Weekend Report…Part Two…All Hail the King (Dollar)

In part two of this Weekend Report I want to take an indepth look at the US dollar as many of the important currencies of the world all seem to be making important moves right now. If that is true then the US dollar is also in the process of making an important move in the opposite direction.

Below is a long term monthly chart for the US dollar that shows black and white candlesticks. In a strong impulse move down you will see a string of back candles all in a row and in a strong impulse move up you will see a string of white candles all in a row. If the US dollar doesn’t crash and burn during this last week of trading for November, it will have completed it sixth month in a row of white candles sticks. This is telling us the breakout move from the massive ten year base is underway and is looking healthy. Remember big bases equals a big move and a small base equals a small move. It’s all relative.

us dollar candlsticks

The next long term chart for the US dollar is a monthly look going all the way back to 1984 which shows its all time high around 160 or so. As the US dollar declined from its all time highs it began to form a huge base which I labeled as, Big Base #1. When the dollar broke out of that big base #1 it led to a move to the 120 area in 2000 which started the bull market in the precious metals complex and the stock markets started their cyclical bear markets.  The move above the big base #1 S&R line, support and resistance line, lasted about three years. The US dollar built out a beautiful blue bullish rising wedge that formed at the halfway point to the 2000 top. The ride up wasn’t an easy one as you can see from all the chopping action during the formation of the blue rising wedge and this is a monthly chart. The big base #1 had two backtest to the S&R line before the impulse move really got going up to the 120 top. We have a well defined line in the sand now. As long as the US dollar trades above big base #2 S&R line it will remain in bullish mode.

us doolar fractal

Lets look at one more monthly chart that is a combo chart that has the US dollar on top and gold on the bottom. This chart shows a huge rounding bottom formation that began at the 2001 high. The red arrows shows the first positive for the US dollar vs gold. In 2008 the dollar bottomed and rallied while gold was building out its biggest consolidation pattern for the bull market up to that time. The divergence came in 2011 when gold made its all time high at 1920. One would have thought the dollar would have collapsed during that nearly parabolic run higher in gold but in fact the dollar made a higher low vs the 2008 low. That was a major divergence that told me the US dollar was finished with its bear market and gold was probably finished with its bull market which so far has been the case. As you can see on the gold chart it made a multi year low for the  month of November while the dollar made a new multi year high for November which is as it should be.

dollar roucndingbottom

Lets now zoom in to the current price action looking at the weekly chart. The dollar made a blue five point rectangle reversal pattern that kicked off the breakout move above the S&R line on big base #2. That move gained momentum as it reversed symmetry up through the same area it came down through in 2013. The initial impulse move up was so strong it broke above the brown shaded support and resistance zone before finally getting a chance for a backtest which was dead on the money. Since the backtest at 84.50 the dollar has been rallying very strongly. So far there is nothing not to like about this move.

doolar weekly

The daily chart for the US dollar shows all the small chart patterns that have formed since this impulse move began off the 5th reversal point on the rectangle reversal pattern. When the dollar had that false breakout of the bottom S&R zone, at the 5th reversal point, I added a note at the time that said, if this is indeed a false breakout we could look for a big move in the opposite direction. I wonder if anyone remembers that time. Back then the bars were much bigger compared to how they look now. As the dollar rises higher all the bars will look smaller and smaller. Note the small red rectangle at the top of the chart. Is this going to be just another consolidation pattern that breaks out to the upside or is it going to reverse the impulse move up that began at the 5th reversal point on the rectangle? At any rate the move from the 5th reversal point is what a strong impulse move looks like.

dollar day many differen chart pattesn

Below is another combo chart that has the US dollar on top and gold on the bottom. If you look to the right side of the chart you can see some inverse price action taking place. Note the dollar made the blue bull flag while gold made a blue bearish rising wedge. Now both the dollar and gold are locked into their current little red trading ranges that has yet to be decided which way the breakout will occur. I get the feeling that most are looking for the dollar to correct and gold to rally strongly higher. As always time will tell the story.

gold cmobo charr with 2 small patters

Below is the same combo chart but this one goes back further in time and shows the blue 18 month triangle on gold. I don’t have to tell you how critical this area is for gold and the US dollar for that matter.

a gold and dooar long

Now I want to get on to the main theme of this US dollar post which is looking at the shorter term daily charts. As I showed you in part #1 of the Weekend Report, many of the important currencies of the world were forming potential bearish falling wedges on their daily charts. If that’s the case then the US dollar should be forming a similar pattern only in the opposite direction. Lets start with the daily chart for the US dollar that Ive been showing you for several  weeks or so that shows two small consolidation patterns forming one on top of the other. The lower pattern, the blue falling bull flag, is your topical bull flag that is sloping against the uptrend.  As you can see it failed to deliver on the price objective, up to the 91 area, before we seen another consolidation pattern forming the possible blue rectangle. This is now setting up the possibility that the US dollar is building out a bullish rising wedge pattern that will slope up in the direction of the uptrend.

a brone fractlat

Now lets put on the upper and lower trendlines connecting these two small chart patterns and see what we get. You can defiantly see a rising wedge taking shape. Keep in mind the rising wedge won’t be complete until the price action breaks above the top rail so it’s still a work in progress. If the rising wedge does breakout to the upside we’ll have a very big clue that this impulse move up is only halfway through and we can expect a similar move that led up to the first reversal point in the rising wedge. Note the two smaller red consolidation patterns that are slopping up into the uptrend.

a bullsig rising wedge us doallar

There is an old adage on Wall Street that says if you see the US dollar and the stock market rising together that is bullish for the stock market because capital from overseas is finding its way to the US markets. Since the October low both the US dollar and the SPX have been rising together. Coincidence?

a conincedence

A perfect example of this happening was back in the mid 1990’s when the US stock markets were in the parabolic phases of their bull markets that actually started in 1995. The dollar and the SPX both topped out fairly close to each other in 2000. This is the point that set the stage for gold’s bull market to begin.

B dollar spx 1994

There is one more thing I would like to show you on what I think is happening with the US dollar right now. I don’t think anyone has picked up on this potential development yet. When a trend changes from from down to up there is usually a lot of chopping action at the bottom followed by the initial rally off of that bottom. During that initial rally phase a trend channel can form that defines the new uptrend. On the dollar chart below you can see a clear trend channel that has been forming since the bottom in April of 2011. As of the close on Friday the price action close right at the top of the channel. This is the point I want to try and tie everything together and show how the potential bullish rising wedge is so important to the big picture right now. Where it’s forming is critical which is just below, what I’m going to call the mid line of the new uptrend channel. Many times when a new trend is reversing from down to up, which is the case for the US dollar right now, the initial move up is huge which doubles the lower channel. As you can see on the chart below the dollar is sitting right at the mid line. If I’m correct we should see the bullish rising wedge breakout to the upside taking out the mid line of the brand new uptrend channel for the US dollar. This initial move up will be fast and furious equal to the first leg up off of the April low. The blue rectangles are what I call measuring sticks that measure each half of the new uptrend channel. The black arrows shows the last impulse move down into the ultimate bottom in April of 2011. I think we are going to reverse symmetry that move down into the 2011 low with our current rally phase capturing half of that move already.

B MAJOR UPTREND CHANNEL ON THEDAY

Below is a 15 year chart for the US dollar that shows the possible brand new uptrend channel. If the bullish rising wedge plays out it will give the dollar the energy to take out the mid line and rally all the way up to the top rail of the new uptrend channel unimpeded pretty much.

b majjr upthrend channel eeeeeeeeee

Lets look at one last chart where I overlaid gold on top of the US dollar chart. I try to show this chart at least once a month or so because it has been spot on since I began posting several years ago. About six months or so ago I put a thin black dashed line on the gold chart and the dollar chart with the two blue arrows. When I first posted this chart, with the blue arrows, the dollar was trading below the thin dashed line and gold was trading above its thin dashed line. Now you can see how the dollar has broken out above its thin dashed line, had a backtest and is now set to run freely to the upside for awhile. On the gold chart you can see it’s still testing the breakout point which isn’t giving us any indication of the impulse move down yet. I moved the purple circle from the crossover area that happened in 2006 to the right side of the chart. If I’m right on the direction of the US dollar and gold then I think there is a good chance that we’ll see these two cross over again in due time.

aaa gold and dollaor combo 999999

So there you have it. The next couple of weeks are going to be very telling on which way all the falling wedges I showed you are going to break. Time always tells the story in hindsight but we can’t use hindsight in trading the markets. So until something changes this is how I see the big picture unfolding over the short to long term for the US dollar. How this affects other areas of the markets will remain to be seen yet. Normally a strong dollar is bad for commodities and the precious metals complex.  Will this time be any different. Stay tuned to find out. All the best…Rambus

 

 

Wednesday Report…THE JAWS OF LIFE..

There seems to be a lot of confusion out there as to whether the stock markets are bullish or bearish. Is the Dow Jones in a topping pattern as so many analysis are suggesting? I’ve seen some charts that are calling the big trading range , on the Dow Jones going all the way back to the 2000 bull market top, THE JAWS OF DEATH. Man it doesn’t get anymore dire than that. As usual I have a different take on the JAWS OF DEATH, which I would like to share with you  tonight .

Before we look at the first chart for the Dow Jones I need you to clear your mind of everything related to the stock markets in any shape or form. That means no Elliot Wave counts, Time Cycles, Gann Lines , volume studies, no indicators of any kind. Clear your mind of every article you’ve ever read on the stock markets, bullish or bearish. And last of all, NO CHARTOLOGY. I want you to look at just the pure price action without any bias whatsoever. From that point we can then start to see what is really happening to the Dow Jones and related markets .

This first chart is a long term monthly look at the Dow going back to 1997 with no annotations or indicators of any kind, just pure price action. When you look at this chart for the Dow I want you to look at the very last bar on the top right hand side of  the chart. As you can see the Dow is making new, ALL TIME HIGHS, for the month of November. Folks this is not what a top or bear market looks like. This is as bullish a chart you will find anywhere. Regardless of all the reasons why the Dow should be topping or is going into a bear market simply don’t add up . Again look at the last bar on the top right hand side of the chart.

dow no annotaiton

Now that you can see what I’m seeing lets put some Chartology on this chart and see what it looks like. If you prefer you can put on your own trading discipline and see what you come up with. One of the basic principals of charting is what the the definition of an uptrend or down trend is. An uptrend consists of higher lows and higher highs while a downtrend makes lower lows and lower highs. This is a simple concept to understand. On this monthly chart below I’ve added all the chart patterns, as I’ve seen them form through the years.

Lets start at the 2009 crash low that ended on a massive capitulation spike in volume. Who could have ever guessed that five years later the Dow would be making record highs in 2014. I remember the 2009 low very well, the world as we knew it was coming to an end. That has stuck with investors all these years and makes them fearful every time the Dow has a decent rally. In reality, the real world, nothing could be further from the truth over the last five years. The old saying, the stock markets like to climb a wall of worry, pertains perfectly in this case.

Getting back to what a basic uptrend is,  you can see the Dow has fulfilled this requirement to a Tee. Higher highs and higher lows all the way up. Start at the 2009 crash low and follow the price action all the way up to our most recent high. I have said many times that gold’s bull market produced some of the best chart patterns I’ve ever seen in a bull market but the Dow is quickly catching up in that department. Once again notice the last bar on the top right hand side of the chart.

dow monthl many patterns

The next chart shows you what most chartists are calling the JAWS OF DEATH. From a Chartology perspective this is classic price action. Any trendline you put on a chart is either a support or resistance line. When the price is trading above a trendline it will act as support when touched from the top side and when the price action is trading below a trendline it will act as resistance. Eventually one of the trendlines will fail and that’s when you get your breakout.

If you look at a triangle consolidation pattern the top rail is resistance and the bottom rail is support. The price action trades between the two rails until either the bulls or the bears win out. In a bull market the bulls usually win the battle and in bear markets the bears usually win out. Looking at the chart below you can see it took six months of chopping action below the top rail of the Jaws of Life consolidation pattern before the Dow was able to overcome that strong resistance rail, as shown by the BO (Break Out) annotation. The Dow then spent about a year trading above that, what had been a resistance rail, to now a support rail. This is a perfect example of what happens when, in this case, the bulls win the battle, resistance turns into support. Note the two backtests, BT, that touched the top rail of the Jaws of Life from the topside.

You may recall last month when the markets were having a tough time of it and everyone was talking bear market. Note where the October low hit. Dead on the top rail of the Jaws of Life.   …Let that sink in for a moment….

Dead On !

A rapid waterfall 10% move to precisely the breakout point . Mr. Market was just checking back from above .At Rambus Chartology we were hoping and waiting for a chance to get on board . But we had to be nimble. Mr. Market did not hang around for a millisecond, in the grand scheme of things . A small head and shoulders pattern on the minute charts was the only signal he gave and fortunately we pounced on it in our General Market Leveraged ETF Trading Portfolio .

This tells us that is one hot rail to be respected. It’s very simple. Above that top rail is bullish and below is bearish. Until that top rail of the Jaws of Life pattern is broken to the downside, one has to be bullish on the longer term time frame, as this massive 14 year consolidation pattern is just breaking out. Well its been breaking out for a year now but it looks like all the work is done and the next big impulse move up is ahead of us. Again notice the last bar on the top right hand side of the chart.

jaws of live

A 75 YEAR BULL MARKET ?  ARE YOU SERIOUS ?

Yes Virginia I am .

Next lets put our Jaws of Life in perspective by looking at a 75 year chart for the Dow Jones. I know some of our older members will remember the 1970’s period when it looked like the world was coming to an end with inflation and rising interest rates going through the roof. That period on the chart carved out a massive H&S consolation pattern complete with a breakout and backtest before the bull market of a lifetime began. You can see our Jaws of Life consolidation pattern that is just breaking out at the top of the chart. Are we at the equivalent in time to the 1982 period for the Dow Jones? Few believed back in 1982 that a bull market was just getting started. It really wasn’t until the mid 90’s that everyone finally figured it out which led to the parabolic blow off. Followed by our just completed 14 year Jaws of Life consolidation .

dow massive

Lets look at the Dow’s Little brother , the SPX. As you can see the SPX has already broken out of its massive flat top triangle , almost two years ago already!  If you focus in on the breakout area you will see there was one quick backtest shortly after the breakout and the SPX hasn’t looked back since.

spx jaw sof live

Lets look at the 30 year chart for the SPX that shows the beautiful flat top triangle consolidation pattern with four complete reversal points. If you compare our current price action, since the 2009 crash low to the bull market rally back in the 80’s and 90’s, separated buy the red bullish rising wedge, you can see the price action just seems to keep rising relentlessly with only small corrections along the way, leaving many retail investors staring from the sidelines in awe !

SPX 555555

Looking at the 75 year chart for the SPX you can see how our current flat top triangle fits into the big picture. As in any time frame an uptrend is a series of higher highs and higher lows. For the most part we can call this a massive 75 year uptrend.

spc massive

Lets look at one last chart which will be for the RUSSEL 2000 small cap stock index. It to has broken out above its top rail of a 14 year expanding flat bottom triangle and is still in the process of the backtesting the top rail from above.

rsssel massenv

As these charts above show we’re at an interesting juncture right now in regards to the stock markets. If one has the discipline and courage to buy the strongest stocks or etfs and hold them for several years or longer they will be well rewarded for their efforts in the future in my opinion. I can tell you it’s never easy to hold on during a bull market as every little correction will seem like the next bear market is beginning. There were some outrages profits made during that last secular bull market in the 80’s and 90’s for those that bought the right stocks, especially in the tech sector, and held on for the ride of a life time. No one knows how long our current five year bull market will go on but by the looks of those really big consolidation pattens, that I showed you above, it’s not going to be a flash in the pan type of move. The bigger the consolidation pattern the bigger the move that follows.

I want to leave you with one last long term chart for the BTK (Biotec Index) that has been the leader in this bull market and has a similar big blue consolidation pattern to the ones I just showed you above. I expect the Dow Jones and the other US stock markets will have a similar look when they really get going. Will you be watching or Participating ?

All the best…Rambus

btk

PS: Tomorrow I will show you some charts on some of the Kamikaze Stocks  that you haven’t seen yet. These are fresh out of the oven…

What Is Rambus Chartology all about ?

Hello :

For new members and trial members who don’t know I am Gary (aka Fullgoldcrown)

Resume :

Former Gold Permabull ..then after having my crown handed to me by Mr Gold Market

Converted  Rambus Student ( Dave calls me his first and most difficult student)

Rambus Chartology Editor

and

Town Crier / Class Clown .

I would like to take this opportunity to review Rambus Chartology and explain what our site is all about .:

Rambus (Dave Tablish from Northern Arkansas) has been a Market Technical Analyst since long before it became fashionable and easy with the advent of computers .

He started out when he came across the original work of Edwards and Magee in “Technical Analysis of Stock Trends” originally published in 1948 and started applying it with  pencil and ruler  protractor and graph paper over 30 years ago .

Sixty-three years. Sixty-three years and Technical Analysis of Stock Trends still towers over the discipline of technical analysis like a mighty redwood. Originally published in 1948 and now in its Tenth Edition, this book remains the original and most important work on this topic. The book contains more than dry chart patterns, it passes down accumulated experience and wisdom from Dow to Schabacker, to Edwards, and to Magee, and has been modernized by W.H.C. Bassetti.

Bassetti, a client, friend, and student of John Magee, one of the original authors, has converted the material on the craft of manual charting with TEKNIPLAT chart paper to modern computer software methods. In actuality, none of Magee’s concepts have proven invalid and some of his work predated modern concepts such as beta and volatility. In addition, Magee described a trend-following procedure that is so simple and so elegant that Bassetti has adapted it to enable the general investor to use it .

……………………………………..

Rambus learned the only way , from the school of hard knocks ,from trial and error , and more error and losses. But his fascination with the incredible symmetry of chart patterns and his never quit attitude convinced him to stick with it .Technical Analysis became his passion . Over the years he refined his skills and added many of his own observations from his real time charting and trading. Many of these insights can be found in the section on the sidebar of Rambus Chartology called ‘Timeless Tutorials”

Dave finally hit the jackpot in the late 1990s teck mania blowoff when he attached himself to the stock RMBS and traded it all the way to the incredible top. Then spotting a tiny head and shoulders top he exited and left that market to build his dreams .

Hence in about 2006 when Dave started posting his original charts at Goldtent  ( a site where rabid goldbugs like myself inhabited) he took on the moniker “Rambus”

After a short hiatus from the Markets in 2000 (Rambus has always told me that when you make a good score in the markets its best to take much of your winnings out and use them for other purposes lest you give them all back) , Dave returned to his charting and identified what appeared to be a 5 year bottoming pattern in the Gold Market

In about 2002 he started to study and learn everything he could about this horribly beaten down and forgotten market . He familiarized himself with the Metals and the Miners both individually and via the Mining Indices . he was immediately  very impressed that the PM markets held some of the most pure and beautiful symmetrical patterns and he quickly became hooked .

He traded the PMs from the long side in quiet obscurity for several years before he found Goldtent and started to contribute posts. We were in awe of his work .

Rambus charts predicted more and more upside all through 2006-7 and into 2008. Nothing but Bullishness as far as the eye could see. Consolidation Patters always broke out to the upside . he was a hero to us goldbugs . Until that fateful post one fine day in mid 2008. he called his post “What If ? ”

I attempted to save all the goldtent posts from that era but many are now dead links.However here is the post I put together in December 2011 called “Deja Vu” which contains some the charts from the 2008 era .Wow. Notice the WTIC call too .

http://rambus1.com/?p=1829

Rambus located this chart which was posted on New Years Eve 2008 which chronicles his calls from that incredible era in the PM markets .

hui2008

Well: That was then and this is Now . And here we are again.

Here are some more recent  charts in  which Rambus Projected  the present PM carnage as long as 2 years ago.

This chart produced Feb 15 2013 , shows how the HUI top was actually predicted by the price objective contained in the 6 year head and Shoulders bottoming pattern from 1997 to 2003 . Incredible Chartology  .

huibull

BUT how did Chartology do in forecasting this present Bear Market ? Well for one thing look at that chart above and see the impending Head and Shoulders TOP !

Wouldn’t you have loved to have seen that Top back the in Feb 2013 ? What would you have done differently ?

Here is the Rambus Comment from the post of this work

“The Chartology of the entire chart is one of beauty and symmetry which some will see and others won’t. They say beauty is in the eye of the beholder. What do you see?”

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Actually Rambus Produced a Chart called “A Diamond in the Rough” on New Years Eve 2012 which preceded the above chart and was the first warning of impending doom .

diamond in the rough

Diabolically  this breakout was followed by a huge bull trap rally back to retest the diamond and that formed the right shoulder of the Huge head and Shoulder pattern which proved to be the Top

Fast Forward February 22 2013

“Lets look at one more example that you won’t find anywhere else except here at Rambus Chartology. You can see two reversal patterns, the 11 point Diamond that is actually the head portion of the much bigger H&S top that few believe is for real. The other pattern is the massive H&S top. Its good that few believe this pattern is authentic because everyone can’t exit at the same time. The lower it goes the more people will begin to understand what is actually happening but it will be too late to take action and they will most likely ride the whole thing down or sell into any counter trend rally that will occur thus putting a ceiling above the price action. I hope these examples help you understand what I mean when I talk about odd and even numbered chart patterns.”

All the best

Rambus

Chart 3: Nervous Breakdown !

hui nervous

Here is a Call on Silver (via SLV) that I couldn’t believe at the time .”SLV BLUE DIAMOND”

diamond

Followed soon after by “SLV RED DIAMOND”

diamond2

See that PO ?  Of the Red Diamond  ?  Made 1 year ago …14.50 !!… Which is exactly where SLV has bottomed to date . Yikes !

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OK : The real point of this post is to Explain this Rambus Chartology Website .

On a day to day basis we all of course focus on the daily and minute charts as that is where the rubber meets the road. However we feel that Rambus best value is in identifying major trends and major trend reversals .As you all know identifying trends and profiting from them in real time are two different animals .This is what Rambus attempts to do in his daily realtime market commentaries.

Rambus Chartology is First and Foremost a teaching site. The greatest value of this site is learning Chartology ( a blend of Chart pattern recognition with Market Psychology). The aforementioned “Timeless Tutorials” as well as “The Wizard of Rambus” are the places to go for this.

We realize that not everyone is inclined to learn Technical Analysis and that many come here to see how Rambus is trading the various markets in the desire to trade with him.

For you ,as you know Rambus is not a Certified Financial Planner and he trades his own portfolios (see the obligatory disclaimer)

He has  4  Virtual Portfolios on this website (Rambus also trades his own personal portfolio with  the same trades)

The Most widely followed Portfolio is the Kamikazi Portfolio.

Rambus recommends you put a maximum of 5% of your risk capital in these trades. To say they are volatile is an understatement.Recently a 200% profit in 3 weeks has vaporized.

http://rambus1.com/?p=14865

His other Portfolios are The Junior and Model Portfolios which were originally meant to hold PM Miners in Bull Mode but which now have various other trades.

AND

The new (from May 2014) General Market Leveraged Portfolio which trades 3X ETFs on selected market sectors.

http://rambus1.com/?page_id=23371

In Summary Rambus would like each an every one of his members to learn and be able to utilize the principles of this incredible Market Forecasting Discipline .

In closing here is a response to a member who asked probably the most important question of all .

Why do charts work  ?

…………………

“Hi its Fullgoldcrown here

In case Rambus misses this question I will answer it as I know he would .

……………………………….

Simply because Human Nature is predictable .  Market Participants are all motivated to act by the basic emotions of Fear and Greed.  Charts are the sum total of the opinions of Market Participants. Rambus favorite expression of this is “Its All in the Charts”. What he means is …we can never really Know the fundamentals and how they will play out .We will never really know the extent of Manipulations .We will never really Know Sentiment…or Seasonal Effects or anything in real time. What we think we know about all these things is just our speculation

What’s that brilliant quote again ..? “Its not what we don’t know that gets us in to trouble It’s what we think we know that isn’t so”

The real drivers of the markets are in sum total only knowable by reading the charts . We can all see the history of the price action by viewing a chart .

Where Rambus is Invaluable is his ability to read the language of the markets through its Price Action .

OK Now

One Of My Personal Favorites where in March 2013 Rambus Posted

“Dollar Bears Prepare to Hibernate”

(be sure to read the last 2 charts )

http://rambus1.com/?p=11237

 

……………………………

Years of Study and Experience , a Gift for Pattern recognition and a touch of Intuition

I doubt that we will ever see Rambus’ equal .

But of course I am Biased

:)

Fully

 

 

 

 

 

Wednesday Report…Gold’s Smoking Gun

Tonight I want to explore the relationship between the US dollar, the Japaneses Yen and gold. Most investors know that a rising US dollar is usually a bad sign for commodities and the precious metals complex. When the US dollar is falling commodities and the precious metals complex usually do pretty well. When the US dollar topped out in 2000 that’s when gold and commodities started their bull markets that lasted until 2011. Since that time the US dollar has been slowly trending higher while most commodities and the precious metals complex have been moving lower. This long term monthly chart for the US dollar shows you the high in 2000 which marked the beginning of gold’s bull market. At the bottom left hand side of the chart, in big base #2, point #4 marks the high for gold’s bull market. Since that low at point #4 you can see how the US dollar has been slowly rising since 2011 which was the peak for gold and most commodities. One last note on the chart below. The US dollar is now in its third month of a breakout move from big base #2 which is a fractal of big base #1. If you’ve been wondering why the US dollar has been so strong lately it’s because it’s in breakout mode. This is what a breakout looks and feels like.

us dollar long term month wede

Below is a beautiful long term monthly chart for the CCI ( Continuous Commodity ) Index that that shows its bull market that started with the massive three year double bottom. The Chartology on this chart is truly amazing as it shows you what a true bull market looks like. When you see consolidation patterns that slope up in the same direction as the major trend, in this case a bull market, that is the market talking to you. It’s the market saying, I want to go higher and in a big way. Normally a corrective pattern, such as a bull flag or wedge will slope against the main trend which is the way most chartists learn from the books they study. Sometimes everything about charting isn’t in the books but is learned from many years of drawing lines on a chart in every conceivable market condition. Note the top in 2001 which coincides with the top in the US dollar on the chart above. I showed you on the US dollar chart above it’s in its 3rd month of breaking out of big base #2. The CCI chart below shows it too is in its 3rd month of breaking out from its big blue triangle consolidation pattern. Coincidence?

cci 1

Lets now look at a long term monthly chart for gold that shows its bull market that started out with a three year double bottom reversal pattern just like the CCI index. You can see several bullish rising wedges that were telling the story of gold’s bull market move. Again, like the CCI index, gold also topped out in 2011 and has been in a bear market ever since. Unlike the US dollar and the CCI index, gold is only in its second month of a breakout move to the downside. Most folks can’t or won’t acknowledge that massive H&S topping pattern that extends all the way back to the left shoulder, which is the red bullish rising wedge which formed in 2010. The big neckline is taken from the 2008 crash low H&S consolidation pattern where I extended the neckline all the way to the right side of the chart more than a year ago. The top of the right shoulder is taken from moving the neckline up to the top of the left shoulder that often times gives you the height for the right shoulder. As you can see the neckline symmetry rail nailed the height for the right shoulder. After a very long wait the breakout in now coming to fruition.

gold montly

This next chart is a long term weekly look at the Japaneses Yen that shows a  massive double H&S top pattern with a small H&S top that is actually just the head part of the much bigger six year H&S top. We’ve been watching this chart with great interest for several years now watching the blue bearish falling wedge mature as the right shoulder. The green circle shows you the breakout and backtesting process to the big neckline, that we watched play out in real time. The big patterns always take longer than you think to play out but it was well worth it, seeing the full breakout and backtest completing and now the impulse move lower. All the work is finished now except to watch the impulse move lower.

xjy h&s top

Now on to the smoking gun. We’ve been watching the US dollar to the Yen ratio chart that has given us guidance as to the direction for gold. When the ratio is rising gold is generally falling and visa versa. It’s not absolutely perfect but close enough that you don’t want to bet against it. Below is a daily line chart that shows the USD:XJY which is going nearly vertical. This means the US dollar is outperforming the YEN in a big way.

dolalr yen da ratio

Below is a long term monthly look that goes all the way back to the beginning of gold’s bull market that started in 2001. As you can see the ratio fell for most of gold’s bull market except for the occasional consolidation period. Note where this ratio bottomed out, does 2011 ring a bell? From that low the ratio has been steadily rising and gold has been heading in a southerly direction.

monthly ratio

In analyzing the markets one needs to become a private investigator and try to get all the clues you can find to make a case before it goes to court or in the markets case, to buy or sell. This next chart is a combo chart that has the USD:XJY ratio chart on top and gold on the bottom. At first glance it doesn’t look like anything special but that is not the case. When we compare the ratio chart to gold we find some interesting things. The two red arrows shows where the ratio chart bottomed out and gold topped out. At the time you wouldn’t have known that this was the end of gold’s bull market but maybe a correction of some kind might develop.

This is where it gets really interesting folks. Note the massive inverse H&S bottom that the ratio chart built out over two years while gold was consolidating it’s gains from the near parabolic run it had into the 2011 high. Note that the massive inverse H&S bottom that broke out in November of 2012 while gold was still in its rectangle consolidation pattern. There was about a 5 month lag time before gold finally broke out of its massive rectangle consolidation pattern. Even though gold was moving lower it still hadn’t broken out of its consolidation pattern. The ratio chart on top was telling us to expect gold to breakdown a full five months before it actually did.

Now using the same principal lets look at our current setup in both the ratio chart and gold. As you can see the ratio chart on top broke out of its blue triangle back in August of this year while gold was still in its own blue triangle consolidation pattern. The ratio chart was giving us a big heads up to expect gold to eventually breakout to the downside out of its blue triangle. It’s only November but you can see on this weekly line chart that gold has indeed broken down and has shown a small backtest to the bottom blue rail. You can see gold started falling once the blue triangle brokekout on the ratio chart. It wasn’t until just about two weeks ago that gold actually broke out of its blue consolidation pattern.

a ration chart

Lets look at one last combo chart for the ratio and gold that is a long term monthly look. Notice how the ratio fell during the bull market years as gold rallied. What’s interesting here is that gold was leading the ratio by about five months or so. When gold broke out of its blue bullish expanding falling wedge the ratio chart on top was still working on building out its blue bear flag. Now lets look at the center of the chart that shows the USD:XJY ratio chart building out a massive inverse H&S bottoming pattern. If you knew then what we know now you would have been selling out all your gold and gold stocks when you seen the inverse H&S bottom breaking up and through the neckline. Again on this monthly chart the ratio broke out in October of 2012 while gold didn’t actually breakout from its massive rectangle consolidation pattern until that infamous day in April of 2013. You can see gold did start to drop when the ratio broke out above the neckline but you had about 5 or 6 more months to get ready for the real breakout that was coming in April. Now lets look at our current situation. As you can see the ratio broke out in August of this year telling us that gold was going to break down form its blue triangle. It was only a matter of time. The ratio chart is calling for a breakout of gold’s consolidation pattern come January of 2015. As subscribers of Rambus Chartology already know the breakout is already underway in gold. The ratio chart on top gave us an early heads up on what to expect going forward with gold.

A GOLD MONTHLY ARIOT

By putting all the pieces of the puzzle together we have a working model that will tell us how much time we have before gold makes a big move down. If you’re not prepared for the next decline in gold I wish you all the luck in the world as this next decline is set up to be just as painful if not more so than the April of 2013 crash that caught many of the gold investors off guard. All the best…
Rambus

 

 

Rambus Kamikazi Trade …Born Oct 15 2014… Died Nov 7 2014…RIP

CLICK TO ENLARGE

KAMIKAZI GAINS

In Round numbers

$100,000 Gain on a $300,000  3 Week Trade  =33%

and yes Virginia the Trade was up over $300,000 at its peak = 100%

When all is said and done and the DUST settles

THIS WAS A DREAM TRADE WITH A NIGHTMARE FINISH

AND YET $100,00 GAIN

Presently the Kamikazi PF is up 305% since August 1 2012

from $100,000 to $405,000

Target $1,000,000 .

Stay tuned .

Here Ye Hear Ye ..A Blast from the Recent Past

For those new members who likely arrived after this October 2nd Weekend Report

This is a Plethora of Monthly PM Miner Charts that Rambus Posted in preparation for what has transpired the last couple of days in the PM Markets . I think If you study these charts and then compare some of them to todays charts it would be a very constructive exercise .

.This is a Teaching Site first and foremost .We love nothing better than to hear stories from members who have embraced Chartology and improved their trading success as a result .

For those serious students we recommend reviewing the many posts at the Timeless Tutorial section of the right sidebar. Scroll Down .

Fullgoldcrown (town crier)

And Now Professor Rambus … Weekend Report..October 2  entitled

PRECIOUS METALS STOCKS…TURNING TO DUST

 

Last night I promised you I would post a bunch of monthly charts for the precious metals stocks that will show their monthly closing price and percentage loss for September. I think you will be surprised at some of the percentage losses that some of the big caps had as the decline has been kind of stealthy.

We took our first round of buys for the Kamikaze Portfolio on September 4th four days into September. When you finish looking at all these monthly charts I’m going to show you, go to the Kamikaze Portfolio Tracker on the sidebar, and see difference one month can make in a portfolio. I can only imagine the pain some of the staunch gold bugs are starting to feel because of their belief that gold can only go up and if it goes down it’s manipulation.

These chart will also show you why I have the confidence to be fully invested in the Kamikaze Portfolio at this time. If one only looks at the PM stock indexes and not at the individual stocks that makeup the indexes you’re missing a very important part of the processes in determining which direction the big trend is. As I showed you in last nights report the big trend is down in the precious metals complex regardless all the fundamental reasons why it should be up.

The charts you are about to see will show you the truth of what is really happening in the Precious metals complex based on Chartology and nothing more. Just look up to top right hand corner of each chart to see what they did for the month of September. These charts are pretty self explanatory so I will just post the charts without any commentary unless I see something that might be interesting.

abx monthly

aem monthly

asa monthly

au monthly

auy monthly

cde montly

GFI MONTHLY

GG MONTHLY

NEM MONTHLY

NGD MONTHLY

PAAS MONTHLY

RGLD MONTHLY

sa monthly

sand monthly

SLW MONTHLY

SSRI MONTHLYL

hui monthly

GDX MONTHLY

gdm monthly

GDXJ MONTHLY

xau monthly

gold monthly

silver monthly

Now the 3 X short the precious metals complex stocks.

dgld monthly

DSLV MONTHLY

jdst monthly

The grand prize winner for the month of September. All the best…Rambus

DUST MONTHLY

All the best

Rambus

 

XJY Update…A Yen For Precious Metals

Below is the daily chart for the yen we’ve been following with great interest regarding the movements in the precious metals complex. I want to focus in on the price action within the green circle. After breaking down from the massive H&S neckline the yen found about 3 days of support on the bottom rail of the black bearish falling wedge before it fell to the October low. From the October low the yen started its counter trend rally that would backtest either the bottom rail of the bearish falling wedge or the much bigger and stronger neckline of the massive H&S top. As it turned out the backtest to place at the neckline and then reversed back down just as you would expect. Note how the price action gapped below the bottom rail of the black falling wedge and has been backtesting it for the last three days or so. It now looks like the backtest is completing and the real move down maybe just getting started. Confirmation will be when we see the yen take out the October lows.

yen day

The yen’s massive H&S top.

yen h&s top weekly

When I overlay gold on top of the yen you can see why the yen is so important to our short precious metals positions.

gold yen

The HUI overlaid on top of the yen.

hui oveer the yen

 

The Most Important Chart on the Planet .

In this Weekend Report I want to shows you what I think is the most important chart on the planet right now. I know many of you won’t agree with this statement because there are a lot of important charts out there that are talking to us right now. This just my opinion based on the most recent price action that this chart exhibited on the recent plunge in the month of October. The chart I’m referring to this the long term monthly chart for the Dow Jones Industrial Average.

Before we get to the present charts I would like to show you a Weekend Report from January 2013 . The signs that a new Bull market in US Stocks was beginning were there , almost 2 years ago . Even I am surprised how this has evolved exactly as described .

http://rambus1.com/?p=9469

Before we look at the Dow Jones I would like to give you just a simple quick explanation of how Chartology works. Every trendline you put on a chart  either acts as support or resistance. For example during a rally phase the bulls are in control and move price higher. At some point the bulls run out of gas and need to consolidate their gains before the stock can make an other advance. The recent high is where you start the trendline which is resistance. Next the reaction takes the stock down far enough where the bears run out of gas and the bull take over again and begin to move the stock back up. This is the beginning of the support line. The next move up can stall out just above, right on or even below the first reversal point high which gives you a the high to place your top trendline which is acting as resistance now. The same goes for the next reaction to the downside where the stock will find support just above, right on or just below the previous low. This is how a consolidation pattern begins to form. The upper and lower trendlines shows you the fight between the bulls and the bears which in a bull market the bulls will when the battle at least 2/3 to 3/4 of the time.

Once the battle is resolved in the bulls favor the top rail, for whatever chart pattern developed, will then reverse its role from what had been resistance to now support. The reason this happens in bull markets is because the bulls are the dominant force in play, Just the opposite in bear markets. Those that bought their stock before or during the consolidation process are still making a profit so there is no reason to sell when the new consolidation pattern breaks out to the upside. A lot of times you will see a backtest to the top rail, which had been resistance turned into support, which gives you confirmation the top rail is hot and to be respected. The bears are weak at that point and can’t drive the price down any lower so the dominate uptrend resumes again. This is just a very short and simple explanation of how support and resistance works which is the basis for Chartology.

The basic principal is, resistance turns into support when it’s broken to the upside and visa versa to the downside, I would like to show you the most important chart on the planet right now IMHO. This very long term monthly chart for the Dow Jones has gotten a lot of play lately as a very bearish pattern which technically is an expanding triangle or as some call it The Jaws of Death.

This next statement will be hard for most folks to understand but I believe the Dow Jones, along with many other stock market indexes and individual stock, have been consolidating in one giant consolation pattern, that got their first reversal point all the way back at the bull market high in 2000. The second reversal point came at the 2002 low followed by reversal point #3 that formed a higher high against the 2000 bull market peak. Then came the crash low in 2009 that looked like the end of the world as we knew. How could the stock market ever recover from such a beating? That important low has scared most investors for life and they will never be able to look at the stock market in a positive light again. That’s what crashes do to your psyche.

Below is a monthly chart, in linear scale, that shows the expanding triangle or as some refer to it as the Jaws of Death. I’ve put a green circle around the area I want to discuss in detail so you can see the principal I showed you earlier in this post on how a trendline can reversal its role, in this case, from resistance to now support. First notice the price action, which was six month of trading, just below the top rail of the expanding triangle. The bulls tried as hard as they could but couldn’t move the price action above that all important top resistance rail that goes all the way back to the 2000 high. Then on the seventh month the bulls were able to crack that strong resistance rail to the upside ever so slightly, but it was beginning to give way. For almost one year now the top rail of the expanding triangle has held SUPPORT with one strong backtest four months after the breakout but quickly reversed direction to close back above the top rail of the expanding triangle. This is where the rubber meets the road as they say. Notice the very last bar on the right hand side of the chart that shows the inter month decline that has everyone worked up about  the new bear market that is now beginning and will lead to the next stock market crash. My take on the October decline is that it was nothing more than the backtest to the top rail of the expanding triangle. This whole process of breaking out from the expanding triangle and the backtesting process, from the topside, has taken roughly a year and a half to complete at this time. If we see the Dow Jones make a new all time high that will be the confirmation I’ll be looking for that the secular bull market is still in play and indeed is just getting started, regardless of all the reasons the stock market has to go down. The reason I call this chart the most important chart in the world right now is because of it’s implications for the rest of the US markets.

indu green cirsce

Below is a quarterly chart for the Dow Jones that shows the expanding triangle with the breakout and backtest in place.

DOW QUARTER

The long term linear scale chart for the SPX shows it has been much stronger than the Dow Jones as it wasted little time in its breakout and backtesting process of its expanding flat top triangle consolidation pattern.

spx linear

Using the 2000 starting point for all these big consolidation patterns the RUT has broken out of an expanding flat bottom triangle pattern. You can see the last bar on the right hand side of the chart that shows our current month of October as having a strong backtest to the top rail. What is encouraging about this chart from a bullish perspective is the price action is now trading back above the top rail of the expanding flat bottom triangle. Another positive development would be if the RUT can close above the previous months closing price which it is doing right now with one more week of trading left for this month. Again any move to new all time highs would be confirmation that the breakout and backtesting process if finished and we can get on with the rally that lies ahead.

rut montl

Next I would like to show you some very large consolidation patterns similar to the ones I’ve shown you on the charts above that have already broken out and have been in their new bull market for several years in some instances. Lets start with the strongest sector in the markets which is the BTK  (Biotech Sector). You can see its nine year blue triangle consolidation pattern that started to form in 2000 and broke out in 2009 and is hitting new all time highs at this moment. Note the breakout and backtest of the top blue rail of the triangle consolidation pattern before the rally to new highs began. This is exactly the same process I showed you on the long term monthly charts above.

btk

Next is a long term chart for the COMPQ that started to from its blue triangle in 2000 and broke out in late 2009. When you look at the short term charts this last decline in October looks like a disaster but when you look at the monthly chart you can see a new all time high isn’t that far above our most recent price action. As this is a monthly chart I would like to see the COMPQ close the month on the higher end of its last bar which would leave a long tail.

compq month

This next chart shows the NDX 100 which represents the 100 biggest tech stocks that shows some beautiful Chartology. There was the beautiful multi year blue triangle consolidation pattern which formed a H&S bottom toward the apex. There are two important break outs and backtests on this chart. The first one is when the price action broke out above the blue rail of the triangle consolidation. As you can see the backtest created the right shoulder of the H&S bottom which had a breakout and a backtest to the neckline before price took off to form the red bullish rising wedge. Note the parabolic rise in the mid to late 1990’s bull market that ended in 2000 after building out a beautiful red bullish rising flag halfway pattern to show where to look for the top, blue arrows.

ndx 100

DIS (Disney) shows you another fine example of a big triangle consolidation pattern that broke out in 2010 with two backtests to the top rail and hasn’t looked back since.

dis

Below is a different and shorter term look for CAT that shows its been building out a 6 point blue triangle for close to 3 1/2 years now. Note where the last bar on this chart found support this month. CAT

MSFT broke out of its massive blue bullish falling wedge after 10 years or so of consolidating the rise that began in the late 1980’s to the 2000 top. This chart shows the bullish breakout that has one red consolidation pattern below the top rail of the blue falling wedge and one red consolidation that formed on top of the falling wedge which I have shown many times signals a bullish setup as you can see.

msft

Lets look at one last huge blue triangle consolidation pattern that YHOO broke out of last year after spending nearly 13 years working off the excesses from the bubble phase of the bull market that topped out in 2000. As you can see it just broke out of the red bullish expanding falling wedge and did the backtest this month which is the reason I bought this stock for the Model Portfolio.

YHOO

Next I would like to show you two sectors that need to be monitored very closely as they look like they’re going to breakout to the upside. The first sector is the RLX, retail sector that has been forming an almost one year rectangle consolidation pattern that is getting close to breaking out to the upside. First the daily chart gives you a close up view of the rectangle consolidation pattern that had a false breakout recently. It’s not uncommon for the last move out of a rectangle to have a false breakout with one last move down that can find support toward the center of the rectangle. We’ll see confirmation when the RLX makes new all time highs above the recent high.

rlx dy

The weekly chart really puts the possible rectangle in perspective. From a Chartology perspective it looks like the blue rectangle consolidation pattern is going to be just another brick in the wall that will lead this sector to new all time highs once all the work is done with the breakout and backtesting process. There are etfs for this index that can be played. Also for those that just like to buy individual stocks you can do a little homework in this sector and find which stocks have the best setup from a Chartology perspective.

rlx weee

Below is a 3 X long etf for the retail sector that is showing a nice triangle consolidation pattern. The volume is very light on this eft which may grow over time like our Kamikaze stocks have.

RETL

The last chart for tonight shows the RLV, health care sector, getting real close to making new all times highs. Again this is an area that one needs to investigate if they’re more interested in stocks instead of playing the etfs.

rlv weekly

I have been watching this 3 X long etf for this sector which just broke out above the top rail of a bullish expand falling wedge on Friday.

cure

The bottom line is the stock markets may not have the crash that many are looking for at this time. That’s not to say we can’t correct some of the recent move from the October low to the high made on Friday. The markets will confirm for us the bull is back once we see the Dow Jones break to new all time highs. With all these new etfs out there now I prefer to trade them for the most part vs individual stocks. There were so many times in the past when I would get the direction right in the markets only to have some of the individual stocks failing to follow along. Picking a stock now days is like adding another degree of difficulty where you have to be right on the trend then you have to be right on your stock selections. To each his own .

All the best…Rambus

Editors Note:

Rambus has recently added a General Market Leveraged Portfolio where he trades the 3X ETFs on selected market sectors .

www.rambus1.com

 

 

 

 

Wednesday Report…The World According to Chartology : Update

CURRENCY WORLD :

Lets start off the Wednesday Report by looking at several currencies that broke out today. As you know the Eruo has been one of the weakest currencies out there. Today’s breakout of a bear flag confirms there is more downside to come. This first chart is a daily look which shows the Euro formed a H&S top in the first half of this year and broke down sharply in late July. The Euro has been chopping out the blue bear flag for most of October which broke down today with a breakout gap.

euro day

Below is a weekly chart I’ve been following very closely that shows the bear flag, on the daily chart above, was the backtest to the bottom rail of the bearish expanding rising wedge. This chart shows the second leg down is just getting started.

euro week rising wedge

This long term monthly chart shows the break down from the bearish rising wedge and the impulse move that has been taking place since the breakout. The euro has been locked in the downtrend channel since topping out in 2008 with no end in sight.

euro

In this last Euro chart I’ve overlaid gold on top of the euro so you can see how the two can trade together at times. Sometimes they move in lockstep and other times in the opposite direction. Since August of this year the two have been moving together fairly closely.

euro combo

A quick update on the Yen shows the backtest last week to the area of the breakout gap from the massive H&S top, green circle. So far this is prefect Chartology. Now we need to see it break back below the bottom blue rail of the falling wedge to really get the move going to the downside as all the work will be completed in regards to the breakout and backtesting.

yen

On the chart below I’ve overlaid gold on top of the yen so you can see the correlation between the two that has been pretty strong since the middle of July of this year.

yen overlaid with gold

The daily chart for the US dollar shows it has formed a blue flag that is getting ready to breakout. Note the little red rectangle that formed just below the brown shaded support and resistance zone. That little red rectangle gave the US dollar the extra strength to finally breakout above the S&R zone. Now notice how our blue flag has been forming right on top of the brown shaded S&R zone. Again, this is perfect Chartology where resistance turns into support once it’s broken.

UDS DAY WEDE

This long term weekly chart puts our brown shaded support zone in perspective. The bottom of our latest move up started with the blue 5 point rectangle reversal pattern to the upside. After reversing symmetry up the US dollar ran into the old highs where it just plowed right on through to the topside of the brown shaded S&R zone. The backtest was the blue flag I showed you on the daily chart above.

ud dlllar weekly

The last chart for the US dollar is a chart I’ve been showing for years where I’ve overlaid gold on top of the US dollar. I would like to focus your attention to the right hand side of the chart that shows a thin black dashed line, one on gold and the other on the US dollar, blue arrows. What the blue arrows show is how gold has been acting a little frisky recently while the US dollar has been chopping out its blue flag as shown on the daily chart. The US dollar has broken above its resistance line while gold is still finding support on its support line. Once the US dollar starts to rally I believe gold will finally break below its support line which is  actually a descending triangle. You can clearly see the trend has been down for gold and up for the US dollar since 2011.

gold & dollar combo caat

KAMIKAZI TRADE

As you know I bought back most of the shares I sold several weeks ago on JDST today. The first chart is a 2 hour look GDXJ that shows the downtrend channel that has been in place since July of this year. Outside of the big rally several weeks ago the GDXJ has made lower highs and lower lows the whole way down. There were the three fanlines that helped in identifying the downtrend. Just below fanline #3 GDXJ formed a blue rectangle that had a false breakout to the upside but quickly turned right around to trade lower negating the false breakout. Next you can see the blue triangle that formed just below the bottom rail of the downtrend channel which gave us one consolidation pattern above and one below which I’ve pointed out many time is a bearish setup. As you can see the bottom rail of the downtrend channel has held resistance since it was broken to the downside in September. Today the bottom blue triangle broke out signaling a resumption of the impulse move lower. Confirmation will be when GDXJ puts in a new lower low.

gdxj 2 hour

Below is a close up look, on the 30 minute chart I showed you this morning, of the morphing blue triangle. This is the reason I bought JDST in the fashion I did today.

gdxj 50

Below is another 2 hour chart shows that shows you the downtrend channel from a different perspective. As you can see there has been one consolidation pattern followed by another since the breakout below the brown shaded support and resistance zone.

gdxj to hour downtremd red

Below is a daily look for GDXJ that shows the most important chart pattern for this stock which is the blue bearish rising wedge. As you can see it hugged the bottom blue rail for about a week before gravity finally took hold and the decline began in earnest.

GDXJ DAY RISNGE

As the rising wedge is the most import chart pattern for the GDXJ I have to put it in perspective by looking at the weekly chart. Folks, it just doesn’t get any prettier. One can complicate things to make it much harder than what it is. Keep it as simple as possible.

gdxy weekly risingw

US STOCK WORLD

As you know we’ve taken on some big positions in the different areas of the markets recently. We are now entering the toughest time when you take your initial positions. No stock or market goes straight up or down but more like two steps forward, in a bull market, and one step back. After moving 2 steps forward we are now taking our one step back if this is just a correction in an on going bull market. There is no way to know 100% for sure if we’re in still in a bull market or have entered into the dreaded bear market that everyone is claiming.

Lets start with a 2 hour chart for the Dow that shows the inverse H&S bottom that broke out and now is in the process of doing the backtest which would come in around the 16,395 area. You can see a similar inverse H&S bottom that formed at the August low that had a strong backtest but still worked out OK.

DOW 2 HOUR

While we’re on the Dow I would like to show you the down to up volume chart that I’ve shown you recently. As you can see we’ve had 2 days where the down to up volume exceeded 8.5 which can be a good indication of some capitulation by the bulls. The capitulation volume doesn’t have to come at the exact bottom as you can see from previous capitulation bottoms.

dow donw to up

Below is a 2 hour chart for the NDX that shows its inverse H&S bottom. The main concern I have here is the big gap that was made on the way up.

ndx 2 hour inverse h7s bottom

The NDX four horsemen are still positive.

ndx 4 horse

The 2 hour chart for the RUT shows it’s now backtesting the neckline. You can see the August inverse H&S bottom had a strong backtest before it began its rally. So far nothing is broken yet. Tomorrow maybe a different story though.

rut 2 hour

The 4 horsemen are still positive.

RUT 4 HORSE

As it is getting late there is one more chart I would like to show you which is the NYSI Summation Index. Normally when the Summation Index gets down to the brown shaded area a bottom is usually pretty close at hand. The exception being is when the markets are in crash mode like the 2009 decline. Many times you will see a double bottom where the SPX will make a lower low while the Summation Index will make a higher low, which is a positive divergence. Our current correction has been the strongest one since the 2011 low. What I’m looking for is for the Summation Index to turn up first, which it has, and then for the MACD to crossover to the upside, which it has. The only question is, will we see a double bottom as seen in 2009, 2010 and 2011? Stay tuned as things are starting to get really interesting.

All the best…Rambus

sumation index

 

 

Hear Ye Hear Ye… Congratulations Sir Parabolic Chuck

For you members that do not visit the forum regularly

Let me Introduce one of our Members and frequent Poster at the Chartology Forum

http://forum.rambus1.com/

Parabolic Chuck ( best know for finding parabolas in a hay stack)

Just announced he achieved a milestone and a goal he set for himself :

…………………………………………………………..

100% gain since May 22, 2013

That was the day I started following chartology, learning chartology, and taking Sir Rambus’ advice.

Been a heck of a roller coaster! Hope it’s all uphill from here! :-)

I figure if I can average just 50% per year I’ll be set for life in about 10 years…

Thank you Sir Rambus and everyone else here!! :-) This is the best site on the planet… Keep up the good work chaps :-)

………………………………………………………………

We are Proud that this Student exceeded the Professor

http://forum.rambus1.com/?p=70951

…………………

Thanks for sharing your milestone with us Chuck

Continued success

Rambus Audept and Fully (Town Crier )

Weekend Report Part 1…The Chartology of U.S. and WORLD Stock Markets

I’m going to divide this Weekend Report up into two parts, the stock markets and the precious metals complex. Both of these markets are on the move right now so we need examine them for clues to see if this is just a short term trading strategy or something more long lasting. Lets start with some US stock markets that had a rough week with many indexes breaking below their 200 dma.

I was first able to build out this rising wedge on the Dow Jones when it put in the August low that formed a small inverse H&S bottom at reversal point #4. It then rallied back up to the top trendline of the rising wedge at 17,300 where it found resistance. As you can see, Friday’s move, closed below the bottom rail and the 200 dma. This is negative price action. We now have a clear line in the sand that is the bottom rail of the rising wedge. A backtest would come in around the 16,725 area which will represent critical resistance.

DOW RISNG WEDGE DAT

The next chart is a longer term daily chart for the Dow that shows the consolidation patterns since the 2012 low.

DOW LONG DAY

The long term weekly chart for the Dow shows the 2007 H&S top and the 2009 inverse H&S bottom that launched the 5 1/2 year bull market that maybe culminating with our blue 5 point rising wedge. It’s still too early to say yet if this is the end of the bull market but it does look like we are in for a decent correction. One of the first big clues will be if the Dow takes out the August low which would then start a series of lower lows. We would then have to see a counter trend rally that makes a lower high to really setup a downtrend.

dow weekl

This long term monthly chart shows how I’ve been following the Dow since the bear market bottom in 2009. If you start at the bear market bottom in 2009 you can see the Dow has formed higher highs and higher lows virtually all the way up including this months bar. This is why it’s important to see if the Dow can take out the August low which would then setup the first lower low.

dow monthly many  h&s

Another very long term monthly chart for the Dow shows the giant blue expanding triangle that started to form at the 2000 bull market peak. Note how the last high on this chart the Dow tried several times to break above the top rail of the expanding triangle only to fail. You can see the last bar on this chart kinda stands out all by itself below the blue top rail of the expanding triangle and the bottom rail of the rising wedge. Note how it took five months and the backtest to the underside of the black bearish rising wedge, that formed the right shoulder in 2007, for the Dow to actually start its impulse move lower. It shows you you can be right on buying the breakout from the rising wedge but it would have been hell holding on during the 5 month backtesting process that formed the right shoulder.

a indu

Lets take a look at a few charts for the SPX to see how this index is doing. Back in the spring of this year the SPX built out a H&S consolidation pattern which reached its price objective at the black arrow. As I have shown you on the long term charts for gold and silver you can extend the neckline out into the future and it’s surprisingly how well it still works. Here I did the same thing which helped me locate the August low and we got our rally. During our current decline the neckline extension rail was tested strongly last week but finally gave way on Friday. I had to respect that the neckline extension rail was still valid until it was broken to the downside. Now it should act as resistance on any backtest which would be around the 1925 area.

SPX DAY

The monthly chart for the SPX shows a flat top triangle that was broken to the upside in 2013. It has been trapped inside the rising wedge since the bull market started in 2009. If the price action breaks below the bottom rail of the rising wedge the first real area of support would be the top rail of the flat top expanding triangle at 1550 or so.

SPX MONTHY RISINGWWESDGES

The 30 year monthly chart with the 10 month moving average.

SPX MON WITH 10 MON

The SPX quarterly chart going back to 1940.

spx quqarterly

This last monthly chart for the SPX shows you what I’m look at for a longer term sell signal. It’s very close but not quite there just yet. I did get a whipsaw in 2011 but that is the only false sell signal since 1994. The only other 2 sell signals came at the 2000 and 2007 tops so buy and sell signals don’t come around very often. First lets look at the indicators at the bottom of the chart. The first thing we need to see is the blue Histogram below zero which we now have. Second we need to see the MACD crossover to the downside which is almost there. Third we need to see the Slow Stoch crossover to the downside which it has. And the last piece of the puzzle is we need to see the pink 6 month ema crossover the 12 month simple moving average which is getting close. So basically we are waiting on the moving averages to crossover to get a long term sell signal.

spx longterm sell signals

Now I would like to look at the Russell 2000 which has been the weakest sector in the US stock markets. This first daily chart shows the brown shades support and resistance zones we’ve been tracking for some time now. There really is some nice symmetry as shown by the two H’s at the top of the chart and the two big S’s that are the same height on the left and right side of the two big H’s. The bottom brown shaded support zone was decisively broken on Friday’s big move down and now should act as resistance on any backtest.

rut dayly

This next daily chart for the RUT shows a 9 point Diamond reversal pattern. Sir Fullgoldcrown, who has been following my work longer than anyone else on the planet, came up with this Diamond reversal pattern that is beautiful in its symmetry. If we are truly entering a new secular bear market, which remains to be seen yet, I would expect the RUT to reverse symmetry down in similar fashion as to how it went up.

rut diamong

The long term monthly chart for the RUT shows some interesting things. First there is the huge black rising expanding wedge that has held support and resistance since the bottom rail was touched way back in 1996. As you can see the bottom rail has had four touches and the top rail is currently working on its third reversal point. What is interesting is that each major top is forming seven years apart with the first one in 2000 the second one in 2007 and our current one in 2014. This long term monthly chart shows the first real support area would be at the top of the blue triangle around 865 or so.

rut long term monthly 7 year

Lets now turn our attention to some foreign markets and see how their charts are looking . The weekly chart for the CAC broke below its neckline last week competing an unbalanced H&S top.

France

cac

The weekly chart for the DAX shows a similar unbalanced H&S top on the weekly look.

Germany

dax weekly

The long term monthly look at the DAX has a more bullish look to it as the H&S pattern, on the weekly chart above, is building out above the top rail of a blue triangle. Key support will be the top rail of the big blue triangle.

dax montly

The weekly chart for the FTSE broke below the red five point triangle reversal pattern two weeks ago on the weekly chart. You will see why the red trendline, that makes up the top rail of the red triangle, is horizontal when I show you the monthly chart.

U.K.

ftse weekly

This monthly chart shows you why the top rail of the red triangle is horizontal. It just couldn’t bust through the bigger and badder top rail of the 15 year rectangle.

ftse monthly red triagnle

Next we will look at some other Countries through their ETFs.

The weekly chart for ATG has broken down out of a bearish rising wedge.

Greece

ATG

EWA broke out of a 7 point bearish rising wedge last week.

Australia

EWA ASUTRAILY

EWC built out a small double top on the weekly chart.

Canada

EWC CANADA

EWI broke out of a H&S top last week.

Italy

EWI WEEKLY

EWJ is testing the bottom rail of the 5 point blue triangle reversal pattern.

Japan

EWJ

The RSK broke below the blue triangle consolidation pattern then had some wild moves around the breakout point which formed a H&S pattern.

Russia

RSK

The EUFN, European Financial Sector, broke out of a H&S top last week.

EUFN

The EUR, European Top 100 index, broke out of a bearish rising wedge last week.

eur top 100

These charts should give you a good feel for what is taking place in the world right now. I think the deflationary pressures are taking hold and it’s going to be hard for most economies of the world to escape its wrath. I’ll have part 2 on the precious metals complex tomorrow. All the best…Rambus

 

 

Monthly Charts… Precious Metals Stocks…Turning to Dust

Last night I promised you I would post a bunch of monthly charts for the precious metals stocks that will show their monthly closing price and percentage loss for September. I think you will be surprised at some of the percentage losses that some of the big caps had as the decline has been kind of stealthy.

We took our first round of buys for the Kamikaze Portfolio on September 4th four days into September. When you finish looking at all these monthly charts I’m going to show you, go to the Kamikaze Portfolio Tracker on the sidebar, and see difference one month can make in a portfolio. I can only imagine the pain some of the staunch gold bugs are starting to feel because of their belief that gold can only go up and if it goes down it’s manipulation.

These chart will also show you why I have the confidence to be fully invested in the Kamikaze Portfolio at this time. If one only looks at the PM stock indexes and not at the individual stocks that makeup the indexes you’re missing a very important part of the processes in determining which direction the big trend is. As I showed you in last nights report the big trend is down in the precious metals complex regardless all the fundamental reasons why it should be up.

The charts you are about to see will show you the truth of what is really happening in the Precious metals complex based on Chartology and nothing more. Just look up to top right hand corner of each chart to see what they did for the month of September. These charts are pretty self explanatory so I will just post the charts without any commentary unless I see something that might be interesting.

abx monthly

aem monthly

asa monthly

au monthly

auy monthly

cde montly

GFI MONTHLY

GG MONTHLY

NEM MONTHLY

NGD MONTHLY

PAAS MONTHLY

RGLD MONTHLY

sa monthly

sand monthly

SLW MONTHLY

SSRI MONTHLYL

hui monthly

GDX MONTHLY

gdm monthly

GDXJ MONTHLY

xau monthly

gold monthly

silver monthly

Now the 3 X short the precious metals complex stocks.

dgld monthly

DSLV MONTHLY

jdst monthly

The grand prize winner for the month of September. All the best…Rambus

DUST MONTHLY

 

 

Wednesday Report…Trading Impulse Moves in the Precious Metals Stocks

For the last two months, and especially the month of September, I’ve been trying to prep you for the impulse move that we currently find ourselves in right now. You don’t have to wait any longer wondering when it’s going to begin. We’ve been in this impulse move down since the last high was made on August 14th, which is the 4th reversal point in that blue triangle consolidation pattern, we’ve been following so close. I’ve been showing you countless H&S top patterns in all the big cap precious metals stocks a long with smaller consolidation patterns that are breaking out.  I’ve shown you how the Japanese Yen and the eruo that have been collapsing and how closely gold and precious metals stock indexes are following the Yen lower. I don’t know how I can make it any more clearer that the move we’ve been waiting for, for 15 months or so, is already six weeks old.

A stock or stock market can do one of four things. First it can build out a topping pattern, 2nd a bottoming pattern,  3rd a consolidation pattern, all of which are followed by number four, an impulse move. This is how markets move. You can’t have a big bull market if you don’t have a big base and you can’t have a big move down without a big topping pattern. The bigger the pattern the bigger the impulse move that follows the breakout. As a trader, one of the most important things you have to learn is, which one of the four phases you are in.

Lets start by looking the long term monthly chart for the HUI that shows you exactly what I described above about the four different phases a stock or market can be in. Notice the massive inverse H&S base that was made at the end of the last bear market that took roughly five years to build. If we were paying attention to that massive H&S base we knew a new bull market was beginning. Big pattern big move. Note the vertical move once the neckline was broken to the topside. That was the first impulse move. After that impulse move became exhausted the blue triangle consolidation pattern began to form that took well over a year to complete. Again, once the triangle consolidation pattern finished building out it was time for the next impulse move to begin. Again, note the vertical move out of the blue triangle which was the next impulse move up.

This repeated all the way up to the 2008 H&S top that reversed the bull market and led to the big crash. Because it was a crash, in this case the HUI had what they call a V bottom. You normally don’t see moves like that in normal behaving markets.

Now I want to focus your attention to the massive H&S top that took over 3 1/2 years to build and broke down in April of 2013. Again, notice the near vertical move down once the H&S top gave way. Like the impulse moves up in the bull market years the HUI is repeating the same process only this time in a bear market. You can see our blue triangle that has been consolidating that first impulse move down out of the 3 1/2 year H&S top. The big H&S top is telling us to expect a big move down which we are currently in the middle of.

1 hui monnly

When you study the chart above ask yourself which was the better way to make money during the bull market years. Trying to trade the consolidation patterns, which stand out like a sore thumb now, but not when they’re building out, or to ride the vertical move called an impulse move. I can tell you from experience that you will make a whole lot more money riding an impulse move than you will trying to guess the next reversal point in the consolidation patterns.

This next chart shows you the impulse move down from the top of the right shoulder to the bottom of the blue triangle on the chart above that occurred in 2013. On the monthly chart above the move looks pretty straight down but on the daily chart you can see the little consolidation patterns that formed along the way down. The black arrows shows you where our earliest members rode that impulse move down. We had a simple plan. As long as the 50 dma held resistance we would let the trade run. The trade lasted from the first week in December of 2012 to August of 2013. I can still remember several short covering rallies in which the HUI was up close to 20 point for the day. The ride wasn’t easy, they never are, but if one can hold on during an impulse move you will be rewarded for your efforts. Those that get shaken off will be looking for a place to get back in as it’s very difficult to trade an impulse move no matter how good you think you are. It’s just the nature of the beast.

1 hui 2013 imuls move

I haven’t shown you these next three charts that show how I’m perceiving our current bear market that started at the top of the right shoulder on that massive H&S top. This first chart shows you the double trendline downtrend channel that shows our blue triangle I’m viewing as a halfway pattern to the downside. As you can see we are now in our second full week of trading below the bottom rail of the triangle consolidation pattern. The impulse move actually started at the last reversal point in the blue triangle where it touches the black downtrend channel. When you look at this blue triangle think of all the blue triangles that formed during the bull market years and the impulse moves that occurred between each triangle consolidation pattern.

1 hui new imulse move

This next weekly chart for the HUI shows the exact same setup that shows the downtrend channel with the blue triangle. This next chart also shows you how our current downtrend channel and blue triangle consolidation pattern fits in with the massive H&S top. Big tops equals big moves down. Note the impulse move that started at the top of the right shoulder that we looked at in more detail on the daily chart above. I envision we are starting a similar impulse move down that will have some twist and turns along the way that will try to shake us off. The ride won’t be easy but if you can hang on you will experience a ride of a lifetime.

As you know personally I favour the maximum leveraged 3X bear ETFs in riding an impulse move . This is definitely not for everyone . The market can easily move against you 20% or more in one day . See Kamikazi Caution on the sidebar .

As I always tell Sir Fullgoldcrown . Find a Vehicle and Position Size you can live with for months and ride it for all its worth . Unfortunately with PM Stocks you are limited to 3X or 2X short etfs .

Only you , know your max pain tolerance

2 hui h&s top

This last chart for the HUI shows the exact same setup as the last two charts above only this time it takes in the bull market years so you can compare our current setup to the bull market triangles. Our current blue triangle is very similar in time and price to some of the blue triangles that formed during the bull market. This is how markets move. For the more experienced trades out there you’re more than welcome to trade the little squiggles but for the average investor, get positioned and stay put until the impulse move runs it’s course. This is how you make the big bucks. Find an impulse move an ride it for all its worth.

I saved a bunch of monthly PM charts last night that I will show you tomorrow as I’m out of time tonight. You will be amazed at some of the percentage losses many of the big cap PM stocks made during the month of September. September was a good month for us in the Kamikaze Portfolio but this is only the very beginning of this impulse move. If you can fasten your seat belt and hold on for dear life, when the going gets tough, you will come out on the other side with a high cash reserve and the experience of actually riding and understanding what an impulse move is and how they work. That experience alone will be worth more than the profits you’ll make as you can take what you’ve learned and use it the next time you see an impulse move beginning. All the best…Rambus

hui monlhth 4444444444

 

Weekend Report… A Trend Emerges in the Precious Metals

Over the last several weeks I’ve been posting many charts showing massive H&S tops in many sectors of the markets in which I’m trying to paint the big picture for you on what to expect in the longer term time frame. I don’t know how many of you are grasping the big picture and what it means going forward but the big picture should be your main focus unless you’re a day trader. It’s no coincidences that the US dollar is breaking out of a massive  multi year base while the precious metals complex and commodities have been taking a beating. It’s happening right here and now as last weeks price action is confirming for me the next impulse move down has begun.

Lets start this Weekend Report by looking at two more massive H&S tops, one on silver and the other on gold. I’ve been showing these potential H&S tops for the better part of a year now if not longer. At some point, if you’re right on your call, the day will come when you finally see the breakout. It may seem like an eternity sometimes but having patience and not giving up when nothing is broken can give you an early heads up to the next big move.

Silver’s day came this past week on Friday when it was down 73 cents on a nice increase in volume. Big moves like Friday”s don’t come around very often but when they do you have to take notice. Usually when I see a big move like that it generally means there is a breakout and that is exactly what silver is doing. After nearly 15 months or so of building out a morphing triangle the real breakout move came on Friday even tho there was a small breakout and backtest earlier in the week. Below is the daily line chart that shows the morphing triangle, red circles, and the real breakout on Friday. The only question is will we see a backtest before silver moves lower?

sivler day line

Now lets take a look at silver’s massive H&S top on the monthly chart. As you can plainly see the breakout is taking place right now. We still have another seven days of trading left for the month of September before the monthly bar is completed. There is not a lot of support below the neckline until major support shows up at the brown shaded support and resistance zone around the 8.50 area. I wonder how many precious metals investors will hold on for a round trip, back to the beginning of the bull market, that will be asking themselves in the future, why didn’t I sell out a long time ago. I know the same thing happened in 1980 when most thought the bull market wasn’t over until it was too late. You can also throw in the 2000 top in the stock market bubble as well.

silver monthly

Below is a weekly chart for silver that shows some of the Chartology that was made during the bull market years to the present.

silver weekly

Lets now take a look at some gold charts that have actually been showing us the way lower. Gold was the first to breakout from its triangle consolidation pattern several weeks ago while silver and the PM stock indexes were still building out their respective triangles. You can see the all important 150 dma is now starting to roll over after rising slightly since June of this year.

gold day triangle

Below is a weekly chart for gold that shows a downtrend channel where the top rail was being tested over the last several months. With the breakout of the red triangle the impulse move is underway that should take gold down to a minimum of the 985 area using the red triangle as a halfway pattern. The all important 65 wma has been doing a good job of holding resistance over the last several years.

gold weekly donwtrend channel

Below is gold’s massive H&S top which is strongly testing the neckline right now. The price objective for the H&S top would be down to the 700 area which was the low for the 2008 crash. Note the MACD that is starting to curl back down along with the slow stoch.

a gold massive h&s top

As I mentioned at the beginning of this post, I believe last week marked the beginning of the next impulse move down. I want to focus in on the GDM as a proxy for the precious metals stocks indexes. The first chart is a daily candle stick chart that shows the reverse symmetry down and all the back candles I said we would see if we were in a true impulse move lower. So far so good.

gdm reverse symmeter

Below is a daily line chart that really shows the reverse symmetry taking place right now.

gdm day line reverses ys

This next daily chart for GDM shows it breaking out from its triangle consolidation pattern late last week. A backtest would come in around the 645 area.

gdm triagnle day

These next few chart will show you just how important this triangle consolidation patten is. The first weekly chart shows the massive H&S top and our current blue triangle consolidation pattern that is finally breaking out to the downside. Note how the oversold condition has been worked off on the RSI at the top of the chart. Also notice how the MACD and the slow stoch have rolled over and are headed down.

gdm weekly h&s triangle

I would like to update you on that potential inverse H&S bottom that kept us in limbo for close to 8 weeks. I had to respect the fact that the price action broke above that potential neckline which held support for 8 weeks or so. Once that neckline failed to hold support anymore it was a green light for me that the failed breakout would lead to a big move in the opposite direction which is now occurring. I also said that a lot of gold bugs were looking at the potential neckline as their savior in which a new bull market would be launched and if that neckline failed we would start to see them exiting their longs positions. What everyone wants no one gets.

gdm wekly failed

This last chart for GDM shows you how I think things may play out over the next year or so. First there is some interesting symmetry with the inverse H&S bottom that formed at the beginning of the bull market in 2000. What is interesting is that the H&S top that formed in 2011 is the exact same height as the 2000 inverse H&S bottom. They are both reversal patterns that reversed many years of a trend that had been in place.

I would like to paint a picture of how this bear market may unfold over time. Again reverse symmetry will play a key role. I drew in two thin black dashed horizontal lines, one at 540 which was the bottom of the blue triangle that was made in 2005 which shows where our current blue triangle found a bottom just slightly higher than 540. The lower thin black dashed horizontal line comes in at 350 which is the bottom of the blue triangle that was made in 2002. What is interesting about the 350 area is that’s close to where our current blue triangle has a price objective if it plays out as a halfway pattern to the downside. The brown shade support and resistance shows where we could see this impulse move down find support between 320 and 350.

I drew in another blue triangle that could be the area for one last consolidation pattern to form before the bear market is finished. The blue triangle is only for the sake of showing you where a potential consolidation pattern may form. I have no idea if it will be a triangle, rectangle or a wedge of some type. One last note. During the bull market years the rallies lasted between four to six months once they broke out from their triangle consolidation patterns. If we see a similar time frame for the breakout of our current blue triangle I could see GDM hitting the 320 to 350 area sometime after the first of the year. At that point we could see one more consolidation pattern form before it’s all said and done.

aa gdm

I would like to show you one last chart that I haven’t posted in awhile that is a ratio chart comparing the HUI to the SPX. The first time I posted this chart the ratio was just breaking down from that massive five point bearish expanding rising wedge. The 2011 high matches precisely the top in the precious metals complex and most. The two rectangles are the exact same size that measures time and price. If this ratio continues to play out as expected we could see a low in this ratio by October of 2015. The red triangle looks like it’s getting ready to break to the downside at any time now which would suggest a weak PM complex and a strong stock market on a relative basis.

hui to the dow

I really think the evidence is piling up that is strongly suggesting that we are now in the next impulse leg down, not only in the precious metals complex, but commodities as well. It’s no coincidence that the US dollar is strong and is  breaking out to the upside while we’re seeing weakness across the board in most commodities. One plus one is equaling two from a Chartology perspective. This is the time to get positioned and hang on for dear life. Trying to trade in and out of an impulse move will be unforgiving for most investors. As I have said many times before, you will be given every reason in the book to cover your short position, but for those that can stay on for the ride will be richly rewarded for their effort IMHO. All the best…Rambus

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