The other day I showed you this 2 hour chart for the UUP (US Dollar ETF)  which had completed an expanding rising wedge pattern when the price action hit the bottom rail at 5? which completed the pattern. The pattern was completed at that time but we still don’t know if it will be a consolidation pattern to the downside or if the UUP can rally back up and through the top rail which would make it a 5 point reversal pattern to the upside as it has formed in the downtrend.

I speculated on a possible H&S pattern forming inside the expanding rising wedge drawing a horizontal line from the top of the left shoulder to the right side of the pattern, looking for a possible high for the right shoulder using the red letters to make it easier to see what I was trying to convey. So far that possible high for the right shoulder is still in play. If and it’s still a big if yet, if the H&S neckline / bottom rail of the expanding rising wedge gets broken to the downside, we’ll have two consolidation patterns in one.

The daily chart for the UUP shows why this potential expanding rising wedge / H&S pattern is so critical to the big picture. As you can see the combo pattern has formed right on top of the brown shaded S&R zone. For those folks that have been with us for several years will remember when the US dollar finally broke out of the multi year base  and began that very strong impulse move up which you can see on the left side of this daily chart.

During that strong impulse move up all the important currencies of the world along with most commodities got taken to the woodshed for a beating. As we’ve seen in the past, when you see a consolidation pattern pointing in the same direction of the trend and not against it, that is usually a very good indication you’re in a strong impulse move. Note the blue bullish rising wedge that formed during the 2014 – 2015 impulse move up.

What makes our present situation so interesting is that if the combo expanding rising wedge / H&S pattern turns out to be a consolidation pattern, then we can expect to see a strong move down over the same area during that strong impulse move up in 2014 – 2015 as show the red arrows which I call reverse symmetry. Why that would be so important is because we should see the currencies and commodities, that were affect by the US dollar on the way up, should now see them move inversely to the US dollar which would be up as the US dollar goes down.

Keep in mind the current pattern is still building out for the UUP with no confirmation yet on which way the eventual breakout may occur but we have something tangible to keep a close eye for more clues that will eventually show us the way.

Sometimes a stock will do something that makes you scratch your head in wonderment. There usually isn’t any rhyme or reason why it happens but it works until it doesn’t. Usually though by the time you finally figure out a certain sequence or a fractal type situation it will change just when you want it to work the most.

I was going over some old charts from the bear market years in the PM complex that I haven’t looked at in quite awhile and came across this old weekly chart for the $HUI. I updated it this afternoon to make it current. If this chart doesn’t make you scratch your head in amazement then I don’t know what will. Again it is what it is until it isn’t.

Below is an eight and a half year weekly chart for the $HUI in log scale. You will see ten rectangles that just measures height and not time. The blue arrows shows the bear market rallies and the red arrows shows the bull market declines.

Starting at the 2008 crash low at 150 you can see there were three corrections up to the left shoulder high as shown by the red arrows and rectangles. The HUI continued to rally all the way up to the 2011 top which ended up forming the head of that massive H&S top. The first decline down from what eventually became the head of the H&S top, fell just shy of reaching the bottom of the rectangle before the next rally took hold. That rallied failed to take out the precious high and made a lower high which was the actual beginning of the five year bear market that followed. Once the price action fell below the bottom of red rectangle #4 the HUI made a lower low for the first time since the 2008 bull market began. The new bear market was underway.

During the course of the bear market years there were five bear market rallies that were all exactly the same percentage move up as shown by the blue arrows and rectangles. When the HUI broke above the top of blue rectangle #5, at the bottom of the chart at 137.40, that showed a major change of character. That was the fist time since the 2011 top that the HUI made a higher high and broke the sequence of bear market rallies. That failure then led to one of the strongest bull market rallies in history for the HUI.

Now on to the present which shows the bull market rally and our first correction taking place since the January low of this year. I have to ask the question, what are the odds that the current red rectangle is going to show us the low for this first correction around the 200 area? Keep in mind all these same sized rectangles are showing us the size of the move in price but not time. What this means is that once the low is set that should be the low for this correction but time wise it could still take many weeks to complete the correction.

The brown shaded area shows where a confluence of support comes in at the 2013 S&R line, the top of blue rectangle #4 at 205 and the 50 week ema currently at 202. So price wise it looks like the low for the first correction is just below at the 200 area which would be a good place to pick up a few more shares of your favorite PM stock. All the best…Rambus