Joe F. Rocks!
Growth Stock Investor & Market Strategist

Joe F. Rocks! Trade the Cycles Updated 2-5-06

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 (2-7 Days) - Untimely (NDX/QQQ are in short term downcycles as of 2-3-06.)
                                                           - Minor Intermediate Term Cycle (3-6 Weeks) - Untimely (NDX minor intermediate term downcycle is in effect.)

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.

For those of you who entered this page directly and haven't discovered the vast resources on the home page yet please check out Joe F. Rocks! Growth Stock Investor & Market Strategist, don't forget to bookmark it and please tell your colleagues and friends.

The long term downcycle trendlines for NDX (NASDAQ 100) and SPX (S & P 500) were broken during the week ending 11-5-04, and (unexciting because of the very long term downcycle since March 2000) long term cycle buy signals occurred shortly thereafter. 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 120 weeks ago to negative/outflows correctly portended a trend change. Given last week's positive NASDAQ Institutional Money Flow, some strength is indicated this week, but cycle channels/trendlines are the primary market timing consideration. A minor intermediate term downcycle is in place, because a 2% follow through sell signal occurred. 

The very long term downcycle (8-20 years in duration) which began in March 2000 probably has about 12 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).

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 strength this week ending 2-10 (a minor intermediate term downcycle is in place at 2-3-06's close, which is the most important consideration, because a 2% follow through sell signal occurred) with 1.57% (443) more uptick blocks during the week ending 2-3. 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 120 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 negative on Friday 2-3 with NASDAQ A/D at nearly 17:13 in favor of declining issues and NASDAQ Up/Down Volume was in favor of down volume by more than 8:3.

The NASDAQ wall of worry (VXN (NASDAQ 100 Volatility Index) and QQV (QQQ Volatility Index)) shrank on Friday 2-3 with VXN revealing that a sharp (2-2.99%) rise in complacency occurred for NDX (NASDAQ 100) and QQV revealed that a sharp (2-2.99%) 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 rise in complacency on Friday. The short term downcycle in place at Friday 2-3's close usually would lead to weakness/a downtrend, but, NDX is oversold so a bounce may occur at some point in Monday's session. Better than expected economic data may result in strength.

Williams %R for NDX is in very oversold territory at -92.52 on 2-3-06 (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 hit a minor intermediate term cycle 2% follow through sell signal recently. MACD is on a sell signal (below it's moving average). RSI and Stochastics are on sell signals near oversold territory. 

A sharp rise in complacency occurred for the NASDAQ 100 on Friday with VXN (NASDAQ 100 Volatility Index) falling -0.26 (-1.46%) to 17.53 while NDX (NASDAQ 100) fell -21.24 (-1.26%) to 1664.53 which reveals that a sharp (2-2.99%) rise in complacency occurred for NDX because VXN fell significantly despite NDX falling significantly (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 2-3. A minor intermediate term downcycle is in effect, because a 2% follow through sell signal occurred. 

A sharp (2-2.99%) (-1.23% decline in QQQQ + -0.90% decline in QQV = -2.13% which is a +2.13% rise in complacency) +2.13% rise in complacency occurred for QQQQ (NASDAQ 100 Tracking Stock, -0.51 (-1.23%) to 40.92) on Friday since QQQQ fell significantly despite QQV falling significantly (QQQ Volatility Index, -0.15 (-0.90%) to 16.46) (QQQQ wall of worry shrank) which portends weakness in QQQQ on Monday, and, a short term downcycle is in place at session's end on Friday 2-3. A minor intermediate term downcycle is in effect, a 2% follow through sell signal occurred.

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 (-2.04%) to 12.96 versus a decline in SPX of -6.81 (-0.54%) to 1264.03 which was a sharp (2-2.99%) rise in complacency (wall of worry shrank) for the S & P 500/value stocks (SPX is about 75% value stocks) since VIX fell sharply despite SPX falling significantly (S & P 500) which portends weakness in SPX on Monday, and, a short term downcycle is in place at session's end on Friday 2-3. 

The S & P 500 (SPX) is deemed Untimely on Monday due to the short term downcycle and the sharp rise in complacency. A short term downcycle is in place at Friday 2-3's close which usually would lead to weakness/a downtrend on Monday if it remains in place. Better than expected economic data may result in some strength. MACD is on a sell signal (below it's moving average). Stochastics and RSI are on sell signals approaching oversold territory. Williams %R for SPX is in oversold territory at -83.84 on 2-3-06 (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 downcycle (2% follow through sell signal occurred).

The CBOE Total Put/Call Ratio at a very high (at or above 1.05 but below 1.25) level of 1.08 at Friday's close points to weakness/volatility on Monday (the CBOE Index Put/Call Ratio at an extremely high 2.50 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.

Looking at NASDAQ 100 (NDX) Chicago Mercantile Exchange Commitments of Traders - Futures Only (Reportable Positions as of January 31, 2006), the Speculators (hedge funds and other speculators/traders) sold 264 long futures contracts and added an unusually large (> 10% increase in short contracts) 973 short futures contracts which portends weakness this week (contrarian indicator), because the unusually large short trade is a short term non contrarian indication, but most of the weakness may have occurred last week because the data is three days old when released, whereas, the Commercial Traders added 914 long futures contracts and covered 309 short futures contracts which portends strength this week (non contrarian indicator). NDX is in a minor intermediate term downcycle, since a 2% follow through sell signal occurred. Keep in mind that the data is three days stale when released. 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.) @ 44.7% bullish last week from 30.8% the prior week is a neutral factor for the prospects of stocks during the week ending 2-10-06 because it's at a mid range level of bullishness (between 30-40%). 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 dramatic rise last week is a positive factor for the prospects of stocks during the week ending 2-10-06 because it's a dramatic 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 - The Major Upcycle's Elliot Wave 4 Has Probably Begun
 

• Thanks partly to massive Fed lending to index fund traders during much of the major upcycle's (since 5-16-05, see latest 1 year charts) Elliot Wave 3 minor intermediate term upcycle (since 10-20-05 for HUI/XAU), HUI rose to the top of my original long term cycle high target range during Wave 3, peaking very near 350 on 1-31-06. HUI's long term cycle high target range, likely to occur in the major upcycle's Elliot Wave 5, is now 400-450 vs last week's 370-400 and 330-350 originally, which was purposely conservative. The Elliot Wave count (see latest 1 year HUI/NEM/XAU charts dated 2-3 and NEM 6 month chart dated 2-2) indicates that the major upcycle's (since 5-16-05) Wave 3 ended on Tuesday 1-31-06, and, none of the indicators or the COT (Commitments of Traders) data suggest that a major/final cycle high may have occurred. The NEM Lead Indicator (see last chart in first group below) will almost certainly be bearish (dramatically underperform the XAU) for a few months prior to the long term cycle highs, and, the gold Commercial Traders will probably short a massive 40,000+ futures/options contracts each week for a number of weeks near the long term cycle high, as they've done near recent major cycle highs, neither of which is the case now. The NEM Lead Indicator the past nine weeks doesn't point to a long term cycle high (at +0.03% -0.14%, -4.36%, +2.21%, -1.05%, +0.41%, +0.69%, +2.15%, and +1.06%) and the gold Commercial Traders covered a large 18,701 gold futures/options contracts last week ending 1-31-06 and covered 8435 gold futures/options contracts the prior week ending 1-24-06, so, instead of massive short selling, there's aggressive short covering. 
  

• "Trade the Cycles" Near Term Synopsis - 2% follow through after Wave 3's trendline breaks down will be a sell signal (see HUI 1 year chart dated 2-3-06 for Wave 3 parabolic and straight trendlines), though Elliot Wave strongly suggests that Wave 3 peaked on 1-31-06, as does the very sharp decline which triggered a Wave 3 2% parabolic trendline sell signal (see HUI 1 year chart dated 2-3-06). The major upcycle's (since 5-16-05) Elliot Wave 4 minor intermediate term downcycle probably began on Tuesday 1-31-06 (see 5 day XAU chart dated 2-3-06 and latest 1 year charts), and, as discussed last week, Wave 4 should last one to two months with likely declines of -20-30%, in similar fashion to the prior parabolic major upcycle's (the strong part of the prior long term upcycle) Elliot Wave 4 in 2003, where HUI fell -26.59% and the XAU fell -25.11% in seven weeks (see 3 year XAU chart dated 5-16-05). The downtrend line since 1-31-06's likely Wave 3 minor int term cycle highs (see 5 day XAU chart dated 2-3-06) is Wave 4's Wave A down (it's too steep to be the minor int term downcycle trendline). The Wave 4 minor int term downcycle trendline's first segment won't be established until it's Wave B cycle high occurs. In the 5 day XAU chart dated 2-3-06 (third chart) one can see that early downside is likely on Monday 2-6, because the XAU is near it's Wave A downtrend line. An A, B, C correction is likely during the major upcycle's Wave 4, with Wave A occurring now. Federal Reserve Bank Credit (released after Thursday 2-2's close) rose +$2.389 Billion in the week ending 2-1-06 (see http://www.federalreserve.gov/releases/h41/Current/), but, given that an important Wave 4 downcycle is in effect and that it's in Wave A down (cycles being the primary consideration), I don't see last week's Fed Credit increase leading to meaningful strength this week unless the Wave B upcycle begins. In NEM's 1 year chart dated 2-3-06 note (very important) the Elliot Wave 1, 2, 3, 4, 5 minor intermediate term upcycle from 5-16-05 until 9-30-05, which is why I believe 9-30-05 was the major upcycle's Elliot Wave 1 cycle high and arrived at the current count, with 1-31's cycle high being the end of the major upcycle's (since 5-16-05) Wave 3 for HUI/NEM/XAU. NEM has downside gaps to fill at 56.97 from 1-25, at 53.40 from 1-3, at 51.59 from 12-28, at 50.45 from 12-22, and at 48.75 from 12-7, and, the XAU has downside gaps to fill at 146.79 from 1-30, at 141.29 from 1-25, at 137.64 from 1-19, at 135.39 from 1-6, at 128.03 from 1-3, at 124.36 from 12-28, and at 122.49 from 12-22. Often cycle highs or lows will occur shortly after gaps get filled, so one needs to track gaps closely. If gaps don't get filled that can be a bearish or bullish sign, as occurred recently when NEM twice closely approached (daily cycle lows at 48.88 and 48.89) but didn't fill it's downside gap at 48.75, then the recent explosive rally occurred. The Elliot Wave 3 minor int term cycle highs are important though not major/final cycle highs, because the major upcycle's Elliot Wave 5 cycle high probably lies ahead of us and should occur in the 400-450 range for HUI, based on extrapolating the prior long term cycle highs since late 2000 when the Bull Market/very long term upcycle began. HUI, NEM, and the XAU will probably do a down, up, down, Elliot Wave A, B, C minor int term downcycle, which is probably the major upcycle's (since 5-16-05) Elliot Wave 4 down. HUI, NEM, and the XAU could, based on their major upcycle trendlines (see latest 1 year charts), fall to 240-250 (HUI), 45-47 (NEM), and 112-117 (XAU), which means that Elliot Wave 4 down could result in declines of 25% or more, and, could last over two months. Gold hit a 2% follow through minor intermediate term cycle sell signal seven weeks ago. Depending on which trendline holds, gold could fall to $500ish, $475ish, or $450ish in the next month or two (see 1 year chart). The numbers are above where gold's current trendlines are to allow for the passage of two months time.
  

• "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 July 2006 based on the fact that the long term cycles have been getting progressively 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 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.

• As discussed at the "Trade the Cycles" Blog (see link): "The larger the spike move the more severe the subsequent correction tends to be, and gold/silver stocks just had a huge spike move in HUI/XAU's major upcycle (since 5-16-05) Elliot Wave 3 minor int term upcycle since 10-20-05, which made sense because the major upcycle since 5-16-05 and the long term upcycle since 5-10-04 (HUI/NEM/XAU) have become very strong, but the Fed's punch spiking was a major factor that probably added 15-20% to Wave 3's gains, because, since their cycles were very strong, they reacted very well to the Fed's massive lending to index fund traders. $73.50 Billion in Repos from 1-18 thru 1-26 for example."  I may not do a weekly update next week, so you can check the Blog to get the latest assessment.

• There was a "screwy" very parabolic monthly upcycle from 12-20-05 to 1-31-06 (see second chart) since the Elliot Wave 4 cycle low occurred below the Wave 2 cycle low, which is evidence that the Wave 3 minor int term upcycle was rolling over and that the Fed's massive lending to index fund traders had distorted the monthly upcycle. In the real world Elliot Waves do overlap (see 3 year XAU chart dated 5-16-05 that shows the prior two major upcycles had overlapping Elliot Waves) and sometimes weird things happen like a Wave 4 cycle low occurring below Wave 2's in the most recent monthly upcycle from 12-20-05 to 1-31-06. In the real world you have to think for yourself and understand that not everything Elliot or others did was applicable in the current somewhat manipulated US market, where the Fed's short term lending or lack thereof can lead to huge short term spikes or plunges. But, his upcycle and downcycle patterns he called waves reliably occur for gold/silver stocks as can be seen in the charts, and are obviously highly useful, because they identify reliably recurring cycle patterns.
  

• The major upcycle's (since 5-16-05) Wave 4 minor intermediate term downcycle's first trendline segment will be established when a Wave B cycle high occurs. Sometimes one has to wait for a cycle's trendline to establish itself, such as with the long term upcycle since 5-10-04, whose first trendline segment wasn't established until 5-16-05's major intermediate term cycle low, which wouldn't be established until a major buy signal occurred, unless it occurred very near the very long term upcycle's trendline and bounced substantially, providing confidence that a very long term upcycle remained in effect. Also, a very bullish NEM Lead Indicator would provide a lot of confidence that a major cycle low had occurred, as would bullish COT data and major spikes in XAU Implied Volatility and the XAU Put/Call Ratio. Aggressive Fed lending would be another major positive.
  

• Since the long term upcycle (since 5-10-04) and the major upcycle (since 5-16-05) have become very strong, the risk to actively trading long, once Elliot Wave 5 begins in a month or two, will be high. In other words, actively trading long in Wave 5 risks cutting your gains unless you're a very nimble trader. The latest very parabolic monthly upcycle from 12-20-05 until 1-31-06, with a lot of help from the Fed ($73.50 Billion in Repos from 1-18 thru 1-26 for example), was great evidence of that. The Fed, in trying to prop up the major averages, actually led to much more gold/silver stock strength than otherwise would have occurred in Wave 3. Index funds have to sell their gold/silver stocks on weakness, so S & P 500 (SPX) weakness would have led to weakness in many indexes, including HUI and the XAU, in January if the Fed hadn't spiked the index fund trader punch.

• The latest COT data (as of 1-31-06) is bullish short term since the gold Commercial Traders traded net long and the gold Speculators traded net short, both of which portend strength for at least part of this week, but the data is three days old when released, so most of the strength may have occurred last week, given that gold stocks, which tend to lead gold, fell very sharply after last Tuesday 1-31's likely Elliot Wave 3 minor intermediate term cycle highs. The gold Commercial Traders sold an unusually large (> 10% decrease in long contracts) 15,347 (added 343, 10,554, 13,289, 6357 the prior four weeks, sold 1381, 8157 the prior two weeks) long futures and options contracts and covered a large 18,701 (covered 8435 the prior week, added 11,306, 4626, 3299 the prior three weeks, covered 2036 the prior week, added 4202, 2623 the prior two weeks) short futures and options contracts which portends strength this week (non contrarian indicator), because the unusually large long liquidation is a short term contrarian indication, and the aggressive short covering also portends strength, but most of the strength probably occurred last week because the data is three days old when released. The gold Speculators (hedge funds and other speculators/traders) added 44 (sold 6157 the prior week, added 5541, 2975, 1521 the prior three weeks, sold 3988, 5112, 19,247 the prior three weeks) long futures and options contracts and added 1047 (added 1783, 3743, 9445, 5824 the prior four weeks, covered 1535, 7432, 8720 the prior three weeks) short futures and options contracts which portends strength this week (contrarian indicator), but most of the strength probably occurred last week because the data is three days old when released. The most important consideration in timing any market is the cycle channels/trendlines (see charts below).

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

• Repurchase agreements (RPs or Repos) are a huge factor for Federal Reserve Bank Credit. I'm still in research mode but it looks like there's huge borrowing going on to buy index futures/options and baskets of indexes' components (index fund trading I've been discussing which is a huge factor for gold/silver stocks and many other sectors) courtesy of the Fed's Open Market Operations ( http://app.ny.frb.org/markets/omo/dmm/temp.cfm ) which leads to occasional dramatic spikes in the stock market when there's a large increase in borrowing from the prior day/week or occasional dramatic plunges when there's a large decrease in borrowing from the prior day/week (Federal Reserve Bank Credit spikes or plunges http://www.federalreserve.gov/releases/h41/Current/ ). The US repo market reached USD 5 trillion (!) at the end of 2004 AND is growing at a two-digit pace, which means it's growing at over $500 Million/year!, so index fund trading is becoming even more of a factor.

  The US Federal Reserve and the European Repo Council (a body of the International Securities Market Association) both try to estimate the size of their respective repo markets. At the end of 2004, the US repo market reached USD 5 trillion and the European one passed EUR 5 trillion in outstandings. Both are growing at a two-digit pace. http://en.wikipedia.org/wiki/Repurchase_agreement

• It's becoming obvious that the reason why NEM is such a good lead indicator for HUI/XAU (see link) is because it's a component of SPX (S & P 500), and, since SPX is the 800 lb gorilla of indexes, it drives index fund trading, hence SPX is the ultimate lead indicator for HUI/XAU and many other indexes. Luckily however SPX's cycles don't match gold/silver stocks' cycles. SPX is in a very long term downcycle/primary Bear Market since March 2000 while HUI, NEM, and the XAU are in a very long term upcycle/primary Bull Market since October (NEM/XAU)/November (HUI) 2000. However, SPX obviously has a profound affect on gold/silver stocks' minor intermediate term and short term cycles due to index fund trading. Rapid modest % moves in SPX cause rapid significant moves in NEM and other gold/silver stocks in the many indexes affected by SPX.
  

• Williams %R is for HUI (-32.40)/NEM (-43.20)/XAU (-45.40) on 2-3-06 (see latest charts). It typically hits an extremely overbought level (near 0) near monthly cycle highs, which is a reliable indication to look to sell, which doesn't mean you mechanically sell, but that you probably will sell very soon or you may start selling (in 2 or 3 stages). The converse is of course true for oversold levels at or below -80, 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).
  

• The USD's major intermediate term upcycle appears to have finally peaked, but 5% follow through is required for a major sell signal, and, will confirm that a major intermediate term cycle high occurred in mid November 2005 (see chart above).               
  

• 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 determines 19.36% (+44% times +44% = 19.36%) of gold's price action/variability now since the USD's correlation coefficient with gold is +44% for the past 180 trading days as of 2-3-06. The USD determines 23.04% of silver's price action/variability since the USD's correlation coefficient with silver is 48% for the past 180 trading days on 2-3-06. Notice that the correlation is now positive, so gold (and silver) 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 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 in 2005. Major buy/sell signal requirements were improved (really were developed for the first time) in 2005.
  

• 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 sell signal occurs it's time to get out (if you're trading that cycle timeframe), which is what happened recently, when HUI, NEM, the XAU, and gold hitting 2% follow through monthly cycle parabolic trendline sell signals in a recent monthly upcycle. 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 2005. 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 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. 
  

• 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) typically weekly, so near critical times especially, you may want to check it out. Also, my "Trade the Cycles" Blog is updated usually two or three times a day.
  

• 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 2005 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 +44% on 2-3 (+47% on 1-27) for the past 180 trading days for gold, according to Moore Research Center, Inc. For silver the correlation coefficient with the USD is +48% on 2-3 (+52% on 1-27) 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 determines 19.36% (+44% times +44% = 19.36%) of gold's price action/variability now since the USD's correlation coefficient with gold is +44% for the past 180 trading days as of 2-3-06. The USD determines 23.04% of silver's price action/variability since the USD's correlation coefficient with silver is 48% for the past 180 trading days on 2-3-06. 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 report I received via e mail from Marketocracy for the week ending 2-3-06: "JFR - Joe F. Rocks's Mutual Fund, Net Asset Value (NAV): $14.56 on 2-3 vs $14.33 on 1-27, Compliant: Yes, This past week return: +1.62%." HUI (AMEX Gold Bugs Index) was up +2.46% last week for comparison, so JFR outperformed HUI in 26 of the past 55 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 45.60% since it's inception on 1-5-05. JFR is in the top 2% of Marketocracy's mutual funds for the 6 months ending 11-18-05, outperforming 98.7% of them in that timeframe.
  

• XAU Implied Volatility fell -1.20% to 34.570 on Friday 2-3 from 34.990 on 2-2 versus a -2.87% decline in the XAU on 2-3, which is a very sharp (3-6%) +4.07% rise in complacency (-1.20% + -2.87% = -4.07%. The XAU wall of worry shrank by -4.07%, therefore complacency rose by +4.07%) that portends weakness/a downtrend during part of Monday 2-6's session (complacency is usually contrarian, therefore normally portends weakness, until it reachs an unusually large level (> 6% increase) where it becomes non contrarian). That weakness/a downtrend could follow a gap up at the open and early strength. 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 1.38442 for the February expiration on 2-3 versus at 1.19527 for the February expiration on 1-27 versus at 1.17922 for the expired January expiration on 1-20 versus at 1.10113 for the January expiration on 1-13 versus at 0.90369 for the expired December expiration on 12-16 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 strength 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 outperformed the XAU last week by +0.03% (-0.14%, -4.36%, +2.21%, -1.05%, +0.41%, +0.69%, +2.15%, +1.06%, +1.02%, -1.52%, +1.16%, -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 45 weeks): -2.60% vs -2.87% on 2-3, -1.20% vs -1.16% on 2-2, +0.24% vs -0.19% on 2-1, +1.46% vs +3.01% on 1-31, +2.89% vs +1.97% on 1-30.        

• 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 98,976 long futures and options contracts versus 272,778 short futures and options contracts (data as of 1-31-06). 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 185,498 long futures and options contracts versus only 44,664 short futures and options contracts (data as of 1-31-06).

• The gold Commercial Traders sold an unusually large (> 10% decrease in long contracts) 15,347 (added 343, 10,554, 13,289, 6357 the prior four weeks, sold 1381, 8157 the prior two weeks) long futures and options contracts and covered a large 18,701 (covered 8435 the prior week, added 11,306, 4626, 3299 the prior three weeks, covered 2036 the prior week, added 4202, 2623 the prior two weeks) short futures and options contracts which portends strength this week (non contrarian indicator), because the unusually large long liquidation is a short term contrarian indication, and the aggressive short covering also portends strength, but most of the strength probably occurred last week because the data is three days old when released. 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 1-31-06, 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) added 44 (sold 6157 the prior week, added 5541, 2975, 1521 the prior three weeks, sold 3988, 5112, 19,247 the prior three weeks) long futures and options contracts and added 1047 (added 1783, 3743, 9445, 5824 the prior four weeks, covered 1535, 7432, 8720 the prior three weeks) short futures and options contracts which portends strength this week (contrarian indicator), but most of the strength probably occurred last week because 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 33,873 long futures and options contracts versus 109,643 short futures and options contracts as of 1-31-06. 

• The notoriously contrarian (in terms of their trading activity) silver Speculators are correctly positioned for silver strength with 62,436 long futures and options contracts versus only 8931 short futures and options contracts as of 1-31-06.

• The silver Commercial Traders added 1291 (sold 1760 the prior week, added 10 the prior week, sold 1188 the prior week, added 621 the prior week, sold 665 the prior week) long futures and options contracts and covered 1269 (covered 4158 the prior week, added 413 the prior week, covered 1239 the prior week, 151 the prior two weeks, added 1454, 1903 the prior two weeks) short futures and options contracts which portends strength this week (non contrarian indicator), but most of the strength probably occurred last week because the data is three days old when released. The most important consideration in timing any market is the cycle channels/trendlines.

• The silver Speculators (hedge funds and other speculators/traders) sold 291 (added 2413 the prior week, sold 350, 1735, 2219 the prior three weeks, added 1565 the prior week, sold 6111 the prior week) long futures and options contracts and added an unusually large (> 10% increase in short contracts) 2570 (added 1465, 150 the prior two weeks, covered 1376, 1031 the prior two weeks, added 55 the prior week) short futures and options contracts which portends weakness this week (contrarian indicator), because the unusually large short trade is a short term non contrarian indication. 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 (net short) with 13,126 long futures and options contracts versus 15,542 short futures and options contracts as of 1-31-06. Last week they sold 978 (added 2134, 1893, 1148, 1525 the prior four weeks, sold 806, 964 the prior two weeks) long futures and options contracts and covered 20 (added 395, 951 the prior two weeks, covered 5422 the prior week, added 1189 the prior week, covered 386, 8250 the prior two weeks) short futures and options contracts which portends weakness this week (non contrarian indicator). 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 (net long) with 10,848 long futures and options contracts versus 6677 short futures and options contracts as of 1-31-06. Last week they added 408 (added 343 the prior week, sold 82, 4033 the prior two weeks, added 959 the prior week, sold 309, 7347, 1970 the prior three weeks) long futures and options contracts and added 129 (added 1206, 126, 1657, 1459 the prior four weeks, covered 690, 653 the prior two weeks, added 369 the prior week) short futures and options contracts which portends USD weakness this week (contrarian indicator). 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.