, so, gold should bottom at $490 to $520 in the next year or so.
HUI/XAU put in likely Wave 1 Cyclical Bull Market and intermediate term (cycle began 8-16-07) cycle highs on 11-7-07, see http://stockcharts.com/charts/gallery.html?%24hui.
The monetary inflation due to the real estate/mortgage/credit boom from 2002 until early/mid 2006 (and the stock market Cyclical Bull Market from October 2002 until 10-11-07 for SPX (S & P 500) was another major factor) was the primary factor that drove gold's Wave 1 Cyclical Bull Market from April 2001 until November 7, 2007.
Gold began to flounder after the 5-11-06 cycle high at $730, and, didn't exceed that cycle high until October 2007, due to the monetary inflation created by the Fed in order to fight the mortgage/credit crisis.
The current monetary deflation due to the real estate/mortgage/credit bust and SPX's (S & P 500) Cyclical Bear Market should result in a gold Bear market.
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.
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 $490ish right now, so, gold would be a great buy in the $490-520 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 Wave 2 Cyclical Bear Market will bottom. ....... http://www.JoeFRocks.com/ .
HUI NEM XAU
Labels: Gold, Gold Stocks, HUI, NEM, Silver, Silver Stocks, SPX, XAU
posted by Joe Ferrazzano at
9:12 AM
0 Comments:
Post a Comment
<< Home