Today's Monster Short Covering Spike Move Was Probably Countertrend Wave B Type Action
Today 10-28's monster short covering spike move, in anticipation of a Fed rate cut announcement tomorrow at 11:15 am EST, was probably countertrend Wave B type action for most indexes/sectors, see http://stockcharts.com/charts/gallery.html?%24spx. I eagerly look forward to trading short tomorrow. Anyone who got or gets excited by this sucker's spike, and went long, is likely to get annihilated.
How do I "know" (very likely) that today 10-28's huge spike move was very likely countertrend Wave B type action. For one thing, huge spike moves like this tend to occur in countertrend type action, which tends to be much more vertical/spiking type action than what occurs in normal upcycles, except when important cycle highs occur. Basically, huge spike moves tend to mark important cycle highs, whether it's a countertrend Wave B type cycle high, or, a Wave 1, Wave 3, or Wave 5 type cycle high.
Also, the five day broad market Walmart (WMT) Lead Indicator is extremely bullish (+0.28% versus the S & P 500 (SPX) today/on 10-28, -0.19% on 10-27, +0.87% on 10-24, -0.32% on 10-23, +3.49% on 10-22, +1.68% on 10-21), see 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, which is usually a very short term bearish sign.
It looks like the S & P 500 (SPX)/the market will follow through briefly to the upside early tomorrow (a big spike move is likely), see http://finance.yahoo.com/q/ta?s=%5Espx&t=1d&l=off&z=l&q=c&p=&a=p12%2Cfs%2Cw14&c. Then, a great shorting opportunity should arise early tomorrow. Nothing I discuss on this Blog is a recommendation.
I'll be looking trade the XOI (AMEX Oil & Gas) ultra short via DUG (downside gaps at 47.70 and 45.20 got filled today 10-28, watch 39.50, 38.85 tomorrow) early tomorrow, or, I'll look to trade SPX/NDX/RUT ultra short via SDS/QID/TWM, or, I'll look to short GDX or gold (via DZZ or shorting GLD).
Fellow gold bugs, it's POSSIBLE that GDX/HUI/XAU (http://stockcharts.com/charts/gallery.html?%24hui) might have put in a Cyclical Bear Market (since mid March 2008) cycle low/finally bottomed, but, it obviously makes a LOT of sense to wait for a 5% follow through major buy signal.
Reliable gold sector lead indicator Newmont Mining (NEM) shot up a spectacular +22.89% today 10-28-08, see http://stockcharts.com/charts/gallery.html?nem.
It LOOKS LIKE (it obviously makes a LOT of sense to wait for a 5% follow through major buy signal) NEM PROBABLY put in a Wave 2 Cyclical Bear Market (since 1-31-06) cycle low just before yesterday 10-27's close at 21.40, which is a bullish double bottom cycle low with the previous session's cycle low at 21.47, see http://finance.yahoo.com/q/ta?s=NEM&t=5d&l=off&z=l&q=c&p=&a=p12,fs,w14&c.
These are great signs (+22.89% NEM gain today 10-28, double bottom the prior two days) for gold bugs, as is the fact that the reliable NEM Lead Indicator was an off the charts super bullish +9.90% versus the XAU today/on 10-28. The GDX/HUI/XAU Wave 3 Cyclical Bull Market (might not have started yet) is likely to be a great one. Wave 3 upcycles tend to be large, relative to Wave 1 upcycles.
SPX (S & P 500) and the XOI (AMEX Oil & Gas) are probably still in a Cyclical Bear Market, see SPX at http://stockcharts.com/charts/gallery.html?%24spx, and, see the XOI at http://stockcharts.com/charts/gallery.html?%24xoi. Since cycle lows keep failing, one has to assume that's the case. SPX put in lower cycle lows in each of the past five sessions.
The NASDAQ 100 (NDX) is probably still in a Cyclical Bear Market, see http://stockcharts.com/charts/gallery.html?%24ndx, as are RUT (Russell 2000), see http://stockcharts.com/charts/gallery.html?%24rut, and, GDX/HUI/XAU, see http://stockcharts.com/charts/gallery.html?gdx.
The XOI's (AMEX Oil & Gas, http://stockcharts.com/charts/gallery.html?%24xoi) 5 day intraday candlestick chart looks similar to SPX's, see http://finance.yahoo.com/q/ta?s=%5Exoi&t=5d&l=off&z=l&q=c&p=&a=p12%2Cfs%2Cw14&c=.
The 5 day XOM (Exxon Mobil) Lead Indicator (-0.45% versus the XOI today/on 10-28, +1.46% on 10-27, +3.46% on 10-24, +2.79% on 10-23, +0.47% on 10-22, +0.57% on 10-21) has turned "super bullish," see http://finance.yahoo.com/q/ta?s=%5EXOI&t=5d&l=off&z=l&q=c&p=&a=m26-12-9,p12,fs,w14&c=xom.
Concerning GDX/HUI/XAU (http://stockcharts.com/charts/gallery.html?%24hui) the NEM Lead Indicator turned super bullish today (which is very short term very bearish), at +9.90% versus the XAU today/on 10-28, at -0.40% on 10-27, -2.08% on 10-24, and, -0.85% on 10-23. See HUI's five day chart at http://finance.yahoo.com/q/ta?s=%5Ehui&t=5d&l=off&z=l&q=c&p=&a=p12%2Cfs%2Cw14&c=.
In order for HUI's Secular Bull Market to remain intact, all HUI has to do is to bottom above it's Secular Bear Market cycle low at 35.31 that occurred in November 2000 (HUI (AMEX Gold Bugs Index) Very Long Term Upcycle/Secular Bull Market began on November 15, 2000 after the 35.31 very long term cycle low). If HUI's Wave 2 Cyclical Bear Market since 3-17-08 bottoms at 36 or even 35.32, then HUI will be in a Secular Bull Market/Very Long Term Upcycle as expected.
The HUI/XAU/GDX (Gold Miners ETF, based on the obscure AMEX Gold Miners Index) Secular Bull Market uptrend line isn't known/defined until the Wave 2 Cyclical Bear Market cycle low occurs.
A Cyclical Bear Market 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).
Please keep in mind that, after an index puts in a potential major cycle low, it has to hit a 5% follow through (after breaking the major downcycle trendline) major buy signal before the Trade the Cycles system indicates that a major cycle low has very likely occurred.
My original Trade the Cycles system uses the reliable Elliott Wave patterns (see the Trade the Cycles charts at http://www.joefrocks.com/GoldStockCharts.html) and maps them to cycles of various timeframes (an Elliott Wave is either an upcycle or a downcycle), from very short term (hours/days), short term (days/weeks), monthly (4-7 weeks), minor intermediate term (2-3 months), major intermediate term (3-12 months), long term (1 to 2 years), Cyclical Bull/Bear Market (6 months to 7 years, yes, a bull/bear can be relatively brief), Secular Bull/Bear Market (8-20+ years).
Gaps are very important also, since most gaps get filled and they often provide insight into when cycle highs/lows will occur.
.......http://www.JoeFRocks.com/
NEM XAU HUI
How do I "know" (very likely) that today 10-28's huge spike move was very likely countertrend Wave B type action. For one thing, huge spike moves like this tend to occur in countertrend type action, which tends to be much more vertical/spiking type action than what occurs in normal upcycles, except when important cycle highs occur. Basically, huge spike moves tend to mark important cycle highs, whether it's a countertrend Wave B type cycle high, or, a Wave 1, Wave 3, or Wave 5 type cycle high.
Also, the five day broad market Walmart (WMT) Lead Indicator is extremely bullish (+0.28% versus the S & P 500 (SPX) today/on 10-28, -0.19% on 10-27, +0.87% on 10-24, -0.32% on 10-23, +3.49% on 10-22, +1.68% on 10-21), see 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, which is usually a very short term bearish sign.
It looks like the S & P 500 (SPX)/the market will follow through briefly to the upside early tomorrow (a big spike move is likely), see http://finance.yahoo.com/q/ta?s=%5Espx&t=1d&l=off&z=l&q=c&p=&a=p12%2Cfs%2Cw14&c. Then, a great shorting opportunity should arise early tomorrow. Nothing I discuss on this Blog is a recommendation.
I'll be looking trade the XOI (AMEX Oil & Gas) ultra short via DUG (downside gaps at 47.70 and 45.20 got filled today 10-28, watch 39.50, 38.85 tomorrow) early tomorrow, or, I'll look to trade SPX/NDX/RUT ultra short via SDS/QID/TWM, or, I'll look to short GDX or gold (via DZZ or shorting GLD).
Fellow gold bugs, it's POSSIBLE that GDX/HUI/XAU (http://stockcharts.com/charts/gallery.html?%24hui) might have put in a Cyclical Bear Market (since mid March 2008) cycle low/finally bottomed, but, it obviously makes a LOT of sense to wait for a 5% follow through major buy signal.
Reliable gold sector lead indicator Newmont Mining (NEM) shot up a spectacular +22.89% today 10-28-08, see http://stockcharts.com/charts/gallery.html?nem.
It LOOKS LIKE (it obviously makes a LOT of sense to wait for a 5% follow through major buy signal) NEM PROBABLY put in a Wave 2 Cyclical Bear Market (since 1-31-06) cycle low just before yesterday 10-27's close at 21.40, which is a bullish double bottom cycle low with the previous session's cycle low at 21.47, see http://finance.yahoo.com/q/ta?s=NEM&t=5d&l=off&z=l&q=c&p=&a=p12,fs,w14&c.
These are great signs (+22.89% NEM gain today 10-28, double bottom the prior two days) for gold bugs, as is the fact that the reliable NEM Lead Indicator was an off the charts super bullish +9.90% versus the XAU today/on 10-28. The GDX/HUI/XAU Wave 3 Cyclical Bull Market (might not have started yet) is likely to be a great one. Wave 3 upcycles tend to be large, relative to Wave 1 upcycles.
SPX (S & P 500) and the XOI (AMEX Oil & Gas) are probably still in a Cyclical Bear Market, see SPX at http://stockcharts.com/charts/gallery.html?%24spx, and, see the XOI at http://stockcharts.com/charts/gallery.html?%24xoi. Since cycle lows keep failing, one has to assume that's the case. SPX put in lower cycle lows in each of the past five sessions.
The NASDAQ 100 (NDX) is probably still in a Cyclical Bear Market, see http://stockcharts.com/charts/gallery.html?%24ndx, as are RUT (Russell 2000), see http://stockcharts.com/charts/gallery.html?%24rut, and, GDX/HUI/XAU, see http://stockcharts.com/charts/gallery.html?gdx.
The XOI's (AMEX Oil & Gas, http://stockcharts.com/charts/gallery.html?%24xoi) 5 day intraday candlestick chart looks similar to SPX's, see http://finance.yahoo.com/q/ta?s=%5Exoi&t=5d&l=off&z=l&q=c&p=&a=p12%2Cfs%2Cw14&c=.
The 5 day XOM (Exxon Mobil) Lead Indicator (-0.45% versus the XOI today/on 10-28, +1.46% on 10-27, +3.46% on 10-24, +2.79% on 10-23, +0.47% on 10-22, +0.57% on 10-21) has turned "super bullish," see http://finance.yahoo.com/q/ta?s=%5EXOI&t=5d&l=off&z=l&q=c&p=&a=m26-12-9,p12,fs,w14&c=xom.
Concerning GDX/HUI/XAU (http://stockcharts.com/charts/gallery.html?%24hui) the NEM Lead Indicator turned super bullish today (which is very short term very bearish), at +9.90% versus the XAU today/on 10-28, at -0.40% on 10-27, -2.08% on 10-24, and, -0.85% on 10-23. See HUI's five day chart at http://finance.yahoo.com/q/ta?s=%5Ehui&t=5d&l=off&z=l&q=c&p=&a=p12%2Cfs%2Cw14&c=.
In order for HUI's Secular Bull Market to remain intact, all HUI has to do is to bottom above it's Secular Bear Market cycle low at 35.31 that occurred in November 2000 (HUI (AMEX Gold Bugs Index) Very Long Term Upcycle/Secular Bull Market began on November 15, 2000 after the 35.31 very long term cycle low). If HUI's Wave 2 Cyclical Bear Market since 3-17-08 bottoms at 36 or even 35.32, then HUI will be in a Secular Bull Market/Very Long Term Upcycle as expected.
The HUI/XAU/GDX (Gold Miners ETF, based on the obscure AMEX Gold Miners Index) Secular Bull Market uptrend line isn't known/defined until the Wave 2 Cyclical Bear Market cycle low occurs.
A Cyclical Bear Market 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).
Please keep in mind that, after an index puts in a potential major cycle low, it has to hit a 5% follow through (after breaking the major downcycle trendline) major buy signal before the Trade the Cycles system indicates that a major cycle low has very likely occurred.
My original Trade the Cycles system uses the reliable Elliott Wave patterns (see the Trade the Cycles charts at http://www.joefrocks.com/GoldStockCharts.html) and maps them to cycles of various timeframes (an Elliott Wave is either an upcycle or a downcycle), from very short term (hours/days), short term (days/weeks), monthly (4-7 weeks), minor intermediate term (2-3 months), major intermediate term (3-12 months), long term (1 to 2 years), Cyclical Bull/Bear Market (6 months to 7 years, yes, a bull/bear can be relatively brief), Secular Bull/Bear Market (8-20+ years).
Gaps are very important also, since most gaps get filled and they often provide insight into when cycle highs/lows will occur.
.......http://www.JoeFRocks.com/
NEM XAU HUI
Labels: DUG, Gold, Gold Stocks, HUI, NEM, RUT, Silver, Silver Stocks, SPX, XAU, XOI
posted by Joe Ferrazzano at
1:19 PM
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