• Gold/silver stocks were in the midst of a sharp decline on Tuesday 11-2 when the US presidential election occurred. HUI and the XAU's sharply rising trendlines since late July broke down on 11-2 but, most importantly, reliable lead indicator Newmont Mining's (NEM) uptrendline since late July held on 11-2. HUI put in an intermediate term cycle low at 221.18, NEM at 45.06, and the XAU at 98.68 on 11-2.

• Straight trendline intermediate term cycle buy signals (see latest charts) occurred on 11-4 and were confirmed by sufficient follow through on Friday 11-5. NEM trended down the entire session on 11-4 after a spike move to 48.54 just after the open. HUI/XAU trended down nearly the entire session on 11-4, so the intermediate term cycle buy signals weren't confirmed until 11-5. So, the fact that intermediate term cycle lows occurred on 11-2 for HUI/NEM/XAU was established on 11-5.

• The synopsis of my system/work this week: Reliable lead indicator Newmont Mining and gold are kissing the top of their long term upcycle channels (see 2nd and 4th charts) in place since May 10, 2004. The best strategy this week is to short term cycle trade only (look to buy a short term cycle low this week and exit after a few days) because risk is high on an intermediate term cycle basis (a few weeks/months). Those trading long should remain long as long as NEM's uptrendline since late July holds, and, should also watch HUI/XAU's long term upcycle channels (see latest charts). Buy and hold investors and long term cycle traders can remain long. A major correction lasting 2-4 weeks probably looms following an intermediate term cycle high in the next 1-3 weeks. There's a slew of warning signs which means caution is required on the part of traders. I suspect this will be another short lived intermediate term upcycle for HUI/NEM/XAU, similar to the previous one that lasted less than 2 weeks for HUI/XAU and only 2 weeks for NEM, which is a major warning sign (Intermediate term upcycles for gold/silver stocks typically last about 3-4 weeks with an entire intermediate term cycle lasting about 4-6 weeks or roughly 1 month, hence intermediate term in duration.). All the gory details to follow. If you find that the details are too involved/technical I suggest checking out the annotated charts at the bottom. The cycle channels/trendlines are the basis/crux of my system.

• The sharp uptrend since late July is losing  momentum. The fact that HUI and the XAU's sharply rising trendlines since late July broke down on 11-2 is another major warning sign.

• The key to the sharp uptrend in gold/silver stocks since late July continuing, now that HUI/XAU's trendlines broke down, is NEM's uptrendline since late July (see latest chart). Intermediate term cycle traders should probably remain long as long as NEM's uptrendline since late July remains intact (one has to watch cycle channels/trendlines for whatever stocks are being traded of course, but traders should be trading gold/silver stocks that are outperforming NEM). Given how short lived and shallow recent intermediate term downcycles have been, it's difficult to trade intermediate term cycles now.

• Also, traders should watch the sharply rising channels for HUI/XAU (see latest charts) to see if the bullish phase since late July is ending. The fact that HUI/XAU's trendlines since late July broke down on 11-2 and that HUI put in a slightly lower intermediate term cycle high at 239.55 on 10-25 versus 239.90 on 10-8 are signs that risk is high now on an intermediate term cycle basis (weeks/months). HUI has been in a modest downtrend since it's 10-8 intermediate term cycle high at 239.90 (see latest chart), which is yet another warning sign. That resistance area is one to keep an eye on.

• Another important trendline is the US Dollar's sharply downtrending intermediate term downcycle trendline since early October. See the third chart. The USD has been oversold for weeks and is likely to put in an intermediate term cycle low in the near future.
  

• Gold/silver commercial traders correctly engaged in substantial short covering during the week ending Tuesday 11-2 (and traded modestly long), while the notoriously contrarian gold/silver speculators did just the opposite and liquidated a substantial number of their long contracts (added a substantial number of short contracts) at the wrong time. Despite this, the gold/silver commercial traders have still dramatically increased their net short position the past 6-7 weeks which can't be ignored. The gold/silver commercial traders, based on the past 6-7 weeks trading activity, remained positioned for a major correction.
  

• There are downside gaps created last week for HUI at 229.79 and 223, for NEM at 47.00 and 45.81, and for the XAU at 101.88 and 99.49. The higher gaps are likely to be filled this week, while the lower ones shouldn't get filled until after an intermediate term cycle high in the next 1-3 weeks.

• The fact that NEM underperformed the XAU by +2.32% versus +2.41% for the XAU on 11-5 and by +2.00% versus +2.42% for the XAU on 11-4 points to weakness early this week, as does the fact that NEM is kissing the top of it's long term upcycle channel at 11-5's close (see latest chart). Also, as discussed in detail later, XAU implied volatility portends weakness on Monday 11-8.

• Also kissing the top of it's long term upcycle channel is gold itself (see second chart), which fell to the bottom of it's long term upcycle channel in early September (bottomed near $395/oz), and has worked it's way to the top of the channel, closing at $433.59 on 11-5. Every time gold has approached the top of it's long term upcycle channel it's experienced a substantial decline. Also, the closer to the top of the channel it gets the larger the decline tends to be. Therefore, a substantial decline in gold is likely in the next few weeks. Until proven otherwise, gold's long term upcycle channel since May 10, 2004 defines it's trading range. The good news is gold's channel indicates it's near term downside is limited to the $408-412 range, which is the bottom of the long term upcycle channel, and, is gold's long term upcycle trendline that must hold in order for a long term upcycle to remain in place.

• William's %R is in extremely overbought territory near 0 for HUI/NEM/XAU which is a warning sign on a short term as well as an intermediate term cycle basis.

• President Bush, with a pro growth policy that liberally employs tax cuts and economic stimulus in the form of large budget deficits and an easy money policy at the Federal Reserve Bank (despite the fact that they've been raising rates, they've continued to add a lot of liquidity into the system in the form of), is more inflation friendly than John Kerry, who promised to raise taxes on high income wage earners, thus the US Dollar weakened after President Bush's reelection and gold/silver stocks rebounded dramatically.
  

• A trendline for an entire cycle is comprised of various segments, which, when combined, form a parabolic shape. That's why I talk about "the straight trendline since the May 10 long term cycle low" or the "parabolic/sharply rising uptrendlines for HUI/XAU since late July" that broke down on Tuesday 11-2.
  

• It's entirely possible and likely based upon the COT data (commitments of traders) that the Bush victory merely delayed a major correction in gold/silver stocks. Luckily however, reliable lead indicator NEM's uptrendline since late July is the primary one to watch. Also, see the long term upcycle channels for HUI/XAU in the latest charts that must remain intact for the sharp uptrend in gold/silver stocks since late July to continue.

• I may go to Las Vegas next weekend. So, there may not be an update next weekend, though I may do a chart update before I go. The most important consideration now is the trendline since late July for NEM. Based upon the cycle channels/trendlines in the latest charts, the major correction scenario appears very likely. The gold/silver commercial traders have clearly been positioning themselves for this scenario the past 6-7 weeks, because they've been dramatically increasing their net short position. HUI and the XAU's sharply rising trendlines since late July broke down last week as previously discussed.
  

• A US Dollar (USD) intermediate term cycle low appears to be imminent (please see third chart). The spike move in gold/silver stocks since late July was partly due to the decline in the US Dollar recently (negative correlation of -73% the past 180 days). A rebound in the USD and a plunge in gold stocks is likely in the near future, which fits the likely major correction scenario. However, the USD's very long term downcycle trendline should limit it's upside to about 87.50 versus a close on 11-5 at 83.88 (see third chart).
  

• HUI has a Relative Strength Index (RSI) divergence versus price for months with the prior two intermediate term cycle highs on August 20 and October 8. HUI's RSI trend has been much weaker than it's price trend since August 20, which portends gold/silver stock weakness.

• The major benefit, should a major correction occur soon, is that it would allow this long term upcycle to be a long healthy one, similar to the previous one that had five major corrections and lasted well over a year (7-26-02 until 12-2-03 for HUI/NEM and until 1-6-04 for the XAU).
  

• The many reasons why a major correction (within an ongoing long term upcycle however) probably looms:
  

• 1. NEM dramatically underperformed HUI for much of the past 6 weeks (see first chart) and is kissing the top of it's long term upcycle channel. NEM is a very reliable lead indicator.
  
• 2. The gold/silver commercial traders have dramatically increased their net short position the past 6-7 weeks, while the gold/silver speculators did just the opposite. Dismissing the gold/silver commercial traders tends to be a big mistake. It appears they're anticipating a major correction. 
• 3. The US Dollar commercial traders have dramatically increased their net long position the past 6-7 weeks while the USD speculators did just the opposite, which points to a sustained rally in the US Dollar soon, and therefore weakness in precious metals, especially gold which has a much higher negative correlation with the USD (-73%) than silver does (-42%).
  
• 4. Spike moves such as occurred in non market cap weighted HUI since late July tend to be followed by substantial protracted corrections, potentially experiencing greater than a 15% decline and lasting a month or more. HUI/NEM/XAU may decline toward their straight long term upcycle trendlines in place since May 10, 2004. Please see the latest charts. Declines on the order of 15-20% may occur for HUI/NEM/XAU, since the sharply rising long term upcycle trendlines since late July (HUI/XAU) have broken down.
  
• 5. The XAU Put/Call Ratio has collapsed to a complacent level (between 0.50 and 0.75) of 0.67146 for the November expiration on 11-5 (XAU Put/Call Ratio was at 0.85989 for the final October expiration value on 10-15), which points to the potential for a major correction.
  
• 6. There were FIVE such major corrections in the previous long term upcycle from 7-26-02 until 1-6-04 for the XAU (see 5 year XAU chart dated 8-20-04).
  
• 7. The gold/silver analysts are (in general) extremely bullish right now which is a bad sign. Many are talking about breakouts and price explosions. While they are probably correct from a 6-12 month standpoint when a long term cycle high should occur, the next month or so is likely to be a humbling experience for them.
• 8. HUI Relative Strength Index (RSI) divergence versus price for months with prior two peaks. See the latest chart. Also, HUI has been in a downtrend since 10-8-04.
  
• 9. USD intermediate term cycle low appears imminent. See second chart.
  

• The numerous reasons above lead me to conclude that the likelihood of a painful protracted correction of 15-20%, potentially lasting 1 to 2 months, is probably much greater than 50%. I'm 100% in cash now. As discussed previously, if NEM's uptrendline since late July breaks down or if HUI/XAU's long term upcycle channels break down, intermediate term cycle traders should look to exit long positions.

• NEM Lead Indicator data since the 10-13: Last week - Friday 11-5 NEM +2.32% vs +2.41% for the XAU, on 11-4 NEM +2.00% vs +2.42% for the XAU, on 11-3 NEM +2.60% vs +2.40% for the XAU, on 11-2 NEM -2.16% vs -2.41% for the XAU, on 11-1 NEM -1.47% vs -1.42% for the XAU, Two weeks ago - Friday 10-29 NEM +2.11% vs +1.78% for the XAU, on 10-28 NEM -0.56% vs -1.54% for the XAU, on 10-27 NEM -2.07% vs -2.32% for the XAU, on 10-26 NEM +0.27% vs -0.31% for the XAU, on 10-25 NEM +3.34% vs +3.54% for the XAU, Three weeks ago - NEM -0.63% vs XAU +0.13% on 10-22, NEM +0.46% vs XAU +0.40% on 10-21, NEM +3.15% vs XAU +2.90% on 10-20, NEM +0.09% vs XAU +0.57% on 10-19, NEM -0.07% vs XAU -1.50% on 10-18, Four weeks ago - NEM +1.47% vs XAU +2.00% on 10-15, NEM +0.36% vs XAU +0.16% on 10-14, NEM -1.19% vs XAU -2.89% on 10-13.
  

• Buy and hold for most investors/traders (until the long term cycle high in probably about 6-12 months) makes a lot of sense unless you're a nimble trader (but consider the likelihood of a major correction in the near future, there are exceptions to most rules). Nimble traders have a good chance (using my system) of increasing returns by trading intermediate term cycles that typically last 1 to 3 months for an entire cycle up and down. Most traders/investors are much better off buying and holding long term upcycles. The previous long term upcycle lasted from 7-26-02 until 12-2-03 for HUI/NEM and until 1-6-04 for the XAU.

• XAU Implied Volatility, which usually factors in early in the session, fell -2.56% to 27.195 on Friday 11-5 from 27.910 on 11-4 versus a +2.41% rise in the XAU, which is a slight 0.15% rise in complacency (-2.56% + +2.41% = -0.15%. The XAU wall of worry shrank by 0.15%, therefore complacency rose by 0.15%) that portends weakness/a downtrend (probably early) on Monday 11-8. That weakness/downtrend could follow a gap up as discussed in previous updates (I left the discussion in toward the bottom). I've noticed that XAU Implied Volatility usually factors in during the first few hours of a session, but cycle channels/trendlines are the most important consideration. It 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. If XAU Implied Volatility indicates strength and the XAU Put/Call Ratio portends weakness typically strength followed by weakness will occur but 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 0.67146 for the November expiration as of 11-5. The XAU Put/Call Ratio was at 0.85989 for the final October expiration value as of 10-15. If it rises 6% or less it portends strength following likely early weakness (indicated by XAU Implied Volatility). If it falls 6% or less it portends weakness. At unusually large greater than 6% moves the XAU Put/Call Ratio becomes non contrarian, so a greater than 6% rise portends weakness (unusually large rise in fear) and a greater than 6% decline portends strength (unusually large rise in complacency).

• A major indicator (NEM Lead Indicator) portending weakness (but all indicators and cycle channels/trendlines must be considered collectively, not in isolation. Think "system.") in the XAU on Monday 11-8 is the fact that NEM underperformed the XAU on Friday 11-5 by +2.32% vs +2.41% for the XAU and on 11-4 by +2.00% vs +2.42% for the XAU. 

• There's an early warning system in place! The NEM lead indicator chart dated 11-5-04 below (first chart) reveals that NEM has begun to outperform recently as can be seen in the narrowing gap between NEM and HUI/XAU (NEM has caught up to the XAU which indicates NEM has been outperforming). When NEM underperforms HUI/the XAU for a few months then the long term upcycle that began on 5-10-04 will probably be in trouble, as was the case during the last few months of the prior long term upcycle that ended on December 2, 2003 (HUI/NEM)/January 6, 2004 (the XAU) and began on July 26, 2002. 
  

• The negative correlation between gold and the USD is high, but it isn't close to 100%. It's -73% on 11-5 (-71% on 10-29) for the past 180 days for gold, according to Moore Research Center, Inc. For silver the negative correlation with the USD is only -42% on 11-5 (-39% on 10-29) for the past 180 days. Silver's negative correlation is much less 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 reliable non contrarian (in terms of their trading activity) gold commercial traders are short gold. They are clearly positioned for gold weakness with only 112,152 long futures and options contracts versus 306,606 short futures and options contracts (data as of 11-2-04).
  

• The notoriously contrarian (in terms of their trading activity) gold speculators are correctly positioned for gold strength with 181,551 long futures and options contracts versus only 30,402 short futures and options contracts (data as of 11-2-04).

• The gold commercial traders added 1191 long futures and options contracts and covered 12,667 short futures and options contracts which portends strength this week (non contrarian indicator), but some of that strength occurred last week because the data is as of 11-2-04.

• The gold speculators (hedge funds and other speculators/traders) sold 10,730 long futures and options contracts and added an unusually large (> 10% increase in short contracts) 5356 short futures and options contracts which portends strength this week (contrarian indicator), but some of that strength occurred last week because the data is as of 11-2-04 and the unusually large degree of shorting points to some weakness. 

• The reliable non contrarian (in terms of their trading activity) silver commercial traders are short silver. They are clearly positioned for silver weakness with only 20,741 long futures and options contracts versus 101,581 short futures and options contracts as of 11-2-04.

• The notoriously contrarian (in terms of their trading activity) silver speculators are correctly positioned for silver strength with 61,133 long futures and options contracts versus only 2877 short futures and options contracts as of 11-2-04.

• The silver commercial traders added 1261 long futures and options contracts and covered 2094 short futures and options contracts which portends strength (non contrarian indicator) this week, but some of that strength occurred last week because the data is as of 11-2-04.

• The silver speculators (hedge funds and other speculators/traders) sold 5842 long futures and options contracts and covered 2912 short futures and options contracts which portends strength this week (contrarian indicator), but some of that strength occurred last week because the data is as of 11-2-04.

• The reliable non contrarian (in terms of their trading activity) USD commercial traders are clearly positioned for US Dollar strength with 17,494 long futures contracts versus only 928 short futures contracts as of 11-2-04. Last week they added 2156 long futures contracts and covered 452 short futures contracts which portends USD strength this week (non contrarian indicator). Because the total number of contracts held is small I'm not considering unusually large changes (>10%) to be contrarian (I'm not using/noting unusually large changes here).
  

• The notoriously contrarian (in terms of their trading activity) USD speculators are correctly positioned for US Dollar weakness with only 6159 long futures contracts versus 19,384 short futures contracts as of 11-2-04. Last week they added 594 long futures contracts and added 2836 short futures contracts which portends USD strength this week (contrarian indicator). Because the total number of contracts held is small I'm not considering unusually large changes (>10%) to be non contrarian (I'm not using/noting unusually large changes here).

• The remainder of the bullets didn't change from last week, so you may want to skip down to the charts. I left them in because they address the very important long term upcycle buy signal discussion and other very important "big picture" information as well as information about my system/indicators. Also, it's a good idea to leave them in because some people are reading this for the first time.
  

• I know some of you have difficulty grasping some of the technical work that's part of my system. Well, I have great news for you. By far the most important part of my system, the basis and crux of my system, are the cycles (very long term (about 35 years for an entire cycle up and down), long term (1 to 3 years), intermediate term (1 to 12 months), short term (days/weeks), very short term (hours/days), intraday) and their channels/trendlines (see the charts). If you can't deal with the detailed technical work you can simply use cycle channels/trendlines on the charts in order to time gold/silver stocks or any other market. You also have to keep in mind that cycles tend to become more parabolic/sharply rising or declining over time.
  

• The fact that HUI, NEM, and the XAU are in very long term upcycles since late 2000 (see NEM and the XAU's very long term upcycle charts, my charting service doesn't go back that far for HUI) and the fact that HUI, NEM, and the XAU are in long term upcycles since May 10, 2004 (see latest charts) are by far the most important factors. Therefore, one really just needs to use cycles and their channels/trendlines in the charts in order to time gold/silver stocks (or any other market). The indicators and COT data are more for finetuning entry/exit points (more for traders).
  

• Keep in mind that my system is relatively new and only reached a well developed stage (with a good understanding of cycles and the three indicators, the NEM Lead Indicator, XAU Implied Volatility, and the XAU Put/Call Ratio, as well as the Commitments of Traders (COT) data) in 2003. Therefore, my application and understanding of the system is still somewhat on a learning curve. My system/research/analysis is relatively new and will probably continue for years. The cycle channels/trendlines in the charts are the basis/crux of my system and help greatly to provide a comfort zone for most I think.

• The intermediate term cycle buy/sell signals my system uses are straightforward. Straight trendline intermediate term cycle buy/sell signals occur when trendlines connecting short term cycle highs or lows are broken and confirmed by sufficient follow through (1 to 2%). See the charts for examples. Parabolic trendline intermediate term cycle buy/sell signals only occur very near the top or the bottom of the long term cycle channels.
  

• Usually when the parabolic trendline intermediate term cycle sell signals occur (as they did on Monday 10-4 for HUI/the XAU, see HUI/XAU charts dated 10-1-04 for parabolic intermediate term upcycle trendlines that clearly broke down on 10-4), the intermediate term upcycle has at least begun to roll over (rate of ascent begins decreasing) and it's possible the intermediate term cycle highs are in, but often higher highs will occur as they did for both HUI and the XAU.
  

• Once the parabolic trendline intermediate term cycle sell signals occur, traders should look to take profits in the near future. The topping process (cycle rolling over), if the highs aren't already in as sometimes is the case (such as 8-20 for HUI/XAU), begins after the parabolic trendline sell signal.
  

• There tends to be choppy sideways action (the intermediate term cycle flattens out/rolls over) for a few days to a week near intermediate term cycle highs (see highs near the top of long term upcycle channels), but every cycle is different. Taking profits in 2-3 stages probably makes sense. The intermediate term cycle highs that occurred on 8-20 for HUI/XAU occurred just before the parabolic trendline intermediate term cycle sell signals, whereas NEM managed to make a slightly higher high at 44.84 on 9-1 than it's high at 44.74 on 8-20 following it's parabolic trendline intermediate term cycle sell signal.

• Those trading intermediate term cycles (probably the shortest timeframe the vast majority should trade, the majority should trade long term cycles that last 1 to 3 years for an entire cycle up and down) should never (unless you're trying to pick a top which is impossible to do consistently) sell prior to parabolic trendline intermediate term cycle sell signals (occurred 10-4 for HUI/XAU) and can begin to sell afterwards or simply wait for the straight trendline intermediate term cycle sell signal IF it doesn't result in a stop that's too loose (trendline may sometimes be too flat to wait for it to break down).
  

• Trading intermediate term cycles typically will result in being long about 2-4 weeks and being in cash and/or short for about 1 to 3 weeks.

• With my system, I only begin looking for an intermediate term cycle high after the rate of ascent slows (the intermediate term cycle starts to roll over), which occurs after parabolic intermediate term cycle trendline sell signals (occurred on 10-4 for HUI/XAU).

• To keep things simple, investors and traders basically buy near the bottom of the channel(s) and sell near the top depending on which timeframe you're investing/trading, using parabolic (more for traders) and straight trendline cycle buy/sell signals (see charts) with straight trendline cycle buy/sell signals confirming parabolic trendline cycle buy/sell signals. For example, intermediate term cycle highs occur near or at the top of the long term upcycle channels (NEM did in late May, mid July, and on September 1) and intermediate term cycle lows occur near or at the bottom of the long term upcycle channels. It helps immensely to understand the nature of cycles with cycle highs usually occurring after dramatic spike moves (cycle trendline turns nearly straight up) and cycle lows usually occurring after dramatic plunges (cycle trendline turns nearly straight down).

• I want to make sure everyone understands what I mean by an intermediate term (1-12 months for the entire cycle up and down) cycle. An intermediate term (months) cycle lasts anywhere from 1 to 12 months and usually lasts 1 to 3 months for the entire cycle up and down. An intermediate term downcycle refers to the down portion of an intermediate term cycle, typically only lasts a few short weeks, and many times lasts less than two weeks.

• With the XAU Put/Call Ratio I calculate it prior to the open and compare it to the prior session's value, with a rise up to 6% portending strength and a decline up to 6% portending weakness. At greater than 6% moves the XAU Put/Call Ratio becomes non contrarian probably because something's up which causes so many traders to buy puts or calls. It's kind of a voting machine. When there's enough votes for weakness (many puts being bought) then weakness/a downtrend usually results and vice versa.
  

• For XAU Implied Volatility, as I do weekly in my updates, I compare the prior session's change with that of the XAU and come up with a delta that's used exactly as discussed above.  For example, if the XAU rises 2% and XAU Implied Volatility falls 1% that's a +1% change/delta which is a significant (0.50%-1.99%) rise in fear that portends strength. The XAU wall of worry held up well during the prior session which portends strength. If I had real time XAU Implied Volatility I could do that calculation just prior to doing a trade. The next best thing I use now intraday is VIX (S & P 500 Volatility Index) since NEM is in the S & P 500. I get real-time VIX from ASKResearch.com for $25/month. I have no affiliation with them except I'm a subscriber.
  

• These indicators portend trends/a session's tone rather than plus/minus for the session. Even if both indicators portend weakness for a particular session, there could be a large gap up at the open followed by a downtrend most of the session, potentially closing higher for the session, in which case the indicators still worked properly. They portend a tone/trend (weakness or strength/downtrend or uptrend) rather than wether that session will close with a gain or a loss. Gaps up or down are very common with gold/silver stocks. Also, more strength is likely in an intermediate term upcycle than an intermediate term downcycle if an indicator portends strength for example. Of course, one must know support/resistance levels using long term cycle, intermediate term cycle, and short term cycle channels/trendlines.

• When timing cycle lows, wait for a substantial plunge into the target range. Then there usually is a significant but relatively modest rally/very short term upcycle followed by a decline again, which, if a higher low occurs, probably means that the intermediate term cycle lows are in. One can also wait for an intermediate term cycle straight trendline buy signal, but sometimes gold/silver stocks will "run away from you" if you wait for that buy signal. Basically, if the plunge takes HUI, NEM, and the XAU close to the bottom of their long term upcycle channels, you can buy if you're confident in those channels. What helps a lot also is that NEM usually/almost always leads, so watching NEM is usually like having a window into the future. After the intermediate term cycle lows are in there should be (usually is) a few hours or even a few days of sideways action. Something to look for. Cycles tend to start out relatively flat (flat rising troughs/bottoms uptrendline) and become more parabolic/sharply rising over time, usually culminating in dramatic spike rallies at cycle highs.

• The deltas or changes in the COT data are the important thing to look at, because they reveal the trading activity of the commercial traders versus the speculators. The notoriously contrarian (in terms of their trading activity) gold/silver speculators have been correctly positioned for gold strength in recent months, but are poor traders as evidenced by their tendency to enter huge trades at the wrong time (go long in a huge way near the top or short near the bottom). This has occurred at least 3 times in recent months. The reliable non contrarian gold/silver commercial traders made correct huge trades in recent months at least 3 times. So, the gold/silver commercial traders are far superior traders than the gold/silver speculators are, which is what has allowed them to maintain their large net short position for a long time, despite gold/silver's Bull Market/very long term upcycle since 2001 (gold/silver stocks since late 2000).

• Something to keep in mind is that gold/silver stocks tend to follow the major averages largely because NEM is in the S & P 500 and is therefore traded by index funds and other funds that correlate highly with the S & P 500.
  

• Reliable lead indicator NEM (down 18.62% as of 8-13-04 from the 50.28 long term cycle high on 12-2-03) outperforming HUI (-26.59% as of 8-13-04 from the 258.60 long term cycle high on 12-2-03) and the XAU (-22.55% as of 8-13-04 from the 113.41 long term cycle high on 1-6-04) in recent months correctly portended strength.
  

• Reliable lead indicator NEM confirmed that a parabolic trendline long term cycle buy signal occurred in May when a straight trendline long term cycle buy signal occurred on Thursday 8-19 (see NEM charts). The XAU confirmed that a parabolic trendline long term cycle buy signal occurred in May when a straight trendline long term cycle buy signal occurred on Friday 8-20 (see charts). HUI has yet to confirm a long term cycle buy signal, but it's a foregone conclusion given that NEM and the XAU have done so.
  

• NEM's straight long term cycle buy signal that occurred on Thursday 8-19 was accompanied by very high volume of about 8 million shares and NEM trended up the entire session into the early part of Friday 8-20's session, so the straight long term cycle buy signal on 8-19 was confirmed by sufficient follow through on very high volume. NEM rose 4.16% on 8-19 which is a very big day for NEM which tends to have lower volatility than many gold/silver stocks because it has the largest market capitalization of any gold/silver stock to my knowledge.

• The relatively flat start to this long term upcycle since 5-10-04 implies that it will be a long one, possibly longer than the prior long term upcycle that lasted from 7-26-02 until December 2, 2003 for HUI/NEM and until January 6, 2004 for the XAU. Also, the fact that the very long term upcycles for HUI, NEM, and the XAU have all turned up and increased in strength is a major positive which implies that the gains seen in this long term upcycle are likely to exceed those in the prior long term upcycle during which HUI rose 178.6% from it's long term cycle low at 92.82 on 7-26-02 to it's long term cycle high at 258.60 on 12-2-03.
  

• NEM (Newmont Mining) again proved to be a reliable lead indicator by flashing a straight trendline long term cycle buy signal on 8-19 one day before the XAU did, and by outperforming the XAU and HUI since the long term cycle highs, it correctly portended strength.
  

• Much less extreme long term cycle lows occurred than was suggested by their very long term upcycle trendlines. The very long term upcycle trendlines have turned up (See NEM and the XAU's very long term upcycle trendlines, my chart service couldn't do HUI's) after less than four years, which is surprising and has very bullish implications for gold/silver stocks and of course the metals, and has very bearish implications for the US Dollar (USD) and the US economy. This is consistent with a post bubble very long term US economic downcycle that began in 2000.
  

• I'll have to find out when the prior gold/silver stock very long term upcycle first went parabolic/turned up, but the major averages' very long term upcycle from 1982 until 2000 didn't go parabolic/turn up until 1995 which was more than 12 years after the start of that cycle. 1995 was the first time that the major averages turned up in their prior very long term upcycle.

• Silver may lag gold it appears, at least from a very long term cycle standpoint, but I need to do more research. Silver experienced a very long term cycle low/Bear Market Bottom in late 2001 about 6 months after gold did for example. I consider gold's very long term cycle low/Bear Market low to be in early 2001 (Aprilish) rather than in 1999 because the 1999 low was followed by a huge spike and quickly returned to a downtrend/Bear Market behavior, which means that the very long term cycle buy signal was never confirmed by sufficient follow through. Gold didn't begin acting like it was in a Bull market until after 2001's very long term cycle low, hence the Bull Market in gold didn't begin until early 2001 while silver's Bull Market began in late 2001. Gold/silver stocks led the metals, beginning a Bull Market in October/November 2000 (see the four year charts).

Joe F. Rocks!

-- Posted Sunday, 7 November 2004 | Digg This Article