Trade the Cycles

Friday, February 27, 2009

SPX (S & P 500) Is Still In Wave A Down Of The Short Term Wave 5 Downcycle

SPX (S & P 500) is still in Wave A down of the Short Term Wave 5 Downcycle since very late 2-25-09, see http://finance.yahoo.com/q/ta?s=%5EGSPC&t=5d&l=off&z=l&q=c&p=&a=p12,fs,w14&c=.

SPX (S & P 500) ended today 2-27's session in (Wave A of) Wave 5 down of Wave A down of the Short Term Wave 5 Downcycle. There's a down up down up pattern since very late 2-25, with Wave 5 down beginning late today 2-27. SPX (S & P 500) created a bearish breakaway upside gap at 752.83 at today 2-27's open.

So, there might be very brief weakness early on Monday, since the late Wave A move will probably bottom shortly after Monday 3-2's open, see http://finance.yahoo.com/q/ta?s=%5EGSPC&t=5d&l=off&z=l&q=c&p=&a=p12,fs,w14&c=, followed by a brief countertrend Wave B up move, then, the final Wave C of Wave 5 of Wave A of the Short Term Wave 5 Downcycle should occur.

There will probably be an opportunity or two to day trade short on Monday.

SPX (S & P 500) is in a Short Term Wave 5 Downcycle (since very late 2-25-09) of the Wave C Monthly Downcycle since 1-28-09 (Wave A Minor Intermediate Term Downcycle since 1-6-09), see http://stockcharts.com/charts/gallery.html?%24spx. Since 1-28-09 there's a down up down up down pattern, with Wave 4 up peaking very late on 2-25-09.

A good short for Monday probably is the AMEX Oil Index (XOI), since the XOM Lead Indicator was a very bearish -1.89% versus the XOI today/on 2-27, and, it was -1.51% on 2-26. Also, the XOI has a bearish medium spike on yesterday 2-26's candle, see http://stockcharts.com/charts/gallery.html?%24xoi. I'll look to day trade ultra short via DUG (UltraShort Oil and Gas ETF) or maybe SRS (UltraShort Real Estate ETF).

The XOI should fill the downside gap at 814.09 early on Monday, and, DUG should fill the upside gap at 31.35 early on Monday.

Today I day traded DUG (UltraShort Oil and Gas ETF) twice and made 34.70 cents/share = $347 for each 1000 shares traded. Since DUG is relatively low priced (closed at 30.50 today, I traded it at lower levels), I had my best day of the year today.

Nothing discussed on this Blog is a recommendation, or, should be construed as investment advice.

The extremely bullish broad market Walmart (WMT) Lead Indicator today, at
+4.41% versus SPX (S & P 500) on 2-27, is a very short term bearish indication. It was
-0.37% versus SPX (S & P 500) on 2-26, and, it was -0.53% versus SPX (S & P 500) on 2-25, it was a very bearish -1.70% versus SPX (S & P 500) on 2-24. The WMT Lead Indicator was a very bullish +1.19% versus SPX (S & P 500) on 2-23, +0.29% on 2-20, +2.10 on 2-19, +3.75% on 2-18, +8.24% on 2-17.

Also, SPX (S & P 500) experienced a significant +1.42% rise in fear/+1.42% rise in the wall of worry today 2-27, since SPX (S & P 500) fell -2.36% versus the SPX Volatility Index VIX rising +3.78%, which points to likely significant SPX (S & P 500)/market (countertrend) strength on Monday 3-2-09, after likely early weakness.

The five day intraday broad market Walmart (WMT) Lead Indicator is extremely bullish at today 2-27-09's close, 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 a very short term bearish indication.

The Dow Jones U.S. Real Estate Index appears to be headed for a test of the late November 2008 cycle low at 90.30 this week, in the Short Term Wave 5 Downcycle that began very late on 2-25-09, see http://finance.yahoo.com/q/ta?s=%5Edjusre&t=5d&l=off&z=l&q=c&p=&a=p12%2Cfs%2Cw14&c=, and, see http://stockcharts.com/charts/gallery.html?%24djusre.

A good short now appears to be the NASDAQ 100 (NDX), see http://stockcharts.com/charts/gallery.html?%24ndx, which put in a slightly higher bearish double top on 2-10-09 at 1286.90 (countertrend Wave B minor intermediate term cycle high), versus early January 2009's cycle high at 1286.08. 2-10-09's cycle high was the countertrend Wave B minor intermediate term upcycle peaking in dramatic rollover mode at 1286.90 (similar to countertrend Wave B action, but, surprising modestly to the upside), versus the early January 2009 cycle high at 1286.08.

I'll probably wait for the NASDAQ 100 (NDX) to do a short term countertrend Wave B upcycle, before trading/holding a QID position overnight.

WMT has bearish breakaway upside gaps at 52.12, and 55.54, and, has a downside bullish breakaway gap at 46.53 (created 2-17-09). SPX (S & P 500) has bearish breakaway upside gaps at 752.83, 826.84, 869.89, and 934.70, see http://stockcharts.com/charts/gallery.html?%24spx.

SPX (S & P 500) has been in a Cyclical Bear Market since 10-11-07, NDX (NASDAQ 100) has been in a Cyclical Bear Market since very late October 2007, and, RUT (Russell 2000) has been in a Cyclical Bear Market since July 2007.

Reliable broad market Lead Indicator Walmart's (WMT) huge very bearish breakaway type gap down on 1-8-09 from 55.54, see http://stockcharts.com/charts/gallery.html?wmt, portended the recent/current substantial weakness for WMT/SPX and the market/most indexes/sectors. WMT's been trying to fill that upside gap recently.

Note that the XAU's peaks rolled over/flattened out dramatically since mid December 2008's cycle high, see http://stockcharts.com/charts/gallery.html?%24xau. The XAU has a downtrend going back to Tuesday 2-17-09's cycle high at 135.29, that very likely (after 2-25-09's action and the large bearish spikes on the daily candles on 2-25) is the start of a large downcycle/the Wave 2 Minor Intermediate Term Downcycle.

Note that the XAU (and GDX/HUI) has a large bearish spike on 2-25's candle, and, reliable gold/silver sector lead indicator NEM has a very large bearish spike on 2-25's candle, see http://stockcharts.com/charts/gallery.html?NEM.Reliable gold/silver sector lead indicator NEM's cycle high at 45.45/candle on 1-26-09, see http://stockcharts.com/charts/gallery.html?NEM, very likely is a Wave 1 minor intermediate term cycle high (cycle began in late November 2008), and, the short term countertrend Wave B upcycle peaked at 45 on 2-20-09.

One needs to wait for a 3 to 6 week GDX/HUI/XAU Wave 2 minor intermediate term downcycle to occur, before a good entry point will arise for long term investors.

The NEM Lead Indicator was an extremely bullish +2.97% versus the XAU today/on 2-27, which is a very short term bearish indication, it was -0.07% on 2-26, +0.64% on 2-25, +1.98% on 2-24, +0.19% on 2-23, +3.48% on 2-20, which correctly was a very short term bearish indication (the XAU was down -3.25% on 2-23-09), +0.01% on 2-19, -1.55% on 2-18, +1.95% on 2-17, -1.20% on 2-13, +0.34% on 2-12, +0.61% on 2-11.

The gold ETF GLD (http://stockcharts.com/charts/gallery.html?gld) and gold also took out their recent cycle highs that occurred on 2-2-09 and 1-30-09, that appeared to be a Wave 1 minor intermediate term cycle high.

The bearish short term and minor intermediate term scenario jives with the bearish gold COT (Commitments Of Traders) data the past five weeks. The savvy non contrarian gold Commercial Traders traded aggressively short for four straight weeks prior to last week, when they traded significantly net long, see the third/last data at http://www.cftc.gov/dea/options/deacmxsof.htm, but, they added modestly to their short position.

GDX (Gold Miners ETF, http://stockcharts.com/charts/gallery.html?gdx) has downside gaps at 35.68 (filled 2-19), 31.46, 29.13, 25.41, and 23.23. NEM has downside gaps at 40.79 (filled 2-24) and 39.35 (filled 2-26).

Gold hit a 5% major buy signal four weeks ago, see annotated chart two at http://www.joefrocks.com/GoldStockCharts.html, which indicates that gold very likely entered a Wave 3 Cyclical Bull Market in late October 2008.

Note that gold did an inverse Elliott Wave 12345 down up down up down pattern, from the 3-17-08 Wave 1 Cyclical Bull Market cycle high at $1033.90, to the likely Wave 2 Cyclical Bear Market cycle low at $681 in late October 2008, see the second weekly view chart at http://stockcharts.com/charts/gallery.html?%24gold. Note also, that in both the first daily view chart and the second weekly view chart, that gold has a very large bullish inverse spike at the $681 cycle low in late October 2008.

The XOM (Exxon Mobil) Lead Indicator was a very bearish -1.89% versus the XOI (AMEX Oil and Gas) today/on 2-27, it was -1.51% on 2-26, +0.65% on 2-25, -0.64% on 2-24, +1.04% on 2-23, +1.43% on 2-20, -0.02% on 2-19, +1.94% on 2-18, +2.00% on 2-17, -1.14% on 2-13, +0.44% on 2-12, -1.99% on 2-11, +0.77% on 2-10, -1.43% on 2-9, -1.06% on 2-6, +1.50% on 2-5, -1.06% on 2-4, -0.49% on 2-3, +1.86% on 2-2, +0.92% on 1-30, +0.80% on 1-29, -2.15% on 1-28, +0.37% on 1-27, -2.11% on 1-26, -2.41% on 1-23, +1.36% on 1-22, -1.43% on 1-21.

GDX/HUI/XAU (http://stockcharts.com/charts/gallery.html?%24xau) hit a 5% follow through major buy signal on Wednesday 12-10-08 (see annotated chart one at http://www.joefrocks.com/GoldStockCharts.html), breaking the multi month Wave 2 Cyclical Bear Market downtrend line since mid March 2008 by more than 5%, see HUI at http://finance.yahoo.com/q/ta?s=%5EHUI&t=6m&l=off&z=l&q=c&p=&a=m26-12-9,p12,fs,w14&c=, and, see the XAU at http://finance.yahoo.com/q/ta?s=%5Exau&t=6m&l=off&z=l&q=c&p=&a=m26-12-9%2Cp12%2Cfs%2Cw14&c=, which means that they very likely entered a Wave 3 Cyclical Bull Market in late October 2008. Note that HUI has a very bullish triple bottom in late October 2008. Trade the Cycles is now obviously on a buy signal for GDX/HUI/XAU.

Keep in mind/major warning that, not all gold/silver stocks have the same cycles. They can be vastly different. CDE (Coeur D' Alene Mines) has/had a bear market from/since 2004 for example, see http://finance.yahoo.com/q/ta?s=cde&t=my&l=off&z=l&q=c&p=&a=m26-12-9%2Cp12%2Cfs%2Cw14&c=. Harmony Gold (HMY) is another stock that's been in a bear market since 2002, see http://finance.yahoo.com/q/ta?s=hmy&t=my&l=off&z=l&q=c&p=&a=m26-12-9%2Cp12%2Cfs%2Cw14&c=.

Since this is a Wave 3 HUI/XAU (http://stockcharts.com/charts/gallery.html?%24xau) Cyclical Bull Market, it's likely to be a great one, since Wave 3 upcycles tend to be considerably larger than Wave 1 upcycles.

The gold/silver stock apocalypse since May 2006 (reliable gold sector lead indicator NEM since 1-31-06 and GDX/HUI/XAU since mid March 2008) is probably finally over for many/most gold/silver stocks, see the XAU's daily candlestick chart at http://stockcharts.com/charts/gallery.html?%24xau, and, see reliable gold sector lead indicator NEM's daily candlestick chart at http://stockcharts.com/charts/gallery.html?nem. Reliable gold sector lead indicator NEM put in a bullish double bottom in late October/late November 2008 at 21.40/21.17.

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/

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