SPX (S & P 500) Wave 4 Monthly Downcycle Is Probably Still In Effect
SPX's (S & P 500, http://stockcharts.com/charts/gallery.html?%24spx) Wave 4 Monthly Downcycle since 5-19-08 is probably still in effect, see http://finance.yahoo.com/q/ta?s=%5EGSPC&t=5d&l=off&z=l&q=c&p=&a=p12,fs,w14&c=. The upcycle since late yesterday 6-9 to late today is probably a countertrend Wave B type rebound, since there's no large bullish inverse spike on the intraday chart at late yesterday 6-9's cycle low, and, late in the session an intraday Wave A down occurred, followed by an intraday Wave B, that appears to have peaked shortly before session's end, so, a Wave C down type move is likely early tomorrow, and, SPX may finally put in a Wave 4 monthly cycle low in the 1340 to 1350 range early tomorrow.
Also, reliable lead indicator Walmart (WMT) filled Friday 6-6's upside gap at 59.80 late today 6-10, was/is peaking in rollover mode, and, looks like it'll be weak early tomorrow, see http://finance.yahoo.com/q/ta?s=wmt&t=5d&l=off&z=l&q=c&p=&a=p12%2Cfs%2Cw14&c, which points to major averages weakness early tomorrow. Watch yesterday's downside gap at 58.37 tomorrow.
NDX (NASDAQ 100, http://stockcharts.com/charts/gallery.html?%24ndx)/RUT (Russell 2000, http://stockcharts.com/charts/gallery.html?%24rut) probably didn't put in Wave 4 monthly cycle lows on 5-23-08. It looks like NDX's and maybe also RUT's 5-23-08 cycle lows will be taken out tomorrow. NDX's and maybe RUT's Wave 3 monthly upcycle since 4-15-08 probably peaked in rollover mode (NDX double top) recently versus the 5-19-08 cycle high.
NDX's downcycle from 5-19 to 5-23 doesn't have a countertrend Wave B upcycle evident on the daily chart, see http://stockcharts.com/charts/gallery.html?%24ndx, as it normally would have, which is why I originally considered it Wave A down, as SPX's was.
Reliable lead indicator Walmart (WMT) created a downside gap at 58.37 at 6-9's open, that may get filled early tomorrow. Then, watch the downside gap at 57.68 from Thursday 6-5's open, that appears to be a bullish breakaway gap, 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=. Additional downside gaps are at 57.20, 56.40, 55.75, and 52.68.
Once SPX puts in a Wave 4 monthly cycle low watch upside gaps at 1404.05, 1426.63, 1447.16, 1467.95, 1488.41, and, there are probably additional upside gaps I need to identify. For now/this week 1404.05 and 1426.63 are the only upside gaps we care about.
Tomorrow 6-11 I'll be looking to trade SPX/NDX/RUT ultra long via SSO, QLD, and UWM, once SPX (and maybe also NDX/RUT) puts in a Wave 4 monthly cycle low. I'll also look to trade short via SDS, QID, or TWM if there's a good entry point. Also, once GDX/GLD/NEM bounce a bit, I'll look to trade one of them short.
The short term Walmart (WMT) Lead Indicator is extremely bullish, see http://finance.yahoo.com/q/ta?s=%5EHUI&t=5d&l=off&z=l&q=l&p=&a=p12,fs,w14&c=wmt,%5EGSPC (+0.59% versus SPX today/on 6-10, +1.98% on 6-9, +0.70% on 6-6, +1.73% on 6-5, -0.13% on 6-4, +1.58% on 6-3, +0.11% on 6-2, -0.50% on 5-30, +0.96% on 5-29, +0.82% on 5-28, +0.48% on 5-27, +0.78% on 5-23, +1.23% on 5-22, +0.32% on 5-21, +0.13% on 5-20).
VIX rose a modest +0.30% today 6-10 versus SPX falling a modest -0.24%, which is a slight +0.06% rise in fear (+0.30% + -0.24% = +0.06% rise in the SPX (S & P 500) wall of worry) that points to some slight strength early on Wednesday 6-11.
The SPX/NDX/RUT Wave 3 monthly upcycle that began on 4-15-08 peaked on 5-19, see http://stockcharts.com/charts/gallery.html?%24spx. SPX/NDX/RUT 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. A Wave 4 monthly cycle low probably didn't occur on 5-23-08 for NDX and RUT.
Downside gap filling action (1356.65 for SPX) is expected (normally would and did occur on 6-9) in the Wave 4 monthly downcycle.
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.
GDX/HUI/XAU/GLD are in Wave C of Wave A of the Wave C minor intermediate term downcycle since 5-21-08, see http://stockcharts.com/charts/gallery.html?gdx, and, are probably heading much lower the next few days, because, they created large bearish breakaway type gaps at today 6-10's open at 46.65, 433.01, 185.15, and 87.99, see GDX at http://finance.yahoo.com/q/ta?s=gdx&t=5d&l=off&z=l&q=c&p=&a=p12%2Cfs%2Cw14&c. NEM created a large bearish breakaway type gap at today 6-10's open at 49.02.
Watch GDX's downside gaps at 44.49 (filled 6-5), 44.10 (filled 6-10), 43.18, and 42.65. Watch NEM's gap at 45.10 from 5-15, and, at 42.29, 41.52.
However, GDX/HUI/XAU/GLD are oversold, so, there's likely to be a brief rebound tomorrow at some point.
HUI/XAU put in an intermediate term and very likely 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.
GDX/HUI/XAU/GLD (http://stockcharts.com/charts/gallery.html?gdx) entered the Wave C downcycle of Wave A of Wave C (since 5-21-08) of the Wave A major intermediate term downcycle since mid March 2008, see http://finance.yahoo.com/q/ta?s=gdx&t=5d&l=off&z=l&q=c&p=&a=p12%2Cfs%2Cw14&c.
GDX/HUI/GLD created large bullish breakaway gaps at 6-6's open at 45.79 (filled), 421.06 (filled), and 86.45 (filled). GLD filled it's upside gap at 87.96 on 6-6 and filled it's upside gap at 89.14 yesterday as expected, since it closed at the session cycle high at 89.06 on Friday.
The NEM Lead Indicator was a slightly bearish -0.22% versus the XAU today 6-10, was a bullish +0.66% versus the XAU on 6-9, was a bearish -0.85% on 6-6, was a bordering on very bearish -0.98% on 6-5, was a very bullish +1.61% on 6-4, was +0.25% on 6-3, +0.33% on 6-2, was -0.65% on 5-30, was a very bullish +1.11% on 5-29, was +0.14% on 5-28, was +0.42% on 5-27, +0.14% on 5-23, was -0.23% on 5-22, was +0.68% on 5-21, was -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.
GDX/HUI/XAU/GLD entered Wave C of the Wave A major intermediate term downcycle since mid March 2008 on Wednesday 5-21-08, see http://tradethecycles.blogspot.com/2008/05/gold-etf-gld-analysis.html. Also, see the COT data that jives big time with that analysis at http://tradethecycles.blogspot.com/2008/05/latest-gold-cot-commitments-of-traders.html.
GDX/GLD/NEM/XAU created huge bearish breakaway gaps at 46.96 (filled), 89.14 (filled), 48.22 (filled), and 185.02 (filled) at 5-29's open, see http://finance.yahoo.com/q/ta?s=GDX&t=5d&l=off&z=l&q=c&p=&a=p12,fs,w14&c.
GDX/GLD/NEM/XAU created huge bearish breakaway gaps at 47.75, 91.23, 48.74 (filled), and 188.10 at 5-27's open, which correctly pointed to more downside early on 5-28, see http://finance.yahoo.com/q/ta?s=GDX&t=5d&l=off&z=l&q=c&p=&a=p12,fs,w14&c.
GLD failed to fill it's big bearish breakaway gap at 92.56 from April 18 recently, confirming the bearish case, see http://stockcharts.com/charts/gallery.html?gld, and, it created additional big bearish breakaway gaps at 91.23 on 5-27, at 89.14 (filled) on 5-29, at 87.96 (filled) on 6-3, and, at 87.99 on 6-10. Therefore, GLD has three very large very bearish breakaway gaps now, at 92.56, 91.23, and 87.99.
I hope you realize that "Deflation Is Everywhere!," see http://tradethecycles.blogspot.com/2008/05/deflation-is-everywhere.html.
NEM is in Wave C downof a monthly downcycle, see http://stockcharts.com/charts/gallery.html?nem. NEM created large bullish breakaway gaps at 45.10 on 5-15 and 47.90 on 6-6 (filled 6-10), and, another one at 46.73 on 5-16 that got filled on 5-29 (46.50 cycle low on 5-29). NEM filled it's bearish upside breakaway gap at 48.72 from 3-20 on 5-15, which confirmed the 5% follow through major buy signal.
5-21 is an HUI/XAU/GDX 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.
NEM has remaining downside gaps at 45.15, 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.
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 nine 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?
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
Also, reliable lead indicator Walmart (WMT) filled Friday 6-6's upside gap at 59.80 late today 6-10, was/is peaking in rollover mode, and, looks like it'll be weak early tomorrow, see http://finance.yahoo.com/q/ta?s=wmt&t=5d&l=off&z=l&q=c&p=&a=p12%2Cfs%2Cw14&c, which points to major averages weakness early tomorrow. Watch yesterday's downside gap at 58.37 tomorrow.
NDX (NASDAQ 100, http://stockcharts.com/charts/gallery.html?%24ndx)/RUT (Russell 2000, http://stockcharts.com/charts/gallery.html?%24rut) probably didn't put in Wave 4 monthly cycle lows on 5-23-08. It looks like NDX's and maybe also RUT's 5-23-08 cycle lows will be taken out tomorrow. NDX's and maybe RUT's Wave 3 monthly upcycle since 4-15-08 probably peaked in rollover mode (NDX double top) recently versus the 5-19-08 cycle high.
NDX's downcycle from 5-19 to 5-23 doesn't have a countertrend Wave B upcycle evident on the daily chart, see http://stockcharts.com/charts/gallery.html?%24ndx, as it normally would have, which is why I originally considered it Wave A down, as SPX's was.
Reliable lead indicator Walmart (WMT) created a downside gap at 58.37 at 6-9's open, that may get filled early tomorrow. Then, watch the downside gap at 57.68 from Thursday 6-5's open, that appears to be a bullish breakaway gap, 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=. Additional downside gaps are at 57.20, 56.40, 55.75, and 52.68.
Once SPX puts in a Wave 4 monthly cycle low watch upside gaps at 1404.05, 1426.63, 1447.16, 1467.95, 1488.41, and, there are probably additional upside gaps I need to identify. For now/this week 1404.05 and 1426.63 are the only upside gaps we care about.
Tomorrow 6-11 I'll be looking to trade SPX/NDX/RUT ultra long via SSO, QLD, and UWM, once SPX (and maybe also NDX/RUT) puts in a Wave 4 monthly cycle low. I'll also look to trade short via SDS, QID, or TWM if there's a good entry point. Also, once GDX/GLD/NEM bounce a bit, I'll look to trade one of them short.
The short term Walmart (WMT) Lead Indicator is extremely bullish, see http://finance.yahoo.com/q/ta?s=%5EHUI&t=5d&l=off&z=l&q=l&p=&a=p12,fs,w14&c=wmt,%5EGSPC (+0.59% versus SPX today/on 6-10, +1.98% on 6-9, +0.70% on 6-6, +1.73% on 6-5, -0.13% on 6-4, +1.58% on 6-3, +0.11% on 6-2, -0.50% on 5-30, +0.96% on 5-29, +0.82% on 5-28, +0.48% on 5-27, +0.78% on 5-23, +1.23% on 5-22, +0.32% on 5-21, +0.13% on 5-20).
VIX rose a modest +0.30% today 6-10 versus SPX falling a modest -0.24%, which is a slight +0.06% rise in fear (+0.30% + -0.24% = +0.06% rise in the SPX (S & P 500) wall of worry) that points to some slight strength early on Wednesday 6-11.
The SPX/NDX/RUT Wave 3 monthly upcycle that began on 4-15-08 peaked on 5-19, see http://stockcharts.com/charts/gallery.html?%24spx. SPX/NDX/RUT 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. A Wave 4 monthly cycle low probably didn't occur on 5-23-08 for NDX and RUT.
Downside gap filling action (1356.65 for SPX) is expected (normally would and did occur on 6-9) in the Wave 4 monthly downcycle.
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.
GDX/HUI/XAU/GLD are in Wave C of Wave A of the Wave C minor intermediate term downcycle since 5-21-08, see http://stockcharts.com/charts/gallery.html?gdx, and, are probably heading much lower the next few days, because, they created large bearish breakaway type gaps at today 6-10's open at 46.65, 433.01, 185.15, and 87.99, see GDX at http://finance.yahoo.com/q/ta?s=gdx&t=5d&l=off&z=l&q=c&p=&a=p12%2Cfs%2Cw14&c. NEM created a large bearish breakaway type gap at today 6-10's open at 49.02.
Watch GDX's downside gaps at 44.49 (filled 6-5), 44.10 (filled 6-10), 43.18, and 42.65. Watch NEM's gap at 45.10 from 5-15, and, at 42.29, 41.52.
However, GDX/HUI/XAU/GLD are oversold, so, there's likely to be a brief rebound tomorrow at some point.
HUI/XAU put in an intermediate term and very likely 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.
GDX/HUI/XAU/GLD (http://stockcharts.com/charts/gallery.html?gdx) entered the Wave C downcycle of Wave A of Wave C (since 5-21-08) of the Wave A major intermediate term downcycle since mid March 2008, see http://finance.yahoo.com/q/ta?s=gdx&t=5d&l=off&z=l&q=c&p=&a=p12%2Cfs%2Cw14&c.
GDX/HUI/GLD created large bullish breakaway gaps at 6-6's open at 45.79 (filled), 421.06 (filled), and 86.45 (filled). GLD filled it's upside gap at 87.96 on 6-6 and filled it's upside gap at 89.14 yesterday as expected, since it closed at the session cycle high at 89.06 on Friday.
The NEM Lead Indicator was a slightly bearish -0.22% versus the XAU today 6-10, was a bullish +0.66% versus the XAU on 6-9, was a bearish -0.85% on 6-6, was a bordering on very bearish -0.98% on 6-5, was a very bullish +1.61% on 6-4, was +0.25% on 6-3, +0.33% on 6-2, was -0.65% on 5-30, was a very bullish +1.11% on 5-29, was +0.14% on 5-28, was +0.42% on 5-27, +0.14% on 5-23, was -0.23% on 5-22, was +0.68% on 5-21, was -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.
GDX/HUI/XAU/GLD entered Wave C of the Wave A major intermediate term downcycle since mid March 2008 on Wednesday 5-21-08, see http://tradethecycles.blogspot.com/2008/05/gold-etf-gld-analysis.html. Also, see the COT data that jives big time with that analysis at http://tradethecycles.blogspot.com/2008/05/latest-gold-cot-commitments-of-traders.html.
GDX/GLD/NEM/XAU created huge bearish breakaway gaps at 46.96 (filled), 89.14 (filled), 48.22 (filled), and 185.02 (filled) at 5-29's open, see http://finance.yahoo.com/q/ta?s=GDX&t=5d&l=off&z=l&q=c&p=&a=p12,fs,w14&c.
GDX/GLD/NEM/XAU created huge bearish breakaway gaps at 47.75, 91.23, 48.74 (filled), and 188.10 at 5-27's open, which correctly pointed to more downside early on 5-28, see http://finance.yahoo.com/q/ta?s=GDX&t=5d&l=off&z=l&q=c&p=&a=p12,fs,w14&c.
GLD failed to fill it's big bearish breakaway gap at 92.56 from April 18 recently, confirming the bearish case, see http://stockcharts.com/charts/gallery.html?gld, and, it created additional big bearish breakaway gaps at 91.23 on 5-27, at 89.14 (filled) on 5-29, at 87.96 (filled) on 6-3, and, at 87.99 on 6-10. Therefore, GLD has three very large very bearish breakaway gaps now, at 92.56, 91.23, and 87.99.
I hope you realize that "Deflation Is Everywhere!," see http://tradethecycles.blogspot.com/2008/05/deflation-is-everywhere.html.
NEM is in Wave C downof a monthly downcycle, see http://stockcharts.com/charts/gallery.html?nem. NEM created large bullish breakaway gaps at 45.10 on 5-15 and 47.90 on 6-6 (filled 6-10), and, another one at 46.73 on 5-16 that got filled on 5-29 (46.50 cycle low on 5-29). NEM filled it's bearish upside breakaway gap at 48.72 from 3-20 on 5-15, which confirmed the 5% follow through major buy signal.
5-21 is an HUI/XAU/GDX 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.
NEM has remaining downside gaps at 45.15, 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.
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 nine 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?
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
1:13 PM
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