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.

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

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.

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.

The GDM Four 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.

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.

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.

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.

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.

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.

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.

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.

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.

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

Tonight I would like to show you a few Oil charts as its been fairly volatile lately. There are several big patterns in play that have been forming for many years. This first chart is a long term weekly look that shows several potential patterns forming. On this chart below I’m showing the bottom rail as a five year support and resistance line. Notice how many times that bottom rail has been hit over the last 5 years. Three weeks ago Oil broke below that bottom S&R line and has been in the process of backtesting from below. So far it has held resistance. I can also make a case for a big 7 point triangle reversal pattern as shown by the numbers.

This next chart is similar to the one above but goes back further in time that shows Oil’s parabolic run, the crash and the potential massive unbalanced H&S top. This chart is a good example of what can happen after a stock goes parabolic.

Below is another long term look at Oil that goes back over 20 years that shows another possible pattern that has been forming since 2011 the blue rectangle. I’ve taken the liberty to draw in the horizontal top and bottom rails that really shows where support and resistance lies. Sometimes on big patterns like this I’ll give the area of support and resistance a little more  leeway because of the distance between the reversal points. Here again you can see the parabolic rally and the parabolic decline that found support at the previous all time highs at 35. The 35 area reversed its role from what had been resistance for the history of oil to support during the crash.

This last chart for Oil shows the entire history for this most important commodity. I’ll let the chart speak for itself.

There is one more important chart I would like to show you tonight that is the GASO, gasoline chart. Like so many of the other commodities 2011 marked an important high. GASO has been chopping out a horizontal trading range and is now trading back at the bottom area of the blue rectangle.

It would be hard to imagine gasoline trading down to the 1.80 area if the blue rectangle breaks down. The same goes for the Oil  that would have a price objective down around the 78 area. With the US dollar showing some important strength and breaking out of a multi year base maybe these price objective are realistic. Until something alters these long term charts I have to put myself in the deflation camp and see how things play out over the next several years. Time always tells the story. All the best…Rambus

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.

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.

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.

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.

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.

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.