It wasn’t until yesterday that I could draw in a possible bottom rail of a possible diamond pattern on the GDXJ. This potential diamond pattern has been forming since the first of July. As it stands right now the diamond pattern has completed five reversal points which theoretically puts it into a reversal pattern category. With that said the bounce yesterday may have started the all important 6th reversal point to the upside which if completed would make this diamond a consolidation pattern to the upside. Keep in mind this potential diamond is still developing with no resolution either way yet.

This next daily chart for the GDXJ is a longer term daily look which shows the sloppy 5 point rectangle reversal pattern which formed at the bear market low. The false breakout through the bottom rail of the 5 point rectangle reversal pattern was the shakeout before the breakout. So far this first new leg up of the bull market is picture perfect with one consolidation pattern forming on top of the next. At some point the last pattern to form before we get a decent correction will be a reversal pattern and not a consolidation pattern. It’s not unusual to see a string of three or four consolidation patterns form within a strong impulse move. The diamond at the top of the chart will most likely tell us the direction of the next important move for the GDXJ and the rest of the PM complex.

Below is a daily line chart for a slightly different perspective. Note how the bullish rising wedge formed below the support and resistance zone and the expanding triangle above which is one way to take out overhead resistance.

This weekly chart puts everything in perspective. The diamond pattern is forming right in the heart of overhead resistance going all the way back to the 2013 breakout gap to the downside ping ponging between the two S&R lines.

Some of our long term members may remember some the diamond consolidation patterns that formed during the bear market years that seemed to take forever to complete. Some were not that pretty and had a false breakout above the top rail like the GDXJ. I believe the $XAU ended up with the most symmetrical diamond consolidation pattern of all the PM stock indexes. This weekly chart for the GDXJ shows the end of the bear market and the beginning of the new bull market with the five point rectangle reversal pattern reversing the bear market. Our current diamond pattern is going to tell us if the next move is going to be to the upside or we get our first real correction. Stay tuned as things are getting interesting in this red hot sector.

The INDU is finding initial support at one of the older chart patterns we use to look at. For the time being the INDU is doing a ping pong move between the neckline and the double top trendline. Something to keep a close eye on.

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We’ve been following the GDX as a proxy for the rest of the PM stock indexes which is showing the on going correction or consolidation phase of the first big move up off the January low. This first daily chart shows the unbalanced double top which is the first reversal point in this new consolidation phase. The double top has a price objective down to the 24.50 area which was almost touched late last week. As you can see the double top trendline has held resistance on two separate occasions with the second one taking place this week. At this point we still don’t have a confirmed low which could launch the second reversal point to the upside yet. The price action is in the middle of no man’s land presently.

Below is a longer term daily chart we’ve been following which shows a possible trading range between 24.50 at the bottom and 32.00 at the top. Again, we still don’t have confirmation yet on the low for this first reversal point to the downside.

This third daily chart shows the fib retracements with the 38% retrace coming in at the 24.33 area. If, and that’s a big if at this point, but the double top trendline could be the neckline for a small H&S bottom which would fit in nicely with this potential trading range as the start of the second reversal point back up to the top of the trading range. It’s possible we could see a double bottom form at the bottom of the potential trading range which would be a reversal pattern also. Right now the price action is in neutral territory. As I mentioned previously these trading ranges can whipsaw a person to death trying to trade in and out. At least once the top and bottom of the trading range can be established then there is a chance to try and play the swing trades within whatever consolidation pattern may develop.

This next chart is a weekly look at the bull and bear market counter trend moves during the bull and bear markets since 2009. The red rectangles measures the same percentage moves down in a bull market but not time. On the left side of the chart you can see the bull market corrections, red rectangles, that punctuated that rally out of the 2008 crash low.  If our current correction is fairly close to the other corrections then price wise the 200 area should provide good support. There is also the 50 week ema that is rising and is currently at 204.

On the weekly chart above you can see the rally out of the 2008 crash low was very strong but even during that strong bull move it had three corrections, one forming on top of the other. Try to put yourself back in the HUI during that strong bull move and how you may have reacted to each correction within the red rectangles. It’s easy to look back in hindsight and see the corrections and say I would do this or that but it’s abstract and not reality. Reality is our current trading range which may very well be just the first correction in the mother of all bull markets, only time will tell.

Editor’s Note: This was posted  intra dayAfter the close GDX can be found closer to the Bottom of “The Zone” at 26.41