Joe F. Rocks!
Growth Stock Investor & Market Strategist

Joe F. Rocks! Trade the Cycles Updated 11-13-05

Growth Stock (NASDAQ) Timeliness - Monday - Untimely (Weakness/a downtrend, that could follow a gap up at the open and early strength, during "much" of Monday's session is a "hit!.")
                                                           - Short Term Cycle (2-3 Days) - Untimely (NDX/QQQ are in short term downcycles as of 11-11-05.)
                                                           - Minor Intermediate Term Cycle (3-6 Weeks) - Timely but Risky (NDX minor intermediate term upcycle is in place as of 11-11-05 but NDX is very overbought.)

Brief Cycles Summary (Analysis/Commentary follows)

NASDAQ 100 Very Long Term Downcycle/Secular Bear Market = Down since March 24, 2000 Bull Market peak/very long term cycle high at 4816.35.

NASDAQ 100 Long Term Cycle = Up since long term cycle low at 1301.93 on 8-13-04.

S & P 500 Very Long Term Downcycle/Secular Bear Market = Down since March 24, 2000 Bull Market peak/very long term cycle high at 1552.87.

S & P 500 Long Term Cycle = Up since 8-13-04 long term cycle low at 1060.72. SPX is working it's way up to the very long term downcycle trendline.

XAU (Philadelphia Gold/Silver Index) Very Long Term Upcycle/Secular Bull Market = Began October 25, 2000 at 41.61 Bear Market/very long term cycle low.

XAU (Philadelphia Gold/Silver Index) Long Term Cycle (heading up) = Began May 10, 2004 at 76.79 long term cycle low. Long term cycle high occurred at 113.41 on 1-6-04.

HUI (AMEX Gold Bugs Index) Very Long Term Upcycle/Secular Bull Market = Began on November 15, 2000 at 35.31 Bear Market/very long term cycle low. 

HUI (AMEX Gold Bugs Index) Long Term Cycle (heading up) = Began May 10, 2004 at 163.81 long term cycle low. Long term cycle high occurred at 258.60 on 12-2-03.

Please see Cycles Summary for the details of the cycles that are the basis for my market timing system.

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Analysis/Commentary -

The NASDAQ Composite (COMPX) opened slightly higher on Friday 11-11, and, COMPX trended sideways most of the session, spent the entire session in positive territory, and closed modestly higher at 2202.47, +5.79 (+0.26%).

The long term downcycle trendlines for NDX (NASDAQ 100) and SPX (S & P 500) were broken during the week ending 11-5-04, so (unexciting because of the very long term downcycle since March 2000) long term cycle buy signals occurred. Long term cycle lows occurred at 1301.93 on 8-13-04 for NDX and at 1060.72 for SPX. NDX and SPX both remain in very long term downcycles since March 2000 (see SPX chart dated 11-16-04).

"Eerie Nikkei-SPX Parallels" (At Zeal) shows the high degree of correlation between the S & P 500's and NASDAQ's post bubble behavior and that of the Japanese stock market that experienced a bubble in 1989 and remains at much lower levels 16 years later.

As one can see in the NDX (NASDAQ 100) charts below, a long term (1 to 3 years) cycle high occurred on 1-20-04 at 1559.47 and a long term cycle low occurred at 1301.93 on 8-13-04. The collapse of the wall of worry from late November 2003 until late January 2004 and the dramatic trend change in NASDAQ Institutional Money Flow 108 weeks ago to negative/outflows correctly portended a trend change. Given last week's negative NASDAQ Institutional Money Flow, some weakness is indicated this week, but cycle channels/trendlines are the primary market timing consideration. A minor intermediate term upcycle is in place (see chart below), because a 2% follow through buy signal occurred. Both NDX and SPX are very overbought, so risk is high early this week.

The very long term downcycle (8-20 years in duration) which began in March 2000 probably has about 13 years to go. Paper assets (and hard assets in reverse fashion) tend to have very long term cycles that last about 35 years with about 17.5 years up (1982-2000) and 17.5 years down (2000-2018ish). There were very long term cycle highs (paper asset bubbles) in 1897, 1929, 1965ish, and in 2000 (about 35 years apart on average).

An Elliot Wave A, B, C correction/intermediate term downcycle ended in early October, because a 2% follow through minor intermediate term cycle buy signal occurred, which means that a higher cycle high than the one in early 2005 is likely, which jives with the long term cycle buy signal that occurred (see chart below).

The intermediate term upcycle from early May 2005 until early August 2005 broke down, but a major intermediate term upcycle is probably still be in effect because the intermediate term upcycle from early May 2005 until early August 2005 was probably a long minor intermediate term upcycle. The very long term downcycle (8-20+ years in duration) that began in March 2000 forces one to be conservative because risk is so much higher in a primary Bear Market. Since the early October intermediate term cycle lows held, I'm switching back to saying that a major intermediate term upcycle is in effect since early May 2005. In the first chart one can see that a major intermediate term cycle buy signal occurred in late May 2005/early June 2005 for NDX and probably remains in effect, but one must be conservative given the primary Bear Market since March 2000.

A Risky NDX long term cycle buy signal occurred because of the very long term downcycle since March 2000 and outflows nearly every week the past 108 weeks (see chart below). A major intermediate term cycle buy signal is in effect for NDX and SPX. A minor intermediate term upcycle is in place for NDX and SPX because 2% follow through buy signals occurred.

NASDAQ Institutional Money Flow (block trading data, 10,000+ share blocks) "portends" (this isn't a good one week look ahead indicator except when there's a well established multiweek trend and the minor intermediate term cycle agrees with it) some weakness this week ending 11-18 (a minor intermediate term upcycle is in place as of 11-11-05, which is the most important consideration) with 2.43% (456) more downtick blocks during the week ending 11-11. This primary fundamental indicator has reliably predicted the NASDAQ's direction, having turned positive in March 2003 after being negative for about three years following the March 2000 bubble peak/very long term cycle high. NASDAQ Institutional Money Flow turned negative again 108 weeks ago however and has generally been substantially negative, which resulted in a sharp decline until 8-13-04's long term cycle low.

Breadth, a primary fundamental indicator, was positive on Friday 11-11 with NASDAQ A/D at nearly 16:13 in favor of advancing issues and NASDAQ Up/Down Volume was in favor of up volume by 9:5.

The NASDAQ wall of worry (VXN (NASDAQ 100 Volatility Index) and QQV (QQQ Volatility Index)) shrank on Friday 11-11 with VXN revealing that a sharp (2-2.99%) rise in complacency occurred for NDX (NASDAQ 100) and QQV revealed that a very sharp rise in complacency occurred for QQQQ (NASDAQ 100 Tracking Stock). The NASDAQ is deemed Untimely on Monday due to the short term downcycle and the fact that NDX and QQQQ experienced a rise in complacency on 11-11. The short term downcycle in place at Friday 11-11's close usually would lead to weakness/a downtrend, and, a minor intermediate term upcycle is in place (see the top chart in the group above), a 2% follow through buy signal occurred, but NDX/QQQQ are very overbought. Better than expected economic data may result in strength.

Williams %R for NDX is in very overbought territory at -5.26 on 11-11-05 (below -80 (near the bottom) on my chart is the (look to) "buy" area (oversold) and above -20 is the look to "sell" area (overbought)). NDX is on a major intermediate term cycle buy signal (5% follow through after breaking it's intermediate term downcycle trendline). NDX is in a minor intermediate term upcycle, because a 2% follow through buy signal occurred (see the top chart above). MACD is on a buy signal (above it's moving average). RSI and Stochastics are on buy signals in very overbought territory. 

A sharp rise in complacency occurred for the NASDAQ 100 on Friday with VXN (NASDAQ 100 Volatility Index) falling -0.40 (-2.74%) to 14.21 while NDX (NASDAQ 100) rose +2.43 (+0.15%) to 1628.03 which reveals that a sharp (2-2.99%) rise in complacency occurred for NDX because VXN fell sharply while NDX rose slightly (NDX wall of worry shrank) which portends weakness in NDX on Monday, and, a short term downcycle is in place at session's end on Friday 11-11. 

A very sharp (3-6%) (+0.27% rise in QQQQ + -4.53% decline in QQV = -4.26% which is a 4.26% rise in complacency) 4.26% rise in complacency occurred for QQQQ (NASDAQ 100 Tracking Stock, +0.11 (+0.27%) to 40.71) on Friday since QQQQ rose modestly while QQV fell very sharply (QQQ Volatility Index, -0.63 (-4.53%) to 13.29) (QQQQ wall of worry shrank substantially) which portends weakness in QQQQ on Monday, and, a short term downcycle is in place at session's end on Friday 11-11. 

On Friday VIX (which is now calculated using the implied volatility of SPX (S & P 500) options instead of OEX (S & P 100) options) fell -0.27 (-2.27%) to 11.63 versus a rise in SPX of +3.76 (+0.31%) to 1234.72 which was a significant (0.50-1.99%) rise in complacency (wall of worry shrank) for the S & P 500/value stocks (SPX is about 75% value stocks) since VIX fell sharply while SPX rose modestly (S & P 500) which portends weakness in SPX on Monday, but, a short term upcycle is in place at session's end on Friday 11-11. 

The S & P 500 (SPX) is deemed Untimely on Monday due to the fact that it's extremely overbought and a significant rise in complacency occurred on 11-11. A short term upcycle is in place at Friday 11-11's close which usually would lead to strength/an uptrend on Monday if it remains in place, but it flattened out/rolled over on Friday 11-11, which indicates that risk is high on Monday 11-14. Better than expected economic data may result in some strength. MACD is on a buy signal (above it's moving average). Stochastics and RSI are on buy signals in very overbought territory. Williams %R for SPX is in extremely overbought territory at -1.73 on 11-11-05 (below -80 (near the bottom) on my chart is the (look to) "buy" area (oversold) and above -20 is the look to "sell" area (overbought)). SPX is on a major intermediate term cycle buy signal (5% follow through after breaking it's intermediate term downcycle trendline). SPX is in a minor intermediate term upcycle (2% follow through buy signal  occurred).

The CBOE Total Put/Call Ratio at a moderate (at or above 0.50 but below 0.75) level of 0.68 at Friday's close points to neither strength or weakness/volatility on Monday (the CBOE Index Put/Call Ratio at an extremely high 1.13 points to weakness/volatility) because it's a reliable non-contrarian indicator of the next session's early action except at very high (at or above 1.05) or very low levels (at or below 0.50) where it sometimes is also a contrarian indicator (sometimes portends early substantial strength (below 0.50) or a sharp rally following early potentially severe weakness (at or above 1.05), judgement is involved). Please keep in mind that cycle channels/trendlines are the most important consideration when timing any market.

The COT (Commitments of Traders) data will be released on Monday 11-14 due to the Veteran's Day Holiday on 11-11, so this is last week's data/analysis. Looking at NASDAQ 100 (NDX) Chicago Mercantile Exchange Commitments of Traders - Futures Only (Reportable Positions as of November 1, 2005), the Speculators (hedge funds and other speculators/traders) sold 193 long futures contracts and added 437 short futures contracts which portends strength this week (contrarian indicator), but most of the strength probably occurred last week because the data is as of 11-1-05 (released 11-4-05), so the indication is three days stale, whereas, the Commercial Traders added 167 long futures contracts and added 412 short futures contracts which portends weakness this week (non contrarian indicator). NDX is in a minor intermediate term upcycle as of 11-11-05 (2% follow through buy signal occurred). Cycle trendlines/channels are the primary market timing consideration. NDX COT (do an edit then find "nasdaq" in Internet Explorer or Netscape to find it because it's near the bottom)

American Association of Individual Investors (AAII) % Bullish (AAII has been a useful non-contrarian sentiment indicator at very low levels below 40% bullish and very high levels above 60% bullish.) @ 58.6% bullish last week from 43.0% the prior week is a neutral factor for the prospects of stocks during the week ending 11-18-05 because it's at a mid range level of bullishness (between 40-60%). The change in or delta AAII % bullish is also a useful short term/weekly look ahead indicator in addition to the absolute value of AAII % bullish. The very sharp rise last week is a positive factor for the prospects of stocks during the week ending 11-18-05 because it's a very sharp rise in complacency for this useful non-contrarian sentiment indicator contrarian. For now I'm using delta AAII % Bullish as a non contrarian indicator and I haven't determined exactly what significant changes are versus sharp or very sharp, etc. Since it appears to be strictly non contrarian (so far), I don't have to determine what an unusually large change is where the indicator becomes contrarian. The absolute value does become contrarian at extremely low (0-30% bullish) or extremely high (70-100% bullish) values, at least from an intermediate term cycle standpoint (a few weeks/months).

Gold & Silver Stocks - HUI/XAU Monthly Upcycle Elliot Wave 3 Is In Effect
 

•  HUI and the XAU are in Elliot Wave 3 of the monthly upcycle (began 10-20-05), and, they experienced a classic technical buy signal last week (see HUI's latest chart), when they broke above their "downtrend" lines (that don't exist according to my system because there's no corresponding cycle) in place since monthly cycle highs occurred on 9-30-05. There should be a higher short term cycle high, the Elliot Wave 5 cycle high, after the Elliot Wave 3 cycle high that's likely to occur early this week.            
  

• "Trade the Cycles" Near Term Synopsis - A monthly upcycle (began 10-20-05) Elliot Wave 3 short term cycle high appears likely early this week and could occur early on Monday 11-14. The spike move on Friday 11-11, the fact that NEM underperformed the XAU by a very wide margin of -1.08% on Friday 11-11, and the fact that Williams %R for HUI/XAU is in extremely overbought territory near zero (latest charts show -1.2 for HUI and -0.1 for the XAU), indicate that a short term cycle high is likely on Monday 11-14. Offsetting factors are that XAU Implied Volatility revealed a significant rise in fear on 11-11, which points to strength for some of 11-14's session, NEM hit a very short term cycle low on Friday 11-11, and HUI/XAU broke out of their "downtrends"since 9-30-05 last week (they've been in monthly upcycles since 10-20-05 as their latest charts reveal), so there could be another day or two of upside. A short term cycle high is likely early this week, the question is, does it occur early on Monday 11-14 or does it last well into the session or even into Tuesday 11-15 or Wednesday 11-16. The close very near the session high for HUI, NEM, and the XAU on Friday 11-11 points to early strength on Monday 11-14. The fact that NEM is "out of sync" with HUI/XAU due to the Placer Dome bid (that caused it to take out it's 10-20 cycle low) makes things interesting. A dramatic XAU Implied Volatility spike occurred recently, which usually only occurs near major cycle lows. Since early September XAU Implied Volatility has risen from below 24 to slightly above 35 on 10-27 (at 32.215 on 11-11), which is comparable to the dramatic spikes that occurred at recent major cycle lows. The dramatic spike in fear has major bullish implications, and, jives with this major upcycle (since 5-16-05) being the sharply rising phase of the long term upcycle (began on 5-10-04). The fact that NEM underperformed the XAU by a very wide margin of -1.08% on Friday 11-11 points to weakness in HUI and the XAU on Monday 11-14 after likely early strength, regardless of whether a short term cycle high occurs on Monday 11-14. Gold hit a 2% follow through minor intermediate term cycle sell signal recently (see 1 year chart). Gold's Elliot Wave A, B, C correction/intermediate term downcycle (similar to what recently occurred for gold stocks and lagging gold stocks as gold tends to do) appears to have ended near $456 in early November. Gold has broken above it's monthly downcycle parabolic trendline (see latest chart), and, once a 2% follow through buy signal occurs, it will indicate that a minor intermediate term cycle low occurred near $456 in early November.
  

• "Trade the Cycles" Big Picture Synopsis - The most important market timing consideration, therefore the most important thing to remember, is that HUI, NEM, and the XAU are in the sharply rising phase of the long term upcycle (began on May 10, 2004) since May 16, 2005's major intermediate term cycle lows (see latest charts), and, this major upcycle should last until about May 2006 based on the fact that the long term cycles have been getting progessively longer (see first chart below and the HUI chart dated 5-12-05). HUI, NEM, and the XAU have been in a true Bull Market/very long term upcycle since October (NEM/XAU)/November (HUI) 2000 (see first chart below and the XAU chart dated 7-12-05). They've been in a long term upcycle since May 10, 2004 (see first chart below and the HUI chart dated August 5). They've been in a major intermediate term upcycle since May 16, 2005 (see latest charts). Gold began a very long term upcycle/true Bull Market in April 2001 and silver did so in late 2001. Elliot Wave Theory (see latest HUI chart, NEM chart dated 8-12-05 and the XAU chart dated 5-16-05) complements cycle channels/trendlines nicely (as do gaps), but is a secondary market timing tool, because cycle channels/trendlines are the primary market timing consideration.

• Cycle parabolic trendline buy signals get you in well ahead of classic technical analysis trendline buy signals. See the latest HUI chart. Notice that the 2% follow through monthly cycle buy signal gets you in well ahead of the classic technical analysis trendline buy signal.
  

• I now have a Trade the Cycles Blog where I post my analysis, thoughts, and the indications on nearly a daily basis. It will be a convenient way for me to indicate if things are going as expected, and, I can post the NEM Lead Indicator, XAU Implied Volatility, and XAU Put/Call Ratio data daily and indicate whether they portend strength or weakness. Please remember to save the link to your favorite places or you can access it near the top of my home page. I will discuss what the short term and other cycles appear to be doing, gaps, Elliot Wave, etc, just as I do in the weekly updates. It's really an extension of the weekly updates, and, will provide me with experience writing daily updates (sometimes several times a day) that may become a daily e mail subscription service at some point in the near future. The Trade the Cycles Blog will be a great free service for now. It's going to be very similar to what may soon become a subscription service, with the weekly updates possibly remaining free, or maybe being free but delayed by a day or two. I've noticed that I need to do an F5 refresh on my computer to see the latest version of the Blog if it's been updated after I've gotten on the internet.
  

• The XAU Put/Call Ratio, a great indicator that all gold/silver stock traders/investors should be using, was at 0.78388 (November expiration) on 11-4 versus at 0.68636 (November expiration) on 10-28, which correctly portended strength last week because it rose much more in percentage terms (+14.21%) than the XAU fell (-0.91%) the week before last. The XAU Put/Call Ratio, at 0.77560 (November expiration) on 11-11 versus at 0.78388 (November expiration) on 11-4, portends strength this week because it fell much less in percentage terms (-1.06%) than the XAU rose (+4.91%) last week, which is a very sharp rise in fear (-1.06% + +4.91% = +3.85% rise in fear) that portends strength. Also, XAU Implied Volatility only fell -1.18% last week (from 32.60 on 11-4 to 32.215 on 11-11), which is a very sharp rise in fear (-1.18% + +4.91% = +3.73% rise in fear) that portends strength. The XAU wall of worry held up well last week.
  

• The COT (Commitments of Traders) data was unavailable for this update due to the Veteran's Day Holiday on Friday 11-11. The next two bullets from last week's update were left in for reference purposes, and, one can see that the indications were correct.
  

• From last week's update: The reliable non contrarian gold Commercial Traders are anticipating strength in gold this week, by trading aggressively net long again last week. However, last week was the first time in recent weeks that they added aggressively to their long position, probably in anticipation of a monthly cycle low for gold (may have occurred on 11-4). The gold Commercial Traders added (data as of 11-1-05) an unusually large (> 10% increase in long contracts) 11,966 long futures and options contracts (added 3163, 2064, 2000, 406 the prior four weeks, sold 12,264 the prior week) and covered a large 12,224 short futures and options contracts (covered 14,669, 11,602 the prior two weeks, added 12,115, 9111 the prior two weeks, covered 6973 the prior week) which portends weakness this week (non contrarian indicator), due to the unusually large long trade that's a short term contrarian indication, but most of the weakness probably occurred last week since the data is three days old when released, and, the large degree of short covering points to some significant strength. Gold has been in Wave C of an Elliot Wave A, B, C correction, lagging the HUI/XAU Elliot Wave A, B, C correction that ended 10-20-05.
  

• From last week's update: The reliable non contrarian silver Commercial Traders (data as of 11-1-05) sold 718 long futures and options contracts (sold 752 the prior week, added 1576, 3924, 2047 the prior three weeks, sold 2981, 4811 the prior two weeks) and covered 3676 short futures and options contracts (added 1354, 3620, 9459, 7237, 2327, 15,066, 801, 2112 the prior eight weeks) which portends strength this week (non contrarian indicator), but the sale of 718 long contracts points to some weakness. The most important consideration in timing any market is the cycle channels/trendlines.

• The remainder of the charts can be found at the bottom.
  

• Williams %R is for HUI (-1.20)/NEM (-54.00)/XAU (-0.10) on 11-11-05 (see latest charts). It hit an extremely oversold level (near -100) near the monthly cycle lows, which was a reliable indication to look to buy, which doesn't mean you mechanically buy, but that you probably will buy very soon or you may start buying (in 2 or 3 stages). The converse is of course true for overbought levels at or above -20, but the most important consideration by far is cycle channels/trendlines. Indicators and timing tools are used for finetuning buy/sell decisions after cycle trendline buy/sell signals suggest it's time to buy/sell (see charts above, most of you should probably be holding until a long term cycle sell signal occurs in 6 to 12 months).

• An important bullish development is that gold's major intermediate term upcycle trendline since early February has turned up/increased in strength (see 1 year chart above). Gold hit a 2% follow through minor intermediate term cycle sell signal recently (see 1 year chart above). After hitting a 2% follow through parabolic trendline sell signal risk skyrockets and reward if any plummets. Gold appears to have completed an Elliot Wave A, B, C down, up, down correction.
  

• The USD's major upcycle remains in effect but has rolled over dramatically, and, the spike move indicates that it may be putting in a major cycle high (see chart above). This jives with the COT data, which reveals that the non contrarian USD Commercial Traders are massively short and the contrarian USD Speculators are massively long. The early July cycle high was not a major intermediate term cycle high. The current rally may be the final last gasp spike move of the USD's major upcycle this year.              
  

• The US Dollar determines 9.61% (+31% times +31% = 9.61%) of gold's price action/variability now since the USD's correlation coefficient with gold is +31% for the past 180 trading days as of 11-11-05. Notice that the correlation is now positive, so gold will get a boost if the US Dollar rises, which is the opposite of the usual negative correlation where US Dollar strength leads to gold weakness and US Dollar weakness leads to gold strength. The USD determines only 1.44% of silver's price action/variability since the USD's correlation coefficient with silver is +12% for the past 180 trading days on 11-11-05. The correlation coefficient, r, provides the direction of the correlation (+ or  -) but only the square root of the strength of the correlation. The coefficient of determination, r², provides the true strength of the correlation but without indicating its direction. Both of them must be used to fully understand the entire picture regarding correlation's effect. For the time being the US Dollar is only a very minor factor for precious metals.

• Many of the bullets that follow haven't changed from last week because this is a system ("Trade the Cycles") and because some are reading this for the first time. Some bullets are needed for reference purposes or to revisit important developments in the precious metals sector. "Trade the Cycles" is a relatively new system (began in 2003) that only reached a well developed state this year. Major buy/sell signal requirements were improved this year.
  

• The major lesson learned from the fact that the downcycle from 9-30's (all dates 2005) monthly cycle high to 10-5's cycle low was a short term/weekly one (Elliot Wave A of an A, B, C downcycle) not a monthly one is that a downcycle's trendline usually begins relatively flat. The downcycle from 9-30 to 10-5 DID begin relatively flat from a short term cycle perspective, with flatness on 9-30 that wasn't evident on the daily chart. On a daily chart a monthly downcycle trendline will almost always begin relatively flat, with one or two short term cycle highs not far below the monthly cycle highs. That was the best clue that 10-5's cycle lows probably weren't monthly ones. HUI, NEM, and the XAU's downcycle trendlines fell off a cliff from 9-30 until 10-5's cycle low on the daily charts, which meant that 10-5's cycle lows were probably short term rather than monthly cycle lows. Therefore, it's very important to keep in mind the nature of cycles and the fact that they tend to begin relatively flat. Also, the downcycle from 9-30 to 10-5 was a relatively brief and shallow downcycle by monthly downcycle standards, which was another indication that it probably wasn't the monthly cycle bottoming.

• Once a cycle's parabola/parabolic trendline breaks down it's time to get out (if you're trading that cycle timeframe), which is what happened recently, with HUI, NEM, the XAU, and gold hitting 2% follow through monthly cycle parabolic trendline sell signals. HUI, NEM, and the XAU rolled over dramatically following their 2% monthly cycle sell signals, with HUI gaining only +1.41% in the nine sessions from 9-19 until 9-30. Even if modestly or even significantly higher highs occur and a monthly upcycle is still in place until proven otherwise, risk is far too high to remain long following a 2% monthly cycle parabolic trendline sell signal, because of the dramatic decline in the rate of ascent (monthly upcycle dramatically rolls over and enters the flat topping part of the cycle). The important thing to remember is that the 2% follow through parabolic trendline sell signals (see gold's latest chart) don't guarantee that the monthly cycle high has occurred (though it often has), but it does clearly indicate that risk is far too high to remain long because the cycle has entered the relatively flat topping area. A good example right now is gold's monthly cycle. Gold hit a 2% follow through parabolic trendline monthly cycle sell signal recently (see latest chart). The 2% follow through parabolic trendline sell signal correctly indicated that risk was far too high for monthly cycle gold traders to remain long.
  

• When an upcycle's parabolic trendline, or "parabola" as I like to call it, breaks down, substantial declines almost always occur (see first chart and the USD chart). Once a cycle dramatically rolls over (rate of ascent declines dramatically), it's usually time to take profits if you're trading that cycle timeframe. Risk skyrockets following parabolic trendline sell signals as discussed in previous updates. Sideways action is a sign that a cycle high or low has occurred or is imminent. The best time to buy or sell is usually during sideways action after a cycle's "parabola" has broken down (or is broken to the upside). Almost all cycles have parabolic shaped trendlines, but, during the final spike move (or plunge/inverse spike for downcycles) some judgement is required as to what the parabolic or nearly vertical trendline is, which is the final segment of the "parabola."
  

• You must chart the cycles for the stocks you trade/invest in, because they can be radically different than those of HUI, NEM, and the XAU. For example, CDE and SIL just hit long term cycle lows in May 2005 versus HUI, NEM, and the XAU doing so on May 10, 2004.
  

• It can take a while for a major upcycle's trendline to establish itself. HUI is more volatile and therefore tends to have more uncertainty than NEM and the XAU. This is one of the good reasons to look at three major upcycles (HUI, NEM, and the XAU) rather than one. Also, NEM, being a reliable lead indicator and the largest market cap component of HUI and the XAU, has the most important cycles. The long term upcycle's (since May 10, 2004) rising bottoms trendline didn't exist until May 16, 2005's major intermediate term cycle lows (HUI, NEM, and the XAU. See first chart above and the HUI chart dated August 5). It took slightly over a year to establish itself and ended up being very flat, probably because the long term cycle lows occurred well above the very long term upcycle trendline (see top chart above). The very important point I'm trying to make is to understand that markets do reliably experience cycles (look at the charts above) even though it can take a while for a cycle's trendline to clearly establish itself, which can lead to surprises with shorter cycles.

• The major intermediate term upcycle trendlines since May 16, 2005 for HUI, NEM, and the XAU (see charts above, gold since early February, see it's 1 year chart) should become more parabolic/sharply rising over time (clearly did recently), as cycles almost always do, and given that this should be the sharply rising phase of the long term upcycle (began on 5-10-04), dramatic gains should occur. HUI, NEM, and the XAU should approximately double from their major intermediate term cycle lows on 5-16-05 to their long term cycle highs as discussed in previous updates. This major intermediate term upcycle should last about twice as long as last year's (6 months from 5-10-04 until 11-17-04) and see about twice the gains (100% or so versus HUI's 51.50% from 5-10-04 until 11-17-04). Note in HUI's 5 year chart dated 6-29-05 (top chart above) that the long term cycles are getting longer. The previous long term upcycle's parabolic phase lasted about 9 months, so it's reasonable to assume that this one will last about one year (until May 2006).
  

• I update my gold/silver stock "Current Assessment" near the top of my home page (middle of the second bullet) regularly, so near critical times especially, you may want to check it out. Also, you can see how I use the indicators in concert with cycles just above the "Current Assessment." Fascinating!
  

• Gold put in a major bottom near $410 in early February, so it led the stocks pricewise but didn't flash a major buy signal until June (see 1 year chart below), a few weeks after HUI, NEM, and the XAU did (see HUI chart dated 6-3-05). So, "major cycle effect wise" gold still lagged gold stocks even though pricewise it bottomed earlier, which is the first time I've seen gold lead gold stocks pricewise. Gold stocks still led gold in that they flashed a major intermediate term cycle buy signal a few weeks before gold did.
  

• If you're trading cycles you should sell whenever a parabolic trendline breaks down for whatever cycle timeframes you're trading (trade parabolas basically, see the first chart and other charts above, that have an ever increasing rate of ascent for upcycles or an ever increasing rate of descent for downcycles, use 2% follow through for minor buy/sell signals and 5% plus the NEM Lead Indicator for major buy/sell signals as previously discussed).
  

• Most of you should not be trading minor intermediate term cycles, but should be holding for the next approximately 6 to 9 months (the HUI 5 year charts dated 6-29-05 and 5-12-05 above shows that the long term cycles are getting longer), during which dramatic gains should occur for HUI, NEM, and the XAU because this is, according to the nature of cycles, the parabolic/sharply rising phase of the long term upcycle that began on May 10, 2004. HUI, NEM, and the XAU were very flat during the early phase of their long term upcycles, which isn't too surprising since cycles tend to begin relatively flat and become increasingly parabolic/sharply rising over time.
  

• The XAU 2 year chart dated 5-16-05 above shows the Elliot Wavesque 1, 2, 3, 4, 5 cycle structure of the major intermediate term upcycle from 5-10-04 until 11-17-04 as well as the A, B, C correction from 11-17-04 until 5-16-05. The fact that there are predictable cyclical patterns for gold/silver stocks and most if not all markets is well established. The major caveat being that one must know what the longer cycles are doing in order to time shorter cycle timeframes. The predictability of the long term cycles uptrend obviously comes from the very long term upcycle since late 2000 and knowing that very long term upcycles (and downcycles) tend to last about 17.2 years. Gold's very long term downcycle lasted 21 years, from 1980 until April 2001.
  

• Gold hit a major intermediate term cycle buy signal (see 1 year chart above) in June because it followed through by more than 5% after breaking it's intermediate term downcycle trendline in place since early December 2004. This major buy signal lagged gold stocks' major buy signal by a few weeks, but this is the first time that I've seen gold hit a major bottom (early February 2005) well before gold stocks did (May 16, 2005) in this very long term upcycle since late 2000 for gold/silver stocks and since April 2001 for gold (late 2001 for silver), which is probably a major positive. Gold usually lags gold stocks at major cycle highs/lows. Gold peaked in early December 2004 versus HUI, NEM, and the XAU doing so on 11-17-04 and gold peaked in early April 2004 versus HUI and NEM doing so on 12-2-03 and the XAU doing so on 1-6-04 (long term cycle highs).
  

• Most of you will do much better holding for the next 6 to 9 months as opposed to actively trading, at which time long term cycle highs should occur for HUI, NEM, and the XAU that may be about double the level of the major lows on 5-16-05. HUI may rise on the order of 100% to about 330 in the next 6-9 months assuming a long term upcycle is in effect. NEM may rise to the 70-75 area in the next 6-9 months in that case. The XAU may rise to about 150 in the next 6-9 months in that case.

• Major intermediate term cycle lows occurred for HUI, NEM, and the XAU on 5-16-05 at 165.71 for HUI, at 34.90 for NEM, and at 78.23 for the XAU, that were above their long term cycle lows that occurred at 163.81 for HUI, at 34.70 for NEM, and at 76.79 for the XAU on 5-10-04.
  

• Looking at the top chart above, the 5 year HUI chart showing the 6 long term cycle 5% follow through buy/sell signals in the gold/silver stock very long term upcycle, one sees that all 6 long term cycle buy/sell signals correctly indicated that the long term cycle high or low was in (the NEM Lead Indicator is also needed when a potential long term cycle low occurs well above the very long term upcycle trendline as discussed previously). The probability that coincidence/pure luck led to that outcome is only 1.56% which is 50% raised to the sixth power. So, assuming that a very long term upcycle remains in effect (they last about 17.2 years on average), there's a very high probability that long term cycle buy/sell signals will work in the future. I can provide countless examples for shorter cycle timeframes where the parabolic trendline buy/sell signals worked every time. The caveat is that one must know what the longer cycles are doing (where their trendlines are) or you might use the wrong trendline and get an erroneous buy/sell signal.
  

• The correlation coefficient is the square root of the strength of the correlation. The correlation coefficient is +31% on 11-11 (+26% on 11-4) for the past 180 trading days for gold, according to Moore Research Center, Inc. For silver the correlation coefficient with the USD is 12% on 11-11 (0% on 11-4) for the past 180 trading days. Silver's correlation is usually much more positive than gold's because it's more of an industrial metal than gold is, hence it usually has a more positive correlation with US economic strength and a strong US Dollar. 

• The Coefficient of Determination is the square of the correlation coefficient (the true strength of the correlation is determined by squaring the correlation coefficient) and explains how much the USD is determining gold's and silver's price action/variability or the S & P 500 is determining gold's or silver's price action/variability. The US Dollar only determines 9.61% (+31% times +31% = 9.61%) of gold's price action/variability now since the USD's correlation coefficient with gold is +31% as of 11-11-05. The USD determines only 1.44% of silver's price action/variability since the USD's correlation coefficient with silver is 12% on 11-11-05. The correlation coefficient, r, provides the direction of the correlation (+ or  -) but only the square root of the strength of the correlation. The coefficient of determination, r², provides the true strength of the correlation but without indicating its direction. Both of them must be used to fully understand the entire picture regarding correlation's effect.

• The correlation coefficient between gold and the S & P 500 is 3% for the past 180 trading days (correlation coefficient with silver is -12%), according to Moore Research Center, Inc. This means that the S & P 500 determines 0.09% of gold's price action/variability (Coefficient of Determination = 0% squared = 0.00%). 
  

• The report I received via e mail from Marketocracy for the week ending 11-11-05: "JFR - Joe F. Rocks's Mutual Fund, Net Asset Value (NAV): $10.38 on 11-11 vs $10.09 on 11-4, Compliant: Yes, This past week return: +2.87%." HUI (AMEX Gold Bugs Index) was up +4.70% last week for comparison, so JFR outperformed HUI in 19 of the past 43 weeks. HUI is a better yardstick than NEM or the XAU, since it usually outperforms NEM and the XAU (in upcycles). HUI was up about 70% each year in 2001, 2002, and 2003, so outperforming HUI is no easy task. My imaginary mutual fund JFR is up 3.80% since it's inception on 1-5-05. JFR is in the top 25% of Marketocracy's mutual funds for the 3 months ending 9-30-05, outperforming 87.6% of them in that timeframe.
  

• XAU Implied Volatility fell -1.54% to 32.215 on Friday 11-11 from 32.720 on 11-10 versus a +2.90% rise in the XAU on 11-11, which is a significant (0.50-1.99%) 1.36% rise in fear (-1.54% + +2.90% = +1.36%. The XAU wall of worry grew by 1.36%, therefore fear rose by 1.36%) that portends strength/an uptrend during part of Monday 11-14's session (fear is usually contrarian, therefore normally portends strength, until it reachs an unusually large level (> 6% increase) where it becomes non contrarian). That strength/an uptrend could follow a gap down at the open and early weakness. XAU Implied Volatility tends to indicate a trend/tone rather than necessarily a simplistic up or down session. The XAU Put/Call Ratio is another very important indicator that may disagree with XAU Implied Volatility. These indicators must be used in concert with cycle channels/trendlines (very long term, long term, intermediate term, and short term).

• The XAU Put/Call Ratio is at 0.77560 for the November expiration on 11-11 versus at 0.78388 for the November expiration on 11-4 versus at 0.80360 for the October expiration on 10-14 versus at 0.84470 for the September expiration on 9-9 versus at 0.85337 for the September expiration on 9-2 versus at 1.02491 for the September expiration on 8-26 versus at 0.73494 for the August expiration on 8-12 versus at 0.81863 for the July expiration on 7-1 versus at 0.91027 for the July expiration on 6-24 versus at 0.76954 for the June expiration on 6-17 versus at 0.87064 for the June expiration on 6-10 versus at 0.80155 for the June expiration on 6-3 versus at 0.55895 (May expiration) on 5-19 versus at 1.13583 (May expiration) on 4-22. The XAU Put/Call Ratio was at 0.65704 for the final January expiration value as of 1-21. The XAU Put/Call Ratio was at 0.79348 for the final December expiration as of 12-17-04. The XAU Put/Call Ratio was at 1.03065 for the final November expiration value as of 11-19-04. The XAU Put/Call Ratio was at 0.85989 for the final October expiration value as of 10-15. If it rises 6% or less it portends strength following likely early weakness (indicated by XAU Implied Volatility). If it falls 6% or less it portends weakness. At unusually large greater than 6% moves the XAU Put/Call Ratio becomes non contrarian, so a greater than 6% rise portends weakness (unusually large rise in fear) and a greater than 6% decline portends strength (unusually large rise in complacency).
  

• A major indicator (NEM Lead Indicator) portending weakness this week (but all indicators and cycle channels/trendlines (most important consideration) must be considered collectively, not in isolation. Think "system.") is the fact that NEM underperformed the XAU last week by -1.04% (-1.26%, -1.01%, -0.69%, -0.12%, +0.80%, +0.16%, -0.19%, +1.09%, +0.51%, -1.32%, -0.40%, +0.98%, +0.52%, -0.08%, +0.26%, +0.81%, -0.91%, -1.00%, -2.86%, -0.38%, +0.09%, -0.39%, -0.72%, -0.69%, -1.87%, +0.45%, -2.15%, -1.17%, +0.10%, +1.83%, +0.08%, +0.44%, and +0.97% the prior 33 weeks): +1.82% vs +2.90% on 11-11, -1.38% vs -1.04% on 11-10, +3.35% vs +3.09% on 11-9, -0.72% vs -0.22% on 11-8, +1.01% vs +0.39% on 11-7.        

• The COT (Commitments of Traders) data was unavailable for this update due to the Veteran's Day Holiday on Friday 11-11. It will be released on 11-14.
  

• The reliable non contrarian (in terms of their trading activity) gold Commercial Traders are short gold. They are clearly positioned for gold weakness (largely because of hedging) with only 96,138 long futures and options contracts versus 268,015 short futures and options contracts (data as of 11-1-05). The Commercial Traders typically correctly begin to take substantial profits (and sell short) as a cycle rolls over/weakens (following cycle parabolic trendline sell signals) while the Speculators tend to overshoot when making the various trading decisions (buying, selling, shorting, short covering).

• The notoriously contrarian (in terms of their trading activity) gold Speculators are correctly positioned for gold strength with 183,116 long futures and options contracts versus only 44,719 short futures and options contracts (data as of 11-1-05).

• The gold Commercial Traders added an unusually large (> 10% increase in long contracts) 11,966 long futures and options contracts (added 3163, 2064, 2000, 406 the prior four weeks, sold 12,264 the prior week) and covered a large 12,224 short futures and options contracts (covered 14,669, 11,602 the prior two weeks, added 12,115, 9111 the prior two weeks, covered 6973 the prior week) which portends weakness this week (non contrarian indicator), due to the unusually large long trade that's a short term contrarian indication, but most of the weakness probably occurred last week since the data is three days old when released, and, the large degree of short covering points to some significant strength. The most important consideration in timing any market is the cycle channels/trendlines (see chart above) and keep in mind that the data is as of 11-1-05, so the data is somewhat stale (for short term cycle trading) by the time it's analyzed, but is highly useful nonetheless, especially for intermediate term cycle trading (a few weeks/months).

• The gold Speculators (hedge funds and other speculators/traders) sold an unusually large (> 10% decrease in long contracts) 26,026 long futures and options contracts (sold 19,207, 10,131 the prior two weeks, added 5239, 10,296 the prior two weeks, sold 1322 the prior week) and added 445 short futures and options contracts (covered 1979, 3065, 930 the prior three weeks, added 4749 the prior week, covered 8053 the prior week) which portends weakness this week (contrarian indicator), due to the unusually large long liquidation that's a short term non contrarian indication, but most of the weakness probably occurred last week since the data is three days old when released. The most important consideration in timing any market is the cycle channels/trendlines (see chart above). 

• The reliable non contrarian (in terms of their trading activity) silver Commercial Traders are short silver. They are clearly positioned for silver weakness (largely because of hedging) with only 34,426 long futures and options contracts versus 108,479 short futures and options contracts as of 11-1-05. 

• The notoriously contrarian (in terms of their trading activity) silver Speculators are correctly positioned for silver strength with 60,096 long futures and options contracts versus only 8925 short futures and options contracts as of 11-1-05.

• The silver Commercial Traders sold 718 long futures and options contracts (sold 752 the prior week, added 1576, 3924, 2047 the prior three weeks, sold 2981, 4811 the prior two weeks) and covered 3676 short futures and options contracts (added 1354, 3620, 9459, 7237, 2327, 15,066, 801, 2112 the prior eight weeks) which portends strength this week (non contrarian indicator), but the sale of 718 long contracts points to some weakness. The most important consideration in timing any market is the cycle channels/trendlines.

• The silver Speculators (hedge funds and other speculators/traders) sold a large 5026 long futures and options contracts (sold 1280 the prior week, added 2978, 6774, 5566, 1961, 7743, 2608 the prior six weeks) and covered an unusually large (> 10% decrease in short contracts) 2044 short futures and options contracts (covered 491, 158, 914, 898, 1895, 11,410 the prior six weeks, added 2153 the prior week) which portends strength this week (contrarian indicator), because the unusually large degree of short covering is a short term non contrarian indication and the large degree of long liquidation also points to strength. The most important consideration in timing any market is the cycle channels/trendlines.

• The reliable non contrarian (in terms of their trading activity) USD Commercial Traders are positioned for US Dollar weakness (massively short) with 1592 long futures and options contracts versus 25,996 short futures and options contracts as of 11-1-05. Last week they added 209 long futures and options contracts (added 383 the prior week, sold 186 the prior week, added 760 the prior week, sold 231, 35, 9451, 1346 the prior four weeks) and covered 677 short futures and options contracts (added 9613, 6411 the prior two weeks, covered 2704 the prior week, added 2193, 5097 the prior two weeks) which portends strength this week (non contrarian indicator), but most of the strength may have occurred last week. The most important consideration in timing any market is the cycle channels/trendlines (see chart above).
  

• The notoriously contrarian (in terms of their trading activity) USD Speculators are positioned for US Dollar strength (massively long) with 26,596 long futures and options contracts versus 2867 short futures and options contracts as of 11-1-05. Last week they sold 1352 long futures and options contracts (added 10,979, 3258 the prior two weeks, sold 247 the prior week, added 1255, 5100, 3236 the prior three weeks) and covered 721 short futures and options contracts (added 356 the prior week, covered 1957 the prior week, added 2501 the prior week) which portends USD strength this week (contrarian indicator), but most of the strength may have occurred last week. The most important consideration in timing any market is the cycle channels/trendlines (see chart above).
  

• FREE COT (Commitments of Traders) Charts (see link) reveal that the Commercial Traders generally know what they're doing and the Speculators don't. The Commercial Traders tend to be near net short extremes near major tops and near net long extremes near major bottoms, thus making them non contrarian indicators most of the time. The Speculators tend to do just the opposite and are contrarian indicators most of the time.

• Detailed analysis regarding the important long term upcycle buy signal and other important "big picture" information as well as information about my system/indicators can be found at this link.
  

• Cycle channels and trendlines are the primary market timing consideration (other tools/indicators are great for finetuning), except the NEM Lead Indicator is (really only) needed for major buy signals when the potential major cycle low occurs well above the next longer cycle's trendline, such as occurred on May 10, 2004 when long term cycle lows occurred for HUI, NEM, and the XAU well above their very long term upcycle trendlines in place since late 2000 (see top chart above). Since May 16, 2005's major intermediate term cycle low occurred right at the very long term upcycle trendline for the XAU (see 5 year chart dated 7-12-05), the NEM lead Indicator wasn't really required (in addition to the 5% follow through requirement), but given how long and brutal the (major intermediate term downcycle from 11-17-04 until 5-16-05) correction was we needed all the confidence we could get. In other words, if HUI, NEM, and the XAU bounce dramatically at their Bull Market/very long term upcycle trendlines or long term upcycle trendlines and 5% or more follow through occurs after breaking their major downcycle trendlines, that strongly suggests that the next longer cycle remains in effect and that a major buy signal has occurred.
  

• The 5% follow through requirement combined with the NEM Lead Indicator, the two new major buy/sell signal requirements, would have weeded out all six important cycle lows that occurred prior to 5-16-05 in the major correction (from 11-17-04 until 5-16-05), and, correctly indicated that 5-16-05 was a major intermediate term cycle low. So, the two new major buy/sell signal requirements worked seven consecutive times and there's only a 0.78% chance that result was due to pure luck (50% raised to the seventh power).

• My system/work is NOT about me making educated guesses and calling bottoms, even though I (mistakenly) did that in the major correction from 11-17-04 until 5-16-05 for HUI, NEM, and the XAU, partly for reasons such as HUI having, until early April 2005, a well developed trendline since 5-10-04's long term cycle low that appeared to be it's long term upcycle trendline. The reason why I'm developing a backtested system ("Trade the Cycles") is because it's impossible to consistently time the market (by educated guessing) using an unbacktested approach comprised of technical analysis and indicators. From now on, where major bottoms are concerned, I'll only indicate that a likely major bottom has occurred after the two major buy signal criteria are satisfied (The 5% follow through requirement in concert with a clearly bullish NEM Lead Indicator for a few weeks), which would have weeded out all 6 important cycle lows (see next bullet) that occurred during the major intermediate term downcycle from being major intermediate term cycle low candidates, and there's only a 1.56% probability that was the result of pure luck (50% raised to the sixth power). Assuming that May 16, 2005 really was a major intermediate term cycle low then the two major buy signal requirements will have been effective 7 consecutive times and there's only a 0.78% chance that was the result of pure luck (50% raised to the seventh power).

• The 5% follow through major buy signal requirement (after breaking through the intermediate term downcycle trendline connecting short term cycle highs) weeds out the December 8, 2004, January 6, 2005, March 29, 2005, April 15, 2005, and the April 28 cycle lows from being a major intermediate term cycle low, but not the February 8 (HUI/XAU)/9 (NEM) 2005 cycle low. However, the NEM Lead Indicator clearly indicated (weeds out) that the February 2005 cycle low probably wasn't a major low. It appears that the 5% follow through requirement in concert with a clearly bullish NEM Lead Indicator for a few weeks will work well for timing/major buy signals. Also, an Elliot Wave type A, B, C major correction pattern is likely to occur, with point C, the major cycle low, occurring relatively close to the Bull Market/very long term upcycle trendline, which helps.
  

• Buying and holding major intermediate term upcycles (that last about 3 to 12 months) makes a lot of sense, but not long term or very long term upcycles, because they're too flat (rising bottoms) and one loses too much during major corrections (However, with good stock selection, one can do very well with buy and hold during this gold/silver stock Bull Market/very long term upcycle that began in late 2000). This is a change from my belief that one should hold during long term upcycles. One should wait for a major intermediate term cycle buy signal before buying. So, it makes sense to be long during major intermediate term cycle buy signals and in cash and/or short during major intermediate term cycle sell signals.
  

• Cycle channels/trendlines are the most important consideration when timing any market. A very long term upcycle has been in place since late 2000 and a long term upcycle has been in place since May 10, 2004 for HUI, NEM, and the XAU (gold began a very long term upcycle in April 2001). Very long term upcycles (and downcycles) tend to last about 17.5 years on average. Gold's previous very long term downcycle lasted from 1980 until April 2001.

• As I've said before, if you find that the detailed technical work is too much to digest, the cycle channels/trendlines in the charts are by far the most important consideration, so one can still use my system even if the indicators/technical work are difficult to grasp (right now, sometimes with perseverance one might grasp it).

• The Gold:XAU Ratio may become a third major buy/sell signal signal criterion, along with 5% follow through and a clearly bullish/bearish NEM Lead Indicator. Per Myles Zyblock, Chief North American Institutional Strategist at RBC Capital Markets, when it's above 5.0 (12% of the time the past 22 years) the average annual one-year holding period return for stocks in the XAU has been +38.4% and in only one instance was there a loss. When it's below 3.0 (5% of the time the past 22 years) the average annual one-year holding period return for stocks in the XAU has been -24.3% with no instances of an up year. As a stand alone indicator, at least for trading purposes, the Gold:XAU Ratio probably isn't highly useful because obviously both gold and the XAU can fall 10% or more in tandem after reaching 5.0 or rise 10%+ after reaching 3.0. However, I need to research/backtest this. 5.25 or even 5.50 is probably a better criterion.
  

• I've created a Joe F. Rocks imaginary mutual fund at Marketocracy that will trade gold/silver stocks and maybe also precious metals via Exchange Traded Funds (ETF) like GLD (new gold ETF) using my "Trade the Cycles" system. The Fund Manager name should say Joe Ferrazzano not  "joefrocks." I bought "en masse" on 1-5-05 and was more than 90% invested on that date. This will be a way of establishing an independently calculated track record. I'll track it's performance weekly in these updates, but the link above updates the fund share price/NAV the day after each session I believe.  

• The Joe F. Rocks fund at Marketocracy will provide a great independently tracked way of assessing "Trade the Cycles" as well as my trading ability and you can compare me to other market timers. I think I have a great shot at being very near the top of Marketocracy's rankings in the near future, partly because of how great the gold/silver stock market is, but also because of my "Trade the Cycles" system. Given how volatile gold/silver stocks are it would be easy to have a substandard rate of return relative to HUI and the XAU if one wasn't good at timing gold/silver stocks. I'll be doing mostly intermediate term cycle trading (cycles that last about 4-6 weeks from cycle low to the next cycle low) and some short term cycle trading. Once the long term cycle high occurs probably in about 6 to 12 months I'll be 35% in cash and will find low volatility stocks to park most of the rest of the fund. I have to be at least 65% invested, which ties my hands some, but I should still do very well. Margin and short selling aren't allowed by Marketocracy because they're following typical mutual fund guidelines. I could end up running a real mutual fund for them if I rank very high.
  

Joe F. Rocks!

====================== End of Update ==============================

The following analysis/commentary didn't change from 4-25's update -

There's some debate about wether the gold stock Bull has ended and deflation will occur or if inflation will increase substantially. Take a look at commodities, housing, healthcare costs, education costs, etc. and what do you see? It's not deflation. The US Dollar (USD) is merely having a countertrend rally and gold a countertrend decline that has a ways to go. The USD is in a very long term downcycle that began in mid 2001 which is INFLATIONARY. Case closed. Basically the US has a crappy economy and high inflation a la the 1970s which is great for precious metals just as it was in the 1970s.

The post bubble economic cycle has deflationary effects (such as in the stock market and the economy) that are being fought with massive stimulus and an extremely easy monetary policy at least as far as rock bottom short term rates are concerned.

The cycle based system I use has stood a great test and the long term downcycle remains in effect despite trendline "buy signals" suggesting otherwise (if one didn't use/understand cycles). The long term upcycle trendlines for HUI and the XAU that began in October 2002 for HUI and in July 2002 for the XAU broke down in January of this year and those indices are now heading (I strongly believe, similar to what occurred after the prior two long term upcycles broke down as shown in the chart below) for their very long term upcycle/Bull Market trendlines in the next few months.&n