SPX (S & P 500) Is Probably Still In A Monthly Downcycle
SPX (S & P 500) is probably still in a monthly downcycle, because, reliable lead indicator WMT's short term picture has turned bearish, see http://stockcharts.com/charts/gallery.html?wmt.
WMT created a large bearish breakaway upside gap at 58.02 today 5-13, see http://finance.yahoo.com/q/ta?s=wmt&t=5d&l=off&z=l&q=c&p=&a=m26-12-9%2Cp12%2Cfs%2Cw14&c=.
From looking at the second weekly view chart at http://stockcharts.com/charts/gallery.html?wmt WMT appears to/might have put in a Wave 5 minor intermediate term cycle high at 59.09 on 5-1-08, for the major intermediate term upcycle since September 2007.
The WMT Lead Indicator was an extremely bearish -2.32% today 5-13, see 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.
Looking at SPX's (S & P 500) Wave 2 monthly cycle low's candle on 4-15-08, it has a respectably large bullish inverse spike and a bullish white candle (close above the open), see http://stockcharts.com/charts/gallery.html?%24spx. On 5-9 neither of those things occurred. The candle is black/bearish (close below the open) and the inverse spike is very small/not bullish.
It's now obviously likely that 5-9-08 wasn't a Wave 4 monthly cycle low for SPX, and, that the downside gap filling action (1356.65 for SPX, 1881.65 and 1840.88 for NDX, 692.06 for RUT, 55.15 and maybe 52.68 for WMT) that was expected in the Wave 4 monthly downcycle will occur.
Since important cycle highs/lows tend to occur shortly after gap filling action is completed, both timewise and pricewise, reasonable Wave 4 monthly cycle low targets are 1350-1355 for SPX, 1875-1880 for NDX, and, 690ish for RUT. WMT has downside gaps at 55.15 and 52.68.
Obviously tomorrow 5-14 I'll be looking to short SPX/NDX/RUT via SDS, QID (VXN collapsed -4.27% today, so, NDX might be the best short tomorrow), or TWM. I might also short WMT. I'll also be looking at GDX/GLD/NEM (probably not NEM, since 44.51 got filled today 5-13). The short term NEM Lead Indicator is very bearish, see http://finance.yahoo.com/q/ta?s=%5EXAU&t=5d&l=on&z=m&q=l&p=&a=&c=%5Ehui,nem
VIX rose +1.07 today 5-13 versus SPX falling -0.04%, which is a significant +1.03% rise in fear (+1.07% + -0.04% = +1.03% rise in the SPX (S & P 500) wall of worry) that points to some significant strength on Wednesday 5-14.
SPX (S & P 500) and NDX (NASDAQ 100) put in Wave A intermediate term cycle (since 10-11-07 for SPX and late October 2007 for NDX) lows on 3-17, while RUT (Russell 2000) did so on 3-10, see http://stockcharts.com/charts/gallery.html?%24spx for SPX.
The Upside Surprise/Rollover Barometer is at "Likely" due to the aggressive Fed credit extended since 2-28-08, that fuels index related program buying ("only" 70% of the dollar volume on the NYSE), see http://www.newyorkfed.org/markets/omo/dmm/temp.cfm?SHOWMORE=TRUE.
A Cyclical Bear Market probably/very likely began on 10-11-07 for SPX (S & P 500), began in late October 2007 for NDX (NASDAQ 100), and, began in late July 2007 for RUT (Russell 2000).
SPX created a bullish breakaway gap at 1322.70 on 4-1 and WMT created one at 52.68, see http://finance.yahoo.com/q/ta?s=%5EGSPC&t=5d&l=on&z=l&q=c&p=&a=p12,fs,w14&c=. SPX (S & P 500) has a bullish breakaway gap at 1276.60 from 3-18's open and WMT has one at 49.95 from 3-18's open.
Reliable lead indicator NEM put in a short term Wave 1 cycle high on 5-8 in rollover mode, 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. Wave 2 might have bottomed at 44.19 today 5-13.
The NEM Lead Indicator has turned very bearish lately, at -0.37% versus the XAU today 5-13, at -0.65% versus the XAU on 5-12, at -0.32% on 5-9, at -1.32% on 5-8, at -0.21% on 5-7, at -0.25% on 5-6, at -1.33% on 5-5, so, GDX/GLD are likely to be good shorts on Wednesday, in order to trade the short term Wave 2 downcycle that began on 5-8 for NEM/gold and began on 5-9 for GDX. NEM's short term Wave 2 downcycle might have bottomed at 44.19 today 5-13.
NEM has remaining downside gaps at 42.29, and 41.52. 45.22 (filled) and 44.51 (filled) got filled in the short term Wave 2 downcycle that began on 5-8 and might have bottomed today 5-13.
GDX has downside gaps at 44.49, 44.10, 43.18, and 42.65.
HUI/XAU put in (5% buy signal occurred on 5-8) a Wave A intermediate term cycle low on 5-1, of the likely Wave 2 Cyclical Bear Market since 3-14-08 for the XAU and since 3-17-08 for HUI, see http://stockcharts.com/charts/gallery.html?%24xau. Keep in mind that this intermediate term upcycle since 5-1 is probably a countertrend Wave B rebound within a Wave 2 Cyclical Bear Market.
Reliable Lead Indicator NEM put in a Wave 2 major intermediate term cycle low on 5-1 at 42.36, see http://stockcharts.com/charts/gallery.html?nem. Wave 1 peaked in January at 57.44 and NEM entered a Cyclical Bull Market in June 2007 after putting in a Cyclical Bear Market (began 1-31-06) cycle low at 37.84.
NEM is a good example of a gold stock that's in a Cyclical Bull Market, and, can be traded aggressively long now that a 5% follow through major buy signal occurred on 5-8 (after breaking the Wave 2 major intermediate term downcycle trendline), but, waiting for a sharp pullback (short term Wave 2 downcycle, might have bottomed on 5-13 at 44.19) makes sense if one's looking to go long. I'm sure there are many other gold/silver stocks that are in a Cyclical Bull Market. The HUI/XAU likely Wave 2 Cyclical Bear Market isn't a "death knell" for all gold/silver stocks.
However, the gold/silver stock trading long/investing environment is likely to be much more difficult now that HUI/XAU are probably in a Cyclical Bear Market. In other words one should probably trade in the same direction as HUI/XAU (with the wind at your back).
Reliable Lead Indicator NEM's Cyclical Bear Market from 1-31-06 until June 2007 (about 17 months, fell -38.51%, and, since NEM tends to be less volatile than most gold/silver stocks, HUI/XAU falling -45-50%+ is likely) is further strong evidence that HUI/XAU probably entered a 15-18+ month Cyclical Bear Market in March 2008.
Gold and silver had two Cyclical Bear Markets in the previous Secular Bull Market that peaked in 1980, corresponding to Elliott Wave 2 and 4 downcycles, see http://tradethecycles.blogspot.com/2008/03/gold-and-silvers-two-cyclical-bear.html.
See http://tradethecycles.blogspot.com/2008/04/crashing-velocity-circulation-of-money.html. My previous 18 month $500-550 cycle low target range for gold's Wave 2 Cyclical Bear Market is probably too optimistic. Probably 2-3 years and $450-500 is more realistic, given the extremely deflationary environment.
"The Bull Case For Gold And Why It Is Totally Incorrect," see http://tradethecycles.blogspot.com/2008/04/bull-case-for-gold-and-why-it-is.html.
For HUI/XAU/gold, the important thing now is that HUI/XAU/gold hit a 5% follow through major sell signal six weeks ago, see http://stockcharts.com/charts/gallery.html?%24xau. The multi month uptrend lines broke down and 5%+ follow through occurred to the downside. HUI/XAU/gold (gold might lag and peak in rollover mode) are in the midst of a major intermediate term downcycle, that's probably the start of an 18 monthish Wave 2 Cyclical Bear Market. HUI/XAU/gold will probably fall -50%+ in this bear market. Got cycles?
HUI/XAU very likely put in an intermediate term and a Wave 1 Cyclical Bull Market cycle high on 3-17 for HUI and on 3-14 for the XAU, see http://stockcharts.com/charts/gallery.html?%5Ehui. The XAU has a large bearish spike on 3-14's candle.
For the five day NEM Lead Indicator see http://finance.yahoo.com/q/ta?s=%5EXAU&t=5d&l=on&z=l&q=l&p=&a=&c=%5Ehui,nem.
The rest of the info is for reference purposes or for new readers.Gold's primary Secular Bull Market (since April 2001) uptrend line is at $500ish, see chart two at http://www.joefrocks.com/GoldStockCharts.html.
The severe weakness/action recently tells us something, just as the severe weakness/5% sell signal that occurred in May 2006 was a good one, since HUI/XAU/gold (http://stockcharts.com/charts/gallery.html?%24xau) were underwater versus the May 2006 cycle high for about 17 months.
A rollover long term upcycle was in effect from June 2006 (from October 2006 for the XAU, http://stockcharts.com/charts/gallery.html?%24xau) until the recent cycle highs, that was probably the Wave 1 Cyclical Bull Market (began in late 2000 for HUI/XAU and in April 2001 for gold, which was a slightly higher bullish double bottom with the 1999 cycle low) peaking in dramatic rollover mode versus the May 2006 cycle high. One can only discuss likely scenarios, not certainties.
The real estate/too easy mortgage boom from 2002 until early 2006 was very inflationary. The current bust is obviously the diametric opposite/very deflationary. Combined with plummeting major world stock markets, many annihilated financial stocks, plummeting money market rates and bond yields, plummeting credit/debt instruments, tight credit and mortgage lending, real estate bust, etc and it's pretty obvious that the environment is very deflationary.
.......http://www.JoeFROCKS.com/ .
NEM XAU HUI
WMT created a large bearish breakaway upside gap at 58.02 today 5-13, see http://finance.yahoo.com/q/ta?s=wmt&t=5d&l=off&z=l&q=c&p=&a=m26-12-9%2Cp12%2Cfs%2Cw14&c=.
From looking at the second weekly view chart at http://stockcharts.com/charts/gallery.html?wmt WMT appears to/might have put in a Wave 5 minor intermediate term cycle high at 59.09 on 5-1-08, for the major intermediate term upcycle since September 2007.
The WMT Lead Indicator was an extremely bearish -2.32% today 5-13, see 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.
Looking at SPX's (S & P 500) Wave 2 monthly cycle low's candle on 4-15-08, it has a respectably large bullish inverse spike and a bullish white candle (close above the open), see http://stockcharts.com/charts/gallery.html?%24spx. On 5-9 neither of those things occurred. The candle is black/bearish (close below the open) and the inverse spike is very small/not bullish.
It's now obviously likely that 5-9-08 wasn't a Wave 4 monthly cycle low for SPX, and, that the downside gap filling action (1356.65 for SPX, 1881.65 and 1840.88 for NDX, 692.06 for RUT, 55.15 and maybe 52.68 for WMT) that was expected in the Wave 4 monthly downcycle will occur.
Since important cycle highs/lows tend to occur shortly after gap filling action is completed, both timewise and pricewise, reasonable Wave 4 monthly cycle low targets are 1350-1355 for SPX, 1875-1880 for NDX, and, 690ish for RUT. WMT has downside gaps at 55.15 and 52.68.
Obviously tomorrow 5-14 I'll be looking to short SPX/NDX/RUT via SDS, QID (VXN collapsed -4.27% today, so, NDX might be the best short tomorrow), or TWM. I might also short WMT. I'll also be looking at GDX/GLD/NEM (probably not NEM, since 44.51 got filled today 5-13). The short term NEM Lead Indicator is very bearish, see http://finance.yahoo.com/q/ta?s=%5EXAU&t=5d&l=on&z=m&q=l&p=&a=&c=%5Ehui,nem
VIX rose +1.07 today 5-13 versus SPX falling -0.04%, which is a significant +1.03% rise in fear (+1.07% + -0.04% = +1.03% rise in the SPX (S & P 500) wall of worry) that points to some significant strength on Wednesday 5-14.
SPX (S & P 500) and NDX (NASDAQ 100) put in Wave A intermediate term cycle (since 10-11-07 for SPX and late October 2007 for NDX) lows on 3-17, while RUT (Russell 2000) did so on 3-10, see http://stockcharts.com/charts/gallery.html?%24spx for SPX.
The Upside Surprise/Rollover Barometer is at "Likely" due to the aggressive Fed credit extended since 2-28-08, that fuels index related program buying ("only" 70% of the dollar volume on the NYSE), see http://www.newyorkfed.org/markets/omo/dmm/temp.cfm?SHOWMORE=TRUE.
A Cyclical Bear Market probably/very likely began on 10-11-07 for SPX (S & P 500), began in late October 2007 for NDX (NASDAQ 100), and, began in late July 2007 for RUT (Russell 2000).
SPX created a bullish breakaway gap at 1322.70 on 4-1 and WMT created one at 52.68, see http://finance.yahoo.com/q/ta?s=%5EGSPC&t=5d&l=on&z=l&q=c&p=&a=p12,fs,w14&c=. SPX (S & P 500) has a bullish breakaway gap at 1276.60 from 3-18's open and WMT has one at 49.95 from 3-18's open.
Reliable lead indicator NEM put in a short term Wave 1 cycle high on 5-8 in rollover mode, 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. Wave 2 might have bottomed at 44.19 today 5-13.
The NEM Lead Indicator has turned very bearish lately, at -0.37% versus the XAU today 5-13, at -0.65% versus the XAU on 5-12, at -0.32% on 5-9, at -1.32% on 5-8, at -0.21% on 5-7, at -0.25% on 5-6, at -1.33% on 5-5, so, GDX/GLD are likely to be good shorts on Wednesday, in order to trade the short term Wave 2 downcycle that began on 5-8 for NEM/gold and began on 5-9 for GDX. NEM's short term Wave 2 downcycle might have bottomed at 44.19 today 5-13.
NEM has remaining downside gaps at 42.29, and 41.52. 45.22 (filled) and 44.51 (filled) got filled in the short term Wave 2 downcycle that began on 5-8 and might have bottomed today 5-13.
GDX has downside gaps at 44.49, 44.10, 43.18, and 42.65.
HUI/XAU put in (5% buy signal occurred on 5-8) a Wave A intermediate term cycle low on 5-1, of the likely Wave 2 Cyclical Bear Market since 3-14-08 for the XAU and since 3-17-08 for HUI, see http://stockcharts.com/charts/gallery.html?%24xau. Keep in mind that this intermediate term upcycle since 5-1 is probably a countertrend Wave B rebound within a Wave 2 Cyclical Bear Market.
Reliable Lead Indicator NEM put in a Wave 2 major intermediate term cycle low on 5-1 at 42.36, see http://stockcharts.com/charts/gallery.html?nem. Wave 1 peaked in January at 57.44 and NEM entered a Cyclical Bull Market in June 2007 after putting in a Cyclical Bear Market (began 1-31-06) cycle low at 37.84.
NEM is a good example of a gold stock that's in a Cyclical Bull Market, and, can be traded aggressively long now that a 5% follow through major buy signal occurred on 5-8 (after breaking the Wave 2 major intermediate term downcycle trendline), but, waiting for a sharp pullback (short term Wave 2 downcycle, might have bottomed on 5-13 at 44.19) makes sense if one's looking to go long. I'm sure there are many other gold/silver stocks that are in a Cyclical Bull Market. The HUI/XAU likely Wave 2 Cyclical Bear Market isn't a "death knell" for all gold/silver stocks.
However, the gold/silver stock trading long/investing environment is likely to be much more difficult now that HUI/XAU are probably in a Cyclical Bear Market. In other words one should probably trade in the same direction as HUI/XAU (with the wind at your back).
Reliable Lead Indicator NEM's Cyclical Bear Market from 1-31-06 until June 2007 (about 17 months, fell -38.51%, and, since NEM tends to be less volatile than most gold/silver stocks, HUI/XAU falling -45-50%+ is likely) is further strong evidence that HUI/XAU probably entered a 15-18+ month Cyclical Bear Market in March 2008.
Gold and silver had two Cyclical Bear Markets in the previous Secular Bull Market that peaked in 1980, corresponding to Elliott Wave 2 and 4 downcycles, see http://tradethecycles.blogspot.com/2008/03/gold-and-silvers-two-cyclical-bear.html.
See http://tradethecycles.blogspot.com/2008/04/crashing-velocity-circulation-of-money.html. My previous 18 month $500-550 cycle low target range for gold's Wave 2 Cyclical Bear Market is probably too optimistic. Probably 2-3 years and $450-500 is more realistic, given the extremely deflationary environment.
"The Bull Case For Gold And Why It Is Totally Incorrect," see http://tradethecycles.blogspot.com/2008/04/bull-case-for-gold-and-why-it-is.html.
For HUI/XAU/gold, the important thing now is that HUI/XAU/gold hit a 5% follow through major sell signal six weeks ago, see http://stockcharts.com/charts/gallery.html?%24xau. The multi month uptrend lines broke down and 5%+ follow through occurred to the downside. HUI/XAU/gold (gold might lag and peak in rollover mode) are in the midst of a major intermediate term downcycle, that's probably the start of an 18 monthish Wave 2 Cyclical Bear Market. HUI/XAU/gold will probably fall -50%+ in this bear market. Got cycles?
HUI/XAU very likely put in an intermediate term and a Wave 1 Cyclical Bull Market cycle high on 3-17 for HUI and on 3-14 for the XAU, see http://stockcharts.com/charts/gallery.html?%5Ehui. The XAU has a large bearish spike on 3-14's candle.
For the five day NEM Lead Indicator see http://finance.yahoo.com/q/ta?s=%5EXAU&t=5d&l=on&z=l&q=l&p=&a=&c=%5Ehui,nem.
The rest of the info is for reference purposes or for new readers.Gold's primary Secular Bull Market (since April 2001) uptrend line is at $500ish, see chart two at http://www.joefrocks.com/GoldStockCharts.html.
The severe weakness/action recently tells us something, just as the severe weakness/5% sell signal that occurred in May 2006 was a good one, since HUI/XAU/gold (http://stockcharts.com/charts/gallery.html?%24xau) were underwater versus the May 2006 cycle high for about 17 months.
A rollover long term upcycle was in effect from June 2006 (from October 2006 for the XAU, http://stockcharts.com/charts/gallery.html?%24xau) until the recent cycle highs, that was probably the Wave 1 Cyclical Bull Market (began in late 2000 for HUI/XAU and in April 2001 for gold, which was a slightly higher bullish double bottom with the 1999 cycle low) peaking in dramatic rollover mode versus the May 2006 cycle high. One can only discuss likely scenarios, not certainties.
The real estate/too easy mortgage boom from 2002 until early 2006 was very inflationary. The current bust is obviously the diametric opposite/very deflationary. Combined with plummeting major world stock markets, many annihilated financial stocks, plummeting money market rates and bond yields, plummeting credit/debt instruments, tight credit and mortgage lending, real estate bust, etc and it's pretty obvious that the environment is very deflationary.
.......http://www.JoeFROCKS.com/ .
NEM XAU HUI
Labels: Gold, Gold Stocks, HUI, NEM, Silver, Silver Stocks, SPX, XAU
posted by Joe Ferrazzano at
1:41 PM
1 Comments:
The gold/commodity "pundits" keep discussing rapid money supply growth, without realizing that the velocity (circulation) of money (= GDP/M3) is plunging, which means obviously that M3 isn't inflating the economy.
What can you say about people who think that a crashing real estate market, tight mortgage lending, crashing debt/credit instruments, stock market bear market, plummeting money market rates, weak retail sales, etc is an inflationary environment.
The rapid money supply growth is an attempt to ward off a severe recession, due to the deflationary tsunami created by the credit crisis and real estate bust.
By
Joe Ferrazzano, at 3:45 PM
Post a Comment
<< Home