Wednesday Report…Currencies…The World According to Chartology

We’ve been looking at massive H&S patterns in the last two reports I’ve posted so you can get a feel for the bigger picture which is so important to grasp. It’s always much easier to make money trading within the big trend. For instance if you’ve been trading the precious metals stocks over the last 3 years or so you have had a strong headwind blowing against your trades making it very difficult to make a decent profit and then hold on to those  profits. If you’re a short term trader and can catch the little swings up and down you at least have a chance but that to is very hard to do constantly. Knowing the direction of the big trend can bail an investor out if his timing is off but if you trade against the trend and your timing is off then you will pay dearly as the markets can be unforgiving.

As I promised you in the Weekend Report, tonight we’ll look at some massive H&S tops that are showing up on some of the major currencies from around the world. When looking at some of the charts keep in mind how they will affect the US dollar. These charts will have a direct impact on the long term direction for the US dollar regardless of why the dollar has to crash and burn.

Lets start with the Canadian Dollar that is showing a smaller H&S top on the daily chart.cad dollar day

We’ve been following this long term weekly chart for the Canadian Dollar  since it broke below the massive H&S neckline in the middle of last year. The breakout took its sweet ole time forming a bear flag just below the neckline which was telling us the bearish setup was in place. Since the breakout of that massive H&S top the Canadian Dollar has now formed its second red bear flag that broke out to the downside two months ago and is starting an impulse move lower. You can see the little H&S top that formed at the high of the lower red bear flag that I showed you on the chart above.

can weekly

The Australian Dollar looks an awful lot like the Canadian dollar on the daily and long term weekly charts. The daily chart shows XAD breaking down out of a H&S top last week.

XAD DAY

The long term weekly chart for XAD shows some really nice Chartology. The head portion was made up of the blue five point triangle reversal pattern that finished up with a seven point red rectangle. Remember an odd number of reversal points equals a reversal pattern and an even number of reversal points equals a consolidation pattern. The left shoulder was made up of the blue expanding falling wedge while the right shoulder is being made up of the blue falling flag. The neckline is still unbroken to the downside yet but the price action is closing in on it. As I have mentioned before these big patterns will take a long time to reverse the downtrend that is being put in place.

xad weely

The long term monthly chart for the euro shows a massive H&S top forming. It’s not one of the prettiest H&S tops I’ve ever seen but all the pieces are in place suggesting that at a minimum the breakout of the blue rising wedge, which is creating the right shoulder, should take the price down to the brown shade support and resistance zone. From that point we’ll have to see what develops.

xeu month

If you’re a goldbug this next chart for the Japaneses Yen should make you stand up and take notice. There are a thousand fundamental reasons why gold should be going up but the XJY is telling you the truth in which I’ll show you in a minute. I first posted this long term weekly chart for the yen when the much smaller H&S top, that is forming the head portion of the massive H&S top, broke out. Note the almost vertical decline once the energy was released to the downside. The right shoulder is a nice piece of Chartology as it shows the two red triangles that are creating a much bigger blue bearish falling wedge. Today the XJY broke below the bottom rail of the blue bearish falling wedge signaling the impulse move  is just beginning. One last note on reverse symmetry. Note the green circle on the left hand side of the chart. It matches perfectly to the green circle on the right hand side of the chart that shows you the breakout of that massive H&S top neckline. It just doesn’t get an prettier.

XJY WEELY

Below is a daily chart for the XJY that shows the bearish falling wedge in more detail with today’s breakout.

XJY DAY FALLINGWDGE

This next daily chart for the yen I’ve overlaid gold on top so you can see the near perfect correlation of the two. I’ll leave it up to the fundamentalist out there to come up with why this correlation is so strong. From a Chartology perspective I don’t need a reason why only that it is happening and that’s whats most important. Following the price action.

xjy overgod

This next chart I’ve overlaid the HUI on top of the XJY that shows a similar correlation that gold has with the yen. Here you can see the massive H&S top that both the yen and the HUI made before they broke down below their respective necklines. The correlation is close enough that I wouldn’t want to bet against it.

xjy and hui

While we’re on the Japaneses Yen I would like to show you a ratio chart that compares the US dollar to the Yen. On the chart below is a long term weekly look that shows a massive inverse H&S bottom with a near vertical move once the breakout occurred. After a pause to refresh, blue triangle, this ratio chart is in another near vertical move up showing how much stronger the US dollar is compared to the Yen. So we have gold and the HUI following the yen lower while the US dollar is going strongly in the opposite direction which isn’t a good sign for the commodities or precious metals complex.

us dollar to yen

All the different currencies have a direct impact on the US dollar so lets see how the US dollar looks vs the different currencies. This first chart is a daily look that shows the beginning of the impulse move up for the the US dollar. As you can see the move started after the US dollar broke out of the five point rectangle reversal patten and hasn’t looked back. There is no question that the US dollar is overbought and is trading back at its most recent highs. In fast moving conditions, like the US dollar finds itself in right now, it can form one small flag type consolidation, one after the other, until it’s time for a bigger correction. You can see the first little red consolidation pattern, the red  bullish rising flag, that formed on the top rail of the five point rectangle. Notice the vertical move out of that pattern that is called a flag pole. Today the US dollar just broke out of a small rectangle which might very well be another halfway pattern to the upside with a vertical move to follow that is similar in nature to the one leading up into the red rectangle.

us dooalllllllll

If many of the currencies I showed you on this post have massive H&S tops in place it stands to reasons that the US dollar should also have a massive H&S base. Below is my epiphany chart when I first discovered the two fractals for the US dollar. As you can see, finally after a year and a half of waiting for big base #2 to breakout, it’s finally happening this month. I have to say it’s very rewarding to finally see something you seen a year and a half ago come to fruition. A lot of investors are wondering why the US dollar is so strong right now. The reason the US dollar is so strong right now is because it’s breaking out of that massive big base #2, it’s a breakout move.

a us dolar frution

I have believed for a very long time that the US dollar was going to take center stage at some point in time. With all the massive H&S tops in place, on a lot of the most important currencies, this is telling me that things related to a strong US dollar are going to be under pressure for sometime to come. We’re not talking about a few days or weeks or even months but most likely years before those massive distribution patterns play their selves out. It’s just my interpretation of the Chartology that is leading me to this conclusion. The fundamentals will show their hand further down the road but it will be too late to take full advantage of what lies before us right now. The big picture is painted in full color for everyone to see if they choose to look. I like what I see from purely from a Chartology perspective. All the best…Rambus

 

Weekend Report…Potential Precious Metals Meltdown Scenario

I believe last week marked an important turning point for the precious metals stocks. After two months of chopping in a tight trading range GDM, which I’m going to us as a proxy for the big cap precious metals stocks, finally broke below the critical brown shaded support and resistance zone. This was a big deal for me as now all those bottoms that had been holding support should now offer important resistance on any backtest.

This first chart for GDM shows the two month trading range that one could call either a double top or if you use your imagination you can see a double headed H&S top with a small left and right shoulder. It really doesn’t matter what you call the trading range above the brown shaded support and resistance zone, it’s the S&R zone that matters the most. That S&R zone is now our line in the sand, above is bullish and below is bearish. If GDM is indeed starting a new impulse move lower we should start to see a bunch of black candles forming one below the next. Note all the white candles that formed during the rally off of the June low which told us the move was strong. One last point on the chart below. I’ve labeled the price action below the brown shades support and resistance zone as having a possible reverse symmetry move down which would look similar to the June rally only in reverse. The main thing to keep an eye right now is to see if we get a backtest to the previous support zone at 710 that should now reverse its role and act as resistance.

GDM CANDLES

This daily bar chart for GDM shows the double top price objective which would come in around the 655 area at a minimum.

GDM DOUBE TOP HUMP

As you know I always like to look at a line chart as it can take out a lot of noise that a bar chart can make sometimes. This line chart shows the breakout and a possible backtest to the 710 area to confirm the top is in place.

gdm day line

Next I would like to start painting the bigger picture if our current top is indeed the top we’ve been looking for. Last December GDM finally found support at the 560 area which led to a rally that took the price up to the March high. This created the first reversal point in a possible consolidation pattern or topping pattern. GDM then reserved direction and headed back down to the June low at reversal point #3 which was a higher low than reversal point #1.This completed the second reversal point. At that point reversal point #3 began which took GDM up to our current top completing the third reversal point that is making a lower high than reversal point #1 which is giving us a triangle looking pattern. The fourth reversal point won’t be complete until the price action hits the bottom trendline at 645 or so. It may sound confusing but when you look at the chart below is becomes very obvious. So the next important area to watch, if indeed the top is in place, will be the bottom rail of the possible blue triangle at 645.

gdm triangle

The GDM Four Horsemen.

gdm the for horsemen

Another reason last weeks price action was so important is because GDM has broken down below the neckline of that potential inverse H&S bottom that has kept us in limbo for the last two months. It’s looking more likely that the inverse H&S bottom maybe negated if we see more weakness coming into the big picture over the next week or two. If GDM was embarking on a new bull run it should be showing more strength instead of weakness in here which it’s not.

gdm weekly h&s

On this next weekly chart for GDM I’m showing the potential blue triangle that we looked at earlier in this post. If you look at the RSI indicator at the top of the chart you can see how the 14 month chopping range has relieved the very oversold condition when GDM first started the correction. It now has plenty of room to run to the downside if it breaks below the black dashed rising trendline.

gdm   weekly triangle blue

This last chart for GDM is a monthly look that shows the massive H&S top and the decline that ensued. This linear scale chart has a price objective down to the 320 area. Note the three blue triangles that formed during the bull market years and compare our current triangle that is similar in nature that has been forming during the bear market. In an uptrend a consolidation pattern will usually breakout to the upside and in a bear market the consolidation pattern will break out to the downside. The odds favor our current and possible triangle will breakout to the downside.

gdm linear monthly

I would like to throw in this long term chart for the HUI that puts our potential blue triangle in perspective. Note that during the bull market years the HUI constantly made higher high and higher lows. Now compare that uptrend to our current downtrend that has made a series of lower highs and lower lows since the bull market peak in 2011.

hui long

Lets now look at a few gold charts and see what’s happening there. This first chart shows the blue triangle that started to form the same time GDM started to form its triangle. The big difference is gold has broken below its bottom rail while GDM is still trading in the middle of its potential triangle. Gold is trading below all the moving averages on this chart with the 150 ma being the most critical.

gold day trianle

Below is a long term daily chart for gold that shows all the most important moving averages. As you can see the price of gold is trading below all the moving averages at this time. These moving averages actually work best when there is a strong move either up or down as show by how they aline themselves. When they are all bunched up together it tells you there is a top, bottom or consolidation pattern forming.

gold ma

This next chart for gold is a weekly look that shows the 65 week moving average acting as resistance since early 2013. This weekly chart also shows you the downtrend channel that has the blue rectangle and the red triangle forming between the top and bottom rails. I’ve added instructions on how I measured for the price objective of the 6 point blue rectangle. If the red triangle plays out to the downside I used the same measuring technique that would give us a price objective down to the 985 area. Note the last bar on the far right hand side of the chart. Is this the beginning of the next impulse move lower or will we get a fake out breakout? I don’t think we’ll have to wait very long for an answer one way or the other.

gold weekly rectangle 65 wma

Lets look at one more long term chart for gold the monthly bar chart. This chart shows the 10 month ema that did an outstanding job during the bull market years for holding support. Even during this bear market it has done a good job of holding resistance. This chart also shows you where I would expect support to come into play if things breakdown for gold, the brown shaded S&R zones. As you can see the 985 to1034 would be the next critical support area for gold.

gold month 10

Lets take a look at the long term silver chart that we’ve been following for close to a year now. The price action hit that potential neckline in June of 2013 and has been finding support ever since. As long as neckline holds the potential H&S top is just that a potential H&S top but if the neckline ever gives way it would be a tough ride down if you were bullish on the white metal. One step at a time.

silver montly

I think last weeks move to new multi week lows on GDM could very well be a warning shot across the bow for the big cap precious metals stocks. The possible backtest to the 710 area is going to be the most important area to keep track of. That’s our line in the sand, give or take a few points, that will let us know which direction the big cap PM stocks want to go. The first part of the week maybe very choppy with some wild swings as the bulls and the bears fight it out for dominance of a new trend that should start to emerge anytime now. All the best…Rambus

US Dollar and Yen Update…

Tonight is a good time to look at some long term charts for the US Dollar and the Japanese Yen. I’ve been waiting for this day for more than a year now when I first created this long term US dollar chart. Some of our long term members will recall this monthly fractal chart that I labeled as having a Big Base #1 and Big Base #2 which are fractals as shown by the numbers on each base. At the time I thought we were ready to breakout above the almost 14 year S&R rail but as you can see the US dollar needed one more small move lower to finish off the big base #2. The breakout doesn’t look very impressive on this bar chart but it is happening.

us dollar big 1 bar

I have shown you many times that a line chart can often times gives you a quicker signal than a bar chart. Below is a monthly line chart that shows Big base #2 with the breakout in progress. Keep in mind this is a monthly line chart so the breakout won’t be complete unless the US Dollar can close the month of September above the big S&R line. It’s a good start to the month.

dollar big base #2

This last long term chart is a combo chart that has the US dollar on top and gold on the bottom. The main point of this chart was to show you the positive divergence the US dollar had vs gold. The red single arrow in 2008 shows how the US dollar was bottoming and gold was in its 2008 crash mode. Note how gold rallied all the way up to it’s bull market high in September of 2011 while the US dollar actually put in a small higher low vs the 2008 low. That’s pretty incredible when you think about it. Gold rallied from roughly 700 to 1920 while the US dollar actually made a higher low during that same time period, double red arrows. It’s easy to lose track of these big monthly charts as it takes a long time for them to come to fruition sometimes but the big picture is most critical to grasp.

aa dollar combo ca

Below is a daily chart for the yen that I showed you a week or two ago and how it broke out of the second blue triangle that is making up the bigger black falling wedge.  After the breakout I thought we might get a backtest to the underside of the blue triangle but it’s beginning to look like that might not be the case now. Please note the brown shaded gap area that appeared this week. I think that gap is going to play a big role in the long term move for the yen which I’ll show you in a minute.

YEN DAILY GAP

Below is a long term weekly chart that shows the two triangles that are making up the bigger bearish falling wedge which is the right shoulder of the massive H&S topping pattern. Note the last bar on the right hand side of the chart which shows the price action is now trading below the neckline.yen weekly falling wedge

I’m going to show you the exact same chart only this time I’m going to leave the neckline off so you can see more easily the brown shaded breakout gap that is telling us that neckline is hot and that the breakout process is now in progress, green circle. These kind of days don’t come around very often but when we see the US dollar up close to a point and the yen breaking below a multi year H&S neckline, one has to take notice. The implications of today’s price action, in these two important currencies, will have a perfound affect on many markets going forward. Throw the euro in the mix, which looks worse than the yen, and that tells us something big is brewing that we’ll see happening over the coming months. It will be interesting to say the least.

PS: Note the reverse symmetry gap on the left side of the chart. It still blows me away when I see things like this.

ABCD REVERSE SYMMEETRY GAPS

 

Weekend Report…The Precious Metals Complex : Contradiction and Potential

In this Weekend Report I’d like to look at some of the Precious metals stock indexes as there was a fairly strong reversal off of the previous lows made over the last two months. It was one of those inflection points where the PM  stock indexes could have gone either way. It just so happened that they all had a decent bounce off the lows with the last two days being up. We’ll examine some of the PM stock indexes in a minute but I would first like to show you the BPGDM as it’s still on a buy signal that was generated three weeks ago.

The reading of 46.67 is the highest point the BPGDM has reached in about year so there is some underlying strength. The BPGDM is above the 5 dma and the 5 dma is above the 8 dma so the buy signal is in place. Also the price action is still finding support at the neckline of the potential one plus year inverse H&S bottom.

BPGDM

Lets look at the GDM which shows the price action this week hitting the bottom of the 2 month trading range and getting a nice little bounce. Reversal point #4 was the inflection point where GDM could have gone either way. Right now it’s finding some resistance at the neckline of the small H&S top that formed at the top of the trading range. Friday GDM close back above the 50 dma. We’re back to the same old question, is this 2 month trading range going to be consolidation pattern to the upside or will it end up being a reversal pattern to the downside. Since we don’t know I’m going to play the trading range until the true trend emerges. Sometimes these types of trading ranges can go on for a long time with several more reversal points taking place.

gxm 1

Below is a daily line chart that shows a potential expanding triangle forming with last weeks low breaking below the previous low as a possible 4th reversal point. Again this can be a consolidation pattern or a reversal pattern once we get some confirmation one way or the other. The expanding triangle won’t be complete until the top rail is hit at potential reversal point #5.

gdm line

The weekly chart for GDM shows our potential inverse H&S bottom with the two month red trading range forming right on the neckline. The neckline held support again this week at 709 which is now a very important area to watch. I’ve added two price objectives if either the inverse H&S bottom or the red trading range plays out. Just keeping an open mind.

gdm weeekly

This next short term daily chart for GDM shows Sir Matrix’s four horsemen’s indicators that show the faster TSI and MACD crossing over with the longer term TSI and MACD  getting close but not quite there yet.

GDM TSI

This long term monthly chart for GDM show how we could see the potential inverse H&S bottom play out to the upside that would take the price action back up to the old neckline around the 1070 area. If that were to occur the bulls would say the bull market is back while the bears would view this as a counter trend rally in a bear market which would be the camp I would be in. As you know anything is possible. I think most PM investors are either really bearish or really bullish leaving little room for compromise. If GDM breaks out of the 2 month trading range to the upside then I think this scenario would come into play. On the other hand if the PM complex stalls out right here and the GDM breaks below the bottom of the 2 month trading range, taking out the neckline at the same time, then the bearish scenario would come into play. Right now all we really have to work with is the 2 month trading range which we’ll trade until we get some confirmation of an impulse move either up or down.

gdm montly

Next I would like to show you some weekly charts for some of the PM stock indexes that shows the potential inverse H&S bottoms we’ve been following for a long time waiting for some type of resolution. Lets start with just a simple weekly chart for GDM that shows its potential inverse H&S bottom. As you can see it has had a breakout and eight weeks of backtesting from the topside of the neckline.

gdm weekly h&s

The HUI has been one of the weaker PM stock indexes as it still hasn’t really broken above its neckline confirming a breakout. You can see the price action bunching up just below the neckline.

hui weekly inveset

The XAU still hasn’t broken out yet either but it has tried several times to do so.

xau weekly h7s

The GDX has broken out of its inverse H&S bottom in similar fashion to GDM and has been in backtest mode for 8 weeks now.

gdx h&s

The GDXJ shows it too has broken out of its inverse H&S bottom and is still in the backtest mode.

gdxj bactel

The GDLX, global gold explores etf, shows it has a potential double inverse H&S bottom but has failed to hold above it’s neckline so far.

gldx douwle

SIL shows what I call a 2 1/2 point double bottom with its 8 week consolidation pattern forming a red flag right on the S&R line.

SIL

You may have become aware that the PM stocks have been acting stronger than gold lately. The HUI:GOLD ratio chart shows you why as it has formed an inverse H&S bottom. Keep in mind both can fall together but if gold falls faster than the HUI the ratio will still show a rising price trend so it can be a little deceiving at times.

HUI ;GOLD

The weekly chart for silver shows its been walking down the black dashed S&R line that has been holding support since it was broken to the upside earlier this summer, reversing its role from resistance to now support. The million dollar question is will it continue to hold support?

aa silver weekly

Silver’s inflection point. This is the point where silver has to start showing some strength in here or it could be bad news for this precious metal.  The situation can still be saved if it can start to rally immediately.

g silver inflectin pat

The daily chart for gold shows you the triangle we’ve been following in which I said to watch the potential 5th reversal point for a short term bounce and then the break of the bottom trendline. The other scenario was that if gold showed more strength, down at the inflection point at reversal point #5, it was possible to see gold rally back up to the top rail. So far we’ve gotten the initial bounce now we have to see how strong gold really is if it can keep on rallying.

gold dat

With the US dollar showing strength in here it will probably produce a headwind for the PM complex.

us dollar weekly

The Japaneses Yen is quite oversold right now and could see a backtest to the underside of the blue triangle it broke out of several weeks ago. This could give gold a little boost for awhile if that were to happen.

YEN BACT

On this last chart for tonight I’ve overlaid gold on top of the yen. As you can see the correlation is pretty close. This past week tho the correlation wasn’t as good as it has been. As I said it’s not perfect but they generally run together.

gold to yen

I have spent a lot of hours this weekend going over many PM stocks from the juniors to the large caps. If, and this is a big if, if we see some strength this week in the precious metals stocks I will start posting some entry points for a short term trade.  At this moment we are in the middle of the 8 week trading range so this is how we’ll trade the PM complex until we see confirmation of a move one way or the other.. We’ll sell at the top and buy the bottom.  The stock markets are still in rally mode but with the SPX and the Dow trading at their all time highs we may see a little hesitation before going higher. It should be an interesting week as the summer doldrums should now be over. All the best…Rambus

 

 

 

Weekend Report…A Plethora of Currency and Precious Metals Chartology

In this Weekend Report there are so many charts I want to show you it’s hard to know where to start. It seems like we have entered a critical inflection point in both the stock markets and the precious metals complex. These inflection points can last for awhile before they show their hand but it’s important to know one exists so we can take advantage of the situation. I’m fully aware that the stock markets are entering the most dangerous time of the year as they move into September. As I mentioned to you before, The Only Rule in the Stock Markets are There are no Rules, so anything can happen at anytime. It just goes with the game we choose to play. With that said lets start by looking at several long term charts for the SPX.

Below is a weekly chart for the SPX that goes all the way back to the 2009 bottom and the uptrend that has developed. It seems like most chartists are looking at the price action from the 2009 bottom as a bearish rising wedge formation which I can see also. I have a different take on the 2009 uptrend tho which I believe is going to double at a minimum. I’ve used this technique in the past in real strong markets either going up or coming down. The original uptrend channel consists of the bottom solid black trendline and the center black dashed trendline. Just follow the price action from the 2009 low to where the SPX broke out above the center dashed trendline in October of last year. That center dashed trendline has done a beautiful job of reversing its role from what had been resistance until it was broken to the upside in October of last year. Outside of the one weekly spike below the center dashed rail, that immediately reversed back up, the center rail has held support just as you would expect from a Chartology perspective.

As you can see the SPX is trading at its all time highs right now. It’s possible that we could see a small consolidations pattern form right here with the current high last week being the 3rd reversal point if the SPX decides it needs a little more time to build up the energy to really keep this new impulse leg up going. On the other hand there is nothing to say it can’t just keep going up from here. Notice the two black rectangles that are exactly the same height. In situations like this many times the original lower uptrend channel, in a strong bull market, can double in size, as the upper black rectangle shows. As you can see there are no touches on the upper solid black trendline yet but if the SPX is in a true impulse move up we’ll see that top rail hit at some point. Right now the center dashed trendline is our line in the sand, above is bullish and below is bearish. Depending on when the price action reaches the top rail of the uptrend channel, a rough estimate would be around the 2300 area.

SPX WEEKLY UPTREND

The long term monthly chart shows the big multi year flat top triangle that broke out back in March of 2013 with one tiny backtest right after the breakout. Note the impulse moves up during the bull market years in the 1990’s. In strong bull markets these moves can become imbedded just like some of the indicators. Notice how the RSI formed back in the 1990’s bull market that stayed overbought for most of the bull market. It wasn’t until the very end that a negative divergence showed up which was a strong warning to take profits. As you can see the current RSI is overbought but not even close to the 1990’s.

bbb spx montly

Let me show you a couple of examples of how the doubling of a channel  has worked in the past. First lets look at the HUI that crashed in 2008 after being in a strong bull market for 8 years. I used the top rail of the uptrend channel as my guide as it had four touches on it. Keep in mind we are only looking at the uptrend channel that started in 2001 to the 2008 H&S top. The center dashed trendline was the bottom of the channel at that time. The H&S top in 2008 suggested we were in for the first real good correction since the bull market started. I had no idea of the magnitude of the correction at that time only that we were seeing the first reversal pattern forming in eight years. Once the price action broke below the center dashed trendline I knew the correction was going to be bigger than what I had originally  thought. At that point I used the measuring stick, taken off the original upper channel and added it the center dashed trendline to see where a possible bottom may come in using this technique. As you can see it was calling for a low around the 160 area which ended up being just a few points higher than the actual low. Like the SPX chart above, when I put that lower trendline on the chart, it had no touches, it just hung out there on its own until it was finally touched at 160. Notice how the new bottom rail held support during the formation of the right shoulder of the big H&S top formation for 8 months before it finally gave way when the massive H&S top completed.

HUI MONTLY

Lets look at one more example of a doubling of an uptrend channel. After finally putting in a bottom in 2008 gold started its move to its all time high at 1920. Notice how most of the uptrend formed in the lower half off the 2008 crash low. When gold broke above the now center dashed trendline, of the original uptrend channel, it was time to add the measuring stick that would show a doubling of the upturned channel. Note how the final blow off phase to golds bull market accelerated after the original top rail, now the dashed trendline, gave way. That was it for gold.

Before we leave this weekly chart for gold notice our current triangle that is working on its fourth reversal point. A touch of the bottom rail will confirm the pattern is a triangle. Note since the all time high made at 1920 in September of 2011 gold has produce lower lows and lower highs all the way down. The last little high gold made last month has so far failed to reach to top rail of the blue triangle. This could be a warning sign that gold is running out of gas.

GOLD WEEEKLY DOUBLE

Next lets look at some different currencies to see if this rally in the US dollar is going to be just a flash in the pan or is there something bigger brewing. Its has been awhile since I showed you some of these different currencies but the general trend down is still in play. The CAD built out a massive H&S top that is very similar to the one the HUI built out. As you can see it built its first bear flag as the backtest to the neckline. It has now just finished up breaking out of another bear flag to the downside.

CAD WEELY

The XAD topped out with the blue 5 point triangle reversal pattern. Since the five point blue triangle reversal pattern, that reversed the uptrend, XAD maybe finishing up a right shoulder of a massive H&s top. I’ve overlaid gold on top of the XAD so you can see how they tend to move together.

XAD WEEKLY

The last time I showed you this chart for the XBP was probably 6 months or longer ago in which I was showing you how the original 6 point dashed triangle was morphing into a bigger triangle. I have not touched this chart since the last time I posted it. The 6 point blue dashed triangle looked like the real deal at the time as the price action broke below the bottom rail, with several backtest to the underside. It threw us a curve ball which I was able to pick up on by the way these types of triangles morph into bigger triangles.  Whenever I see a nice tight triangle like the blue dashed triangle, it’s rare that they don’t play out in the expected move, in this case down. This is where I have shown you in the past how a morphing triangle develops by showing you the morphing process using the red circles. The red circles are exactly the same size that measures the false breakout of the bottom rail which we will see a similar false breakout of the top rail. It’s just a symmetry thing. The markets love symmetry. As you can see I was looking for the top to come in at reversal point #4 at 173. The actual high came in at 171.92 or just about a point lower than what I was looking for. I will now go ahead and tweak the top rail to the most recent high that still shows a triangle consolidation pattern, just as we thought before the morphing process, but now it just a bit bigger. Note the ping pong action in the apex of the blue dashed triangle. This happens a lot during the morphing process.

exhb

Lets take a look at the XSF that has been building out a rising channel for 2 years now that has the potential 4th reversal point in place. The pattern won’t be complete until the bottom blue rail is broken to the downside. Note the failed H&S top that looked so promising when it was developing.

xsf swilss

Lets now look at the two currencies that will affect the US dollar the most, the EURO and the Japaneses Yen. Lets start with the euro that broke out of two bearish rising wedges, one inside the bigger rising wedge and the big rising wedge, each accompanied by a breakout gap. Keep in mind when these big patterns are complete is when you get your impulse moves which it looks like the euro is now in. Note the little pause just before the euro broke below that bottom black rail. This is what I like to see.

euro day

The weekly chart shows the two year bearish rising wedges that broke out six weeks or so ago. For those that like to play with Chartology you will not find a better chart that shows measured moves and symmetry. The directions are on the chart if you want to play with the uptrend that formed in 2006 to 2008 and the downtrend that formed during the decline that occurred in 2010. The distance between each consolidation going up and coming down were all exactly the same height. The red horizontal dashed lines shows the center of the price action. In 2007 the euro built out a bullish rising flag on the way up. During its decline in 2010 the euro built out a bearish falling flag in the exact same location. Anyway it’s a good study in measured moves and symmetry.

EURO WEEKLY SYMMETER YESLLO

The very long term chart for the euro shows the blue downtrend channel that began forming in 2008. The euro is now in month number 2 since it broke out of the red bearish rising wedge as shown on the weekly chart above. There are two possible areas of support that could come into play down the road. The bottom rail of the blue downtrend channel and the neckline extension rail taken off the massive inverse H&S bottom made at the turn of the century.

euro monthly

Now I would like to expand on the Japaneses Yen chart I showed you Friday night. Below is the same chart I posted Friday night that shows it just broke out of a bearish falling wedge which was the second pattern that has formed inside the much bigger falling wedge that started to build out in May of 2013. The first pattern to form inside the big black falling wedge was the blue triangle that did a little morphing as shown by the red circles. On this chart you can see I have the big black falling wedge labeled as a bearish falling wedge. You are probably wondering why, which I will show you in a bit.

xjy day

The long term weekly chart shows a large H&S top that formed back in 2011 and 2012. Note the impulse move once the H&S neckline was broken to the downside. The decline stopped right where our black bearish falling wedge started to form back in May of 2013 right after the precious metals stocks collapsed in April. What I think is happening, and have said so before when I posted this chart, is that the Yen is forming a massive H&S top. The blue bearish falling wedge is the right shoulder that matches the blue bullish falling wedge that formed the left shoulder. Note the very last bar on the chart that shows the yen closed right on the potential neckline last week.

YEN WEEKLY H&S

You maybe asking yourself, whats the big deal if the Yen is putting in a large H&S top? On the chart below I’ve overlaid gold on top of the yen so you can see what it looks like and why the potential H&S top is very important to the big picture. It’s not a perfect correlation but it’s pretty close.

yen and gold combo

Lets take it one step further and see how the yen correlates with the HUI, the precious metals stocks. The HUI is in red and the Yen is in black on the chart below. Again not a perfect correlation but pretty close. I wouldn’t want to bet against it unless it was for a very short term scalp. Note the price action for both stocks once the right shoulders were completed back in late 2012 and the first half of 2013.

AAAHU AD YEN

Below is a chart that I’ve shown you many times in the past where I overlaid gold on top of the US dollar. Since gold topped out in 2011 it has been trending down while the US dollar has been trending up.

gold over the us dolalr

This next chart is a multi combo chart that shows how gold is trading vs many of the important currencies out there. If we ever see gold trading above all those black dashed support and resistance lines I will have to reconsider the bearish case for the PM complex but until that happens the trend seems to be down. Notice how the black support and resistance lines have been backtested from below telling us that those lines are hot.

A MULTI COMBO CURRENCE

Below is gold’s triangle we’ve been following. I showed you the bottom rail support would come in around the 1270 area. Last weeks low was 1274. So far this is a text book test of the bottom rail. Initially I like to see an important trendline hit and have a small bounce telling us the trendline is still hot. After just a small bounce we need to see the next decline take out the bottom rail with preferably a nice long bar on increasing volume. If you’re a bull you want to see the bottom trendline hold and a 5th reversal point form that will take the price action up to the top rail. A break of the top rail would then strongly suggest the triangle is a 5 point triangle reversal pattern to the upside.

gold triangle

This last chart for tonight shows the entire history for the HUI. I have shown you the big black bearish rising wedge but not the blue triangle because I didn’t know what type of pattern would form below the massive H&S top and the bearish rising wedge. This blue triangle has the same reversal points as gold.  Notice on the gold chart above the price action is bouncing off of the bottom trendline on its triangle while the HUI is bouncing off its top rail of its potential triangle. Previously the precious metals stocks led the way down. If the triangle ends up being a consolidation pattern to the downside it looks like gold is going to lead the way lower with the PM stocks following behind. I believe we are as close as we’ve been, since this one year plus correction started, to actually follow through on the next impulse move down, which will take the PM complex to new lows for this bear market. Silver is sitting on a potential massive H&S top neckline also. It’s impossible to pin point the exact moment this next impulse leg down will begin but we have enough Chartology to strongly suggest the next major move for the precious metals complex will be down and not up. Keep a close eye on the bottom rail of gold’s triangle for the first big clue that the PM complex is headed lower. All the best…Rambus

hui lng mongy triangle

 

 

US STOCK INDICES 10 YEAR CONSOLIDATION PATTERNS ..UPSIDE BREAKOUTS ?

I was originally going to do the Weekend Report on the very long term charts for the markets but after last Friday’s trading I decided to mix it up a bit with some shorter term charts. It seems like everyone is either looking for that 10% to 15% correction right here before the stock markets can go higher or many looking for the top that will lead to a bear market. That is possible but I would like to show you some charts that maybe saying this correction is over and the next impulse leg up is now getting underway. You never know 100% for sure if you are right until you can look back in hindsight. With that said lets look at some charts starting with the INDU.

Last week I posted some inverse H&S bottoms that broke out on Friday only to have a strong backtest based on some negative information from the Ukraine. It was a wild day with big price swings. For the most part the necklines held their ground with some having what I call a strong backtest. The two hour chart for the INDU shows you what I mean.

indu 2 hour

That little inverse H&S bottom, on the 2 hour chart above, doesn’t look like a big deal when you see it in isolation but when you put it in context of the daily chart it takes on a whole new meaning. I can guarantee you no one is looking at the INDU as the chart below shows. That small inverse H&S bottom on the 2 our chart may very well be the 4th reversal point in a much bigger bullish rising wedge consolidation pattern.

I know many of you are thinking another bullish rising wedge, how can that be? As I have shown you many times in the past these type of patterns show up in strong bull markets which the INDU has been in since the 2009 low that no one can deny. When you look at the daily chart below I would like you to compare the indicators from reversal point #2 to our current 4th reversal point as shown by the dashed purple vertical lines. The red circles shows how this pattern has morphed into the bigger bullish rising wedge by failing to reach the top and bottom rails. When you build charts in real time the original bottoms were where the red circles are. Triangles can do the same thing when they morph into a bigger triangle. The originally interpretation of the rising wedge was correct but it just morphed into a bigger rising wedge. Same pattern just bigger. This happens a lot with triangle also. Note how the bottom rail of the rising wedge lies right on top of the 200 dma.

indu day one

Lets now take a look at the weekly chart for the INDU that goes back to the 2011 bottom that shows this bullish rising wedge isn’t at all unusual. Keep in mind this pattern won’t be complete until the top rail is broken to the upside. The little inverse H&S bottom maybe giving us an early heads up that at least a move up to the top rail maybe in play. It’s possible we get a 5th and 6th reversal points before the pattern is completely matured. We just have to follow the price action. A sell/stop can be place just below the possible 4th reversal point if things don’t work. Note how the RSI 50 has been holding support for the last year or so, red arrows.

indu weekly

Perspective is everything when it comes to the markets. It’s always important to know where you’ve been in order to have an idea of where your at in the big picture. This next weekly chart goes back to the beautiful H&S top that formed back in 2007 which led to the big crash. It was as plain as the nose on your face back then but few grasped the consequences of how important it would be. I knew back then that the INDU was topping out but I didn’t know the markets would crash like they did. I just knew a top was being put in place and the uptrend from the 2002 low was being reversed. Note the beautiful inverses H&S bottom that formed in 2009. An interesting fact about that 2009 inverse H&S bottom is that it’s the same height as the 2007 H&S top. The 2007 H&S top took longer to build out but both H&S patterns ended up being the same height.

I suspect many analysis are looking at our current blue raising wedge as a bearish rising wedge which could be the case but until that bottom rail is significantly broken to the downside I’m sticking with the bullish scenario as I have seen too many of these patterns form in bull markets. Just think of these bullish rising wedges as a running corrections to the upside until proven otherwise. One last note on the chart below. The INDU has pretty much made higher highs and higher lows since the 2009 bottom which is an uptrend, Chartology 101.

INDU WEEKLY PERSPAECTIVE

Lets look at another chart for the INDU which is a long term monthly look that shows you how a bullish rising wedge, that developed back in the 2002 to 2007 bull run, formed right in the middle of that bull market as a halfway pattern in both time and price. Will history repeat?

indu monthly

This last chart for the INDU I use for looking for bottoms. At the bottom of this chart it shows you two different volume bars. The green volume bars shows you the up volume vs the down volume which I don’t use. The beauty of this chart is the red volume bars that shows you the down volume vs the up volume. I have two dashed lines on the red volume bars. The upper one is at 8.5 and the lower one is at 3.35. If you recall the INDU was down over 300 points several weeks ago which looked like the beginning of a big correction. Note how the down to up red volume bar expanded up to 8.5 which suggested a low maybe forth coming. About 4 days later we got another capitulation bar that made it up to 3.35 giving us another clue an important low maybe at hand. As you can see several days later the low did come in for this down move so far. Keep in mind that little inverse H&S bottom I showed you on the first 2 hour chart above which maybe the the 4th reversal point in the bullish rising wedge on the daily chart. Again, you can see how critically important I’m viewing this potential bottom in here. It makes sense from a Chartology perspective.

dow up to down vol.

Lets take a look at the COMPQ as it has been one of the stronger US markets. As you can see Friday’s price action completed the 4th reversal point in a potential bullish expanding falling wedge. The only question is do we get a breakout right here or do we go back down to form a 5th and 6th reversal points? The MACD and HISTO are now positive with the slow stoch moving up.

COMPQ DAY CROSSOVER

I’m going to move right on the the monthly chart for the COMPQ that shows its beautiful bull market. Lets start on the left side of the chart that shows the red bullish rising flag that formed as a halfway pattern that helped me get out of the markets in plenty of time to lock in my profits in a stock called Rambus that was a life changer for me. If you think riding this bull market is difficult it pales in comparison to the move from the low in 1995 to the top in 2000. Unlike this current bull market where everyone is looking for this bull market to crash and burn the move in 1995 to the top in 2000 was just the opposite. A lot analyst were saying we were going to 20,000, 30,000 even higher as we were in a new paradyme. IPO’s were going through the roof on their opening day. It was a time to behold but as always the party must end and end it did.

Next lets look at the big blue 10 year triangle consolidation pattern that I’m viewing as a halfway pattern at present. Notice the H&S bottom that formed the last reversal within the blue triangle. That blue triangle took 10 years to work off the access from the huge bull market. I’ve labeled the old bull market high in 2000, that comes in at 5132, which I think will be the first place we may see a pause that refreshes.

compq  5132.

Next I would like to look at a couple of different sectors we took positions in last week. First lets look at the BTK, Biotechnology index which has been by far the strongest sector in the markets. The first chart is a 2 hour chart that shows the little blue triangle that broke out last week with a backtest on Friday.

bio 2 hour

Now we need to put that little 2 hour triangle in context by looking at a longer term daily chart. As you can see on the chart below our little 2 hour triangle is part of a much bigger daily triangle which both broke out of last week.  A backtest is possible to confirm the breakout.

btk day

The BTK has been the strongest performing sector since the 2008 crash. Note the beautiful blue triangle that formed as a consolidation pattern between the 2000 high and the 2008 low on the monthly chart. Compare it to the COMPQ’s blue triangle consolidation pattern. These huge consolidation patterns are the reasons why the stock markets are so strong. After 10 years of consolidation it was time for their big moves to the upside. Note the  beautiful breakout and backtest before it ran up to the next consolidation pattern the red bullish rising wedge. This is what a bull market looks like.

btk monthly

I would like to take a close look at the other sector we bought last week, the SOX. The SOX held its ground last Friday during the big swings back and forth with the neckline holding support. I could make a case that the SOX is making a double inverse H&S bottom with the second neckline still waiting to be broken to the upside.

SOX 2 HOUR

Below is a weekly chart with just a few annotations that shows its uptrend channel that has been forming since the end of 2012. Again our little inverse H&S bottom of the 2 hour chart above would be at the last reversal point in the uptrend channel.

sox uptrend channel weekly

This last chart shows the SOX big 10 year bullish falling wedge that finally broke out in 2010. Note the little red bull flag that formed just below the top rail of the falling wedge just before the big break out. After the breakout the SOX went on to form the blue triangle consolidation patterns as the backtest. The last bit of resistance was finally over come at the horizontal black dashed line made off the big blue flat top triangle that formed inside the falling wedge. Keeping an open mind, it’s possible we could still see a backtest to the 546 area that should now offer strong support. At any rate this long term chart for the SOXs looks extremely bullish. When you look at this chart below ask your self how would you have handled the rally that started in 1998 at 185 to the top in 2000 at 1350. It looks easy when you look back in hindsight but could you have held on for the ride of a lifetime or would you have taken your profits at the first opportunity looking for a place to get back in that never happened?

sox montly

There are many individual stocks that back up the big 10 year consolidation patterns that I’ve shown you above. It’s just as hard riding a bull market up as it is shorting and riding a bear market down. I have to admit I’m just as guilty as the next guy trying to call an intermediate term top in these bull markets that seems to be a loosing proposition. In a strong bull market there is always the wall of worry which keeps most investors on edge but if you can look at the big picture it should help in controlling ones emotions. All the best..Rambus

 

One Chart… The TLT:GLD Ratio Chart

Below is a combo chart that shows the TLT:GLD ratio chart on top and the GLD on the bottom. This chart shows you when the ratio is falling GLD is rising and when the ratio is rising GLD is falling. Notice back in 2008 the ratio was at its high and GLD  was at its low. As you can see the ratio fell during the next three years while gold put in its all time high at 1920 in September of 2011. From that all time high in GLD to the low in the ratio chart, GLD has been falling while the ratio has been rising. Note the massive inverse H&S bottom on the ratio chart that broke out in April of 2013. There was a laborious backtest to the neckline that seemed to go on forever which ended up forming the blue triangle that sits right on top of the neckline. We got the backtest to the top rail of the blue triangle back in early July that held beautifully. Now the ratio chart is getting ready to make a new high for this move off of the September 2011 low. The yellow shaded areas shows minor lows in the ratio chart that corresponds to minor tops in the GLD. As long as the ratio chart keeps rising, which it should after breaking out of the blue triangle and the huge inverse H&S bottom, GLD should fall and most likely break throug of the bottom of its one year plus blue trading range. The Chartology of this chart says GLD is going lower in no uncertain terms. All the best…Rambus

aaaa gold to tlt

Weekend Report…POTPOURRI of Chartology : Precious Metals , US Stocks and Energy

Last week we seen the stock markets go down and the precious metals stock indexes go up for the most part, inverse correlation. Friday the stock markets had a big reversal day with the PM stocks being mostly flat to down. It will be interesting to see how long this inverse correlation holds together.

Lets start with a daily chart for GDM that is showing a falling wedge at the moment that has broken out to the upside with a backtest to the top rail last Friday. The PSAR has been on a buy signal for 3 days now. The MACD and Histogram are still in negative territory while the slow stoch is rising giving us a mixed picture at the present time.

GDM PSAR

Next I would like to show you the SPX and the decline it had last week which looks like it may have found a bottom of some kind on Friday. Note the red falling wedge that has 5 reversal points which makes it a reversal pattern to the upside. Also there is a possible Wolfe Wave that shows a price objective up to the green trendline which could overshoot a bit. At the top of the chart you can see the blue rectangle I posted just before it broke down that also had a H&S top so that part has played out accordingly. Now the question is what kind of rally will we see going forward. If the green WW doesn’t hold resistance then the bottom of the blue rectangle, at the 1955 area, should be the first real area of resistance.

spx ww

The weekly chart for GDM shows the neckline has held support for the 5th week in a row now. It did drop down to 708 earlier in the week but recovered to close closer to the high for the week instead of the low. Five weeks of grinding action with no clear cut signal yet.

gdm weely

Lets now look at a daily line chart for GDXJ that shows it’s still in the confines of a falling wedge which has completed 6 reversal points so far with the possible 7th one in progress. And the chop continues.

GDXJ FALLINGWDGE

The weekly chart for GDXJ shows it to has tested its neckline for many weeks now which is still holding support. Above the neckline is bullish and below is bearish. We have a very fine line it the sand in which to place a sell/stop if one is long.gdxj weekly

Below is a daily chart of GOLD that shows the potential triangle forming. Note the potential 4th reversal point where the price action broke below the S&R line and then backtested it on Friday and closed toward the low of the day. On a positive note Gold is still trading above the 150 and 300 dma. It looks like the 1270 area is going to be critical support if gold moves down to the bottom rail.

GOLD TRIANLE

Below is a chart I posted several weeks ago in which I was looking for the neckline symmetry rail to hold support for the bottom of the possible right shoulder. So far the Neckline symmetry rail has held support unlike silver.

gold invese

Below is a long term daily chart for gold that shows the potential one year inverse H&S bottom. It looks like the 1365 area on the neckline is going to be critical resistance until it gold can break it to the upside. If gold can break that neckline it would suggest a rally up to the 1596 area. First things first, 1365 needs to be taken out before we can get too excited.

gold day inverse h&s bo9ttom

Next lets look at silver as it seems to be a big fly in the ointment. As you know silver has been lagging pretty badly in the PM complex. Is it going to be late to the party or is it leading the way lower?  The long term daily line chart shows the one year red triangle that had a false breakout to the downside and then it had one to the upside. As you can see it’s now trading below the apex. When you look at this chart notice all the lower lows and lower highs that have been made since the top in April of 2011. Silver had a chance in July to take out the March high but so far has refused to do so.

silver year red triangel

Next I would like to bring back a few long term charts for silver that I haven’t shown in awhile that have some bearish implications if they play out. The first chart goes back to 2003 that shows some of the more important chart patterns during its bull market. Some of our longer term members have been looking at this potential H&S top for close to a year now. You can see the neckline symmetry rail called the high for the potential right shoulder last year. That big neckline has held support and has refused to give up yet. If it does break it would be very bearish for silver but until that time comes the price action is still trading above it.

silver h&s top nl symmetry rzail

Below is a monthly chart for silver in which I have tweaked the red triangle that is making up the potential right shoulder. By tweaking it I mean I’ve adjusted the top and bottom rails to the symmetry false breakouts of the top and bottom rails. When I first drew in the right shoulder I was looking for more work to be done before the potential right shoulder could be considered finished. As you can see enough time has now passed for this possible right shoulder to be considered complete. Until the neckline is broken to the downside it is what it is.

siolver monthly h&s top

The last chart for silver is a very long term look that goes all the way back to 1977 that shows how silver reversed symmetry back up in 2000 to the top made in April of 2011. You can see how precariously close silver is getting to that 4 plus years neckline. Again, until that neckline is broken to the downside silver still remains positive but if it ever breaks below it there will be a huge H&S top in place that will be reversing the bull market that began in 2001. Something to keep a close eye on.

silver parcaiously

There is another chart for the SPX that I would like to show you that had a nice H&S consolidation pattern that reached its price objective up at the 1995 area. I’ve extended the neckline to the right side of the chart that sometimes will come back into play as a backtest. The rally last Friday looked pretty strong so the neckline extension rail may not provide resistance. We’ll just have to see what happens.

spx daily h&s consolidation patter

Below is a long term chart for the  QQQ’s that also had a H&S consolidation pattern with the head being the low in 2009. It just recently hit its price objective at 94.80. On a positive note the 30 and 88 wma has done an excellent job of holding support since the buy in late 2009. The QQQ’s could have a decent correction without breaking the 30 and 88 wma.

qqqq invese h&s

Below is a chart for oil that is also getting very close to an important neckline. This potential neckline goes back 5 years and counting.

wtic oil

This long term monthly chart for oil shows its major uptrend channel that began in 1998 and topped out in late 2007 after its parabolic rise. You can see the crash that ensued once the move completed. The backtest to the underside of the bottom rail of the major uptrend channel created the head portion of the possible 5 year H&S top.

oil monghty

Lets look at one last chart which will be Natural Gas. It too had a nice H&S top but much smaller that broke down six weeks ago. Its in a confirmed downtrend but there are no rules that says it can’t backtest the neckline before it declines is earnest. I would prefer to play this one on the short side unless you’re very quick on the draw.

nat gas

So there you have it, a mixed bag in the PM complex and the stock markets. Either one could be in the beginning stages of a decent move but we need to see more confirmation of a trend to really get excited. This looks like it could be an interesting week ahead so stay tuned for further developments. All the best…Rambus

 

Weekend Report…An In-depth Look at GDM and GDXJ

In this Weekend Report I would like to show you an in-depth look at two important precious metals stock indexes, the GDM and GDXJ. The reason I want to show you these two PM stock indexes is because they correspond with the 3 X leveraged etf’s, GDM for NUGT and the GDXJ for JUNG that we are currently trading. Last week seemed like the end of the world to a lot of the gold bugs as the PM complex had a decent sell off causing much pain for those holding on the long side. If you’ve been in the markets for any length of time you know there usually no gain without some pain. It just goes with the territory. We’ll look at the very short term to the long term charts, looking for clues that may shed some light on the future direction for the precious metals complex, at least for the short to intermediate term horizons. Lets start with the 2 hour look at GDM that is showing a some what unconventional consolidation pattern, a six point Diamond. Normally when an area of congestion is taking place and there are no obvious consolidation patterns forming I begin to look at the more obscured patterns such as a Diamond or a Roof pattern. When a Diamond is forming there is usually a big decline in the middle of the pattern that generally expands on the left side and contacts on the right side. As you can see on the 2 hour chart below reversal points #1 and #2 are start the expansion. Reversal points #3 and #4 show the longest point in the Diamond with reversal points #5 and #6 contracting like a triangle. The price action actually broke above the top trendline on the right side of the chart late in the day on Friday. You can see the indicators on the right side of the chart are all in bullish configuration in this 2 hour chart. GDM 60 MIN The daily chart puts our little Diamond in perspective in the bigger picture. This chart starts at the December 2013 low and it also shows a higher low made last month in June. This is the start of an uptrend. In order to create an uptrend we’ll need to see GDM take out the March highs creating the first higher high. Right now I’m viewing our Diamond as a halfway pattern that is forming off the June low similar to the little red triangle that formed during the December to March impulse move as measured by the blue arrows. I’ve put two possible price objectives based on the two different measuring techniques I use. Both measurements are very close to each other at 860 for the breakout to breakout method and 865 for the impulse method. One last note on this daily chart for GDM. You may have noticed there was a negative divergence on the RSI when the high was put in on the Diamond several weeks ago. This started the actual correction. Now notice the positive divergence on the RSI. In strong impulse move one likes to see the RSI stay above the 40 area during a correction. So far the RSI has held above 50 which positive. gd, diamond The weekly chart for GDM shows our inverse H&S bottom that has been in backtest mode for three weeks now after breaking  above the neckline. These backtests can sometimes be painful but they are a necessary evil which helps you confirm the breakout. As you can see GDM has been trading above the neckline for three weeks now helping to confirm the breakout is for real. The neckline is now our line in the sand, below is bearish and above is bullish. gdm weekly Now for the monthly chart that shows the entire bull market along with the massive H&S top that has led to our current low. When you look at this long term chart notice how each important top and bottom were accompanied by a H&S pattern. Even the 2008 crash low had an inverse H&S bottom but the bounce was too steep to show up on this monthly chart. If our current inverse H&S bottom plays out it will have a price objective up to the 1017 area which is getting close to the most important resistance point on the chart. The brown shaded area shows the price objective of our inverse H&S bottom and the neckline for that massive H&S top which will act as resistance on the initial hit. If the PM complex is actually embarking on the next leg up to new highs I would expect GDM to form some kind of consolidation pattern just below the big H&S top neckline before the price moves higher. On the other hand the old neckline may be too much resistance to overcome and the GDM retreats back down to the precious low or lower. The bottom line is that this inverse H&S bottom is telling us that GDM should have an intermediate term rally that should take the price back up toward the old neckline. From that point we’ll have to see how it interacts with the neckline and take it from there. Note the positive indicator on the sidebar. gdm monthly Now that we’ve looked at the big cap PM stocks lets take a look at the GDXJ that will show us how the small caps are doing. As you know the small caps have been leading this rally which is a positive as it shows speculative money is finding its way into the more riskier PM stocks. It looks like GDXJ has formed a blue falling wedge which didn’t really show itself until late in the day on Friday. We need to see it breakout above the top rail to really put the falling wedge into the bullish category. You can see an A B C correction within the blue falling wedge that just missed the bottom target by a hair. It’s possible we get another reversal back down to the bottom rail before this pattern is complete. As long as the price action stays within the confines of the falling wedge it should remain bullish. gdxj 60 This is the first time I’ve shown you this daily chart for the GDXJ as I was waiting to see if the second backtest would hold support. First, notice the unbalanced H&S bottom that has a much bigger left shoulder than the right. Sometimes this happens in fast moving conditions. Note the nice breakout gap and two quick backtest to the neckline before GDXJ moved higher. What I really like about this setup is how the blue falling wedge has formed on top of the neckline. I’ve shown you many times in the past, when you have a very important trendline, many times you will see a small consolidation pattern form just below, right on top or just above that support and resistance line. As you can see the GDXJ actually put in a slightly higher high before it began to correct. Again, we have an important line in the sand, above the neckline is bullish and below is bearish. GDXJ BULLISNH FALLINE WDGE The weekly chart for GDXJ shows the slanted inverse H&S bottom that broke out about three weeks ago. Last week we seen another weekly bar backtesting the neckline which to the untrained eye can seem like the end of the world if you don’t have a game play to follow. As I showed you in last weeks, Weekend Report, that another backtest to the neckline was very possible and I gave you specific price targets to watch for. So far the backtesting to the necklines has been textbook. I’ve put a red circle around the breakout and backtest that took place when the massive H&S top neckline finally gave way and the bear market really got underway. What’s so interesting about the current inverse H&S bottom for the GDXJ is it has a price objective up to the neckline of its major H&S top around the 65 area. It’s one step at a time. If this inverse H&S bottom plays out according to the Chartology I’ve laid out for you we should see a the old neckline act as resistance on the initial hit. From that point we’ll have to see what takes place and go from there. gdxj weekly The monthly chart for the GDXJ shows the total history for this PM small cap index. You can see all the indicators are positive along with a positive divergence on the RSI indicator at the top of the chart. The GDXJ is really coming into its own as volume continues to grow exponentially. gdxj monthly 3333 These two very important PM stock indexes gives us a good feel for the precious metals complex as a whole. We have some really good lines in the sand to exit our positions if things don’t work out as expected. There are no absolutes in the markets so we have to go with the odds, and right now from a Chartolgy perspective, the odds are favoring a move higher in the intermediate term. So watch the necklines for major support and take it from there. All the best…Rambus

Weekend Report…An In-Depth Look at The Chartology of Gold

In this Weekend Report I would like to take an in depth look at gold as there could be some important developments taking place that didn’t show up until this weeks volatile swings. Keep in mind a week ago this particular pattern didn’t exist as there was no evidence in place to even speculate on what what I’m seeing right now. As you know things can change very fast in the markets especially when the volatility increases as we seen this week. One always has to keep an open mind and look at what the markets are giving us to work with.

With that said lets start by looking at daily line chart for gold that shows, after this weeks wild price swings, we maybe seeing a right shoulder being formed. What’s so important about the location of this possible H&S bottom is that it’s forming above the December inverse H&S bottom, which if our current H&S bottom plays out, it will give us a higher low and a higher high creating an uptrend. There is a technique I use, which I’ve shown you before, where I will extend the neckline to the right side of the chart far beyond the actual breakout. There is an old expression that a neckline never dies it just slowly fades away. Many times you will see an old neckline act as support long after you think it’s no longer relative. Here you can see how it has been working so far creating the bottom of the left shoulder, followed by a sharp break to form the head and then the rally back above the neckline extension rail which held support last week. As you can see the possible right shoulder is still in the early stage of development. I would really like to see some more work on the right shoulder but no closing price below the 1290 area. Just think of that neckline extension rail as a support and resistance line, below is bearish and above is bullish. If this possible H&S bottom plays out it will have a price objective up to around the 1450 area which would then give is a higher high vs the high made last August.

gold ddail line

Lets look at the same time frame using a bar chart with what I think are the most important moving averages for gold, the 50 dma, the 150 dma and the 300 dma. During last weeks volatility the 50 dma and the 150 dma held their ground while the 300 dma finally held its ground at the low last Friday. So we have three important averages holding support at the bottom of the right shoulder so far. One big down day can change all that but for right now we have to give the benefit of a doubt that they will hold until proven otherwise.

gold bar day

Along with the moving averages gold is also showing a fib 50% retrace that comes in also at the bottom of the right shoulder.

GOLD FIB

This next chart for gold is a long term daily look that shows our one year plus trading range which is hard to put a name on what type of pattern it will ultimately be. Most have been calling it a triangle which is still inconclusive as we don’t have four completed reversal points in place yet. For a long time everyone was calling it a double bottom which isn’t the case now. If the June low had made it all the way down to the bottom, at the December low, that would have completed the fourth reversal point and we could then call this one year trading range a triangle. We still wouldn’t know if it was a consolidation pattern to the downside or a reversal triangle to the upside until we seen how the price action interacted with the bottom blue rail. If the price action broke through the bottom rail this one year trading range would be a consolidation pattern to the downside. If the price action bounces off the bottom rail and rallied up to breakout above the top blue rail it would then have five reversal points and we could call the triangle a reversal pattern.

This is where it gets interesting. The December inverse H&S bottom and our current H&S bottom are exactly the same size if you measure from the bottom of the head to the right shoulder armpit. If our current H&S plays out the price action will have to break above the top rail of the possible blue triangle. As I showed you earlier the price objective for our current H&S bottom comes in around the 1450 area which is slightly higher than the previous high made back in August of 2013. If that were to occur we would then have a horizontal trading range which would look more like a rectangle than a triangle. The fourth reversal point is always the hardest to locate in real time. It’s easy in hindsight.

AAA RECT

I have never shown you this long term daily chart for gold as it’s not as pretty as I would like it to be. I can tell you that chartists are having a hard time trying to put a name on this one year plus trading range for gold as it doesn’t have all the characteristics in place to actually call it something yet.

As you know I’ve been labeling some of the precious metals stock indexes as having an inverse H&S bottom in place. As I showed you on the chart above it’s hard to put a name on this one year trading range so far. Many times the precious metals stock indexes and the precious metals will form very similar chart patterns and generally breakout about the same time. If we use our imagination I can see a double headed inverse H&S bottom that has been forming over the last year or so. There is some nice symmetry taking place where I added the neckline symmetry rail, where you take the neckline and move it down to the bottom of the left shoulder. It then projects to a possible bottom for the right shoulder if things progress that far, which they have. As you can see the June low hit the neckline symmetry rail dead on the money. Right now it looks like the neckline resistance will come in around the 1365 area which gold will have to overcome to enter into the next move higher. One step at a time.

I would like to make one last comment on this daily chart for gold that is showing a big divergence with the RSI and the bottom of the right shoulder. As you can see, the RSI at the top of the chart, bottomed at the December low along with gold. They both rallied up to the March highs where they both started to decline. The RSI declined and took out the December low while gold’s decline was very modest and made a much higher low than the December low, which so far is the bottom of the right shoulder. This is a big divergence to say the least. Time will tell how this plays out but gold will have a head start vs the RSI if it decides it wants to put on a decent rally phase.

gold inverse H&s bottom

Lets look at a few more charts for gold, in no particular order, that shows the longer term look at the bull market and some of the interesting chart patterns and moving averages that have played a key role during gold’s 14 year run. The 150 dma worked magic during gold’s bull run off the 2008 crash low. It also reversed its role to resistance several times during this bear market. Right now gold is trading back above the 150 dma which comes in at 1287 and is slowly starting to rise.

gold 150

Below is another daily chart that shows the important moving averages and what a true bull run will look like. Once a correction is over and the rally phase gets going these moving averages will start to aline themselves as shown by the rally off of the 2008 crash low to the top in 2011. You can see they also went into alinement during part of this bear phase gold has been in since 2011. What we see happening now is they are starting to squeeze together very tightly while gold is trading above all four moving averages. This is first time this has happened since late 2012.

gold many mo

This next chart for gold is a long term monthly look that shows the 10 month ema and how good of a job it has done during gold’s 14 year run showing both support and resistance. The only time it really failed on the upside is when gold had the 2008 crash and the top in 2011. You can see it has reversed its role to the downside and has held resistance since the second peak, top red arrow. Gold did manage to spike above it for a short time several months back but it couldn’t hold. Then last month gold actually closed above it ever so slightly, and as of today gold is trading about a dollar higher with two weeks to go yet for July.

gold 10 month ma

This next monthly chart for gold shows the bigger chart patterns that have formed during gold’s 14 year run. On the first chart in the post I showed you a small neckline extension rail that is helping to add support to the bottoms of the left and right shoulders. In this very long term monthly chart I’ve extended the neckline, that was part of the complex consolidation pattern, that was made back in 2008. It was made up of three different chart patterns with a H&S bottom being one of them. I drew in the neckline extension well over a year ago wondering how the price action was going to react to it. So far the neckline extension rail has reversed its role and has been acting as support for the last year and a half. I can’t tell you how important that neckline extension rail is because if it gets broken to the downside that’s when we get the flush to new lows. This chart also shows that when gold is in an impulse move up you will see a string of white candles form and just the opposite when gold is in an impulse move down, you will see a string of back candles. When you see a mix of black and white candles you know your in a trading range.

gold onthly trading range

I would like to show you one last long term monthly chart for gold that has all the chart patterns that I’ve followed through the years. I call this chart, JUST ANOTHER BRICK IN THE WALL, because it has to be one of the most beautiful bull markets in recorded history. I’ve said this before and I’ll say it again, they will look back at this gold bull market in the future and study it like we study the 1929 crash. From a Chartology perspective this is as good as it gets when you see one consolidation pattern form on top of the next, each one higher than the last. There are several bullish rising wedges that generally show up in strong bull markets. There was also a bullish expanded falling wedge that was one of the consolidation patterns made in 2008. As you can see the last chart pattern at the top of the chart is now three years in the making and is by far the biggest and longest running trading ranges for this bull market. It to is an expanding falling wedge. Is it going to be just another brick in the wall and lead gold to new all time highs or have we seen the end of gold’s bull market. Stay tuned as we follow the price action to where ever it leads us. All the best…Rambus

gold brick in thewal

PS: We’ll look at silver in depth in the Wednesday Report.

 

 

 

 

Very Late Friday Night Charts…Palladium ..The Leader of the PM Pack

Sometimes there just aren’t enough hours in the day to get everything done one wants to do.

Today I would like to look at Palladium as it has been the leader in the precious metals complex. When Palladium starts an impulse move up it usually wastes little time and rallies very strongly. Below is a weekly chart that shows the latest triangle consolidation with the breakout and the impulse move that has been in progress since the first of the year. Note the two parabolic moves with the first one starting at the 2008 low and ending at the first reversal point on the red 6 point triangle consolidation halfway pattern. After the red triangle finished building out, the second impulse move began that also went parabolic leaving the red triangle as a halfway pattern as measured by the blue arrows. It wouldn’t surprise me if the big blue triangle that Palladium just broke out of at the first of the year doesn’t workout as a halfway pattern starting at the 2008 crash low with the top at 850 being the first impulse move up.

PLADIUM

Below is a monthly chart for PALL that puts our blue triangle in perspective within the big picture. The all time high was made way back in 2000 along with the tech bubble and then crashed like just about everything else. PALL is now taking out the previous highs made back in 2010 and 2011 which is showing incredible strength when you compare where gold and silver are relative to their 2011 highs. At some point I expect PALL to start forming a possible halfway pattern after it move a little higher which we will then be able to fine tune a possible price objective. All the best…Rambus

PALL MONT

Wednesday Report…The Million DOLLAR Question…

Tonight I would like to take a look at the US dollar as its been showing a little strength lately. Over the last month or two I’ve been showing some commodities indexes that have been very weak which I think has to do with the strengthening US dollar. The move up in the US dollar hasn’t been that big yet but it could be in the beginning stages of a rally phase that could send this index higher. How high is anyone’s guess but any strength will have an impact on the commodities sector and possibly the precious metals complex. It has been awhile since we looked at the US dollar so lets take a look under the hood and see what we can make of the reserve currency.

The first chart I would like to show you is a long term daily chart we were watching very closely back in May of this year. At the time it looked like the US dollar was building out a massive H&S top formation. As you can see the neckline was broken to the downside but quickly reversed direction and rallied back up above the neckline. At the time I said that was probably a very bullish development. When you get a false breakout like that and the price action reverses quickly that is generally a sign of exhaustion. So far that has been the case.

us dollar H&S top

The daily dollar chart is really quite boring for the short term as there aren’t any good chart patterns to be seen at this time. The longer term daily chart does show a big horizontal trading range going all the way back to November of 2013 which corresponds with a similar sideways trading range for gold. It’s not perfect but you can see the inverse movements between the US dollar and Gold. If you look at the last month of trading for both the US dollar and gold, on the combo chart below, it’s very clear that they are moving in the opposite direction.

us dollar & Gold horizontal

This next chart for the US dollar I’ve been following for many years that shows a three year cycle low that comes in like clock work. It’s hard to believe that the next three year cycle low comes in on July 22 of this year. Please notice the three year cycle low in 2008 and 2011 which coincides pretty close to important tops in the PM sector and commodities. Are we going to experience the same thing again three years later from the 2011 cycle bottom? Also the US dollar is now trading above its 200 dma.  It’s something I’m keeping a very close eye on.

us dollar 3 year bottoms

If we’re going to look at the US dollar we need to take a close look at the XEU as the euro is the biggest component in a basket of stocks for the dollar. Unlike the daily chart for the US dollar, that doesn’t have a decent short term daily pattern in play, the euro does. Today it looks like the euro broke out of a H&S top with a small gap. This could be an important top that has just formed as I’ll show you in a bit as to why.

xeu day h&s top

Below is a very long term chart for the euro that shows two bearish rising wedges, one inside the other. Notice the last bar on this chart. It’s the same small gap that accompanied our little H&S top on the chart above. Now you can see why this is such a big deal. If the euro starts to drop precipitously it will have a positive affect on the US dollar which will have a negative impact on the commodities complex.

xeu risingwedges

This next chart I’ve overlaid the euro on top of gold so you can see the similar correlation. Again it’s not perfect by any means but it does give you a sense that when the euro is strong or weak so is gold. You can do the same thing with the other important currencies and get a similar result. Again something I’m keeping a close eye one.

xeu over gold

This last chart is a very long term monthly look that shows you just how precarious the situation is with the euro. I showed you a bearish rising wedge earlier in this post for the euro that just broke the bottom trendline today with a gap. This is the same bearish rising wedge only on the monthly look. You can”t see the gap on this chart but the daily chart does show it’s now breaking the bottom trendline. This could be a very big deal.

XEU LONG TERM RISINGWEDGE

Below is a very long term chart in which I’ve overlaid gold on top of the US dollar. This chart clearly shows you the inverse correlation over the long haul. It doesn’t feel like it but the inverse correlation has been pretty good since the commodities complex topped out in 2011 along with the US dollar bottoming about the same time.

gold and us dollor overlaids

Below is the CCI commodities index we’ve been following that has been showing weakness since the first of the year or so.

aa cci wee

CCI monthly look.

aa cci monthy

Lets take a quick look at copper as it’s one of the more important commodities to help give us direction. As you can see it has been building out a massive triangle pattern that started to form way back in 2011 when the commodities complex topped out. As you can see it’s testing the top rail which would be the 7th reversal point if it holds which would make this triangle a reversal pattern to the downside. On the other hand if it breaks out through the top rail that would be very bullish for the different economies of the world.

copper

The US dollar is at a critical juncture right here and now. Based on the XEU, which is just starting to break down, this would imply that the US dollar will show strength in the coming months. The weakness in the commodities complex has already shown up which is suggesting deflation is more pronounced than inflation at this moment. There are areas of strength in the commodities, such as the industrial metals, which have been doing pretty good, but other areas like the agricultural side of the commodities complex is doing very poorly. How will the precious metals complex fair is the million dollar question. Will they buck the trend and move to the beat of their own drummer? Looking back in hindsight we will know the answer to that question. Right now we have to be ever so vigilant looking for clues that may help us understand the answer to that million dollar question. All the best…Rambus

Wednesday Report…Precious Metals Miners The Beginning of the End !

I think today’s price action marks a very important confirmation point in the precious metals stock indexes, at least for the intermediate to longer term outlook. Finally, after a year of chopping around in small up and down moves, we are starting to get some confirmation that this one year trading range is indeed a reversal pattern and not a consolidation pattern. When a big patterns like this ends is when you get the big impulse moves which is where you make the real money.

As you have found out trading ranges can be very frustrating to trade especially when there is no real horizontal support and resistance rails. The inverse H&S bottom was hard to trade because there were many smaller moves within the one year trading range. There were also several patterns that failed to mature which also made it difficult to know if we were forming a consolidation pattern or reversal pattern. It always looks easy in hindsight but when you are living through one of these very large trading ranges it’s a totally different ballgame. Patterns can morph and grow larger than what one might have first anticipated on the front end. The name of the game is to protect ones capital and is one reason why we were in and out trying to catch part of the small moves inside the big one year trading range. Sometimes you win and sometimes you lose but preservation of capital will guarantee that you will be able to play the next impulse move when it finally arrives. We did that.

For those members that were with Rambus Chartology back in December of 2012 know what its like to ride an impulse move. It’s a totally different ball game vs consolidation trading. We did very little trading during that huge impulse move down holding on for dear life every time there was a counter trend rally. It would have been easy to sell out during those short term counter trend moves but we held on and captured the lions share of that big impulse move down. Now after a year of going nowhere it looks like we are on the cusp of another important impulse move, this time higher, which gives us many more options to trade with vs just going short.

If this is truly the beginning of a new impulse move higher the toughest thing you will face is the urge to sell out and take a small profit. I know folks are already looking for the exits because they have decent profit but one of the biggest lesson I’ve learned through the years is not to try and trade an impulse move. You will get your small profit but you will find it nearly impossible to get back in at a lower price than where you exited your initial position. It’s the nature of the impulse move to take as few investors for the ride as possible until you arrive at the end of the move.

The first chart I would like to show is the the Gold:XAU ratio chart that we’ve been following for years now. It still amazes me how far out of whack this ratio got. Just when you thought it couldn’t go any higher it did. Below is a weekly line chart that is finally showing us that the end is at hand and the XAU is now going to outperform gold, probably in a big way, revision back to the means. I’m using a line chart because it often times gives you an earlier confirmation than a bar chart. As you can see this ratio just broke the neckline of a one plus year H&S top that is now reversing the uptrend that has been in place since October of 2009. This is a big deal folks and it shouldn’t be taken lightly. This nearly five year uptrend, where gold has outperformed the XAU, is coming to an end. The precious metals stocks are now the place to be.

GOLD TO XAU

Below is a long term weekly chart for the HUI that shows the major uptrend channel beginning back in late 2000. This chart shows you what I mean when I talk about an impulse move. Note all the consolidation patterns that formed in the bull market from late 2000 to the 2008 H&S top. Each impulse move started with the last reversal point in each consolidation pattern. You can clearly see the different characteristics from the price action when the HUI was forming a consolidation pattern vs the price action, impulse move, when the consolidation pattern finished building out. The move between each consolidation pattern is an impulse move. That is where the big money is made. What generally happens is, if you caught part of the impulse move up and had a decent profit, you probably gave most of it back during the next consolidation pattern. Sound familiar.

hui upten.I have a lot of work to do tonight so I’m going to end it right here. Today was a very positive day for the precious metals stocks. If we are right then the beginning of the end is at hand. All the best…Rambus

 

 

 

Weekend Report…US Stock Markets Can’t Get No Respect ..BUT…

In this Weekend Report I’d like to show you some charts on the different US stock  markets and some of the stronger sectors within the US markets. It seems like no one believes this rally taking place in the US stock markets and many stock markets abroad. The mantra is we have to have a correction because markets can’t keep going up like this , which is true , but the stock markets will let us know when it’s time for a correction. Right now most of the charts are looking positive with no sign of a top in place yet. This could all change next week but right now things are looking much more bullish than bearish.

Lets start with the Dow Jones daily chart that shows us the price action has been chopping around in a 270 point trading range for the better part of June. We still don’t know if this pattern is going to be a rectangle consolidation pattern that will let the price action breakout to the upside or if it will be a double top reversing the uptrend. More time is need to see what the Dow wants to do.

DOW 60

Now lets put our little June trading range in perspective by looking at a daily chart to see how it fits into the bigger picture. What this daily chart shows us is that the Dow has been actually consolidating since the fist of the year. The possible little rectangle has formed as the backtest to the top blue rail of the rising wedge. What we don’t want to see is an end around the apex move as that would change everything in the short to probably intermediate term. So from my perspective a six month correction is enough time for the Dow to have another impulse move higher before it’s time for the next consolidation phase to begin as long as the apex isn’t violated. The trend is your friend.

dow rectangle

Now lets look a long term weekly chart that shows our latest consolidation pattern, at the top of the chart, as just another in a string of consolidation patterns that have formed since the low in 2011. As you can see the Dow is in backtest mode right now that needs to hold so the next leg up can begin. As you can see the Dow has been flirting with new highs for the last four weeks now.

dow weeekly

This last very long term monthly chart for the Dow shows how I’ve been following the price action for many years how. What is interesting about this chart is the blue bullish rising wedge that formed back in the rally phase from the 2002 low to the 2007 top. It formed exactly in the middle of that nearly five year cyclical bull market in both time and price as shown by the blue arrows and black rectangles. Now fast forward to the 2009 crash low and the rally phase that has ensued since. Some of our long term members may remember this chart when I posted it when the price action broke out of the blue bullish rising wedge. We got about three months of rally before the Dow started to form another rising pattern the little red rising bull flag. If you look at the price action from the 2009 crash low this monthly chart shows a rally that doesn’t want to quit. When I see chart patterns slopping up into an uptrend that tells me we are in a very strong market. Just the opposite in a down market when the consolidation patterns slope to the downside in the same direction of the downtrend. Until something changes this behavior we have to go with the trend, which is up until proven other wise.

down monthly

Back in May I showed you this morphing six point Diamond consolidation pattern on the SPX which so far has been working beautifully. Note how much stronger the SPX chart is compared to the Dow chart above. While the Dow has been building out a sideways trading range the SPX has been making a series of higher highs and higher lows since it broke out of its consolidation pattern. It’s showing relative strength to the Dow.

spx diamond

This next very long term monthly chart for the SPX I built many years ago. You can read what I wrote when we were still trading inside the massive flat top triangle consolidation pattern. At the time I didn’t know when the SPX would breakout or if it would ever breakout but as you can see it did in fact  breakout and hasn’t looked back since. June produced another new all time high regardless of all the reasons why it shouldn’t.

spx lng term very month

This last chart for the SPX shows you 74 years worth of trading. The reason I’m showing you this chart is so you can see how big the 13 year blue flat top triangle is relative to anything built in the last 74 years. Big consolidation patterns creates big moves.

spx 74

Lets take a quick look at the RUT that shows its correction since the first of the year was the blue bullish falling wedge. As you can see it just looks like another consolidation pattern in a long string of consolidation that have developed since the 2009 crash low. I would like to see the RUT take out the previous high to confirm the new move higher.

rut day

The NDX has been gaining back its strength since it had its correction this year that took on the form of the blue bullish expanding falling wedge. The NDX made a new multi year high last Friday that shows you strength not weakness. It still has some more work to do to breakout into new all time highs but it is getting there.

ndx 1000 biggest

Lets look at the long term monthly chart for the QQQ which is the etf for the NDX 100 biggest tech stocks. This chart shows some beautiful Chartology starting with its massive three year inverse H&S bottom with the head portion being the 2009 crash low. Note the bullish setup that occurred at the neckline where there was one consolidation pattern that formed below the neckline and then one that formed on top of the neckline. After breaking out from the blue bullish rising flag the price action as been rising steadily creating a new multi year high last week. From a Chartology perspective it’s hard to find anything bearish with this chart.

qqqq

Lets now look at several areas of the stock markets that have been doing exceptionally well. The fist sector I would like to show you is the DRG sector which is making new time highs. After breaking out from its massive blue bullish falling wedge it has been a straight shot to the upside. Whenever you see a nice neat consolidation pattern like this many times how a rally looked coming into the consolidation will look very similar when the price action leaves the consolidation pattern. Note how similar the move was leading into the bullish falling wedge and how similar the rally is since DRG broke out.

DRg

The BTK has been the strongest and the first sector to breakout and begin its new bull market back in early 2010. While most stock markets and different sectors really crashed in 2009 you can see it is hardly visible on the long term monthly chart. This is why it has been the leader during our current bull market.

btk

I had been watching the XOI build out that beautiful blue symmetrical triangle for literally years. As you can see it kept bouncing within the confines of the blue triangle with each reversal getting smaller and smaller. It was one of those big patterns that was hard to believe when it first broke out because of all the time and reversal points it took to finally complete the consolidation pattern. Now with the beauty of hindsight we can see the price action is starting to accelerate to the upside just as we should expect. As you can see it made a new all time high this month.

xoi

This last sector I would like to show you is the SOX which is not close to making new all time highs but it has just recently broken above horizontal resistance at 546. As with all the other sectors I showed, which all had massive consolidation patterns, the SOX also has its own 10 year bullish falling wedge. When you look at this chart it shows a good example of how markets work from a Chartology perspective on any time scale. There is an impulse move followed by a consolidation period followed by another impulse move. Rinse and Repeat until eventually the major move is finished and then what may look like another consolidation will actually be a reversal pattern. Then the same thing happens when the markets goes down.

sox

When I look at these massive consolidation patterns that have broken out, some years ago already, it’s hard for me to see a new secular bear market forming. Many have been claiming this rally off the 2009 crash low was nothing more than just a counter trend rally in the secular bear market. When you have stock markets and different sectors in the stock markets making new all time highs its hard to call it a top or bear market. Tops take time to form and with many stock markets making new all times highs it would still take a long time to build out a  major top. I’m just going to follow the price action and see where it takes me regardless of why the markets are not supposed to go higher.

There are many individual stocks in these strong sectors that one can find using a little Chartology. If you put in a little time and effort you will be surprised what you will come up with. It’s called doing your homework. You know what sectors are strong right now so those are the areas to focus your attention on.

All the best…Rambus

 

Wednesday Report…A Cold Hard Look at The Big Cap Precious Metals Charts

In tonight’s report I would like to take a good hard unbiased look at some of the big cap precious metals stocks that have been in rally mode since the first of June. This rally has been pretty impressive so far but is it the real thing? Last night I showed you some charts on the GDM going from the 60 minute short term look to a year and a half look that showed the two big patterns we have in place right now, the falling flag and the inverse H&S bottom. Tonight I would like to follow up with some big cap PM stocks, on the 60 minute chart and the bigger long term chart charts, that have their own respective year long trading ranges.

First lets look at the 60 minute chart of the GDM that I showed you last night that had a H&S top forming. Today GDM did some more work on the right shoulder that is making the H&S top a little more symmetrical now. Keep this H&S top in your mind when we look at some of the other big cap PM stocks in a bit.

gdm h7s top 60

Below is the 2 year weekly chart that shows the blue parallel downtrend channel that we’ve been following for some time now. These are the two chart patterns I’m going to show you tonight, the little H&S top on the 60 minute charts and this year long blue trading range on the longer term big cap PM charts. The combination of where these little H&S tops lie in regards to the top rail of these big one year trading ranges maybe be giving us a big clue that we are just at the top of this one year trading range that may continue for who knows how much longer. I do know everyone is super bullish right now on the precious metals complex so maybe now might be a good time to go against the crowd. After we look at some of the more important big cap precious stocks you can make up your own mind.

gdm weekly chart

First lets look at biggest of the big cap PM stocks ABX. This 2 hour chart shows a potential H&S top that has yet to break below the neckline. Keep in mind where this potential H&S top resides on the longer term chart following this short term look.

abx 2

Below is the daily chart for ABX that shows our little H&S top has formed just below the bottom rail of the big blue bearish rising wedge as a backtest so far.

abx daily

Now the weekly chart that shows our little H&S top forming at the bottom rail of the bearish rising wedge as the backtest. You can see how critical this area is right here on the biggest PM stock there is.

abx weekly

Lets now look at the star performer for this rally off the June low, RGLD.

rgld 2 hor

Below is a daily look at RGLD that shows it’s big one year trading range is a rising wedge formation. You can’t really see the small H&S top but it’s there just below the top rail at reversal point #4.

aaaa rgld

Below is a weekly chart that shows the rising wedge with our little H&S top forming just below the top blue rail at reversal point #4.

RGLD #2 WEEKLY

I have to show you the monthly chart for RGLD as it ties all the time frames together. As you can see this is the third backtest to the bottom rail of the long term black rising wedge. How critical is this backtest?

RGLD MONTHLY

FNV has been another high flyer during this June rally.

FNV 2 HOUR

The weekly chart of FNV looks a lot like RGLD that shows a very long term black uptrend channel and now another backtest from the underside making it the fourth now.

FNV WEEKLY

SLW has been another star performer during the June rally.

SLW 2 HOUR

SLW’s trading range has been a triangle formation. As you can see it had a false breakout of the bottom rail and then reversed direction and rallied all the way backup to the top blue rail.

SLW DAY

Below is the 2 hour chart for Randgold.

rgld 2 hor

Below is the daily chart that shows Randgold’s expanding triangle and our little H&S top at reversal point #4.

bbbbrand god

Randgold long term look.

zzzgold

Lets look at one more big cap PM stock GG and its 2 hour bar chart.

GG 2 HOUR

Below is a daily chart for GG that shows its black falling flag as its one year trading range.

gg falling flag

The weekly chart really puts the blue falling flag in perspective.

gg weekly new pattern

This last chart for GG shows its entire history going all the way back to 1994. You can see its classic bull market that ended with that massive H&S top.

gg monthly historw

This is where we stand tonight in regards to the big cap precious metals stocks. Keep in mind those little H&S tops, on the two hour charts, weren’t there two days ago. They started to show their self yesterday with some follow up work on the right shoulder today. They still haven’t broken down yet so they are still incomplete patterns. What I showed you tonight, on the bigger one year trading ranges, is the top rails are still hot and to be respected even though there were many different one year congestion zones. Nobody knows with 100% certain how things will evolve from here but there is a lot of evidence that this June rally could just be another reaction within the one year trading ranges exhibited by most of the PM stocks. We need to be prepared for whatever the markets throw our way. If these small H&S tops start to breakdown then we will need to act accordingly. The first thing will be to exit the Junior Portfolio stocks. The big cap precious metals stocks are truly at an inflection point right here and now in which we can take advantage of with just a little more information. Keep and open mind and lets see what kind of hand the markets deals us. All the best…Rambus

PS: Just so you know I’m not bias. Here is the possible inverse H&S bottom everyone and there brother is now seeing. May the best pattern win…

a gdm inverse h&s bottom