Wednesday Report…A Potential Life Changing Market

The markets have a way to push you just beyond your limits to get you to do the wrong thing at the wrong time and then reverse on a dime. The bearish sentiment from just a casual observation over the last few weeks has felt like there was no way the bulls could rally the PM sector higher before there was a decent correction. In a new bull market the surprises come to the upside and not the downside.

The rally we’re currently experiencing in the PM complex right now and especially the Junior Miners is a potential once in a lifetime event for most investors. Sometimes we get lucky and experience several of these kind of bull markets over a lifetime, but generally your first experience is a learning experience if you can survive long enough to have learned something. I was lucky enough during the tech bubble in the 1990’s to have had just enough experience to play the last five years well enough to be able to retire at 50 years of age. Had I not had any experience before the tech bubble burst I would have most likely not gotten out at the top and rode the whole thing back down.

I didn’t become aware of the bull market in the PM sector until the spring of 2002. My whole focus up till then was the stock market. I still remember very clearly the first time I really looked at a chart for gold and seen a beautiful inverse H&S bottom. I didn’t even know what a junior gold stock was back then as the PM sector was so far off my radar screen. I began to study everything I could on this, way off the radar sector, knowing that the Chartology would be just as clear as the many different tech stocks I traded in the 1990’s.

It didn’t take me long to find some of the junior PM stocks with some really nice Chartology to start trading this new area for me. I felt like I had died an gone to heaven again as I thought nothing could ever beat the tech stocks.The chart patterns the PM stocks were making were just as beautiful as the many different tech stocks I traded.

So I got lucky twice in my investing career by finding two great bull markets in which to invest. Now we have entered the third great bull market of my lifetime which is the bull market that started in the precious complex in January of 2016. To be able to get in on the ground floor of a brand new bull market is only a dream for most investors but to get in at the bottom of the small cap junior PM stocks can change your life forever if you can trade accordingly, which is easier said than done as I know some of you are finding out.

It’s very easy to trade in hindsight when you look at a chart and see a top or bottom already in place but living day by day as a pattern builds out can be very challenging at times. It can take patience beyond what most have , to sit tight and let the pattern mature out , as sometimes they can morph just to throw you a curve ball. Knowing what the big trend you’re trading in, either a bull market or bear market, is the most important aspect of investing. Rule #1 is don’t short a bull market and rule #2 is rule #1. Let the bull market work for you. If you buy too early in a bull market you’ll be saved as the bull market progresses.

The first six months of our new bull market is now over and there is no way to get it back. Many have missed the bottom and have been waiting patiently for a pull back to get in . This strategy is not working. Many have tried to trade in and out of this new bull market and are left standing at the train station waving goodbye to the conductor as the train leaves. Personally I sold my positions a few months back and quickly realized this was a mistake and scrambled to buy them back at somewhat higher levels . This is how a new bull market works taking as few along for the ride as it can. At some point there is going to be a correction which will end up forming some type of consolidation pattern which will be needed to get the overbought condition back to normal. However predicting when and how this will occur will prove to be very challenging.

I have a ton of charts I could post tonight but I’m going to leave this Wednesday Report just the way it is. This is the first time since we opened up our doors at Rambus Chartology in which I didn’t post a chart , which is weird for me. What is most important to understand is this new bull market that is already six months old and isn’t waiting around for you to make up your mind if you want to participate or not. Only you can determine for yourself how you want to play this new bull market in the precious metals stocks. For some it will be a life changing event and for others it will be a should of or could of kind of bull market. Take what you’ve learned during the first 10 years of the PM bull market and the recently completed 5 years of PM bear market and use that experience to guide you through this next leg of the secular bull market. As always I will be right here analysing the Chartology of this most interesting and frustrating and exiting little market that we have all come to have a love / hate relationship with  , The Precious Metals Junior Miners .

All the best…Rambus

PM Combo Chart…

Whenever you begin to feel uncomfortable about the short term price action always look at the weekly or even the longer term monthly charts to gain perspective about your feelings.

PM COMBO 1

Below is a four year weekly combo chart which we’ve been following for years as the bear market unfolded before us. Always keep in the back of your mind the magnitude of those three year bullish falling wedges and what they mean for the new bull market that started in January of this year. During the bear market years there were all lower lows and lower highs made. Since the breakouts above their respective top rails you can see a series of higher highs and higher lows. This is a simple concept to understand but hard for many see.

combo triple

SLV Update…

It looks like SLV is forming a small H&S top similar to the one it formed back in May of this year. The minimum price objective for this H&S would be a measured move down to 17.48.

SLV DAY 1

The long term daily chart for SLV shows the big double H&S bottom. Note the small H&S top that formed at the May high which led to the backtest to neckline #1. A backtest to neckline #2 would come in around the 17.05 area. This is where one needs to decide if they want to play the swings or hold on for the intermediate to longer term ride with a portion of your trading capital. SLV has a well defined breakout point and price objective if one chooses to try a short position. Just don’t get greedy.

SLV DAY 2

 

Late Friday Night Charts…$XJY

This week the Japanese Yen backtested neckline #2 of a possible triple H&S bottom at the 94 area. Below is a weekly line chart which shows the price action closed right on the neckline. To say this weeks backtest was critical is an understatement. How the yen goes so does gold for the most part.

yen day line

Below is the exact same chart as the one above except it’s a bar chart that shows the subtle differences. The reason this backtest is so important, is because if neckline #2 holds support then the low for the third right shoulder will have formed. Reverse symmetry suggests we could see a ping pong move between neckline #2 and neckline #3 as shown by the black arrows, before we see a resolution to this 2 1/2 year pattern. The yen has made a series of higher highs and higher lows since the head was put in place a year ago.

yen weekly bar

This next long term weekly chart shows a pretty symmetrical H&S bottom as shown by the neckline symmetry line which shows the low for the left and right shoulders. The backtest this week was a little sloppy but so far the neckline is holding support.

yen weekly long

This next chart I overlaid gold on top of the daily line chart for the yen which shows why this currency is so important for gold. Sometimes one can be a bit stronger or weaker than the other but they tend to move together so you can see why the 94 area on the charts above is so important. If the backtest to the neckline holds support then there is a good chance that gold will also be finding support. It looks like next week is shaping up to be another very important week in the precious metals complex. Have a great weekend. All the best…Rambus

yen over gold

ANF.V Update…

Tuesday of this week ANF.V broke out of H&S consolidation pattern where I took an initial position and bought 3000 shares. The daily chart shows the breakout and backtest holding.

ANF.V BUY

The monthly chart really puts everything in perspective for this stock. The H&S consolidation pattern on the daily chart above is just part of a much bigger inverse H&S bottom on the monthly chart below. You can see the beautiful H&S top which ended the bull market. Big patterns lead to big moves. The H&S bottom is 2 1/2 years in the making with the price action testing the neckline presently. That big H&S bottom is actually bigger than the H&S top and has a price objective up to the old high around the 6.40 area. I’m going to put an order in to buy another 3000 shares at 1.83 which is just above the neckline, on the breakout.

ANV MONTHLY BUY

HUI Update…

Below is the reverse symmetry chart with the support and resistance lines we’ve been following since the new bull market began. So far the price action has interacted perfectly with each S&R line. The last rally phase took the price action above the highest S&R zone and now is backtesting it from above between 245 and 260. The 50 day moving average has been rising strongly and now comes in at the 234.06 area.

HUI S&R ZONE

The weekly line chart shows the reverse symmetry and S&R zones. As you can see the HUI made it all the way up to the top of the S&R zone at 275 where we should see it act as initial resistance which it has. The bottom of the brown shaded S&R zone comes in around the 245 area. The bottom of the S&R zone is taken from the highs made back in 2013 and 2014. Once this counter move down is complete and the next move higher begins, the area above the top of the brown shaded S&R zone is called the thin zone in which the price action can move easily threw until it reaches overhead resistance at the old neckline around the 380 area.

hui wweekly

 

$XJY Update…

This week the yen is backtesting the neckline on a possible three year H&S base at the 94 area. This is the first critical test of support.

yed week 1

Below is a longer term weekly chart for the yen which puts the H&S bottom on the chart above into focus. The lower portion of the base was the seven point inverted roof reversal pattern. On the completion of the inverted roof pattern the yen rallied back up to the bottom of the blue bearish falling wedge where we seen a small decline. That small decline built out the possible right shoulder of a pretty big H&S bottom. You can follow the price action which shows the yen is now at the backtest point to the neckline from above. So far this is exactly what we would expect from a Chartology perspective. Now we need to see the neckline hold support.

yen weekly big h&s base

This next very long term weekly chart is the reverse symmetry gap chart as shown by the green circles. If you recall we were looking for a possible reverse symmetry gap above neckline #2 after the bottom of our current right shoulder was put in place. We didn’t get the gap but the price action did have a clean breakout right at the neckline with no overlap to the downside. As you can see the backtest is taking place right now at the 94 area. If the inverse H&S bottom plays out we should see the yen rally up to the 112 area at a minimum. Neckline #2 also shows you a good example of how a support and resistance line works going all the way back to 2008. The price action is either above it or below it but the breakouts are clean with no overlapping of the neckline.

yen reverse gaps

 

The Chartology of a Generational Precious Metals Miner Move

This first chart for tonight is the GOLD:XAU ratio combo chart we’ve been following very closely. I just want to make it perfectly clear what this ratio chart is telling us. The ratio chart on top is telling us that gold is in a parabolic collapse vs the XAU after 20 years of out performance. Even though they can both go up together the XAU stocks are going up parabolic to gold as shown by the vertical move down in the ratio and the vertical move up in the XAU.

When the ratio broke down from its double top all time highs at 24.33 there has only been one month, May, that the ratio had a small rally and backtested to the bottom of the S&R zone at 15. You can see the same thing happened on the XAU chart at the bottom, where it just went sideways in May. We are witnessing an unprecedented rebalancing of the precious metals stocks to gold. This started in January of this year and shows no signs of abating.

If you’ve been a precious metals complex investor, or as some like to call them gold bugs, this is the absolute best buying opportunity in 20 years to buy your favorite precious metals stocks. The unwinding of the parabolic 20 year arc is something you don’t see everyday and to be on the ground floor of the rebalancing move should be very rewarding if one can stay in the saddle.

gold xau

Below is another ratio chart in which I compare the HUI to gold. When the ratio is rising the HUI is outperforming gold. If the ratio chart above has any validity then we should see the HUI rising in a near vertical move vs gold. After building out a Diamond reversal pattern at the bear market low, this ratio has been in a strong impulse move higher. Note the breakout and backtest to the top rail of the current bullish rising wedge. As long as the apex holds support we need to let this ratio fulfill its destiny.

hui gold 5555

This next chart is a 10 month daily chart for gold which shows the breakout and backtest to the top rail of its six point bullish expanding rising wedge. If gold is just now breaking out in a brand new impulse move up, what does that say about the GOLD:XAU ratio chart we just looked on the first chart above? In order for the ratio to keep falling in a near vertical manner, as it has been doing since January of this year, the PM stocks are going to have to go up faster than gold itself which they’ve been doing since January.

Note the huge volume bar on the breakout from the six point bullish expanding rising wedge. Also note the backtest to the top rail that took place this morning. These are major clues that this consolidation pattern is mature and ready to make its next move.

This chart also has what I consider to be the most important moving averages for gold. The 50 day simple ma has held support except for the move below it at the sixth reversal point in the bullish expanding rising wedge. It even held on the big volatility day when gold broke out from the bullish expanding rising wedge. As you can see all the moving averages were slopping down coming into the December 2015 bottom. It took until last month June, for all the moving averages to have a positive crossover when the 200 finally moved above the 300 day moving average which was the last piece of the puzzle for the moving average alignments. They are now all proper aligned for the new bull market and pointing up.

gold mas 1

The longer term daily chart for gold shows the rally off the 2008 crash low and how all the important moving averages aligned to show the bull move that took place. During that big bull run up to gold’s all time highs the 150 day moving average was the one moving average that held support the best. It was never violated until the first move down from the 2011 top which also tested the 200 day moving average for the first time during that epic run.

gold day moving

The 20 year monthly chart for gold shows how well the 10 month ema held support during the bull market years and resistance during the bear market. Note how the 10 month ema has reversed its role back to support on the rally out of the bear market low at 1035.

I think the charts are showing us, now is the time to be strongly invested in the precious metals stocks. To try and trade in and out of a strong bull move like we’ve been seeing  since the first of the year can take one out of the market just when the time is right to take advantage of a possible life changing event. Opportunities like this don’t come around very often in ones investing career and to be on the ground floor, well that’s just the frosting on the cake. The general pubic isn’t even aware of what is taking place in the PM complex right now. If you have been following the PM complex for 10 to 15 years then yes, you should be aware of what is taking place right now and taking advantage of what you have learned through the years. I believe most gold bugs see the rally that is taking place but aren’t  fully aware of the magnitude of what is really taking place right now in the PM complex. As always we’ll know in the fullness of time if these charts are telling us the truth. Have a great weekend. All the best…Rambus

gold 10 month ema

 

 

PM Stock Indexes Update…

Several weeks ago we were looking at a couple of consolidation patterns that were forming on some of the PM stock indexes. One was the bullish rising wedge and the other was a H&S consolidation pattern. Below is a daily chart for the HUI which shows the black five point expanding triangle as the bear market reversal pattern. From that reversal pattern the HUI built out its first real consolidation pattern which is the bullish rising wedge. I commented just before the breakout gap of how the battle was shaping up between the bull and the bears at the top rail which had been holding resistance. I mentioned that we would see how strong the bears were by how well they could defend the top rail. We got our answer a day or two later when the price action gapped above the top rail of the bullish rising wedge. Keep in mind these patterns show up in strong trending markets, so it’s something I always look for when I know the move is strong.

HUI BULLISH RISING WEDGE

The GDX bullish rising wedge.

gdx bullsi

Below is a daily chart for the GDXJ we looked at earlier this week when it gapped above the top rail of its own bullish rising wedge. It has six reversal points instead of four for the other PM stock indexes.

gdxj 6 poont ris

The other consolidation pattern we were looking at was a strongly slanted H&S consolidation pattern as shown on the daily chart for the $GDM. I said it was very symmetrical as the neckline symmetry line was showing the low for both the left and right shoulders. The H&S consolidation pattern also formed on top of the big brown shaded S&R zone which was a very good place to look for support.

gdm day h&s bottom

Below is a long term daily combo chart which has the HUI on top and GLD on the bottom. The most important point on this chart is the 2013 S&R line on each chart. You can call the price action below the 2013 S&R line anything you want. What is most important is the breakout gap above that three year S&R line. As you can see the HUI has formed its first consolidation pattern of its new bull market which was the bullish rising wedge. GLD also formed the first consolidation pattern of its new bull market which is a bullish expanding triangle. Note each consolidation pattern shows a breakout gap above the top rail. Maybe we’ll get a backtest to the top blue rails before these two go higher but I wouldn’t count on it as these guys are mean reverting back to some kind of normalcy.

hui gld combo

 

 

GDX Update…

Last week we looked at a weekly chart for the GDX which showed a gap made during the 2013 impulse move down. This week the GDX has finally arrived at the gap area as shown by the two brown shaded rectangles. This is the point where we’ll want to watch how the price action interacts with the gap area. First, the bottom of the gap my hold resistance for awhile and we may see a ping pong move between the bottom of the gap at 30.65 and the horizontal S&R line at the 26.75 area. The other possibility is we may see a reverse symmetry gap over the 2013 gap. Interesting times to say the least.

GDX REVERSE