Time To Turn Bullish On The Major Averages And (Still) Bearish On HUI/XAU/Gold
SPX (http://stockcharts.com/charts/gallery.html?%24spx), NDX (http://stockcharts.com/charts/gallery.html?%24ndx), and RUT (http://stockcharts.com/charts/gallery.html?%24rut) put in bullish large inverse spikes on their candles today, with RUT's (Russell 2000) being a very large inverse spike (the most bullish of the three indexes).
It's important to note that their candles are white/bullish today, indicating a bullish close above the open, whereas, when I (profitably) traded RUT long via UWM a few days ago (bought Monday and sold yesterday), it's candle was dark, indicating a bearish close below the open (it had a bullish large inverse spike and the WMT Lead Indicator had been very bullish the previous two sessions).
SPX (http://stockcharts.com/charts/gallery.html?%24spx), NDX, and RUT appear to have put in intermediate term cycle lows today, with SPX and NDX probably putting in minor intermediate term cycle lows, after putting in likely Cyclical Bull Market (cycle began October 2002) cycle highs on 10-11-07 and late October 2007 respectively, and, with RUT (Russell 2000) putting in a potential major intermediate term cycle low today.
NDX filled all but one of the downside gaps (previously discussed) at 2111.77 (filled), 2106.09 (filled), 2069.68 (filled 1-2), 2031.00 (filled 1-4), 1989.36 (filled), 1982.16 (filled), 1960.20 (filled), 1899.24 (filled), 1846.09.
Tomorrow I'll be looking to go long RUT (Russell 2000) via the Ultra Long ETF UWM, and, I'll be looking to short HUI (http://stockcharts.com/charts/gallery.html?%24hui)/XAU via shorting the Gold Miners ETF GDX.
However, before trading SPX/NDX/RUT aggressively long it makes sense to wait for a strong multi day short term Wave 1 upcycle, that will trigger a 2%+ follow though buy signal (after breaking the intermediate term downcycle trendline). Once a 2%+ follow though buy signal occurs, one looks to go long during a 2-3 day short term Wave 2 downcycle.
The WMT Lead Indicator was bullish the past four sessions, at +0.66% versus SPX (S & P 500) today/on 1-9, +0.57% on 1-8, at +1.21% on 1-7 and at +1.04% on 1-4.
Since putting in a likely Cyclical Bull Market cycle high at 856.48 in July 2007, RUT (Russell 2000) has done (is doing if it hasn't bottomed obviously) an Elliott Wave ABC down up down pattern, see the second weekly view RUT chart at http://stockcharts.com/charts/gallery.html?%24rut.
The bullish factors for RUT (Russell 2000) include the cycles/Elliott Wave count pointing to an imminent major intermediate term cycle low (appears to have occurred today/1-9, http://stockcharts.com/charts/gallery.html?%24rut), the bullish RUT COTs (Commitments Of Traders, there's a regular COT and one for the mini contract, see toward the bottom of http://www.cftc.gov/dea/futures/deacmelf.htm and note that the Commercial Traders are overall net long, and, their latest weekly changes are net long, with the mini contract being very bullish), and, the bullish WMT Lead Indicator the past four sessions, at +0.66% versus SPX (S & P 500) today/on 1-9, +0.57% on 1-8, at +1.21% on 1-7 and at +1.04% on 1-4.
HUI (http://stockcharts.com/charts/gallery.html?%24hui) put in a nearly perfect bearish double top cycle high yesterday at 463.19 versus the 11-7-07 cycle high at 463.06, while the XAU (http://stockcharts.com/charts/gallery.html?%24xau) put in a modestly lower countertrend Wave B cycle (began 12-18-07) high yesterday at 193.78 versus the 11-7-07 likely Wave 1 Cyclical Bull Market cycle high at 195.50. Both HUI/XAU have bearish large spikes on yesterday/1-8's candle.
Yesterday was probably just a last gasp for the gold bulls. The US Dollar probably entered a Cyclical Bull Market in November 2007 after being in a Bear Market since late 2005 (think any of the con artist gold writers (too many are con artists) will point that fact out?), see http://stockcharts.com/charts/gallery.html?%24usd, gold stocks have been underperforming gold since 11-7-07, the very bearish gold COT data, etc.
The NEM Lead Indicator is very bearish recently, it was a bearish -0.55% versus the XAU today/on 1-9, it was a bearish -0.81% on 1-8, was -0.05% on 1-7, -0.42% on 1-4, -0.56% on 1-3, +0.94% on 1-2, +1.38% on 12-31, -0.90% on 12-28, -1.15% on 12-27, -1.12% on 12-26, -1.10% on 12-24, -1.08% on 12-21, -0.18% on 12-20, -0.26% on 12-19.
The gold COT (Commitments Of Traders) data remains bearish, see the third/last 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 12-31-07 (traded net short 16,658 gold futures and options contracts versus trading net short 12,456 the previous week), trading a significant long position (added 5608 long gold futures and options contracts versus 8002 added the previous week), correctly anticipating some short term strength, but, continuing to go massively short (added 22,266 short gold futures and options contracts versus 20,458 added the previous week), as they've done in recent months.
So, the gold COT (Commitments Of Traders) data is short term and long term bearish. Some significant gold strength this week won't be surprising, but, it's very likely to be a great shorting opportunity.
I'm looking to trade the US Natural Gas ETF UNG (http://stockcharts.com/charts/gallery.html?ung), that sports a 6%ish yield. Note that UNG recently put in a slightly higher bullish double bottom cycle low at 33.58 versus 33.23 a little over 4 months ago. UNG appears to be in a short term Wave 3 upcycle, see http://finance.yahoo.com/q/ta?s=ung&t=5d&l=off&z=l&q=c&p=&a=m26-12-9%2Cp12%2Cfs%2Cw14&c=.
I bought a tiny position in LTXX at 2.9999 on 1-2, see http://stockcharts.com/charts/gallery.html?ltxx. The purchase was ill timed, because, SPX/NDX/RUT were in an intermediate term downcycle. One wants to trade with the wind at one's back, that is, trade long when SPX/NDX/RUT are in an intermediate term upcycle. LTXX appears to have put in a Cyclical Bear Market cycle low at 2.25 recently.
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 (the long term upcycle from June 2006 to 11-7-07 was an anemic rollover upcycle, in which HUI/XAU were underwater until October 2007 versus the 5-11-06 cycle highs), 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
It's important to note that their candles are white/bullish today, indicating a bullish close above the open, whereas, when I (profitably) traded RUT long via UWM a few days ago (bought Monday and sold yesterday), it's candle was dark, indicating a bearish close below the open (it had a bullish large inverse spike and the WMT Lead Indicator had been very bullish the previous two sessions).
SPX (http://stockcharts.com/charts/gallery.html?%24spx), NDX, and RUT appear to have put in intermediate term cycle lows today, with SPX and NDX probably putting in minor intermediate term cycle lows, after putting in likely Cyclical Bull Market (cycle began October 2002) cycle highs on 10-11-07 and late October 2007 respectively, and, with RUT (Russell 2000) putting in a potential major intermediate term cycle low today.
NDX filled all but one of the downside gaps (previously discussed) at 2111.77 (filled), 2106.09 (filled), 2069.68 (filled 1-2), 2031.00 (filled 1-4), 1989.36 (filled), 1982.16 (filled), 1960.20 (filled), 1899.24 (filled), 1846.09.
Tomorrow I'll be looking to go long RUT (Russell 2000) via the Ultra Long ETF UWM, and, I'll be looking to short HUI (http://stockcharts.com/charts/gallery.html?%24hui)/XAU via shorting the Gold Miners ETF GDX.
However, before trading SPX/NDX/RUT aggressively long it makes sense to wait for a strong multi day short term Wave 1 upcycle, that will trigger a 2%+ follow though buy signal (after breaking the intermediate term downcycle trendline). Once a 2%+ follow though buy signal occurs, one looks to go long during a 2-3 day short term Wave 2 downcycle.
The WMT Lead Indicator was bullish the past four sessions, at +0.66% versus SPX (S & P 500) today/on 1-9, +0.57% on 1-8, at +1.21% on 1-7 and at +1.04% on 1-4.
Since putting in a likely Cyclical Bull Market cycle high at 856.48 in July 2007, RUT (Russell 2000) has done (is doing if it hasn't bottomed obviously) an Elliott Wave ABC down up down pattern, see the second weekly view RUT chart at http://stockcharts.com/charts/gallery.html?%24rut.
The bullish factors for RUT (Russell 2000) include the cycles/Elliott Wave count pointing to an imminent major intermediate term cycle low (appears to have occurred today/1-9, http://stockcharts.com/charts/gallery.html?%24rut), the bullish RUT COTs (Commitments Of Traders, there's a regular COT and one for the mini contract, see toward the bottom of http://www.cftc.gov/dea/futures/deacmelf.htm and note that the Commercial Traders are overall net long, and, their latest weekly changes are net long, with the mini contract being very bullish), and, the bullish WMT Lead Indicator the past four sessions, at +0.66% versus SPX (S & P 500) today/on 1-9, +0.57% on 1-8, at +1.21% on 1-7 and at +1.04% on 1-4.
HUI (http://stockcharts.com/charts/gallery.html?%24hui) put in a nearly perfect bearish double top cycle high yesterday at 463.19 versus the 11-7-07 cycle high at 463.06, while the XAU (http://stockcharts.com/charts/gallery.html?%24xau) put in a modestly lower countertrend Wave B cycle (began 12-18-07) high yesterday at 193.78 versus the 11-7-07 likely Wave 1 Cyclical Bull Market cycle high at 195.50. Both HUI/XAU have bearish large spikes on yesterday/1-8's candle.
Yesterday was probably just a last gasp for the gold bulls. The US Dollar probably entered a Cyclical Bull Market in November 2007 after being in a Bear Market since late 2005 (think any of the con artist gold writers (too many are con artists) will point that fact out?), see http://stockcharts.com/charts/gallery.html?%24usd, gold stocks have been underperforming gold since 11-7-07, the very bearish gold COT data, etc.
The NEM Lead Indicator is very bearish recently, it was a bearish -0.55% versus the XAU today/on 1-9, it was a bearish -0.81% on 1-8, was -0.05% on 1-7, -0.42% on 1-4, -0.56% on 1-3, +0.94% on 1-2, +1.38% on 12-31, -0.90% on 12-28, -1.15% on 12-27, -1.12% on 12-26, -1.10% on 12-24, -1.08% on 12-21, -0.18% on 12-20, -0.26% on 12-19.
The gold COT (Commitments Of Traders) data remains bearish, see the third/last 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 12-31-07 (traded net short 16,658 gold futures and options contracts versus trading net short 12,456 the previous week), trading a significant long position (added 5608 long gold futures and options contracts versus 8002 added the previous week), correctly anticipating some short term strength, but, continuing to go massively short (added 22,266 short gold futures and options contracts versus 20,458 added the previous week), as they've done in recent months.
So, the gold COT (Commitments Of Traders) data is short term and long term bearish. Some significant gold strength this week won't be surprising, but, it's very likely to be a great shorting opportunity.
I'm looking to trade the US Natural Gas ETF UNG (http://stockcharts.com/charts/gallery.html?ung), that sports a 6%ish yield. Note that UNG recently put in a slightly higher bullish double bottom cycle low at 33.58 versus 33.23 a little over 4 months ago. UNG appears to be in a short term Wave 3 upcycle, see http://finance.yahoo.com/q/ta?s=ung&t=5d&l=off&z=l&q=c&p=&a=m26-12-9%2Cp12%2Cfs%2Cw14&c=.
I bought a tiny position in LTXX at 2.9999 on 1-2, see http://stockcharts.com/charts/gallery.html?ltxx. The purchase was ill timed, because, SPX/NDX/RUT were in an intermediate term downcycle. One wants to trade with the wind at one's back, that is, trade long when SPX/NDX/RUT are in an intermediate term upcycle. LTXX appears to have put in a Cyclical Bear Market cycle low at 2.25 recently.
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 (the long term upcycle from June 2006 to 11-7-07 was an anemic rollover upcycle, in which HUI/XAU were underwater until October 2007 versus the 5-11-06 cycle highs), 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
1:04 PM
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