When looking for support and resistance many times I will build out a horizontal zone which will generally have several previous highs or lows depending on what direction the move is taking place. For instance, on the HUI two our chart below, the previous small tops that formed in April shows the latest brown shaded S&R zone which comes into play between 208 and 210. There was another brown shaded S&R zone that worked well with the March highs as support. If the 2008 to 210 S&R zone gives way then I’ll be looking at the March S&R zone for critical support. If that one gives way then we’ll know a bigger correction is in order.

This next chart for the HUI is a two year daily line chart which shows how the reverse symmetry is building out. The blue circles shows how the price action hit the horizontal support and resistance line and then built out a small consolidation pattern just below it  before the breakout. This is perfect Chartology. This rally off the January low has been very strong and near vertical. The failure of the price action to reach the top brown shaded S&R zone between 245 and 250 suggests it needs a rest which it has been doing by correcting down to the previous S&R line at 208.

I know it’s not fun to be in the markets when the inevitable pull backs take place but that’s part of the game. Having a game plan and an idea of where to look for possible support makes riding the corrections out much easier. When one is in the dark with no idea of where possible support may show up, that’s when emotions will take hold, making you do something you might not want to do. For the time being the new trading range now exists between roughly 200 and 250 where anything can happen in the short term which will be just noise.

Below is a shorter term daily bar chart which shows the two brown shaded support and resistance zones. The 50 day ma has now risen up to 188 which should offer some support if needed.

This next daily line chart for the HUI shows the massive H&S top that led to the five year bear market and the double bottom that ended the bear market. Note how the apex of the blue triangle showed resistance on the initial hit at 235 which then led to the decline to the lower S&R line at 208 or so. This may be a good place to see some ping pong action take place between 235 and 210 which may end up forming some type of consolidation pattern which would be healthy. The 200 day moving average is still pretty low but it has turned up strongly. This chart also gives you a feel for the magnitude of this impulse move up.

The weekly chart below shows what I would consider to be the worst case scenario which would be a complete backtest to the top rail of the black expanding downtrend channel and the top rail of the blue expanding triangle reversal pattern at 180 or so. The 180 area would also represent a fib 38% retrace of this first impulse move up. Will the HUI go that low? I don’t know but I’m prepared mentally if it does.

Below is the two year daily chart we’ve been following very closely. Last week the price action broke below the bottom rail of the small red bear flag that formed right on top of the brown shaded support and resistance zone. That little red bear flag has given the UUP the energy it needed to break below the S&R zone. Note the gap below the bottom of the S&R zone. The brown shaded S&R zone may also be the double top hump which should now reverse its role to what had been support to now resistance if the double top is going to play out to the downside. It’s still possible we could see a backtest to the underside of the S&R zone between 24.20 and 24.45 that should now act as critical resistance.

The other very important feature of this two year daily chart is the possibility that we could see some reverse symmetry to the downside. Note the eight month impulse move the UUP made from July of 2014 to March of 2015 which was nearly parabolic in nature. Longer term members will remember how we tracked that big impulse move up and how many small consolidation patterns formed a rising wedge or flag which is the sign of a strong move when they slope in the same direction as the trend and not against it. If the PM complex and commodities are going to have a strong rally it will be because the US dollar will be in a strong impulse move down. We now have a very clear line in the sand as shown by the brown shaded S&R zone between 24.20 and 24.45. Above will be negative for the PM complex and below positive.

The weekly line chart shows the double top in place with a breakout and backtest to the double top trendline. A reversal pattern always has an odd number of reversal points so a double top or bottom will have at least three reversal points. This weekly line chart also shows how steep that impulse move up was in 2014 and 2015. This is the kind of setup to see reverse symmetry down over the same area as the rally. As you can see there were only a couple of weeks that were down over that eight month rally so there isn’t much in the way to halt a decline once it gets going.  Again the double top trendline is our line in the sand for the PM complex and commodities in general.