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

 

Weekend Report…Potential Precious Metals Meltdown Scenario

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

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

GDM CANDLES

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

GDM DOUBE TOP HUMP

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

gdm day line

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

gdm triangle

The GDM Four Horsemen.

gdm the for horsemen

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

gdm weekly h&s

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

gdm   weekly triangle blue

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

gdm linear monthly

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

hui long

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

gold day trianle

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

gold ma

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

gold weekly rectangle 65 wma

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

gold month 10

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

silver montly

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

US Dollar and Yen Update…

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

us dollar big 1 bar

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

dollar big base #2

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

aa dollar combo ca

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

YEN DAILY GAP

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

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

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

ABCD REVERSE SYMMEETRY GAPS

 

Weekend Report…The Precious Metals Complex : Contradiction and Potential

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

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

BPGDM

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

gxm 1

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

gdm line

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

gdm weeekly

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

GDM TSI

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

gdm montly

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

gdm weekly h&s

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

hui weekly inveset

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

xau weekly h7s

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

gdx h&s

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

gdxj bactel

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

gldx douwle

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

SIL

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

HUI ;GOLD

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

aa silver weekly

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

g silver inflectin pat

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

gold dat

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

us dollar weekly

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

YEN BACT

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

gold to yen

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

 

 

 

Weekend Report…A Plethora of Currency and Precious Metals Chartology

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

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

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

SPX WEEKLY UPTREND

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

bbb spx montly

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

HUI MONTLY

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

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

GOLD WEEEKLY DOUBLE

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

CAD WEELY

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

XAD WEEKLY

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

exhb

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

xsf swilss

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

euro day

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

EURO WEEKLY SYMMETER YESLLO

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

euro monthly

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

xjy day

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

YEN WEEKLY H&S

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

yen and gold combo

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

AAAHU AD YEN

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

gold over the us dolalr

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

A MULTI COMBO CURRENCE

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

gold triangle

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

hui lng mongy triangle

 

 

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

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

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

indu 2 hour

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

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

indu day one

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

indu weekly

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

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

INDU WEEKLY PERSPAECTIVE

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

indu monthly

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

dow up to down vol.

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

COMPQ DAY CROSSOVER

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

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

compq  5132.

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

bio 2 hour

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

btk day

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

btk monthly

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

SOX 2 HOUR

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

sox uptrend channel weekly

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

sox montly

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

 

One Chart… The TLT:GLD Ratio Chart

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

aaaa gold to tlt

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

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

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

GDM PSAR

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

spx ww

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

gdm weely

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

GDXJ FALLINGWDGE

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

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

GOLD TRIANLE

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

gold invese

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

gold day inverse h&s bo9ttom

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

silver year red triangel

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

silver h&s top nl symmetry rzail

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

siolver monthly h&s top

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

silver parcaiously

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

spx daily h&s consolidation patter

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

qqqq invese h&s

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

wtic oil

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

oil monghty

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

nat gas

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

 

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

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

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

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

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

gold ddail line

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

gold bar day

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

GOLD FIB

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

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

AAA RECT

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

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

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

gold inverse H&s bottom

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

gold 150

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

gold many mo

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

gold 10 month ma

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

gold onthly trading range

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

gold brick in thewal

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

 

 

 

 

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

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

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

PLADIUM

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

PALL MONT