Trade the Cycles

Wednesday, September 17, 2008

GDX/HUI/XAU/Gold and NEM Probably Have More Upside Early Tomorrow

GDX/HUI/XAU/gold and NEM probably have more upside early tomorrow, see HUI's 5 day intraday candlestick chart at 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, see HUI's daily candlestick chart at http://stockcharts.com/charts/gallery.html?%24hui.

The amazing strength of today 9-17's GDX/HUI/XAU/gold and NEM move was due partly to a very weak US Dollar (AIG debacle and fear of more debacles to come), and, probably also the SEC coming out against naked short selling.

This huge spiking action has "countertrend" written all over it (from an intermediate term cycle point of view, not short term). Countertrend action tends to be much more vertical/spiking type action than the action that occurs in normal upcycles. GDX/HUI/XAU (http://stockcharts.com/charts/gallery.html?gdx) are very likely in a countertrend Wave B major intermediate term upcycle since 9-11-08, which is the Wave B upcycle of the likely Wave 2 Cyclical Bear Market since mid March 2008.

The sector NEM Lead Indicator was a bullish +0.81% versus the XAU today/on 9-17, and, the broad market Walmart (WMT) Lead Indicator was a bullish +0.69% versus the S & P 500 (SPX) today/on 9-17.

Reliable lead indicator Newmont Mining (NEM) will probably try to fill it's upside gap at 45.10 early tomorrow. Watch the upside gap at 46.12 if 45.10 gets filled. Watch GDX's upside gap at 37.64 just in case.

GDX/HUI/XAU's (http://stockcharts.com/charts/gallery.html?%24hui) and NEM's (http://stockcharts.com/charts/gallery.html?nem) Elliott Wave count on the daily chart is Wave 3 of a big short term Wave 1 upcycle since 9-11-08 (there's an up down up pattern since 9-11-08), versus the Wave 5 of Wave 1 it appeared to be looking at the 5 day intraday chart (discussed in previous updates), 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.

So, the current monster spike move is probably Wave 3 of a big short term Wave 1 upcycle since 9-11-08, but, this is such a huge Wave 3 of Wave 1 move that it'll probably seem like a short term Wave 1 cycle high after it peaks. In other words, Wave 4 down of the big short term Wave 1 upcycle will probably last 2 or 3 days and be similar to a short term Wave 2 downcycle.

Tomorrow I'll be very carefully looking to short Harmony Gold (HMY, in Wave C of a Cyclical Bear Market since mid 2002!, see http://finance.yahoo.com/q/ta?s=HMY&t=my&l=off&z=l&q=c&p=&a=m26-12-9,p12,fs,w14&c) or GDX (Gold Miners ETF), and, I'll be looking to "double short" gold via DZZ.

Typically I'll wait for a significant intraday Wave A type plunge, and, I carefully check the Elliott Wave count on the 5 day intraday candlestick charts (GDX/HUI/XAU/NEM and whatever I'm trading), as well as the NEM/WMT Lead Indicators, then I'll go short late in an intraday countertrend Wave B rebound or (probably) early in Wave C down. Large spikes tend to occur at or near important cycles highs on both the intraday and daily candlestick charts, so, I look for that also.

The coal ETF KOL (http://stockcharts.com/charts/gallery.html?kol) appears to have put in a Wave A major intermediate term cycle low yesterday 9-16. It needs to hit a major 5% follow through buy signal however before the Trade the Cycles system indicates that a major cycle low has very likely occurred.

Both the five day sector NEM Lead Indicator (+0.81% versus the XAU today/on 9-17, +0.95% on 9-16, +2.86% on 9-15), see http://finance.yahoo.com/q/ta?s=%5EXAU&t=5d&l=off&z=l&q=l&p=&a=&c=%5Ehui,nem, and, the five day broad market Walmart (WMT) Lead Indicator (+0.69% versus SPX today/on 9-17, -0.92% on 9-16, +3.40% on 9-15, -1.41% on 9-12, +0.47% on 9-11, +0.84% on 9-10, +2.01% on 9-9, +0.02% on 9-8, +1.17% on 9-5, +2.97% on 9-4, +0.44% on 9-3, +1.39% on 9-2), at http://finance.yahoo.com/q/ta?s=%5EHUI&t=5d&l=off&z=l&q=l&p=&a=m26-12-9,p12,fs,w14&c=wmt,%5EGSPC, jive with trading long tomorrow, but, I wouldn't chase it at this point.

Very strong likely Wave 1 type moves have occurred since 9-11-08. GDX/HUI/XAU (http://stockcharts.com/charts/gallery.html?gdx, gold/GLD lags and silver lags gold) probably finally put in a Wave A major intermediate term (since mid March, Wave A down of the Wave 2 Cyclical Bear Market) cycle low on 9-11-08.

Before holding positions overnight one obviously should wait for a strong/major 5% follow through buy signal (Wave 1 monthly upcycle, or, maybe a 5% major buy signal will occur after a Wave 3 short term upcycle, or, maybe after a very strong short term Wave 1 upcycle), then look to go long after a Wave 2 monthly downcycle or maybe after a short term Wave 4 downcycle (of a monthly upcycle), or, even after short term Wave 2 downcycle, if a very strong short term Wave 1 upcycle occurred.

Tuesday 9-9's extremely high GDX/HUI/XAU volatility is what tends to/almost always occurs near important cycle lows and cycle highs, so, 9-9's extremely high volatility indicated that an important cycle low was probably imminent/probably occurred on 9-11, as does the cycle picture and the Elliott Wave count, see annotated chart two at http://www.joefrocks.com/GoldStockCharts.html.

GDX/HUI/XAU and NEM created large bullish breakaway gaps at 9-12's open (downside gaps at 28.20, 262.97, 115.32, 37.28, GLD at 73.08), see http://finance.yahoo.com/q/ta?s=gdx&t=5d&l=off&z=l&q=c&p=&a=p12%2Cfs%2Cw14&c.

The three month sector NEM Lead Indicator (http://finance.yahoo.com/q/ta?s=%5EXAU&t=3m&l=on&z=m&q=l&p=&a=&c=%5Ehui,nem) is extremely bullish, which is another sign that GDX/HUI/XAU/GLD and reliable lead indicator NEM were probably very near an important cycle low.

The three month (http://finance.yahoo.com/q/ta?s=%5EHUI&t=3m&l=off&z=l&q=l&p=&a=m26-12-9,p12,fs,w14&c=wmt,%5EGSPC) broad market Walmart (WMT) Lead Indicator, used in concert with the sector NEM Lead Indicator, is extremely bullish, which is another sign that GDX/HUI/XAU/GLD and reliable lead indicator NEM were probably very near an important cycle low.

Reliable lead indicator NEM has the most bullish/large inverse spike on a bullish white (close above the open) candle on 9-11-08, see http://stockcharts.com/charts/gallery.html?nem. NEM closed at 37.28 on 9-11 (session cycle high at 38), well above the session cycle low and potential Cyclical Bear Market (since 1-31-06) cycle low at 35.79.

Upside gaps were created at 9-2's open at 37.64 for GDX, at 45.10 for NEM (also watch 46.12), and, at 81.71 for GLD, see http://finance.yahoo.com/q/ta?s=gdx&t=5d&l=off&z=l&q=c&p=&a=p12%2Cfs%2Cw14&c.

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.

There are a lot of gold/silver stocks that have been crushed (as most of you know) and will probably soon (or already have) enter a Cyclical Bull Market. A few examples are CDE and NXG. I'll try to remember to point many of them out in the next few days/weeks.

The US Dollar entered a Wave 3 Minor Intermediate Term Upcycle on 7-15-08, see http://stockcharts.com/charts/gallery.html?%24usd, and, entered a Cyclical Bull Market within a Secular Bear Market on 3-17-08, after putting in a cycle low at 70.698. Note the very large bullish inverse spike on 3-17-08's and 7-15-08's candle.

The US Dollar hit a 5% major buy signal! (major breakout), see http://tradethecycles.blogspot.com/2008/08/us-dollar-hit-5-follow-through-major.html.

Reliable lead indicator NEM created a bearish breakaway gap at 44.71 on 8-8 (filled), GDX created one at 38.92, HUI created one at 356.72, and, GLD created one at 86.09. Upside gaps were created on 7-23 at 47 for GDX, 432.50 for HUI, 185.04 for the XAU, and, at 93.06 (filled 9-17) for GLD.

SPX (S & P 500) is trying to put in a very important Wave A major intermediate term (since 10-11-07) cycle low, see http://stockcharts.com/charts/gallery.html?%24spx, that's Wave A down of the Cyclical Bear Market since 10-11-07. Obviously, a flood of major bad news has been a huge factor recently. That's all I'm going to say about the major averages today.

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).

.......http://www.JoeFRocks.com/

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