Before we look at tonight charts I would like to congratulate the folks that are taking the initiative by locking in some of their profits based on their own risk tolerance. Taking profits is a hard thing to do sometimes as greed can get in the way of rational decision making. Risk tolerance iS an individual thing Only you can know the answer. If you took any of my trades last Friday then you have some decent profits right now and depending on your risk tolerance you may want to sell some of your stocks or all of them. JDST is up almost 36 % in less that a week. Most investors would jump at the chance to cash in those kinds of profits in the course of a years trading so keep that in mind. There are going to be many more trades to come. The thing is, once you make a decision to do what is in your best interest, live with it. Don’t do the blame game or I shoulda done that or I coulda done this. Take responsibility for your own personal decision. This will help you further down the road when you are on your own.

I will place my sell/stops where I think is the best place based on the Chartology. We will also have a place on the sidebar which Sir Fully is working on right now that will use a mechanical approach. So you will have several options in which to make your own personal decision on what is best for you.

Lets start by looking at the GDX two hour chart that shows what is obvious now, a bull trap, above the breakout point. Put that false breakout in your memory bank as it shows how a failed breakout can lead to a much bigger move in the opposite direction. As you can see that is exactly what has happened. Notice the little but subtle clues that took place after the false breakout occurred. Whenever you have an important trendline, like the top and bottom rails of the blue triangle, always look for a backtest even if there is  a false breakout and prices return back inside the pattern. Note the backtest to the underside of the top rail of the blue triangle once the false breakout price action fell back inside the blue triangle. There was another backtest last Friday when the blue triangle broke down. That is where we took our initial positions in DUST. So even though a pattern is broken that doesn’t mean the trendlines are no good anymore, as they may still play a role in the new move that is taking place.

As I have mentioned many times in the past, whenever you know exactly what has happened to a particular trendline, in a chart pattern that goes wrong, always use the new information to tweak your trendlines. Sometimes it may just be a small tweak that shows exactly where the breakout and backtest occurred. Other times it may be a much bigger tweak as with the false breakout on the GDX chart that now gives us a totally different perspective. From what looked like a positive breakout move to a reversal pattern in just a matter of a few day shows you why you can never let your guard down when it comes to the markets. By not giving up on the false breakout, like so many investors who get discouraged when things don’t go exactly as planned, I was able to see a 5 point point bearish expanding rising wedge reversal pattern. Yes we gave back most of our gain but we survived to trade another day unlike most that are still hanging on for dear life waiting for the rally to bail them out. Our Model Portfolio is safe and sound in cash waiting to be deployed at some point in the future along with the Junior Portfolio. Both of those portfolios had small gains that were protected. As you probably know by now the Juniors are getting hammered to no end right now and many that bought them have no clue what is taking place. You do and that is most important from my perspective.

Lets look at another daily chart for the GDX that shows our top, 5 point reversal pattern, and the sharp decline that has followed. You may recall the inverse H&S bottom that led to the three month rally. As you can see I’ve extended the neckline to the right hand side of the chart that may offer some initial support on this decline. Today’s price action for GDX stopped right on the neckline extension rail. As I mentioned earlier, even if the GDX breaks below the neckline extension rail we can still use it to look for an entry point to buy more DUST if things work you that way.

This next daily chart for the GDX shows a potential very bearish setup that maybe unfolding right before our very eyes. I know it doesn’t seem like a fast moving market, it’s all relative, but when you have a down sloping chart pattern in a downtrend that is usually a very bearish setup. If… If this recent false breakout turns out to be the fourth reversal point in a possible bearish falling flag, this would be a halfway pattern as measured from the breakout from that massive H&S top. Keep in mind I’m using the GDX as a proxy for the rest of the precious metals stock indexes. The top and bottom rails of this potential falling flag are exactly parallel.

This last chart I would like to show you for the GDX is the long term weekly look that shows the massive H&S top formation that took over three years to complete. You can see how nicely this possible bearish falling flag fits into the big picture. Using my two different measuring techniques I can tell you the price objective would be around the 10 to 12 area. You may remember that area came up when we were looking at a different possible halfway pattern awhile ago. I don’t want to put too much positive spin on this potential huge setup but if you look at the top of the right shoulder, on that massive H&S top, and follow the price action down to the first reversal point in the blue falling flag halfway pattern, I would expect a similar move starting at the 4th reversal point we just put in that would take the price down to the 10 to 12 region. That would be the impulse measuring method. There is still a lot of work to do but the potential for a big payday is there if we play our cards right.

Many of our longer term subscribers know I was originally looking for a consolidation pattern in this area that would be a halfway pattern. Sometimes charts patterns can morph as I have shown you above that can give a false look to what is actually happening. During, what now looks like a three month counter trend rally, there were many potential double bottoms forming that gave the appearance of a major low being formed. After last weeks performance that now looks unlikely. I will start posting more charts during the day tomorrow to show you why this huge potential has a strong possibility of playing out to our advantage. Stay tuned and all the best…Rambus

As we all know last week was a tough week in the PM sector. The real question we have to ask is whether this was just a short term correction in the uptrend that started at the December low or is this the end of the three month rally? We’ll look at some charts to see if we can answer this question.

Lets start with the BPGDM chart that I showed you last week which was real close to giving a sell signal. We were just waiting for the 5 dma to cross below the 8 dma to confirm the sell signal. We got that last Friday so it’s officially on a sell signal now. The red circle shows the BPGDM is down to 36.67 with the 5 dma at 39.33 and the 8 dma now the highest at 40. This is the alignment we want to see for a sell signal.

The precious metals complex has been in a trading range since the June low made last year. There is still no confirmation yet if this sideways trading range is a double bottom reversal pattern or just a consolidation pattern. The trading range on gold has had three reversal points so far as you can see on the chart below. I’ve been looking for the price action to reach the August high made last year at the 1430 area where we would then sell regardless if gold was going to move higher. Everybody and their brother knows the 1430 is a hot zone and will be selling. I had originally labeled the red rising flag as a bullish rising flag as it was forming as a halfway pattern with a price objective up to 1430 which fit in perfectly. You can see the red rising flag had a false breakout through the top rail and turned down hard breaking below the bottom red rail. I’ve renamed the red rising flag to a bearish rising flag and moved the 4 with a question mark down to the top of the red rising flag. In these big consolidation patterns you will always see some type of reversal pattern form at the reversal points. As you can see reversal point #1 started out with a little unbalanced double bottom that worked into an inverse H&S bottom. Reversal point #2 built out a H&S top. Our last bottom,#3 started out with another small double bottom that ended up being the head of the inverse H&S bottom. Now here we are back up toward the top of the trading range where the price action has fallen short of reaching the price target of 1430, and has just built a 5 point bearish rising red flag. Is this going to be the reversal pattern that puts in the 4th reversal point in this nearly 9 month trading range?

This next chart shows where the green 65 wma and the most recent high touched, red arrow. That 65 week moving average always worked as support during the bull market years. Is it now going to reverse its role and act as resistance during the bear market? Sometimes it can be too painfully easy not to pay attention to something, as simple as a moving average, that worked miracles during the bull market years. Sometimes it can be that easy. Also if this is the 4th reversal point in the red triangle we are catching it at the optimal time to take advantage of a move down to at least the bottom red rail. If gold can takeout the top red rail and the 65 wma to the topside then we’ll know right away that gold is much stronger than what it appears right now.

If gold is topping out right here we should see another black candlestick show up this week. There could be some volatility during the week but I would like to see a black candlestick form by the end of this weeks trading to add a little more weight to a downside move beginning.

If gold is actually building out a triangle consolidation pattern then that means the neckline of the very large H&S top will be broken to the downside. The neckline is still quite a ways down around the 1200 area so there is plenty of time to watch how things unfold over the coming weeks and months.

Lets take a look at silver that is starting to crack the strong area of support we’ve been watching at the 20.50 area which is the top of the blue 5 point rectangle reversal pattern. You can see the price action came down to the top of the support and resistance zone and had a good bounce but ran out of steam and now silver is starting to penetrate that brown shaded support and resistance zone which it shouldn’t be doing. The situation can still be saved if silver can start to rally strongly from here but support is starting to crack.

Below is another weekly chart I’ve been showing you that has the lite blue arrows that shows the mid rail support and resistance areas. As you know I’ve been watching that 20.50 area like a hawk hoping it would hold support. As you can see it closed the week below that critical mid line of support. I’ve added a red arrow that shows what happened the last time the center rail failed to hold support on the 6 point rectangle consolidation pattern above. That red arrow, on the blue 6 point rectangle, is the actual spot that began the big impulse leg down to eighteen. Is our current failure to hold support at the center dashed line the actual beginning of the next impulse leg down similar to what we seen on the blue rectangle?

With the potential support rail being violated this sets up the possibility that a triangle pattern is now forming. I can guarantee you that this possible triangle is not on anyone’s radar screen yet. The fourth reversal point is now just beginning to show itself.

If silver is building out a triangle consolidation pattern lets see how it fits into the big downtrend channel that has been in place since silver topped out in April of 2011 almost three years ago already. As you can see it fits perfectly.

Lets take one last look at silver that shows how our potential triangle, that is now forming, may play out in the very long term look. As I’ve stated several times there is some beautiful symmetry is taking place on the long term monthly chart for silver. As you can see on the chart below the potential triangle is the right shoulder of a very large H&S top. I know it maybe hard to wrap your head around what this means for silver and the precious metals complex in general. If silver along with gold break below their respective necklines, I’ve been showing you, there is going to be one more hard down phase that will virtually wipe out most of the bull market gains off the books. This would then be a round trip from start to finish. How many investors do you think sold all their gold and gold shares in 1980 when gold and silver topped out? I would bet very few actually sold anywhere near the top as the same hype we have heard in this bull market was the same back then. Maybe this time will be different but silver and gold will need to show us some strength by making a new higher high at some point to reverse this downtrend that has been in place for close to three years now.

If gold and and silver are going to make new lows we need to look at the US dollar for any clues it can give us. The first chart I would like to show you is the possible H&S top with the Diamond head. As you can see the price action reached the neckline again just recently and has bounced up. We know that is one hot neckline. Still no confirmation that the potential H&S top is valid.

I have many charts for the US dollar that can show either a bullish or bearish outcome. Lets look at one more chart that shows a bearish setup. The US dollar broke down out of a blue bearish rising wedge and then built a red triangle as the backtest. You can see the dollar backtested the bottom rail of the red triangle this week. So far it’s still holding resistance.

Now lets look at several charts that may show a positive outcome if support can hold. Below is a very long term chart for the US dollar that is showing a possible very large blue triangle forming. If the bottom rail of the red consolidation pattern can hold support, right here, then the US dollar should be able to rally at least back up to the top red rail at a minimum. This is a critical time for the US dollar.

Below is basically the same chart but this time I moved the first reversal point up to the 87 area which gives us more of a bull flag type pattern. The red trading range is still the key as to which way the US dollar is eventually going to break. So far the bottom red rail has been holding strong support.

This last chart I would like to show you is one I built quite awhile ago that shows the two fractals or big base #1 and big base #2. The dollar has been moving at a snails pace between the top down sloping rail and the support and resistance rail on the bottom. Eventually it’s going to have to break one way or the other and whichever way it breaks out a good trend should develop.

It looks like the precious metals complex maybe at another inflection point right here and now. Last weeks price action may have ended the three month rally that began at the December low. I think we’ll know shortly if this is indeed the case. Stay tuned as it can get pretty wild at these turning points sometimes. All the best…Rambus