HUI, NEM, and the XAU Appear To Have Hit An Important High

HUI, NEM, and the XAU appear to have put in Elliot Wave 3 minor intermediate term cycle highs this week for the major intermediate term upcycle that began on 5-16-05. Federal Reserve Bank Credit fell by a very large -$16.920 Billion the week ending 1-11-06, which should lead to a very sharp decline near term because index fund traders will have much less buying power. Large increases in Federal Reserve Bank Credit lead to very sharp rallies and large decreases lead to very sharp declines based on significant backtesting.

 

Gold will go higher.

 

A substantial correction (major upcycle's EW Wave 4 down) within a major upcycle for HUI, NEM, and the XAU. Look at the charts and it's pretty obvious it's time to correct.

 

Perhaps the stock, not the gold.

 

Gold lags/follows gold stocks.

 

Not always.

 

HUI, NEM, XAU peaked in December 2003/January 2004. Gold peaked in April 2004. HUI, NEM, XAU peaked in Nov 2004 and gold peaked in December 2004. HUI, NEM, XAU bottomed in late 2000 and gold bottomed in April 2001. At important/major cycle highs/lows gold lags.

 

I'd like to see you go short gold real money.

 

Maybe it will reverse, maybe it won't.

But remember that Gold is a market that people just love to call highs in. For every 10 top callers there's only 1 who says it goes higher. Been like this ever since the bottom in 2001.

I wonder, at some stage over the next several years if this will inverse, ie 10 higher callers and 1 top caller. That might be very significant information.........

It's also interesting that the Rydex fund that follows the HUI (could be the other one XAU, I forget) has rallied by 40% over the last 10 months but money invested has dropped by 15%. No real speculation in gold shares yet.......

 

As I said, an Elliot Wave 4 down for the major upcycle since 5-16-05 (for the stocks) is about to begin (there was more upside today) and gold will also have a substantial correction the next few weeks, then I expect a very strong rally/Elliot Wave 5 culminating in long term cycle highs later this year. I'm a Bull but I expect a substantial correction near term. I'd have no problem shorting gold once it establishes a near term downtrend. I'd trade Puts though. I trade XAU Puts/Calls as opposed to gold options, but most of my money is made trading gold/silver stocks long.

The unusual strength recently is a sign that an important cycle high is near as is all the bullishness. Human emotion/sentiment is contrarian. The fact that most are so bullish is a very bearish sign near term. Take a good look at the charts and you'll see it's time to correct.