The Bullish Chartology for Gold …Public Version

Tonight I would like to update you on some of the longer term gold charts we’ve been following which are still hanging in there from the bullish perspective. Keep in mind these are long term charts so changes come slowly.

Lets start by looking at the long term weekly chart for gold which shows its 2011 bear market downtrend channel we’ve been following for a long time now. Back in July of this year the price action broke out above the top rail and just recently the top rail was backtested from above and we are getting a bounce exactly where we needed to see a bounce.

Normally at the end of a long protracted bull or bear market you will find some type of reversal pattern buildout. As you can see the 2011 top built out the 6 point rectangle just below the all time highs. Currently gold has built out the blue triangle with the 5th reversal point falling just shy of reaching the bottom rail. I have seen in the past that sometimes when the 5th reversal point fails to reach the bottom rail it can be a sign of strength, meaning the bulls are not waiting around, red circle. If the bulls are truly in charge the next thing we’ll want to see is a new high above the previous high that was made on the initial breakout.

This next chart is probably the most important chart for gold as it shows the possible H&S bottom building out. We’ve discussed in the past that big patterns lead to big moves. This potential H&S bottom is 4 years in the making and is big enough to lead the next leg of gold’s bull market much higher if the neckline is broken to the upside. Currently the neckline comes in around the 1350 area.

There are several other possibilities we been follow as well for gold. This next chart is a monthly look which shows the ping pong move taking place between the top rail of the blue expanding falling wedge and the bottom rail of the black expanding falling wedge. Again, we are seeing gold bouncing right where we need to see it bounce.

The blue expanding falling wedge without the top rail of the downtrend channel or the much bigger black expanding falling wedge.

Almost 2 years ago gold broke out above the top rail of the blue 7 point falling wedge with the top rail holding support on two backtests. It would be nice to see a white candlestick form at the end of this month and if the breakout is going to really take hold we should see a string of white candlesticks form all in a row which tells you the impulse is very strong. In a strong move down you will see a string of black candlesticks all in a row.

Gold’s major bull market uptrend channel with the 2011 bear market downtrend channel with the possible 2015 H&S bottom.

Gold’s long term monthly chart showing the potential H&S bottom.

 

Gold’s 40 year chart.

 

Stock Market Combo Chart…Breakouts

All the different stock market indexes have now broken out above the top rail of their rising patterns except for the two tech indexes. The IWC, micro caps, continues to be the strongest sector. I know it may not feel like it, but rising wedges and flags that slope up in the same direction of the uptrend tells us the uptrend is very strong.

Wednesday Report…Commodities Bottom as Emerging Markets Breakout

Tonight I would like to update some of the different commodities and emerging markets we took some positions in back in late July of this year. First, let me say that as investors we like everything to line up in perfect harmony so we can make some sense out of what is actually happening in the markets. It’s just human nature. For example, if the US dollar is doing this then the PM complex or the commodities should be doing that. There is a general rule that there is an inverse correlation between the US dollar and the PM complex or commodities, but it’s not always accurate.

Many times we can get bogged down trying to make everything fit perfectly before we make a trade. This can sometimes lead to missed opportunities as what we were expecting didn’t take place. For the most part this is one of the reasons why I prefer Chartology. When a pattern is building out the bears and bulls are making their side known by the battle they’re having with each other, which eventually creates a consolidation or reversal pattern. All the fundamentals that a stock has is also priced into the chart pattern.

Many times as investors we have to know why a stock is doing what it’s doing, from a fundamental point of view, which can begin to complicate things to the point where we become more confused than ever and can’t see the forest for the trees anymore. For me personally I try to keep it fairly simple by looking at what chart pattern is building out and base my buy or sell points by what the chart is suggesting. Nothing is perfect when it comes to trading the markets, but sometimes less is more.

I know right now many investors are seeing a stronger dollar and expect that commodities will head much lower based on the inverse correlation these two generally have which may in fact turn out that way. From a Chartology perspective many of the different commodities built out very large reversal patterns, which is going to be very hard to reverse those patterns. So regardless of what the US dollar is doing I have to go with what the chart patterns are suggesting.

Lets start by looking at a weekly chart for Copper which built out a very large 3 year inverse H&S bottom. About 3 months ago we got the breakout above its neckline telling us the bottoming process was complete. After a strong breakout move Copper is now pulling back to the breakout point forming a backtest to the neckline which will come in around the 2.75 area along with the 30 week ema. Until something changes this bullish setup I have to respect what the chart is saying regardless of what the US dollar is doing presently.

The 20 year monthly chart for Copper shows a very symmetrical H&S bottom forming after an almost 7 year decline. This is the area one would be looking for some type of reversal pattern to form.

When one looks at this 45 year quarterly chart for Copper you can begin to see how our current H&S bottom fits into the very big picture. Note the beautiful H&S top that formed at the 2010 high. It took approximately 3 quarters for the breaking out and backtesting process to play itself out before the impulse move down began. Before we leave this chart Copper built out a 25 year flat top triangle which led to that strong impulse move up. Also note the blue bullish rising wedge which formed just below the top rail of that 25 year flat top triangle which gave Copper the energy it needed to finally take out that massive resistance line.

Another very important commodity is Oil, which is building out its own 3 year H&S reversal pattern after an almost 5 year decline. This weekly chart shows the price action is currently testing the neckline. Many times a line chart will give you an early heads up when a breakout is about to take place vs a bar chart.

When looking at these H&S bottoms make a mental note of the price objective which is taken from the bottom of the head straight up to the neckline. That distance is then added to the breakout point to get a minimum price objective.

Next lets look at a weekly chart for the XLB, basic materials sector, which is hitting new all time highs.

In the past we’ve looked at how the lower channel can morph into a bigger channel that can double in size. In the case for the XLB it looks like a possible 3rd equal channel maybe in the process of building out.

Next lets look at several different commodities indexes to see what they may be telling us. This first commodities index is the old CRB index which has built out a double H&S bottom that experienced a breakout gap above its neckline earlier this month.

This next commodities index chart is monthly look at the $GNX which is in the process of breaking out above its neckline. Note how this H&S bottom is forming at the 4th reversal point in its 10 year falling wedge.

The $GYX, industrial metals index, is building out a double  inverse H&S bottom at the 4th reversal point in its 10 year triangle. A backtest to the neckline would come in around the 320 area which should be expected, but not necessary.

Another base metals index is the DBB which broke out of a double H&S bottom about 8 weeks ago with a breakout gap. A backtest to the neckline would come in around the 16.75 area along with the 30 week ema.

Now lets turn our attention to the emerging markets which is generally affected by the US dollar. The rule of thumb is that when the US dollar is weak it’s good for the emerging markets and vice a versa. Below is a 10 year look at the EEM, emerging market etf, which broke out of a massive 7 year expanding falling wedge. A backtest to the top rail would come in around the 41.85 area along with the 30 week ema.

Believe it or not there is an even a bigger chart pattern building out on the EEM which is a 10 year triangle consolidation pattern. As you can see the breakout occurred 3 months ago with the possible backtest to the top rail in progress.

There is another emerging market etf I follow which is the VWO that broke out from its 6 year flat top expanding triangle and is now in the process of backtesting the top rail. Note how the blue bullish rising wedge formed just below the to rail just before the breakout. Classic Chartology.

This monthly chart shows a complete backtest would come in around the 41.75 area.

This last chart for tonight is a 10 year monthly look at the VEU which is an all world etf minus the US stock market. This chart gives you a good idea of how the rest of the world is doing, which looks very bullish as this index is making new all time highs within its 2009 bull market uptrend channel.

When looking at many of these commodity charts above you can see many H&S bottoms playing out on a large scale. Think of all the shares that had to trade by millions of investors to build out these reversal patterns. Regardless of what the US dollar is going to do these huge bottoms are going to be very difficult to change into something bearish. Trying to figure it all out from a fundamental point of view will be harder still. The patterns are there and until something changes these pattern, they are what they are. All the best…Rambus

 

 

GLD Update…

Just a quick update on the daily chart for GLD which shows the price action gapping below the top rail of the expanding triangle this morning. This gap matches the breakout gap on the way up which is now creating an island reversal pattern. Today’s price action also gapped below the 50 day ema. With the price actin now trading back inside the expanding triangle I have label the breakout back in August as a false breakout.

The Most Hated Bull Market in History

This is the Short version :

On the 2 hour charts I’ve spotted several small H&S bottoms building out on some of the stock market indexes. It wasn’t until Monday of this week that they began to show themselves when several broke out above their necklines. Some of these small H&S bottoms are part of a bigger pattern that has been building out for most of this year. At a minimum their price objectives should get some of the stock market indexes back up to the top of their 2016 uptrend channels.

Lets start with a 2 hour chart for the SPX which shows it gapped above its neckline on Monday of this week and closed at a new all time high today. A backtest to the neckline would come in around the 2482 area.

Several weeks ago I posted this chart which was showing how the original rising wedge, blue dashed trendiness, was morphing into a bigger pattern as shown by the red circles with a symmetry false breakout of the top and bottom blue dashed rails. It’s getting pretty busy in the apex, but you can see how the small H&S bottom fits into the bigger pattern that began building out back in February of this year. If that little H&S bottom plays out it strongly suggests the SPX is going to breakout topside from that 7 month morphing rising wedge in a new impulse leg up.

Below is a 2 year daily chart for the SPX which just shows its 2016 uptrend channel. On many of the stock market indexes the 200 day moving average does a good job of showing you the angle of the uptrend channel.

Perspective is everything when you discover what may be an important chart pattern. The weekly chart below shows the 2 year H&S consolidation pattern that corrected the last impulse move up. Now you can see how the blue morphing rising wedge fits into the very big picture. Keep in mind the rising wedge hasn’t broken out yet so the pattern isn’t complete. The reason I think the rising wedge is going to breakout topside is because we are in a bull market and patterns like this tend to form in strong bull markets. If we do get the upside breakout from the rising wedge I would view it as a halfway pattern that would have formed between the neckline and the ultimate price objective.

 

As I mentioned earlier perspective is everything. Below is a 20 year monthly chart for the SPX which we’ve been following before the top rail of the 13 year expanding flat top triangle consolidation pattern was broken. On this chart I’m showing the 2014 and 2015 consolidation period as a bullish expanding falling wedge halfway pattern. I have to tell you that it has been pretty lonely being a long term bull, but it has even been harder over the last several months as the rising wedge has been developing on the daily charts above. It’s these long term charts that take out all the noise that give me the confidence to hang in there when most say the bull market can’t keep going up. This chart shows you the wall of worry since the breakout from the blue bullish expanding falling wedge.

Again perspective is everything when you look at this 75 year quarterly chart for the SPX. The blue expanding falling wedge on the chart above is the small red consolidation pattern at the top of this chart. This chart along with the Jaws of Life on the INDU has given us a look into the future that few want to believe. For whatever reason investors love to hear bad news or that the markets are going to crash. Fear sells where bullish scenarios go by the wayside. For all the reasons this bull market that began in March of 2009 can’t keep going up, it keeps going up regardless of all the reasons it can’t, and there are a millions reasons why it can’t keep going up. The price action above all else has the final say when everything else is boiled away.

This weekly chart shows the INDU’s H&S consolidation pattern with the breakout and impulse move higher.

The monthly line chart for the Jaws of Life.

Below is the 75 year chart for the INDU which shows the Jaws of Life and a glimpse into the future.

The Most Hated Bull Market in History chart for the INDU.

Below is a 25 year look at the NDX which shows some beautiful Chartology. Note the bullish rising wedge which formed just below the all time highs that gave the NDX the energy it needed to finally move on to all time highs. Classic Chartology

There’s always a bull market In healthcare

This next chart is for our many long term holders that don’t like to trade every little wiggle a stock makes and are looking for something to hold on to. This was one of the big leaders during the first leg up and then built out the blue triangle consolidation pattern.

The long term monthly line chart. Think of the blue triangle as a halfway pattern

I had planed on showing you some charts on oil, but I’ve run out of time. The bottom line is that until something changes the bull market, it is what it is and all the negativity about the economy or fundamentals or whatever one uses to gauge the health of the stock markets is not going to make you a dime. Trying to short a bull market is one of the hardest things to do as many have found out. Realize that everybody who has tried to catch THE Top of the Most Hated Bull Market in History since 2009 has lost money.

. It’s much easier to go with the price action and what it’s telling you to do than to fight it. Maybe we crash into October like so many are predicting, but on the other hand what if we don’t? All the best…Rambus