Wave A Of SPX/NDX/RUT's Wave 4 Monthly Downcycle Might Have Bottomed
Wave A of SPX/NDX/RUT's Wave 4 Monthly Downcycle since 5-19-08 might have bottomed, see http://finance.yahoo.com/q/ta?s=%5EGSPC&t=5d&l=off&z=l&q=c&p=&a=p12,fs,w14&c= and see http://stockcharts.com/charts/gallery.html?%24spx.
However, given that today's WMT Lead Indicator was bullish and became very bullish late in the session (closed at +1.23% versus SPX today 5-22), see http://finance.yahoo.com/q/ta?s=%5EHUI&t=1d&l=off&z=l&q=l&p=&a=,p12,fs,w14&c=wmt,%5EGSPC, today 5-22's SPX (S & P 500) action was very anemic (I still managed to day trade NDX ultra long via QLD, buying at 84.25 and selling at 84.72), which suggests that maybe Wave A down hasn't bottomed yet, as does the absence of a large bullish inverse spike on yesterday 5-21's intraday chart.
The SPX/NDX/RUT Wave 3 Monthly Upcycle that began on 4-15-08 peaked on 5-19, see http://finance.yahoo.com/q/ta?s=%5EGSPC&t=5d&l=off&z=l&q=c&p=&a=p12,fs,w14&c= and see http://stockcharts.com/charts/gallery.html?%24spx. SPX/NDX/RUT all have large bearish spikes on 5-19's candle.
An SPX Wave 2 monthly cycle low occurred on 4-15-08, and, a countertrend Wave B intermediate term upcycle began on 3-17-08 for SPX and NDX (3-10-08 for the Russell 2000 (RUT)). A Wave 1 monthly cycle high occurred on 4-7-08.
Tomorrow 5-23 I'll be looking to trade SPX/NDX/RUT ultra long via SSO, QLD, or UWM, and, if the countertrend Wave B of the monthly downcycle since 5-19 peaks I'll look to trade ultra short via SDS, QID, or TWM, and, I might trade WMT short.
Once the SPX Wave A move that began on 5-19 bottoms, as it might have late yesterday 5-21 at 1388.81, there'll be a reference point for trading the Wave C move (Wave 4 monthly cycle low target). If Wave A bottomed at 1388.81 for SPX yesterday/on 5-21, then, Wave C obviously should bottom well below 1388.81, and, SPX (S & P 500) should fill it's downside gap at 1356.65 in the Wave C move and bottom at 1350-1355 = Wave 4 monthly cycle low target.
Downside gap filling action (1356.65 for SPX, 1917.70, 1881.65, and 1840.88 (likely bullish breakaway gap) for NDX, 692.06 for RUT, 55.15 (filled) and maybe 52.68 for WMT) is expected (normally would occur) in the Wave 4 monthly downcycle.
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 (filled) and 52.68.
VIX fell -3.01% today 5-22 versus SPX rising +0.26%, which is a sharp +2.75% rise in complacency (-3.01% + +0.26% = +2.75% decline in the SPX (S & P 500) wall of worry) that points to some severe weakness on Friday 5-23.
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 or 4 bottomed at 44.19 on 5-13 and Wave 3 or 5 peaked on 5-21 at 50.89. NEM looks like it's in a Wave 4 down, but, it's probably Wave A down of a monthly downcycle, we'll see. NEM had a big spike move and filled it's upside gap at 48.72.
NEM created a large bullish breakaway gap at 45.10 on 5-15 and another one at 46.73 on 5-16. NEM filled it's bearish upside breakaway gap at 48.72 from 3-20 on 5-15, which confirms the 5% follow through major buy signal.
Yesterday 5-21 has the look of a potential HUI/XAU Wave 5 cycle high of the countertrend Wave B monthly upcycle since 5-1-08, see http://stockcharts.com/charts/gallery.html?%24xau. Note the large bearish spike on 5-21's candle.
I've been discussing a short term Wave 3 upcycle since 5-13, but, there is an up down up down up pattern on the daily chart (see http://stockcharts.com/charts/gallery.html?%24xau), and, 5-21's candle, which is black/bearish (close below the open) with a large bearish spike, has the look of a final Wave 5 cycle high.
GDX/HUI/XAU are in a short term Wave 4 downcycle or Wave A down of a likely Wave C intermediate term downcycle, see http://stockcharts.com/charts/gallery.html?%24xau.
The NEM Lead Indicator was a slightly bearish -0.23% versus the XAU today 5-22, was a bullish +0.68% versus the XAU on 5-21, was a bearish -0.83% on 5-20, was -0.21% on 5-19, was a very bullish +1.56% on 5-16, was -0.27% on 5-15, was a very bullish +1.93% on 5-14, was -0.37% on 5-13, was -0.65% 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.
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 bottomed on 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). 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.
Probably over half of all gold/silver stocks are in a Cyclical Bear Market right now, and, some of the ones that aren't might have been helped a lot by program buying. It would be interesting to see what % of gold/silver stocks that are in a Cyclical Bull Market are also in indexes.
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
However, given that today's WMT Lead Indicator was bullish and became very bullish late in the session (closed at +1.23% versus SPX today 5-22), see http://finance.yahoo.com/q/ta?s=%5EHUI&t=1d&l=off&z=l&q=l&p=&a=,p12,fs,w14&c=wmt,%5EGSPC, today 5-22's SPX (S & P 500) action was very anemic (I still managed to day trade NDX ultra long via QLD, buying at 84.25 and selling at 84.72), which suggests that maybe Wave A down hasn't bottomed yet, as does the absence of a large bullish inverse spike on yesterday 5-21's intraday chart.
The SPX/NDX/RUT Wave 3 Monthly Upcycle that began on 4-15-08 peaked on 5-19, see http://finance.yahoo.com/q/ta?s=%5EGSPC&t=5d&l=off&z=l&q=c&p=&a=p12,fs,w14&c= and see http://stockcharts.com/charts/gallery.html?%24spx. SPX/NDX/RUT all have large bearish spikes on 5-19's candle.
An SPX Wave 2 monthly cycle low occurred on 4-15-08, and, a countertrend Wave B intermediate term upcycle began on 3-17-08 for SPX and NDX (3-10-08 for the Russell 2000 (RUT)). A Wave 1 monthly cycle high occurred on 4-7-08.
Tomorrow 5-23 I'll be looking to trade SPX/NDX/RUT ultra long via SSO, QLD, or UWM, and, if the countertrend Wave B of the monthly downcycle since 5-19 peaks I'll look to trade ultra short via SDS, QID, or TWM, and, I might trade WMT short.
Once the SPX Wave A move that began on 5-19 bottoms, as it might have late yesterday 5-21 at 1388.81, there'll be a reference point for trading the Wave C move (Wave 4 monthly cycle low target). If Wave A bottomed at 1388.81 for SPX yesterday/on 5-21, then, Wave C obviously should bottom well below 1388.81, and, SPX (S & P 500) should fill it's downside gap at 1356.65 in the Wave C move and bottom at 1350-1355 = Wave 4 monthly cycle low target.
Downside gap filling action (1356.65 for SPX, 1917.70, 1881.65, and 1840.88 (likely bullish breakaway gap) for NDX, 692.06 for RUT, 55.15 (filled) and maybe 52.68 for WMT) is expected (normally would occur) in the Wave 4 monthly downcycle.
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 (filled) and 52.68.
VIX fell -3.01% today 5-22 versus SPX rising +0.26%, which is a sharp +2.75% rise in complacency (-3.01% + +0.26% = +2.75% decline in the SPX (S & P 500) wall of worry) that points to some severe weakness on Friday 5-23.
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 or 4 bottomed at 44.19 on 5-13 and Wave 3 or 5 peaked on 5-21 at 50.89. NEM looks like it's in a Wave 4 down, but, it's probably Wave A down of a monthly downcycle, we'll see. NEM had a big spike move and filled it's upside gap at 48.72.
NEM created a large bullish breakaway gap at 45.10 on 5-15 and another one at 46.73 on 5-16. NEM filled it's bearish upside breakaway gap at 48.72 from 3-20 on 5-15, which confirms the 5% follow through major buy signal.
Yesterday 5-21 has the look of a potential HUI/XAU Wave 5 cycle high of the countertrend Wave B monthly upcycle since 5-1-08, see http://stockcharts.com/charts/gallery.html?%24xau. Note the large bearish spike on 5-21's candle.
I've been discussing a short term Wave 3 upcycle since 5-13, but, there is an up down up down up pattern on the daily chart (see http://stockcharts.com/charts/gallery.html?%24xau), and, 5-21's candle, which is black/bearish (close below the open) with a large bearish spike, has the look of a final Wave 5 cycle high.
GDX/HUI/XAU are in a short term Wave 4 downcycle or Wave A down of a likely Wave C intermediate term downcycle, see http://stockcharts.com/charts/gallery.html?%24xau.
The NEM Lead Indicator was a slightly bearish -0.23% versus the XAU today 5-22, was a bullish +0.68% versus the XAU on 5-21, was a bearish -0.83% on 5-20, was -0.21% on 5-19, was a very bullish +1.56% on 5-16, was -0.27% on 5-15, was a very bullish +1.93% on 5-14, was -0.37% on 5-13, was -0.65% 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.
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 bottomed on 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). 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.
Probably over half of all gold/silver stocks are in a Cyclical Bear Market right now, and, some of the ones that aren't might have been helped a lot by program buying. It would be interesting to see what % of gold/silver stocks that are in a Cyclical Bull Market are also in indexes.
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
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