Joe F. Rocks!
Growth Stock Investor & Market Strategist

Joe F. Rocks! Trade the Cycles Updated 4-2-06

Growth Stock (NASDAQ) Timeliness - Monday - Timely but Risky (Strength/an uptrend, that could follow a gap down at the open and early weakness, during "much" of Monday's session is a "hit!.")
                                                           - Short Term Cycle (7-21 Days) - Untimely (NDX/QQQ are in short term downcycles as of 3-31-06.)
                                                           - Minor Intermediate Term Cycle (4-10 Weeks) - Timely (NDX minor intermediate term upcycle as of 3-31-06.)

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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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 (see second chart). Long term cycle lows occurred at 1301.93 on 8-13-04 for NDX and at 1060.72 for SPX. NDX and SPX are 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 17 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 128 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, because a 2% minor intermediate term cycle buy signal occurred recently (see first chart below). 

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 weakness this week ending 4-7 (a minor intermediate term upcycle is in place at 3-31-06's close, which is the most important consideration, a 2% follow through buy signal occurred last week) with 1.00% (260) more downtick blocks during the week ending 3-31. 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 128 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 mixed on Friday 3-31 with NASDAQ A/D at 19:12 in favor of advancing issues but NASDAQ Up/Down Volume was in favor of down volume by more than 3:2.

The NASDAQ wall of worry (VXN (NASDAQ 100 Volatility Index) and QQV (QQQ Volatility Index)) grew on Friday 3-31 with VXN revealing that a significant (0.50-1.99%) rise in fear occurred for NDX (NASDAQ 100) and QQV revealed that a sharp (2-2.99%) rise in fear occurred for QQQQ (NASDAQ 100 Tracking Stock). The NASDAQ is deemed Timely but Risky on Monday due to the short term downcycle. Worse than expected economic data may result in weakness.

Williams %R for NDX is at -27.85 on 3-31-06 (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 buy signal recently (see top chart in group above). MACD is on a buy signal (above it's moving average). RSI and Stochastics are on buy signals. 

A  significant rise in fear occurred for the NASDAQ 100 on Friday with VXN (NASDAQ 100 Volatility Index) rising +0.17 (+1.05%) to 16.31 while NDX (NASDAQ 100) fell -5.02 (-0.29%) to 1703.66 which reveals that a significant ( 0.50-1.99%) rise in fear occurred for NDX because VXN rose significantly more than NDX fell (NDX wall of worry grew) which portends strength in NDX on Monday, but, a short term downcycle is in place at session's end on Friday 3-31. A minor intermediate term upcycle is in effect, because a 2% follow through buy signal occurred. 

A sharp (2-2,99%) (-0.29% rise in QQQQ + +3.11% decline in QQV = +2.82% which is a +2.82% rise in fear) +2.82% rise in fear occurred for QQQQ (NASDAQ 100 Tracking Stock, -0.12 (-0.29%) to 41.93) on Friday since QQQQ fell modestly while QQV rose very sharply (QQQ Volatility Index, +0.46 (+3.11%) to 15.24) (QQQQ wall of worry grew) which portends strength in QQQQ on Monday, and, a short term upcycle is in place at session's end on Friday 3-24. A minor intermediate term upcycle is in effect, because a 2% follow through buy 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 -0.18 (-1.56%) to 11.39 versus a decline in SPX of -5.43 (-0.42%) to 1294.82 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 rose slightly versus SPX falling modestly (S & P 500) which portends weakness in SPX on Monday, and, it's in a short term downcycle at session's end on Friday 3-31. 

The S & P 500 (SPX) is deemed Untimely on Monday due to the short term downcycle and the rise in complacency on 3-31. A short term downcycle is in place at Friday 3-31'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. Williams %R for SPX is in oversold territory at -84.30 on 3-31-06 (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 upcycle (2% follow through buy signal occurred).

The CBOE Total Put/Call Ratio at an elevated (at or above 0.75 but below 0.90) level = 0.83 at Friday's close points to some weakness/volatility on Monday due to the elevated level of fear (the CBOE Index Put/Call Ratio at an extremely high 1.68 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 March 28, 2006), the Speculators (hedge funds and other speculators/traders) sold 293 long futures contracts and added 383 short futures contracts which portends strength this week (contrarian indicator), whereas, the Commercial Traders added 1569 long futures contracts and added 774 short futures contracts which portends strength accompanied by some weakness this week (non contrarian indicator). NDX is in a minor intermediate term upcycle, a 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.) @ 37.2% bullish last week from 43.8% the prior week is a negative factor for the prospects of stocks during the week ending 4-7-06 because it's at a low 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 sharp decline last week is a negative factor for the prospects of stocks during the week ending 4-7-06 because it's a sharp rise in fear for this useful non-contrarian sentiment indicator, but much of the weakness may have occurred last week because the data is released on Wednesday. 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 Monthly Upcycle's Wave 4 Down Is In Effect
 

• NEM, HUI, and the XAU's Wave 4 short term downcycle began early on Thursday 3-30 (see 1 year charts). NEM, HUI, and the XAU hit 2% follow through Wave 5 minor intermediate term cycle buy signals on Tuesday 3-14 (see HUI 1 year chart dated 3-17), which indicates that the major upcycle's (since 5-16-05) Wave 5 minor intermediate term upcycle and a monthly upcycle began on Friday 3-10-06. HUI is probably headed for 400-450+ in Wave 5.
  

• "Trade the Cycles" Near Term Synopsis - Monthly upcycle (since 3-10-06) Wave 1 and 3 short term cycle highs and Wave 2 short term cycle lows occurred for HUI, NEM, and the XAU recently (see latest 1 year charts), and, the Wave 4 short term downcycle began early on Thursday 3-30. The bearish NEM Lead Indicator on Friday 3-31 at -0.87% vs the XAU suggests that NEM and the XAU will probably fill their downside gaps at 51.49 and 138.84 (from 3-30's open) on Monday or Tuesday, and, that the XAU's upside gap at 143.19 from 3-31 probably won't get filled until the Wave 5 short term upcycle. The COT (Commitments Of Traders) data (see bullet just before the charts) is short term bearish because the gold Commercial Traders traded substantially net short and the gold Speculators traded substantially net long. NEM's major upcycle (since 5-16-05) Wave 4 bottomed at 46.60 on 3-10 versus the Wave 4 cycle low target range of 47-49, the XAU's Wave 4 bottomed at 121.76 on 3-10 versus the Wave 4 cycle low target range of 117-122, and HUI hit a Wave 4 cycle low at 278.47 versus the Wave 4 cycle low target range of 255-265. So, cycle trendlines did a great job as usual. Cycle trendlines (primary consideration) in concert with gaps and Elliot Wave are the crux of my "Trade the Cycles" system. Wave 4 bottomed on Friday 3-10 shortly after the last downside gap was filled, which was the XAU's downside gap at 122.49 from 12-22-05. Federal Reserve Bank Credit (see http://www.federalreserve.gov/releases/h41/Current/) fell a substantial -$6.726 Billion in the week ending 3-29-06, which is a bearish sign, and the Fed's massive $14.250 Billion in Repos on Thursday 3-30 (see http://www.newyorkfed.org/markets/omo/dmm/temp.cfm?SHOWMORE=TRUE) resulted in a very brief spike followed by a downtrend on 3-30, when the Wave 4 short term downcycle began. In NEM's 1 year chart dated 2-3-06 note (third chart, 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 and the cycle lows that occurred on 3-10 being the end of Wave 4 and the start of the Wave 5 minor intermediate term upcycle. NEM has downside gaps to fill at 51.49 from 3-30's open, at 49.46 from 3-27, and at 49.24 from 3-24, some of which will get filled soon. NEM has upside gaps to fill at 53.27 from 3-6, at 58.10 from 2-27, and at 60.48 from 2-7. The XAU has downside gaps at 138.84 from 3-30, at 134.17 from 3-29, at 3-27's open at 133.40 and at 3-24's open at 130.03. The XAU has upside gaps to fill at 143.19 from 3-31 and at 143.05 from 2-10. HUI has no gaps to fill according to Yahoo's historical data. 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 (that culminated in Wave 3 cycle highs on 1-31-06) occurred. The Elliot Wave 3 minor intermediate term cycle highs that occurred on 1-31-06 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. Gold's Elliot Wave ABC correction ended and a 2% minor intermediate term cycle buy signal occurred recently (see 1 year chart).
  

• "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 or August 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.

• The "Trade the Cycles" Blog (see link) is typically updated a few times each day and will provide you with the current "Trade the Cycles" assessment. From the Blog: "HUI's major upcycle (since 5-16-05) Wave 5 cycle high, that should also be a Cyclical Bull Market cycle high (see second chart) for the first of three Cyclical Bull Markets (3 Elliot Wave upcycles and 2 downcycles/Cyclical Bear Markets) in this Secular gold/silver stock Bull Market that began in late 2000 (see second chart), should occur in the 400-450+ range. " 

• Trade the Cycles lite is the cycle trendlines in the annotated charts, since cycle trendlines are the primary market timing consideration, with Elliot Wave and gaps also being very important. The detailed analysis of indicators and data is finetuning intended more for traders and sophisticated/experienced investors. Investors can simply view the cycle trendlines in the charts (with the Elliot Wave count) for a weekly update. Cycle trendlines (primary consideration) in concert with gaps and Elliot Wave are the crux of my "Trade the Cycles" system.

• Cycle trendlines and the nature of cycles are more important than Elliot Wave, even though Elliot Wave is a truly great tool, because it reliably provides a cycle's structure. In NEM's Wave 4 minor intermediate term downcycle from 1-31-06 until 3-10-06 (see 1 year chart dated 3-31-06) it did an Elliot Wave ABC correction as expected, BUT, here's the problem with Elliot Wave, why cycle trendlines and the nature of cycles are more important, and, are the primary market timing consideration. NEM and the XAU's Wave A and Wave C short term downcycles ALSO had Elliot Wave ABC patterns, so, if you didn't know where the major upcycle trendlines were (47ish for NEM and 120ish for the XAU), and, that downcycles and upcycles almost always begin relatively flat, you easily could have thought that the Wave A short term cycle lows were Wave 4 minor intermediate term cycle lows. As discussed in the "Trade the Cycles" Near Term Synopsis (second bullet) recently I correctly surmised that HUI/NEM/XAU's cycle lows that occurred over a month ago were Wave A short term cycle lows, because, their downtrend lines were too steep to be likely Wave 4 minor intermediate term downcycle trendlines, and, the cycle lows occurred too far above the major upcycle trendlines to be likely Wave 4 minor intermediate term cycle lows. The Wave A short term downcycle trendlines did begin relatively flat from a short term cycle perspective, but it isn't evident on the daily charts.         
  

• The latest COT data (as of 3-28-06) is short term bearish since the gold Commercial Traders traded substantially net short and the gold Speculators traded substantially net long, both of which portend weakness this week. Most of the strength indicated by the unusually large trades by both the Commercial Traders and the Speculators probably occurred last week, because the data is three days old when released on Friday and HUI/NEM/XAU hit a Wave 3 short term cycle high early on Thursday 3-30. The gold Commercial Traders sold an unusually large (> 10% decrease in long contracts) 15,099 long futures and options contracts and added 1716 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, however, most of the strength probably occurred last week, because the data is three days old when released and HUI/NEM/XAU hit a Wave 3 short term cycle high on 3-30, and, the short selling points to some weakness. The gold Speculators (hedge funds and other speculators/traders) added 16,048 long futures and options contracts and covered 3668 short futures and options contracts which portends strength this week (contrarian indicator), because the unusually large long trade is a short term non contrarian indication, however, most of the strength probably occurred last week, because the data is three days old when released and HUI/NEM/XAU hit a Wave 3 short term cycle high on 3-30, and the short covering points to some weakness. 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.
  

• The cycle types are Secular Bull or Bear Market/very long term up or downcycle, Cyclical Bull or Bear Market, long term up or downcycle, major intermediate term up or downcycle, minor intermediate term up or downcycle, monthly up or downcycle, short term up or downcycle, and very short term up or downcycle. Each upcycle is nearly always comprised of five Elliot Waves contained in a few of the next shorter cycles' cycles and each downcycle is nearly always comprised of three Elliot Waves contained in a few of the next shorter cycles' cycles. Each cycle is comprised of an up and down cycle of course, so really the complete cycles are very long term cycle (about 35 years up and down), cyclical Bull/Bear cycle (about 7 years), long term cycle (about 2 years), major intermediate term cycle (about 6-12 months), minor intermediate term cycle (a few months), monthly cycle (1-2 months), short term cycle (2-3 weeks), and very short term cycle (a few days to a week).

• As discussed in recent weeks Elliot Wave (see second chart) suggests that HUI/NEM/XAU are due for a 12-18+ month Cyclical Bear Market after long term cycle highs occur later this year, because this is the third long term upcycle or fifth Elliot Wave of the first Wave 1 Cyclical Bull Market of the Secular Bull Market that began in late 2000. HUI/NEM/XAU are due timewise for a Cyclical Bear Market since very long term upcycles (and downcycles) last about 17-18 years on average and HUI/NEM/XAU will be about 6 years into this very long term upcycle later this year when Elliot Wave 5 long term and Elliot Wave 1 Cyclical Bull Market cycle highs will probably occur, since the Secular Bull Market/very long term upcycle began in October 2000 for NEM/XAU and in November 2000 for HUI. Notice in the second chart how far the XAU is above it's Secular Bull Market/very long term upcycle trendline. The Cyclical Bear Market will "simply" (painful yes) bring HUI/NEM/XAU back to their Secular Bull Market trendlines, which could turn up some, so they may bottom in a few years above where those trendlines would be based on the current trendlines. Many and probably most Junior gold/silver stocks and some non Juniors should run mightily in HUI/NEM/XAU's Cyclical Bear Market due to begin once long term cycle highs occur later this year, because many (probably most) Junior gold/silver stocks' cycles dramatically lag those of HUI/NEM/XAU's. So, there should be a lot of money to be made during HUI/NEM/XAU's Cyclical Bear Market.
  

• HUI, NEM, and the XAU are in an Elliot Wave 5 long term upcycle since 5-10-04 (see first chart above), which is the third long term upcycle of the first/Elliot Wave 1 cyclical Bull Market of the secular Bull Market/very long term upcycle that began in Oct 2000 (NEM/XAU)/Nov 2000 (HUI). There should be two more cyclical Bull Markets corresponding to Waves 3 and 5 of the secular Bull Market after this one peaks later this year. In the first chart I labeled the first major upcycle a long term upcycle, but it was only a six month major intermediate term upcycle that was the first segment/major upcycle of the long term upcycle that peaked in May 2002. The first cyclical Bear Market/long term downcycle of this secular Bull Market/very long term upcycle (since late 2000), corresponding to the secular Bull's Elliot Wave 2 down, is likely after long term cycle highs occur later this year and will probably last 12-18 months, based on gold/silver stocks such as CDE (Coeur D' Alene Mines), MNG (Miramar Mining), NXG (Northgate Minerals Corp), RGLD (Royal Gold), and SIL (Apex Silver Mines) completing 14-16 month long term downcycles/cyclical Bear Markets in May 2005, that began after their early 2004 long term cycle highs. Their long term downcycles/cyclical Bear Markets all did Elliot Wave A, B, C down up down patterns.
  

• Now for HUI/NEM/XAU's Bull Market/very long term upcycle (since late 2000) Elliot Wave count! The long term cycle high that occurred in mid 2002 appears to be the Wave 1 cycle high (see first chart above). The long term cycle high that occurred on Dec 2, 2003 for HUI/NEM/Jan 6, 2004 for the XAU appears to be the Wave 3 cycle high. The long term cycle high that will occur in this long term upcycle later this year will probably be the final Wave 5 cycle high of the first cyclical gold/silver stock Bull Market within a primary/secular very long term Bull Market that may last 15-20 years or more, possibly until the year 2020 and beyond. The previous secular Bear market/very long term downcycle lasted about 21 years, from 1980 until April 2001 for gold. However, the interesting thing is that many gold/silver stocks dramatically lag HUI/NEM/XAU's cycles. CDE, Coeur D' Alene Mines, a silver (with some gold) stock, MNG (Miramar Mining), NXG (Northgate Minerals Corp), RGLD (Royal Gold), and SIL, Apex Silver Mines, hit long term cycle lows in May 2005 about a year after HUI/NEM/XAU did for example. Some silver stocks lag simply because silver's Bull Market lags gold's by about 6 months, since silver bottomed in late 2001 versus April 2001 for gold. With the help of cycles and Elliot Wave there will be many gold/silver stocks that can be invested in or traded after long term cycle highs occur later this year, if their cycles lag dramatically, as CDE, MNG, NXG, RGLD and SIL's do, but one must wait for them to experience major cycle lows of course. CDE, MNG, NXG, RGLD and SIL's long term cycle highs will be Wave 1 cycle highs of their new cyclical Bull Market, because they experienced an Elliot Wave A, B, C down, up, down cyclical 15-16 month Bear Market from their early 2004 long term cycle highs until their May 2005 long term cycle lows.

• 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 (-17.11)/NEM (-36.09)/XAU (-17.13) on 3-31-06 (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 USD is in a Wave C short term downcycle.              
  

• 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 15.21% (+39% times +39% = 15.21%) of gold's price action/variability now since the USD's correlation coefficient with gold is +39% for the past 180 trading days as of 3-31-06. The USD determines 19.36% of silver's price action/variability since the USD's correlation coefficient with silver is 44% for the past 180 trading days on 3-31-06. 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. For the time being the US Dollar is only a very minor factor for precious metals.

• Many of the bullets 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 the previous one (6 months) from 5-10-04 until 11-17-04 and see about twice the gains (100% or more 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 one year or more (now estimated to end July 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 2005, so it led the stocks pricewise but didn't flash a major buy signal until June 2005 (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. HUI may rise to about 400-450 in the next 6-9 months. NEM may rise to the 70-75 area in the next 6-9 months. The XAU may rise to about 180-190 in the next 6-9 months.

• 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 +39% on 3-31 (+37% on 3-24) for the past 180 trading days for gold, according to Moore Research Center, Inc. For silver the correlation coefficient with the USD is +44% on 3-31 (+44% on 3-24) 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 15.21% (+39% times +39% = 15.21%) of gold's price action/variability now since the USD's correlation coefficient with gold is +39% for the past 180 trading days as of 3-31-06. The USD determines 19.36% of silver's price action/variability since the USD's correlation coefficient with silver is 44% for the past 180 trading days on 3-31-06. 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 3-31-06: "JFR - Joe F. Rocks's Mutual Fund, Net Asset Value (NAV): $15.90 on 3-31 vs $15.06 on 3-24, Compliant: Yes, This past week return: +5.57%." HUI (AMEX Gold Bugs Index) was up +7.10% last week for comparison, so JFR outperformed HUI in 31 of the past 63 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 59.00% since it's inception on 1-5-05. For the three months ending 2-3-06 my JFR imaginary gold/silver stock fund at Marketocracy (see link) was the 64th best fund. JFR was better than 97.3% of their funds for the past year and was better than 99.4% of their funds for the past six months. I went to about 30% cash near the Wave 3 cycle high, which is near the allowable 35% limit.
  

• XAU Implied Volatility rose +1.47% to 33.810 on Friday 3-31 from 33.320 on 3-30 versus a -1.10% decline in the XAU on 3-31, which is a modest (0.25-0.49%) +0.37% rise in fear (+1.47% + -1.10% = +0.37%. The XAU wall of worry grew by +0.37%, therefore fear rose by +0.37%) that portends strength/an uptrend during part of Monday 4-3'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, cyclical Bull/Bear, long term, major intermediate term, minor intermediate term, short term, and very short term).

• The XAU Put/Call Ratio is at 0.84112 for the April expiration on 3-31 versus at 0.64172 for the April expiration on 3-24 versus at 0.75672 for the final March expiration on 3-17 versus at 0.73200 for the March expiration on 3-10 versus at 0.78629 for the March expiration on 3-3 versus 0.92033 for the March expiration on 2-24 versus 1.07156 for the March expiration on 2-17 versus 1.30761 for the expired February expiration on 2-17 versus 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 some 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 -1.22% (-2.06%, -1.30%, -1.06%, -6.12%, +2.12%, +2.29%, -2.11%, +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 53 weeks): -1.97% vs -1.10% on 3-31, +2.80% vs +3.13% on 3-30, +2.92% vs +3.48% on 3-29, -0.97% vs -2.24% on 3-28, +2.14% vs +2.87% on 3-27.      

• 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 99,672 long futures and options contracts versus 254,994 short futures and options contracts (data as of 3-28-06). 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 163,969 long futures and options contracts versus only 40,712 short futures and options contracts (data as of 3-28-06).

• The gold Commercial Traders sold an unusually large (> 10% decrease in long contracts) 15,099 (sold 4229 the prior week, added 7857, 2767 the prior two weeks, sold 347 the prior week, added 228, 4848, 4679 the prior three weeks) long futures and options contracts and added 1716 (covered 34, 10,609, 5047 the prior three weeks, added 4974 the prior week, covered 1317 the prior week, added 1765 the prior week, covered 9233, 18,701, 8435 the prior three 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, however, most of the strength probably occurred last week, because the data is three days old when released and HUI/NEM/XAU hit a Wave 3 short term cycle high on 3-30, and the short selling points to some weakness. 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 3-28-06, 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 16,048 (added 6379 the prior week, sold 23,450, 3373 the prior two weeks, added 4662 the prior week, sold 5614, 10,272, 5910 the prior three weeks, added 44 the prior week) long futures and options contracts and covered 3668 (covered 1495 the prior week, added 695, 3328 the prior two weeks, covered 2621, 2300, 3511 the prior three weeks, added 5621, 1047, 1783, 3743, 9445, 5824 the prior six weeks) short futures and options contracts which portends strength this week (contrarian indicator), because the unusually large long trade is a short term non contrarian indication, however, most of the strength probably occurred last week, because the data is three days old when released and HUI/NEM/XAU hit a Wave 3 short term cycle high on 3-30, and the short covering points to some weakness. 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 30,946 long futures and options contracts versus 103,493 short futures and options contracts as of 3-28-06. 

• The notoriously contrarian (in terms of their trading activity) silver Speculators are correctly positioned for silver strength with 61,823 long futures and options contracts versus only 11,223 short futures and options contracts as of 3-28-06.

• The silver Commercial Traders added 1124 (sold 191, 607 the prior two weeks, added 704 the prior week, sold 5513 the prior week, added 1751, 2313 the prior two weeks) long futures and options contracts and added 100 (added 1026 the prior week, covered 906 the prior week, added 8286 the prior week, covered 11,487 the prior week, added 2390 the prior week, covered 723, 4837, 1269 the prior three weeks) short futures and options contracts which portends strength this week (non contrarian indicator). The most important consideration in timing any market is the cycle channels/trendlines.

• The silver Speculators (hedge funds and other speculators/traders) added 930 (added 4131 the prior week, sold 3144 the prior week, added 4352 the prior week, sold 198 the prior week, added 1665 the prior week, sold 4298, 4051, 291 the prior three weeks) long futures and options contracts and added an unusually large (> 10% increase in short contracts) 1644 (added 1976 the prior week, covered 2199, 2239 the prior two weeks, added 4157, 730 the prior two weeks, covered 1767, 9 the prior two weeks, added 2570, 1465, 150 the prior three weeks) short futures and options contracts which portends weakness this week (contrarian indicator), because the unusually large short selling is a short term non contrarian indication and the long trade also points to weakness. 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 net short) with 9887 long futures and options contracts versus 19,741 short futures and options contracts as of 3-28-06. Last week they sold an unusually large (> 10% decrease in long contracts) 3282 (added 7157 the prior week, sold 3290 the prior week, added 1232 the prior week, sold 1146, 578, 2011, 1320, 978 the prior five weeks) long futures and options contracts and added a large 1253 (covered 3457, 1607 the prior two weeks, added 349 the prior week, covered 998 the prior week, added 2079, 4614, 1966 the prior three weeks, covered 20 the prior week) 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, but the short selling points to some weakness. 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 net long) with 13,850 long futures and options contracts versus 3352 short futures and options contracts as of 3-28-06. Last week they added an unusually large (> 10% increase in long contracts) 2512 (sold 7142 the prior week, added 1258 the prior week, sold 1012, 874 the prior two weeks, added 3939, 4207, 213, 408, 343 the prior five weeks) long futures and options contracts and covered an unusually large (> 10% decrease in short contracts) 1151 (added 1713, 258 the prior two weeks, covered 190, 1331 the prior two weeks, added 971 the prior week, covered 1928, 1668 the prior two weeks, added 129, 1206, 126, 1657, 1459 the prior five weeks) short futures and options contracts which portends USD strength this week (contrarian indicator)