Joe F. Rocks!
Growth Stock Investor & Market Strategist

Joe F. Rocks! Trade the Cycles Updated 8-21-05

Growth Stock (NASDAQ) Timeliness - Monday - Timely but Risky (Strength/an uptrend, that could follow a gap down at the open, during "much" of Monday's session is a "hit!.")
                                                           - Very Short Term (2-3 Days) - Untimely or Risky (NDX/QQQ may still be in minor intermediate term downcycles.)
                                                           - Short Term (1-3 Weeks) - Timely (NDX minor intermediate term downcycle should soon turn up and may have bottomed last Tuesday.)

Brief Cycles Summary (Analysis/Commentary follows)

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

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

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

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

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

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

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

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

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

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Analysis/Commentary -

The NASDAQ Composite (COMPX) opened slightly higher on Friday 8-19, but, COMPX trended modestly lower most of the session, spent most of the session in positive territory, and closed slightly lower at 2135.56, -0.52 (-0.02%).

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

"Eerie Nikkei-SPX Parallels" (At Zeal) shows the high degree of correlation between the S & P 500's and NASDAQ's post bubble behavior and that of the Japanese stock market that experienced a bubble in 1989 and remains at much lower levels 15 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 96 weeks ago to negative/outflows correctly portended a trend change. Given last week's slightly 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 downcycle may still be in place (see second chart below).

The very long term downcycle (3-10+ years in duration) which began in March 2000 probably has about 13 years to go. Paper assets (and hard assets in reverse fashion) tend to have very long term cycles that last about 35 years with about 17.5 years up (1982-2000) and 17.5 years down (2000-2018ish). There were very long term cycle highs (paper asset bubbles) in 1897, 1929, 1965ish, and in 2000 (about 35 years apart on average).

Risky NDX long term cycle buy signal because of the very long term downcycle since March 2000 and outflows nearly every week the past 96 weeks. A major intermediate term cycle buy signal is in effect for NDX (and SPX) and a minor intermediate term downcycle may still be in place for NDX (2% follow through sell signal occurred) and SPX.

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) neither strength or weakness this week ending 8-26 (a minor intermediate term downcycle may still be in place as of 8-19-05, which is the most important consideration) with 0.07% (13) more downtick blocks during the week ending 8-19. 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 96 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 8-19 with NASDAQ A/D at nearly 8:7 in favor of advancing issues but NASDAQ Up/Down Volume was in favor of down volume by nearly 7:6.

The NASDAQ wall of worry (VXN (NASDAQ 100 Volatility Index) and QQV (QQQ Volatility Index)) grew on Friday 8-19 with VXN revealing that a very sharp rise in fear occurred for NDX (NASDAQ 100) and QQV revealed that a significant rise in fear occurred for QQQQ (NASDAQ 100 Tracking Stock). The NASDAQ is deemed Timely but Risky on Monday. A short term upcycle appears imminent at Friday 8-19's close that would lead to strength/an uptrend, but a minor intermediate term downcycle may still be in place (see second chart from the top dated 8-12-05 in the group above). Worse than expected economic data may result in weakness.

Williams %R for NDX is in extremely oversold territory at -97.36 on 8-19-05 (below -80 (near the bottom) on my chart is the (look to) "buy" area (oversold) and above -20 is the look to "sell" area (overbought)). NDX is on a major intermediate term cycle buy signal (5% follow through after breaking it's intermediate term downcycle trendline, see the second chart from the top in the group above). NDX may still be in a minor intermediate term downcycle. NDX may have hit a minor intermediate term cycle low last Tuesday 8-16. MACD is on a sell signal (below it's moving average). RSI and Stochastics are on sell signals. 

A very sharp rise in fear occurred for the NASDAQ 100 on Friday with VXN (NASDAQ 100 Volatility Index) rising +0.87 (+5.69%) to 16.16 while NDX (NASDAQ 100) fell -2.04 (-0.13%) to 1573.72 which reveals that a very sharp (3-6%) rise in fear occurred for NDX because VXN rose very sharply while NDX fell slightly (NDX wall of worry grew substantially) which portends strength in NDX on Monday, and, a short term upcycle appears imminent at session's end on Friday 8-19. 

A significant (0.50-1.99%) (-0.06% decline in QQQQ + +1.67% rise in QQV = +1.61% which is a 1.61% rise in fear) 1.61% rise in fear occurred for QQQQ (NASDAQ 100 Tracking Stock, -0.02 (-0.06%) to 38.82) on Friday since QQQQ fell slightly while QQV rose significantly (QQQ Volatility Index, +0.23 (+1.67%) to 13.97) (QQQQ wall of worry grew) which portends strength in QQQQ on Monday, and, a short term upcycle appears imminent at session's end on Friday 8-19. 

On Friday VIX (which is now calculated using the implied volatility of SPX (S & P 500) options instead of OEX (S & P 100) options) was unchanged +0.00 (+0.00%) at 13.42 versus a rise in SPX of +0.69 (+0.06%) to 1219.71 which was a slight (up to 0.24%) rise in fear (wall of worry grew) for the S & P 500/value stocks (SPX is about 75% value stocks) since VIX was unchanged while SPX rose slightly (S & P 500) which portends strength in SPX on Monday, but, a short term downcycle might still be in place at session's end on Friday 8-19, and the minor intermediate term cycle may still be heading down (sell signal requires 2% follow through). 

The S & P 500 (SPX) is deemed Untimely on Monday. A short term downcycle might still be in place at Friday 8-19's close which may 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 -87.29 on 8-19-05 (below -80 (near the bottom) on my chart is the (look to) "buy" area (oversold) and above -20 is the look to "sell" area (overbought)). SPX is on a major intermediate term cycle buy signal (5% follow through after breaking it's intermediate term downcycle trendline). SPX may still be in a minor intermediate term downcycle since August  4 or 5 (sell signal requires 2% follow through, but an A, B, C Elliot Wave pattern correction appears to be taking place).

The CBOE Total Put/Call Ratio at an extremely high (at or above 1.05) level of 1.05 at Friday's close points to weakness/volatility (could be followed by strength or could get strength followed by weakness, i.e. volatility is the key word) on Monday (the CBOE Index Put/Call Ratio at an extremely high 1.70 points to weakness/volatility) because it's a reliable non-contrarian indicator of the next session's early action except at extremely high (at or above 1.05) or extremely low levels (at or below 0.50) where it sometimes is also a contrarian indicator (sometimes portends early substantial strength (below 0.50) or a sharp rally following early potentially severe weakness (at or above 1.05), judgement is involved). Please keep in mind that cycle channels/trendlines are the most important consideration when timing any market.

The NASDAQ TRIN closed at a modestly bearish level of NA (modestly more activity in xxxxing issues) on Friday which is xxxxtive technically. A level between 0.35 and 0.80 is a bullish range for the NASDAQ TRIN because it indicates much more activity in rising issues. A NASDAQ TRIN above 1.00 indicates more activity in declining issues. A NASDAQ TRIN between 1.20 and 1.50 is a clearly bearish "red zone" range because it indicates much more activity in declining issues but not a very oversold condition. If the NASDAQ TRIN rises above 1.50 (oversold condition) you can begin to look for a rally and if it rises above 2.00 that tends to be a reliable short term buy signal (very oversold condition).

Looking at NASDAQ 100 (NDX) Chicago Mercantile Exchange Commitments of Traders - Futures Only (Reportable Positions as of August 16, 2005), the Speculators (hedge funds and other speculators/traders) added 8 long futures contracts and added an unusually large (> 10% increase in short position) 2258 short futures contracts which portends weakness this week (contrarian indicator), because the unusually large degree of short selling makes them short term non contrarian, whereas the Commercial Traders added 2216 long futures contracts and added 2681 short futures contracts which portends weakness accompanied by some strength this week (non contrarian indicator), because the addition of 2216 long futures contracts points to some potentially substantial strength. NDX may have hit a minor intermediate term cycle low last Tuesday 8-16. 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.) @ 29.3% bullish last week from 39.7% the prior week is a positive factor for the prospects of stocks during the week ending 8-26-05 because it's at an extremely low level of bullishness (below 30%). The change in or delta AAII % bullish is also a useful short term/weekly look ahead indicator in addition to the absolute value of AAII % bullish. The very sharp decline last week is a negative factor for the prospects of stocks during the week ending 8-26-05 because it's a very sharp rise in fear 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 Minor Correction Has Probably Run It's Course            
 

• HUI, NEM, and the XAU corrected last week as expected and appear to have bottomed on Thursday August 18. The NEM Lead Indicator was bearish from Thursday 8-11 until Tuesday 8-16, but turned convincingly bullish again on Wednesday 8-17 (NEM outperformed the XAU by +1.31% from 8-17 through 8-19), which is another indication that HUI, NEM, and the XAU bottomed late last week.
  

• HUI and the XAU declined toward the bottom of their major upcycle channels last week (see latest charts). Reliable lead indicator NEM rose to the top of it's major upcycle channel (since May 16, see chart) on Friday August 12 and proceeded to underperform the XAU for four consecutive sessions (Thursday August 11 until Tuesday August 16), correctly portending last week's correction. NEM outperformed the XAU last week by a respectable margin of +0.98% (+0.52% the prior week), which is what one would expect since HUI and the XAU are near the bottom of their major upcycle channels and short term cycle lows appear to have occurred on Thursday 8-18 (HUI, NEM, and the XAU).

• The fact that NEM has significantly outperformed the XAU since July 14 (after dramatically underperforming for two months) is a great sign that portends substantial strength for the foreseeable future. But, the most important market timing consideration is that HUI, NEM, and the XAU are in the sharply rising phase of their long term upcycles (began on May 10, 2004) since May 16, 2005's major intermediate term cycle lows, and, this major upcycle should last until about May 2006 based on the fact that the long term cycles have been getting progessively longer (see first chart below and the HUI chart dated 5-12-05). HUI and the XAU should rise toward the top of their major upcycle channels during the next week or two (see charts dated 8-19-05), then a more substantial correction may be in the cards. HUI and NEM's correction (assuming it ended on 8-18) lasted all of two days, while the XAU's lasted four days, and the declines were a modest -5.53% (HUI), -4.27% (NEM), and -5.28 (XAU)%.
  

• The gold COT (Commitments of Traders) data points to strength this week. The non contrarian gold Commercial Traders made another huge short trade (48,207 short futures and options contracts added versus 45,387 the prior week, data as of 8-16-05) while the contrarian gold Speculators made another huge long trade (41,184 long futures and options contracts added versus 48,821 the prior week, data as of 8-16-05). Unusually large trades (> 10% change in long or short position) normally make the gold Commercial Traders short term contrarian and the gold Speculators short term non contrarian. However, the gold Speculators tend to "go nuts" and make huge long trades near important cycle highs (see one year gold chart), which is what happened the past two weeks. Last week the gold Commercial Traders also traded long a respectable 4653 futures and options contracts. They are anticipating some significant strength this week followed by a resumption of the correction (maybe an Elliot Wave A, B, C type correction pattern). Gold's major upcycle trendline since early February (see one year chart) is currently at $422, so a decline to the $422 to $424 area from Friday 8-19's close at $437.60 may occur. Gold's dramatic spike move two weeks ago (see one year chart) was a sign that the minor intermediate term upcycle was peaking. A 2% follow through minor intermediate term cycle sell signal occurred for gold last week.
  

• The silver COT data points to both strength and weakness this week. The unusually large (but not huge) degree of short selling by the silver Speculators points to some weakness this week, while the silver Commercial Traders COT data is bullish (they traded net long by 3665 futures and options contracts) as discussed in detail later (toward the bottom of this update), but they did engage in significant long liquidation which points to some weakness.
  

• The big picture cycles summary is as follows: 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 charts dated 8-19-05 and the HUI/NEM charts dated 8-12-05).
  

• HUI, NEM, and the XAU's major intermediate term upcycle channels since May 16, 2005 in concert with Elliot Wave Theory and parabolic shaped cycle trendlines model their trading behavior well, thus greatly aiding and simplifying trading decisions. All three had five wave upcycles and three wave downcycles that bottomed on July 19 (minor intermediate term cycle lows, see HUI/NEM 3 month charts dated 8-12-05).
  

• The XAU Put/Call Ratio rose substantially last week from 0.73494 (August expiration expired) on 8-12 to 0.89710 for the September expiration on 8-19, which is a substantial rise in fear (the wall of worry grew substantially) that portends substantial strength for the next week or two. XAU Implied Volatility points to weakness on Monday 8-22. XAU Implied Volatility fell -3.42% to 26.105 on Friday 8-19 from 27.030 on 8-18 versus a +0.40% rise in the XAU on 8-19, which is a very sharp (3-6%) 3.02% rise in complacency (-3.42% + +0.40% = -3.02%. The XAU wall of worry shrank by -3.02%, therefore complacency rose by 3.02%) that portends weakness/a downtrend on Monday 8-22 (complacency is usually contrarian and therefore normally portends weakness, until it reachs an unusually large level (> 6% increase) where it becomes non contrarian). That weakness/downtrend could follow a gap up at the open and early strength. XAU Implied Volatility (or XAU Put/Call Ratio) tends to indicate a trend/tone rather than necessarily a simplistic up or down session. Cycles are the primary market timing consideration.
  

• The previous minor intermediate term cycle (May 16 to July 19 from cycle low to cycle low for HUI, NEM, and the XAU) followed an Elliot Wave five wave upcycle and three wave downcycle pattern (see HUI/NEM 3 month charts dated 8-12-05) with typical parabolic shaped cycle trendlines (becoming more sharply rising in upcycles and vice versa in downcycles).

• The XAU filled it's gap above 100 (created in March) two weeks ago. HUI, NEM and the XAU have upside gaps created last Wednesday 8-17 at 215.73, 40.85, and 98.79, so short term cycle highs may occur shortly after those gaps get filled. Most of the time if it appears reasonable that a gap will be filled, then it probably will get filled. You should be aware of gaps when making buy/sell decisions.
  

• The remainder of the charts can be found at the bottom. The very long term upcycle trendlines are now relatively flat rather than parabolic (with a segment having turned up), but the major buy/sell signals shown still apply.
  

• Williams %R is below overbought territory (above -20 is overbought) for HUI (-44.70)/NEM (-33.90)/XAU (-45.50) on 8-19-05 (see latest charts). If it hits an overbought level well above -20 (near 0) that's 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). Gold hit a 2% follow through minor intermediate term cycle sell signal last week.
  

• The USD should remain below 90 (the likely major intermediate term downcycle trendline) if a major intermediate term cycle high has occurred (see 1 year chart above). The USD appears to have put in a major intermediate term cycle high, because it's parabolic uptrendline has broken down (see 1 year chart above). A 5% follow through sell signal is required to confirm that's the case. The dramatic spike also suggests that a major cycle high may have occurred.
  

• Dan Norcini's recent piece "COT Propaganda" (see link) is ironically titled because it's not accurate regarding the fact that gold/silver/USD/oil Commercial Traders know what they're doing, and conflicts with his own recent accurate work (link and quotes follow shortly). The Commercial Traders in the gold, silver, and USD markets are very reliably non contrarian (in terms of their trading activity) as regular readers of my work know. I obviously agree with Dan's bullish stance regarding gold/silver, but his latest discussion regarding Commercial Traders is seriously flawed, insults other analysts such as Ted Butler and myself who've accurately and intelligently written about this subject, and, he isn't consistent with another recent piece in which he felt the silver Commercial Traders knew what they were doing and the Speculators were "nitwits." He proceeds to discuss the crude oil COT (bizarre since he's a gold trader), where the Commercial Traders are generally non contrarian, because they've correctly been at net long extremes near cycle lows (September 2003, December 2004, June 2005) and net short extremes near cycle highs (August 2003, May 2004, April 2005). So, he isn't even accurate regarding the market he discussed. In the gold/silver markets (maybe also with oil), hedging occurs so the Commercial Traders tend to be net short, but, it's the trading activity where the Commercial Traders shine and the Speculators blunder. Gold's COT chart clearly shows (see link) that gold Commercial Trader net short extremes closely coincide with major peaks (they also do well for shorter timeframe cycle highs/lows) and gold Commercial Trader net long extremes closely coincide with major bottoms, and, that the Speculators ("large traders" = Large Speculators) are spectacular contrarian indicators and do just the opposite. In a recent article Dan (see link or next bullet) refers to the gold/silver Speculators (hedge funds = Large Speculators) as "nitwits" who buy or sell at the wrong time. Since the gold/silver Commercial Traders have the largest share of gold/silver futures and options trading volume, who do you think is doing most of the buying and selling at the right time to the "nitwit" Large Speculators Dan? You got it! The gold/silver Commercial Traders are (for the most part) the ones on the right side of those trades (it obviously can't be the Small Speculators).
  

• In a recent article Dan (see link) correctly discusses the fact that the silver/gold Speculators don't know what they're doing and the silver Commercial Traders do. To quote Dan regarding silver/gold hedge funds/speculators: "The funds can be safely ignored in the silver pit – as a matter of fact, one can make quite a good living fading those nitwits. They are nothing but ATM machines for the sharper traders of silver as they inevitably end up selling bottoms and buying tops. In other markets they are a force to be respected but when it comes to silver and for that matter, gold, I have nothing but disdain for the managers of those funds who continue to let their black boxes tell them what to do with their clients’ money instead of thinking and using their brains for a change." Here's what Dan had to say about the silver Commercial Traders in that piece: "The commercials on the other hand are now at the smallest net short position they have carried since JULY 2003 – that is more than 2 years! However, what I find even more astounding is the commercial long category. These tend to normally be the end users of silver – they are now carrying the LARGEST NUMBER OF LONG POSITIONS THAT THEY HAVE CARRIED GOING ALL THE WAY BACK TO THE BEGINNING OF 2001. I stopped looking after that point as that was far enough for me. There has been heavy and substantial new buying by this category of traders when silver dipped briefly below the 7.00 mark. What that would indicate to me is that this group sees silver as having value anywhere below $7.00. That is something that should not be lost on the rest of us." Good job Dan. Ted Butler (article) (see link) also discusses COT data as many of you know. What happened recently in the gold futures and options markets? The non contrarian gold Commercial Traders correctly made two huge short trades (48,207 short futures and options contracts added as of 8-16-05 and 45,387 short futures and options contracts added as of 8-9-05) near the recent cycle high (see one year gold chart above) while the "nitwit" contrarian gold Speculators blundered and made two huge long trades (41,184 long futures and options contracts added as of 8-16-05 and 48,821 long futures and options contracts added as of 8-9-05) near the recent cycle high. As discussed in previous updates, the gold/silver/USD 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 non contrarian gold Commercial Traders usually correctly sell into strength as a cycle peaks and buy weakness as it bottoms. I rest my case.

• 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.
  

• Now that the major intermediate term upcycle channels are defined (see latest charts) we have a good idea of what the trading range for this and subsequent minor intermediate term cycles will be, keeping in mind that the channel should turn up/increase in strength at some point, especially since this is the parabolic/sharply rising phase of the long term upcycle that began on May 10, 2004 (HUI, NEM, and the XAU). Another way of saying that is the major upcycle trendline and channel since May 16, 2005 should be parabolic shaped just as the minor intermediate term cycle's trendline was from May 16 to July 19 and nearly all cycles are. Look at the three previous long term cycles in the top chart above for more examples of parabolic shaped cycle trendlines. In very basic terms one should be trading parabolas for any market based on my experience and the substantial evidence from the charts I've used in these updates. Active traders can use parabolic shaped cycle trendlines to short term trade and/or day trade.
  

• After a stock's minor intermediate term upcycle parabolic shaped trendline breaks down one can  trade a stock like DEZ or AUY whose cycle began a few weeks after HUI, NEM, and the XAU. Some stocks like PAAS have minor intermediate term upcycles that began a few weeks before HUI, NEM, and the XAU. Obviously one has to perform due diligence on any trading stock to ensure it's a quality stock, has enough liquidity/trading volume, and looks strong technically (you want to trade high relative strength stocks long or weaklings short).

• 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.
  

• As discussed in previous updates this parabolic/sharply rising phase of the long term upcycle is estimated to last about one year, until May 2006, based on the fact that the long term cycles are getting longer (see top chart above) and the previous long term upcycle's parabolic phase lasted about nine months (mid March 2003 until December 2, 2003 (HUI, NEM)/January 6, 2004 (XAU)).
  

• 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).

• 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, 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).
  

• Gold hit a 2% follow through buy signal recently (see one year chart above), indicating that a minor intermediate term cycle low occurred near $418. The major intermediate term upcycle since early February has turned up/increased in strength. Gold's dramatic spike move late last week points to an imminent minor intermediate term cycle high (see one year chart above).
  

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

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

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

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

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

• Cycles are the most important consideration when timing any market. "Trade the Cycles" indicates that HUI, NEM, and the XAU are now on a major intermediate term cycle buy signal (see HUI chart dated 6-3-05). There's been a major intermediate term upcycle since May 16, 2005 for HUI, NEM, and the XAU (the HUI chart dated 6-3-05 shows the 5% follow through major buy signal requirement being satisfied, which is one of two major buy signal requirements), a long term upcycle since May 10, 2004 for HUI, NEM, and the XAU (see first chart above, the HUI 5 year chart dated 6-29-05), and a very long term upcycle since late 2000 for HUI, NEM, and the XAU (see HUI 5 year chart dated 6-29-05 (top chart above) and XAU 5 year chart dated 7-12-05). Gold began a very long term upcycle/true Bull Market in April 2001 and silver did so in late 2001.
  

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

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

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

• Additional confidence factors that pointed to May 16 being a major bottom include the fact that the gold Commercial Traders added aggressively to their long position for a few weeks following the major bottom in addition to engaging in massive short covering, the USD Commercial Traders were massively short, reliable lead indicator NEM rallied on well above average volume, the XAU Put/Call Ratio (June expiration) remained steady near 0.80 despite a substantial rally which indicated that many doubted the low was in, XAU Implied Volatility spiked dramatically near the May 16, 2005 major intermediate term cycle low (rose to 32 area from below 25 in early April 2005) in similar fashion to what occurred near the May 10, 2004 long term cycle low and didn't occur at other times (rose to 42.50 area from 30.50 area in early April 2004), and an Elliot Wavesque A, B, C correction pattern culminated on May 16, 2005.
  

• 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.
  

• A new indicator is Chaikin Money Flow (CMF) for reliable lead indicator Newmont Mining (NEM). Money flow is a primary fundamental indicator. NEM CMF turning negative tends to correspond closely with the beginning of sharp downcycles. Please see the NEM chart above dated 8-19-05. NEM's CMF closed at -0.12 on 8-19-05. Given that a CMF level of -0.25 for NEM reflects strongly negative CMF, then -0.12 is significantly negative CMF.
  

• The negative correlation between gold and the USD is not as high as the correlation coefficient makes it seem, since it's the square root of the strength of the correlation. It's -53% on 8-19 (-56% on 8-12) for the past 180 trading days for gold, according to Moore Research Center, Inc. For silver the negative correlation coefficient with the USD is -7% on 8-19 (-11% on 8-12) for the past 180 trading days. Silver's correlation is much more positive than gold's because it's more of an industrial metal than gold is, hence it has a more positive correlation with US economic strength and a strong US Dollar. 

• The positive correlation coefficient between gold and the S & P 500 is +9% for the past 180 trading days (positive correlation coefficient with silver is +9%), according to Moore Research Center, Inc. This means that the S & P 500 determines 0.81% of gold's price action/variability (Coefficient of Determination = 9% squared = 0.81%). The S & P 500's sharp decline from early March until late April is a major reason why gold and gold stocks were weak during that stretch (positive correlation coefficient between gold and the S & P 500 for the past 180 trading days was at 60% 14 weeks ago). The next bullet discusses the Coefficient of Determination.
  

• 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 28.09% (-53% times -53% = 28.09%) of gold's price action/variability now since the USD's negative correlation coefficient with gold is -53% as of 8-19-05. The USD determines only 0.49% of silver's price action/variability since the USD's negative correlation coefficient with silver is -7% as of 8-19-05. The correlation coefficient, r, provides the direction of the correlation (+ or  -) but only the square root of the strength of the correlation. The coefficient of determination, r², provides the true strength of the correlation but without indicating its direction. Both of them must be used to fully understand the entire picture regarding correlation's effect.

• The Gold:XAU Ratio (currently at 4.55) may become a third major buy/sell signal signal criterion, along with 5% follow through and a clearly bullish/bearish NEM Lead Indicator. Per Myles Zyblock, Chief North American Institutional Strategist at RBC Capital Markets, when it's above 5.0 (12% of the time the past 22 years) the average annual one-year holding period return for stocks in the XAU has been +38.4% and in only one instance was there a loss. When it's below 3.0 (5% of the time the past 22 years) the average annual one-year holding period return for stocks in the XAU has been -24.3% with no instances of an up year. As a stand alone indicator, at least for trading purposes, the Gold:XAU Ratio probably isn't highly useful because obviously both gold and the XAU can fall 10% or more in tandem after reaching 5.0 or rise 10%+ after reaching 3.0. However, I need to research/backtest this. 5.25 or even 5.50 might be a better criterion.
  

• The report I received via e mail from Marketocracy for the week ending 8-19-05: "JFR - Joe F. Rocks's Mutual Fund, Net Asset Value (NAV): $9.99 on 8-19 vs $10.48 on 8-12, Compliant: Yes, This past week Return: -4.65%." HUI (AMEX Gold Bugs Index) was down -3.93% last week for comparison, so JFR outperformed HUI in 14 of the past 31 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 down 0.10% since it's inception on 1-5-05.
  

• XAU Implied Volatility fell -3.42% to 26.105 on Friday 8-19 from 27.030 on 8-18 versus a +0.40% rise in the XAU on 8-19, which is a very sharp (3-6%) 3.02% rise in complacency (-3.42% + +0.40% = -3.02%. The XAU wall of worry shrank by -3.02%, therefore complacency rose by 3.02%) that portends weakness/a downtrend on Monday 8-22 (complacency is usually contrarian and therefore normally portends weakness, until it reachs an unusually large level (> 6% increase) where it becomes non contrarian). That weakness/downtrend could follow a gap up at the open and early strength. XAU Implied Volatility tends to indicate a trend/tone rather than necessarily up or down for that session. The XAU Put/Call Ratio is another very important indicator that may disagree with XAU Implied Volatility. These indicators must be used in concert with cycle channels/trendlines (very long term, long term, intermediate term, and short term).

• The XAU Put/Call Ratio is at 0.89710 for the September expiration on 8-19 versusat 0.73494 for the August expiration on 8-12 versus at 0.95013 for the August expiration on 8-5 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 +0.98% (+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 21 weeks): +0.47% vs +0.40% on 8-19, +0.50% vs -0.22% on 8-18, -2.25% vs -2.77% on 8-17, -0.51% vs -0.25% on 8-16, -0.99% vs -0.92% on 8-15.        

• 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 70,705 long futures and options contracts versus 272,116 short futures and options contracts (data as of 8-16-05). The Commercial Traders (typically) correctly begin to take substantial profits (and sell short) as a cycle rolls over/weakens (following cycle parabolic trendline sell signals) while the Speculators tend to overshoot when making the various trading decisions (buying, selling, shorting, short covering).

• The notoriously contrarian (in terms of their trading activity) gold Speculators are correctly positioned for gold strength with 209,234 long futures and options contracts versus only 46,187 short futures and options contracts (data as of 8-16-05).

• The gold Commercial Traders added a large 4653 long futures and options contracts (sold 5908, 8248, 14,585 the prior three weeks, added 10,066, 10,022, 4733 the prior three weeks) and added an unusually large (> 10% increase in short contracts) 48,207 short futures and options contracts (added 45,387, 6337 the prior two weeks, covered 13,163, 16,960, 19,554, 26,665 the prior four weeks) which portends strength this week (non contrarian indicator), because the unusually large degree of short selling is the contrarian case short term, and the long trade points to strength. The huge short trade two weeks ago correctly pointed to an imminent minor intermediate term cycle high. The gold Commercial Traders are anticipating at least some strength this week followed by a resumption of the correction. 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 8-16-05, so the data is somewhat stale (for short term cycle trading) by the time it's analyzed, but is highly useful nonetheless, especially for intermediate term cycle trading (a few weeks/months).

• The gold Speculators (hedge funds and other speculators/traders) added an unusually large (> 10% increase in long contracts) 41,184 long futures and options contracts (added 48,891, 6406 the prior two weeks, sold 3899, 7935, 23,682, 36,820 the prior four weeks) and added 400 short futures and options contracts (covered 4094, 7457, 2223 the prior three weeks, added 12,036, 8147 the prior two weeks) which portends strength this week (contrarian indicator), because the unusually large long trade is the contrarian case short term, and the short selling also points to some strength because they tend to be contrarian. The huge long trade two weeks ago correctly pointed to an imminent minor intermediate term cycle high. 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 35,528 long futures and options contracts versus 85,070 short futures and options contracts as of 8-16-05. 

• The notoriously contrarian (in terms of their trading activity) silver Speculators are correctly positioned for silver strength with 40,297 long futures and options contracts versus only 15,918 short futures and options contracts as of 8-16-05.

• The silver Commercial Traders sold 838 long futures and options contracts (added 1556 the prior week, sold 3170, 3715 the prior two weeks, added 1492, 1927, 8586 the prior three weeks) and covered a large 4503 short futures and options contracts (covered 2360 the prior week, added 10,229 the prior week, covered 4687 the prior week, added 549 the prior week, covered 1244, 13,971, 3899, 475 the prior four weeks) which portends strength (non contrarian indicator) this week, but the significant long liquidation points to some weakness. The most important consideration in timing any market is the cycle channels/trendlines.

• The silver Speculators (hedge funds and other speculators/traders) sold a large 2178 long futures and options contracts (sold 1041 the prior week, added 2416 the prior week, sold 2836 the prior week, added 1889 the prior week, sold 1245, 10,966, 3328, 2231, 5182 the prior five weeks) and added an unusually large (> 10% increase in short contracts) 3067 short futures and options contracts (added 3263 the prior week, covered 9740, 2765 the prior two weeks, added 2848, 557, 12,064, 951, 43 the prior five weeks) which portends weakness this week (contrarian indicator), because the unusually large degree of short selling is the non contrarian case short term, but the large degree of long liquidation points to some significant strength because they tend to be contrarian. 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 now correctly positioned for US Dollar weakness with 9826 long futures and options contracts versus 11,115 short futures and options contracts as of 8-16-05. Last week they added an unusually large (> 10% increase in long contracts) 1260 long futures and options contracts (sold 486 the prior week, added 2674 the prior week, sold 11 the prior week, added 1688, 277, 232, 60, 752 the prior five weeks) and covered an unusually large (huge) (> 10% decrease in short contracts) 8222 short futures and options contracts (added 249 the prior week, covered 3226, 1315 the prior two weeks, added 687 the prior week, covered 3966 the prior week) which portends strength this week (non contrarian indicator), because of the huge degree of short covering (they revert to non contrarian when they make huge trades), but the unusually large long trade points to some weakness (contrarian case short term). 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 now incorrectly positioned for US Dollar strength with 5078 long futures and options contracts versus 2955 short futures and options contracts as of 8-16-05. Last week they sold an unusually large (huge) (> 10% increase in long contracts) 8064 long futures and options contracts (added 1359 the prior week, sold 4799, 1041 the prior two weeks, added 623 the prior week, sold 6568 the prior week, added 1987, 2655 the prior two weeks) and added 287 short futures and options contracts (added 232, 644, 21, 376 the prior four weeks, covered 1290 the prior week) which portends USD strength this week (contrarian indicator), because the huge trade makes them contrarian again as they typically are, and, the addition of 287 short contracts also points to strength. 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.
  

• 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 recently (early April), a well developed trendline since 5-10-04's long term cycle low that appeared to be it's long term upcycle trendline. The reason why I'm developing a backtested system ("Trade the Cycles") is because it's impossible to consistently time the market (by educated guessing) using an unbacktested approach comprised of technical analysis and indicators. From now on, where major bottoms are concerned, I'll only indicate that a likely major bottom has occurred after the two major buy signal criteria are satisfied (The 5% follow through requirement in concert with a clearly bullish NEM Lead Indicator for a few weeks), which would have weeded out all 6 important cycle lows (see next bullet) that occurred during the major intermediate term downcycle from being major intermediate term cycle low candidates, and there's only a 1.56% probability that was the result of pure luck (50% raised to the sixth power). Assuming that May 16, 2005 really was a major intermediate term cycle low then the two major buy signal requirements will have been effective 7 consecutive times and there's only a 0.78% chance that was the result of pure luck (50% raised to the seventh power).

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

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

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

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

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

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

Joe F. Rocks!

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