• HUI, NEM, and the XAU followed through by more than 5% after breaking their intermediate term downcycle trendlines in place since 11-17-04 (see HUI chart dated 6-3-05). Therefore, major buy signal requirement number two has been satisfied, with requirement one, a clearly bullish NEM Lead Indicator, being satisified by the recent five week stretch in which NEM significantly outperformed the XAU. The two major buy signal requirements would have weeded out all six previous important cycle lows in the major correction from being major cycle low candidates, and, there's only a 1.56% chance that result was due to pure luck (50% raised to the sixth power).
  

• If the two major buy signal requirements correctly indicate that May 16, 2005 is a major bottom, then the chance that pure luck led to those requirements weeding out the six important cycle lows and correctly calling the major bottom will be 50% raised to the seventh power or 0.78%. So, if May 16, 2005 is a major bottom there's a good chance that the two major buy signal requirements will be effective in the future. Also, the additional confidence factors discussed shortly will be very useful for assessing risk and the likelihood that a major bottom has occurred.
  

• "Trade the Cycles" indicates that HUI, NEM, and the XAU are now on a major intermediate term cycle buy signal. Gold/silver stocks are in a very long term upcycle/true Bull Market since October/November 2000 (see 5 year charts for HUI, NEM, and the XAU below) and, until proven otherwise, are in a long term upcycle since May 10, 2004. Major intermediate term cycle highs occurred for HUI, NEM, and the XAU on 11-17-04. Gold peaked a few weeks later, lagging the stocks as it usually does at major highs/lows. Gold began a very long term upcycle/true Bull Market in April 2001 and silver did so in late 2001.

• The other major buy signal criteria that was satisfied is the NEM Lead Indicator which was bullish for five straight weeks. NEM outperformed the XAU during the five weeks ending 4-22 by +0.10%, +1.83%, +0.08%, +0.44% and +0.97%. See the 3 month chart below, which is the last chart in the first group below.
  

• Major intermediate term cycle lows probably 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 point 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 are now massively short, reliable lead indicator NEM rallied on well above average volume, the XAU Put/Call Ratio (June expiration) remained steady near 0.80 in recent weeks (despite a substantial rally) which indicates that many doubt the low is 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 (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. If one is risk averse one can wait for a higher short intermediate term cycle low (about a one month low), which would confirm that May 16 is a major bottom (a rising bottoms long intermediate term upcycle trendline would be in place).
  

• Keep in mind that this major upcycle probably is the parabolic/sharply rising segment of the long term upcycle that probably began on 5-10-04, therefore this major (intermediate term) upcycle will probably far surpass the 51.50% gain that HUI experienced from 5-10-04 until 11-17-04, which was a major intermediate term upcycle and probably the first very flat segment of the long term upcycle. HUI may rise on the order of 100% to about 330 in the next 6-12 months assuming a long term upcycle is in effect. NEM may rise to the 70-75 area in the next 6-12 months in that case. The XAU may rise to about 150 in the next 6-12 months in that case.
  

• The USD is likely to break down this week per the COT data, and, it's experiencing a dramatic spike move which suggests that gold will probably be strong, at least part of the week, assuming that the USD breaks down. Please see the six month USD chart below. When the US Dollar spike move breaks down it's likely to fall hard and fast, which is typical behavior following dramatic spike moves. The more dramatic the spike move the more dramatic the breakdown tends to be.
  

• It's important to keep in mind that NEM's gap to 40.25ish (created in late April) may get filled this week.
  

• Williams %R is at or near overbought territory (above -20) for HUI (-15.30)/NEM (-21.30)/XAU (-16.80). If it hits an extremely overbought level near 0 that's a reliable indication to  to look to take profits.

• Some bullets don't change from week to week because this is a system ("Trade the Cycles") and the info is/may be needed to know what's going on (for reference purposes) and because some are reading this for the first time.
  

• It's likely that there won't be an update next weekend. May the force be with you!
  

• One should be using cycle trendlines for investing/trading decisions (buy/sell signals). If a trendline breaks down unexpectedly as HUI's did in early April one MUST SELL. You have to use a very disciplined approach or you'll occasionally suffer very substantial losses that may take months and possibly over a year to recover from.
  

• The COT (Commitments of Traders) data (as of 6-10-05) for gold, silver and the USD clearly points to a continuation of the gold Bull Market/very long term upcycle that began in April 2001 (HUI, NEM, and the XAU's began in October/November 2000 and silver's began in late 2001) and a continuation of the USD Bear Market/very long term downcycle that began in June 2001. The reliable non contrarian gold Commercial Traders sold 6390 (sold 23,530 the week before, added 11,214, 860, 11,417, 9363 the prior four weeks) long futures/options contracts, correctly anticipating a 1 month cycle high in gold stocks on June 2 (cycle began May 16) and that the metal probably hasn't bottomed yet (usually lags the stocks). Also, they appear to have completed the massive short covering they had been engaged in for five weeks, adding a large 8457 (37,593, 8497, 29,470, 17,544, 26,014 covered the prior five weeks) short futures and options contracts which portends weakness this week (non contrarian indicator). The massive short covering in 5 of the past 6 weeks is a major positive on an intermediate term cycle basis (weeks/months).
  

• The big news again this week is the huge manner that the silver Speculators traded long last week (data as of 6-7-05) and, as usual, the silver Commercial Traders did the opposite, which normally portends potentially substantial strength in silver this week, because the unusually large (> 10% changes in their long (Speculators) and short (Commercial Traders) positions) trades generally make the Speculators short term non contrarian and the Commercial Traders short term contrarian. However, that indication was wrong last week since silver fell sharply. I think when the Speculators "go crazy"and make huge trades/get very greedy they revert to their normally contrarian status and tend to blunder which makes sense. The week before last the silver Speculators increased their long position by over 41% which was a huge increase in one week. I've seen this before in the gold COT data also, when the gold Speculators made a huge long trade very near gold's major top in early December 2004. The silver Speculators added a whopping 12,457 long futures/options contracts in the week ending 6-7-05 after adding a whopping 15,429 long futures/options contracts in the week ending 5-31-05. The silver Commercial Traders added 9289 short futures/options contracts in the week ending 6-7-05 after adding 14,467 short futures/options contracts in the week ending 5-31-05.
  

• The reliable non contrarian (in terms of their trading activity) USD Commercial Traders are now correctly positioned for US Dollar weakness (massively short) with 10,925 long futures and options contracts versus 28,687 short futures and options contracts as of 6-10-05. A few months ago they were substantially net long, so they've dramatically repositioned themselves for a major decline in the US Dollar, which is great news for precious metals in US Dollar terms.
  

• The Commercial Traders (typically) correctly begin to take substantial profits 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 USD Commercial Traders correctly anticipated USD strength the past three weeks by trading long futures/options positions (5823, 102, 360 long futures/options contracts added), even while they continued to massively short the US Dollar. They added an unusually large (> 10% increase in their short position) 6056 (1196, 2931,7151, 307, 2494 added the prior five weeks and 770, 2662, 2421, 1576 added the four weeks ending 4-12-05) short futures and options contracts in the week ending 6-7-05 which portends volatility with a bias toward weakness in the USD this week (non contrarian indicator). They also made an unusually large addition to their long position last week.

• Gold will probably take out it's early February low near $410 since it 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).
  

• A new indicator is Chaikin Money Flow (CMF) for reliable lead indicator Newmont Mining (NEM). Money flow is a primary fundamental indicator. Notice how NEM CMF turning negative tends to correspond closely with the beginning of sharp downcycles. Please see the 2 year NEM chart below dated 6-10-05. NEM CMF closed at -0.11 for NEM on 6-10-05. Given that a CMF level of -0.25 for NEM reflects strongly negative CMF, then -0.11 is significantly negative CMF.
  

• If a long term upcycle is in effect, it had a very flat start, partly because the long term cycle lows on 5-10-04 occurred well above the very long term upcycle/Bull Market trendlines. The fact that the long term cycle lows on 5-10-04 occurred well above the Bull Market/very long term upcycle trendlines complicated matters. Even if things don't go as expected cycles allow you to figure out what's going on.
  

• Interestingly, at this point the long term upcycle for HUI, NEM, and the XAU is similar to the previous ones (see the HUI 5 year chart). The cycle timeframes are getting longer however. The prior two long term cycles in this gold/silver stock Bull Market (since late 2000) had lower major (intermediate term cycle) highs after long term cycle highs that were followed shortly thereafter by the parabolic/sharply rising segment of the long term upcycle (the long term cycles have been getting longer, see the HUI 5 year chart). The trend of longer long term cycles means that major corrections will tend to be longer also.
  

• 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 -72% on 6-10 (-75% on 6-3) for the past 180 days for gold, according to Moore Research Center, Inc. For silver the negative correlation with the USD is -16% on 6-10 (-30% on 6-3) 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 positive correlation between gold and the S & P 500 is 35% for the past 180 days (positive correlation with silver is only 11%), according to Moore Research Center, Inc. This means that the S & P 500 determines 12.25% of gold's price action/variability (Coefficient of Determination = 35% squared = 12.25%). 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 between gold and the S & P 500 for the past 180 days was at 60% 4 weeks ago). The next bullet discusses the Coefficient of Determination.
  

• The Coefficient of Determination is the square of correlation 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 51.84% (-72% times -72% = 51.84%) of gold's price action/variability now since the USD's negative correlation with gold is -75% as of 6-3-05. The USD determines only 2.56% of silver's price action/variability since the USD's negative correlation with silver is -16% as of 6-10-05. 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 4.82) may become a third major buy signal criterion, along with 5% follow through and a clearly bullish 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 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. The last HUI chart below shows the major cycle highs/lows in this gold/silver stock Bull Market, but the very long term upcycle trendline is now flat rather than parabolic, or at least much flatter than it was, so the very long term upcycle trendline in that chart is now wrong (the last segment is wrong).
  

• The report I received via e mail from Marketocracy for the week ending 6-10-05: "JFR - Joe F. Rocks's Mutual Fund, Net Asset Value (NAV): $9.51 on 6-10 vs $9.38 on 6-3, Compliant: Yes, This past week Return: +1.42%." HUI (AMEX Gold Bugs Index) was up +0.84% last week for comparison, so JFR outperformed HUI in 11 of the past 21 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 4.90% since it's inception on 1-5-05.
  

• 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!
  

• XAU Implied Volatility fell -1.81% to 25.525 on Friday 6-10 from 25.995 on 6-9 versus a +3.71% rise in the XAU on 6-10, which is a significant (0.50-1.99%) 1.90% rise in fear (-1.81% + +3.71% = +1.90%. The XAU wall of worry grew by +1.90%, therefore fear rose by 1.90%) that portends strength/an uptrend on Monday 6-13 (fear is usually contrarian and therefore normally portends strength, until it reachs an unusually large level (> 6% increase) where it becomes non contrarian). That strength/uptrend could follow a gap down at the open and early weakness. 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 0.87064 for the June expiration on 6-10 versus at 0.80155 for the June expiration on 6-3 versus at 0.80161 (June expiration) on 5-27 versus at 0.55895 (May expiration) on 5-19 versus at 1.13583 (May expiration) on 4-22 versus at 0.48700 for the final April expiration on 4-15 versus 1.04250 for the final March expiration on 3-18 versus 0.94130 for the final February expiration on 2-18. The XAU Put/Call Ratio was at 0.65704 for the final January expiration value as of 1-21. The XAU Put/Call Ratio was at 0.79348 for the final December expiration as of 12-17-04. The XAU Put/Call Ratio was at 1.03065 for the final November expiration value as of 11-19-04. The XAU Put/Call Ratio was at 0.85989 for the final October expiration value as of 10-15. If it rises 6% or less it portends strength following likely early weakness (indicated by XAU Implied Volatility). If it falls 6% or less it portends weakness. At unusually large greater than 6% moves the XAU Put/Call Ratio becomes non contrarian, so a greater than 6% rise portends weakness (unusually large rise in fear) and a greater than 6% decline portends strength (unusually large rise in complacency).
  

• A major indicator (NEM Lead Indicator) portending weakness this week (but all indicators and cycle channels/trendlines (most important consideration) must be considered collectively, not in isolation. Think "system.") is the fact that NEM underperformed the XAU last week by -0.39% (underperformed the XAU the prior three weeks by -0.72%, -0.69% and -1.87%, outperformed the prior week by +0.45%, underperformed the prior two weeks by -2.15% and -1.17%, outperformed the five prior weeks by +0.10%, +1.83%, +0.08%, +0.44% and +0.97%): +3.26% vs +3.71% on 6-10, +0.33% vs +0.19% on 6-9, -0.35% vs -0.27% on 6-8, -1.94% vs -1.95% on 6-7, -1.16% vs -1.15% on 6-6. NEM underperformed the XAU the week before last by -0.72%: +1.06% vs +0.92% on 6-3, -0.29% vs -0.71% on 6-2, +1.40% vs +1.97% on 6-1, -0.93% vs -0.22% on 5-31. NEM underperformed the XAU three weeks ago by -0.69%: +3.27% vs +3.72% on 5-27, -0.52% vs -1.03% on 5-26, -0.22% vs +0.30% on 5-25, +2.40% vs +2.47% on 5-24, +1.36% vs +1.52% on 5-23. NEM underperformed the XAU four weeks ago by -1.87%: -1.56% vs -1.19% on 5-20, -0.31% vs -0.62% on 5-19, +1.66% vs +2.06% on 5-18, +1.17% vs +2.31% on 5-17, -0.60% vs -0.33% on 5-16. NEM outperformed the XAU five weeks ago by +0.45%: -2.16% vs -1.67% on 5-13, -2.93% vs -3.64% on 5-12, -0.93% vs -0.96% on 5-11, -1.99% vs -2.08% on 5-10, +0.45% vs +0.34% on 5-9. NEM underperformed the XAU six weeks ago by -2.15%: -0.91% vs -0.25% on 5-6, -1.00% vs -0.46% on 5-5, +1.94% vs +2.02% on 5-4, +1.06% vs +1.10% on 5-3, -0.66% vs +0.17% on 5-2. NEM underperformed the XAU seven weeks ago by -1.17%: +3.10% vs +1.68% on 4-29, -2.31% vs -1.70% on 4-28, -6.34% vs -4.02% on 4-27, -1.64% vs -1.73% on 4-26, +0.47% vs +0.22% on 4-25. NEM outperformed the XAU eight weeks ago by +0.10%: -0.10% vs -0.69% on 4-22, -1.09% vs -1.09% on 4-21, -1.51% vs -0.91% on 4-20, +2.45% vs +3.14% on 4-19, +2.72% vs +1.92% on 4-18. NEM outperformed the XAU nine weeks ago by +1.83%: -1.09% vs -0.91% on 4-15, -2.97% vs -3.27% on 4-14, -0.89% vs -1.99% on 4-13, -0.10% vs -0.47% on 4-12, -0.31% vs -0.55% on 4-11. NEM outperformed the XAU ten weeks ago by +0.08%: -0.57% vs -0.35% on 4-8, +0.14% vs -0.28% on 4-7, +0.93% vs +0.75% on 4-6, -0.12% vs +0.35% on 4-5, -1.48% vs -1.65% on 4-4. NEM outperformed the XAU 11 weeks ago by +0.44%: +0.47% vs +0.30% on 4-1, -0.38% vs +0.54% on 3-31, +2.24% vs +1.43% on 3-30, -0.53% vs -0.72% on 3-29, -0.22% vs -0.41% on 3-28. NEM outperformed the XAU in the holiday shortened week 12 weeks ago by +0.97%: -0.17% vs -1.01% on 3-24, -1.99% vs -1.94% on 3-23, -1.86% vs -2.06% on 3-22, -2.77% vs -2.75% on 3-21.         

• There's an early warning system in place! 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) (began on July 26, 2002). 
  

• 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 86,596 long futures and options contracts versus 157,183 short futures and options contracts (data as of 6-7-05).
  

• The notoriously contrarian (in terms of their trading activity) gold Speculators are correctly positioned for gold strength with 114,070 long futures and options contracts versus only 73,481 short futures and options contracts (data as of 6-7-05).

• The gold Commercial Traders sold a large 6390 (23,530 sold the prior week, 11,214, 860, 11,417, 9363 added the prior four weeks) long futures and options contracts and added 8457 (37,593, 8497, 29,470, 17,544, 26,014 covered the prior five weeks) short futures and options contracts which portends weakness this week (non contrarian indicator). The most important consideration in timing any market is the cycle channels/trendlines (see charts) and keep in mind that the data is as of 6-7-05, 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 789 (115, 9331, 11,417, 19,091, 22,590 sold the prior five weeks) long futures and options contracts and covered a large 5491 (12,638, 7410, 13,922, 8331, 10,107 added the prior five weeks) short futures and options contracts which portends weakness this week (contrarian indicator). The most important consideration in timing any market is the cycle channels/trendlines (see charts below). 

• 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 23,214 long futures and options contracts versus 102,016 short futures and options contracts as of 6-7-05.

• The notoriously contrarian (in terms of their trading activity) silver Speculators are correctly positioned for silver strength with 64,999 long futures and options contracts versus only 7347 short futures and options contracts as of 6-7-05.

• The silver Commercial Traders sold an unusually large (> 10% decrease in long contracts) 4750 (4443 sold the prior week, 1363 added the week before, 507, 5858 added the two weeks ending 5-10-05) long futures and options contracts and added an unusually large (> 10% increase in short contracts) 9289 (added 14,467, 2447 the prior two weeks, covered 226 the week ending 5-17-05, and covered 14,841 the week ending 5-3-05) short futures and options contracts which portends strength (non contrarian indicator) this week, because the unusually large degree of long liquidation and short selling is the contrarian case short term for this normally non contrarian indicator. The most important consideration in timing any market is the cycle channels/trendlines (see charts below).

• The silver Speculators (hedge funds and other speculators/traders) added an unusually large (> 10% increase in long contracts) 12,457 (added 15,429, sold 41, added 611, sold 823, and sold 7580 in the prior five weeks) long futures and options contracts and covered an unusually large (> 10% decrease in short contracts) 2807 (covered 2801, 996, 1239, 2750 the prior four weeks, and added 13,999 the week before) short futures and options contracts which portends strength this week (contrarian indicator), because the unusually large long trade and the unusually large degree of short covering is the non contrarian case short term for this normally contrarian indicator. As discussed previously, last week's similar indication didn't work (silver fell sharply), probably because the Speculators are "going crazy" and getting very greedy. Therefore, weakness in silver may occur again this week. The most important consideration in timing any market is the cycle channels/trendlines (see charts below).

• The reliable non contrarian (in terms of their trading activity) USD Commercial Traders are now correctly positioned for US Dollar weakness (massively short) with 10,925 long futures and options contracts versus 28,687 short futures and options contracts as of 6-7-05. Last week they added an unusually large (> 10% increase in long contracts) 5823 (102 added, 360 added, 2151 sold the prior three weeks, and 616, 403, 1728, 2192, 4322, 3274 sold the six weeks ending 4-19-05) long futures and options contracts and added an unusually large (> 10% increase in short contracts) 6056 (1196, 2931,7151, 307, 2494 added the prior five weeks and 770, 2662, 2421, 1576 added the four weeks ending 4-12-05) short futures and options contracts which portends USD volatility with a bias toward weakness this week (non contrarian indicator). The most important consideration in timing any market is the cycle channels/trendlines (see charts).
  

• The notoriously contrarian (in terms of their trading activity) USD Speculators are now incorrectly positioned for US Dollar strength (massively long) with 17,978 long futures and options contracts versus 2022 short futures and options contracts as of 6-7-05. Last week they added 372 (added 924, 1537, 6453, 361, and 1515 in the prior five weeks) long futures and options contracts and covered an unusually large (> 10% decrease in short contracts) 404 (covered 115, covered 1010, covered 1710, added 662 and 22 the prior five weeks) short futures and options contracts which portends USD strength this week (contrarian indicator), because of the unusually large degree of short covering (non contrarian case short term), however, the total number of short contracts held was very small, so this may not be a reliable indication and may actually portend weakness. The most important consideration in timing any market is the cycle channels/trendlines (see charts below).
  

• 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). 

• 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!

-- Posted Sunday, 12 June 2005 | Digg This Article