Last Thursday the price action tested the top rail of the April falling wedge and declined on Friday which told us the top rail was hot. Today the UWT gapped above the top rail which appears to be the breakout move. I’m going to take my second and last position and buy 400 shares at the market at 13.28 with the sell/stop just below the previous low at 9.98 for now which I’ll be raising shortly. This can be a very volatile eft so if you don’t want the leverage you can buy USO or UCO 2 X leverage.
This week PPLT is officially ending its bear market that began with the rest of the PM complex back in 2011. For the past year PPLT has been building out a 5 point bullish expanding rising wedge reversal pattern that completed with the breakout gap yesterday. A backtest to the top rail would come into play around the 89.25 area.
This weekly chart shows some classic Chartology with a nice long breakout bar last week through the top rail of the 2016 downtrend channel. This week you can see a nice breakout gap above the top rail of the now 5 point bullish expanding rising wedge reversal pattern.
This long term monthly chart shows the 2011 high and the bear market that ensured. Just like silver there is a good chance that PPLT could start outperforming the rest of the PM complex. We can now add Platinum to the list of good clues that the PM complex is truly in a long term bull market.
The most important part of investing is knowing if you are in a bull or bear market. It’s always much easier to trade in the direction of the main trend. There are times when a market is reversing from bull to bear or vise versa that there is not a lot of confirmation the turn has completed which leaves one apprehensive about getting fully invested. The more clues you can get that the major trend has reversed the more confident you can become to put your hard earned capital to work.
Over the last year or two we have been slowly gathering clues on the PM complex that is reversing from the 2011 bear market to the new bull market which has just started to takeoff. There are still many investors that can’t believe the 2011 bear market is over and are gun shy to put capital to work in the PM complex. This is perfectly understandable because the job of a bear market is to crush any optimism one may have had with the PM complex.
Tonight I would like to show you some super bases that will leave no question in your mind that the PM complex has indeed reversed course from the 2011 bear market to a new and long term bull market that will have many years to run. I know you are tired of me saying, “big patterns lead to big moves.” but the charts to follow will show you exactly what I mean by that statement.
When looking for big bases or reversal patterns in the PM complex I like to use a quarterly line chart. Keep in mind we are looking for big patterns that are well over 5 years in the making that show up at major reversal points from bull to bear or bear to bull markets. When you find a big pattern like I’m going to show you then you can be pretty confident of what the major trend is and invest accordingly.
Lets start with the quarterly line chart for gold I first showed you back in 2017 when the price action bounced off the 2013 neckline failing to breakout. At the time we did have the possible H&S neckline building out but no confirmation the H&S bottom would eventually play out. What we did have in place were 2 left shoulders and a possible head with one right shoulder. Symmetry suggested before the H&S bottom would be completed that we would most likely see 2 right shoulders form. As you can see that was the case.
Also what a quarterly line chart can show us is reverse symmetry, how a stock goes up is often how it comes back down over the same area and visa versa. You can see this very clearly on this quarter line chart for gold. Also when looking at the quarterly line charts to follow take a quick look at the indicators for confirmation the major trend has reversed from down to up. I’m starting with the gold chart because it has been leading the rest of the PM complex higher and shows you what to expect with the rest of the PM complex when it becomes their turn to run higher.
Many PM investors are in awe of the run silver is having right now not knowing why. The reason silver is rallying so strongly right now is because it has just broken out of its massive H&S base that had 2 left shoulders and 2 right shoulders. There is no question that silver has been one of the laggards when it comes to the PM complex as shown by the downscoping neckline. Nevertheless its 2013 neckline has given way completing its massive H&S bottom. Again, look at how gold reversed symmetry up after breaking out from its H&S bottom. Silver is going to do the same thing and has already started.
Next is the quarterly line chart for the GDM, gold miners index, which has been around the second longest of all the PM stock indexes except for the XAU. Note the massive base which formed from the mid 1990’s to the early 2000’s which launched this PM stock index on its bull market run. As you can see it is now in the process of breaking out above its 2013 neckline. There appears to be some possible serious reverse symmetry just above the neckline.
Below is the quarterly line chart for the HUI which is still trading below its 2013 H&S neckline. There is no doubt that the HUI will follow suit and breakout from is super base. Again, note how the price action could very well reverse symmetry back up over the same area on the way down as shown by the blue arrows.
Next up is the XAU, gold and silver index, which is breaking out from its 2013 H&S neckline. Again, note the super base on the left hand side of the chart which launched this PM stock index on its bull market that ended in 2011. What’s interesting is that the XAU actually retraced 100% of its 2000 to 2011 bull market because this index is made up of some silver stocks which were very weak during the bear market years.
The GDX has only been around since 2006 but has still produced 2 super pattens, the 2011 H&S top and the current 2013 H&S bottom. The price action is currently trying to breakout from the 2013 H&S neckline.
The GDXJ, junior gold miners etf, has only been around for 10 years. When you compare this 2013 base to the GDX 2013 base you can see the juniors have been slightly underperforming the big cap PM stocks up to this point. At some point in the future we will see the juniors outperform the big caps in a big way once the speculative fever hits the PM complex.
This next stock, HGU.TO, Canadian gold miners etf, is setup a bit differently than the rest of the PM stock indexes we’ve looked at so far. It doesn’t have a lot of history but it does have enough to show a 3 year double bottom building out. A breakout above the double bottom trend line will complete the reversal pattern. To measure for a price objective just measure the distance of the double bottom and add it to the breakout of the double bottom trendline. Again, there could be some very nice reverse symmetry to the upside.
Yesterday we looked at a short term daily chart for the SIL, silver miners etf, which was breaking out from a bullish rising flag. I mentioned that SIL was probably the weakest sector within the PM complex but it could be getting ready to play some catch up. This quarterly line chart really drives home just how weak this index is vs the rest of the PM stock indexes.
What all these charts above are strongly suggesting is that the corner has been turned from bear market to bull market in regards to the PM complex. The indexes where the necklines are sloping up are showing more strength than the ones that are sloping down. Either way though a breakout above any of the necklines is a very bullish setup and lays the groundwork for many more years of bull market price action. Big patterns lead to big moves. All the best…Rambus
Yesterday we looked at PPLT, Platinum, which broke out from a small bullish falling wedge last week. I suggested it could be time for PPLT to start outperforming the rest of the PM complex for awhile as it has been a laggard. Today we got a massive gap to the upside on the daily chart.
It doesn’t show up on this weekly chart but the reason for the massive gap today is that the price action finally broke out above the top rail of its 2016 downtrend channel. So now platinum has joined the rest of the PM complex in its new bull market.
Below is the long term monthly chart showing the breakout above the top rail of the 2016 downtrend channel.
Tonight I would like to take an in-depth look at Sliver and show you the bottoming process that finally came to an end in late May of this year. There is no question that silver as been the laggard when it comes to the PM complex similar to what we saw back in the early 2000’s when gold led the way for the rest of the PM complex. Silver eventually caught fire and actually topped out in April of 2011 a full five months before gold and the PM stock indexes. If you’ve been trading silver for any length of time then you know when it moves it can make up lost ground in a hurry.
Since the early 2016 low SLV has been trying to bottom around the 13 area. Every time it would find support and rally higher SLV could never maintain its impulse move higher. Below is a one year daily chart for SLV which shows a small double bottom that formed late last year and after reaching the double bottom price objective at 15.00 the price action declined once again toward the bottom of the previous lows.
This time however SLV was able to find its low slightly above its 2018 double bottom low forming the blue bullish falling wedge. The blue bullish falling wedge ended up being part of a bigger reversal pattern the four month classic H&S bottom with the left shoulder and head forming inside the falling wedge and the right shoulder low forming on the neckline symmetry line. Note the big breakout gap above the neckline with no backtest. This is one of those cases that if you didn’t buy on the breakout and waited for the backtest you don’t get positioned.
This next chart for SLV is a slightly longer term daily chart which shows the fall 2018 double bottom with the late May of this years low which has created a bigger double bottom. Note the double bottom hump that came into play around the 15.20 area which initially found resistance when the price action rallied up to the previous multi 2018 lows as shown by the red arrows. Once the 2018 lows were broken to the downside that double bottom trendline would then reverse its role to resistance just like we saw at the double bottom hump. That’s classic Chartology.
Once this years H&S bottom was confirmed it strongly suggested that the double bottom hump at 15.20 would give way. As you can see the initial rally out of the H&S bottom slammed into the black dashed double bottom trendline and had a small selloff. That is what you would expect on the first hit. From a psychological perspective everyone that bought SLV above the double bottom hump were underwater at that point so those that wanted to get out had their shot. I have to say I’m a bit surprised that it only took one hit and a backtest for SLV to breakout through such a powerful resistance line. We now have a strong line in the sand for SLV, above the double bottom trendline at 15.20 is bullish and below is bearish.
Now lets work our way further back in time and look at a 4 1/2 year weekly chart for SLV. As you already know the dominate chart pattern for the PM complex is the 2016 bullish falling wedge which is showing up on most of the PM stock indexes and most of the individual stocks. SLV is no different from the others just a bit slower in the breaking out process. Here you can see how the H&S bottom formed just below the top rail of the 2016 falling wedge which again strongly suggested the breakout would finally take place. Again, if you didn’t buy the breakout above the neckline and the top rail of the 2016 bullish falling wedge you didn’t get positioned as there wasn’t a backtest.
The other important feature on this weekly chart is the massive three year double bottom. The left side of the three year double bottom was actually a small double bottom. The decline from the August 2016 high formed the bullish falling wedge which finished up with a small double bottom, late last year which is part of a bigger double bottom with the head of the H&S reversal pattern being the second bottom. Note the strong volume that took place on the simultaneous breakout of the H&S neckline and the top rail of the 2016 bullish falling wedge.
This next long term weekly chart for SLV puts the three year double bottom in perspective. The double bottom hump comes into play around the 19.75 area. The price objective for the 3 year double H&S bottom would be up to the 28.75 area. I would expect we could see a small consolidation pattern form just below the double bottom trendline around the 19.25 area which would give SLV the energy it needs to reach the double bottom price objective.
The 2013 S&R line is the same line that is found on gold’s 2013 H&S bottom neckline. When drawing a trendline, in this case the 2013 S&R line, I always look for a minor low, minor high, or a gap on the left side of the chart in which to set the trendline. This 2013 S&R line actually starts at the breakaway gap that really put the bear market under pressure. If one didn’t heed the warning of that breakaway gap it has been a slow and painful ride to the bear market bottom.
This chart also shows you why I took my third position in USLV this week because of the breakout above the S&R line. Again we have a very clear line in the sand with the S&R line.
This next chart is a long term monthly chart for Silver which shows its 2011 bear market downtrend channel. Unlike gold and the PM stock indexes that have broken out above the top rail of their 2011 downtrend channel Silver is just now showing its breakout move on a nice increase in volume.
This last chart for tonight is one that I hold near and dear to my heart. This is the very first chart I ever posted publicly back in the old days at, Gold Eagle. Silver was just in the process of breaking out above neckline #1. Back then no one was looking at charts that were 40 or 50 years old. For me the symmetry was just to important to ignore, how silver came down was how it was going to go up. For those that don’t believe in big patterns leading to big moves I would like them to explain away the 25 year double H&S bottom.
Note the perfect breakout and backtest to neckline #1 before silver went on to breakout above neckline #2. I don’t know how many remember the 2008 crash in the PM complex but silver found support on the backtest to neckline #2 which led to the nearly vertical move to fifty. With the 2011 bear market downtrend channel now being broken to the upside is that downtrend channel going to be the handle of a massive cup and handle formation? As they say, we’ll know in the fullness of time. All the best…Rambus
Since I’ll be on the road tomorrow I need to get the Weekend Report posted today.
There has been a lot of discussion lately about some deflation coming into the big picture. In this Weekend Report I will show you what the Chartology is suggesting. I have literally 100’s of charts on commodities that I’ve been building over the last 15 years from short term to the very long term quarterly charts. Many of the long term charts should look familiar to our long term members as they played a key role in the last deflationary event back in mid 2014 to the first half of 2015.
Lets start with the most important commodity on the planet oil. Back in 2007 the WTIC formed an unassuming H&S bottom which ended up being the spark to launch oil on its parabolic run to 147 in just under a year. That parabolic move ended when the WTIC formed a large H&S top which is hard to see on this long term daily chart. The price objective was down to 33.61 which was hit dead on the money.
After that low was established in early 2009 oil began a countertrend rally which would last for a couple of years. The WTIC then began to form one of those very large and drawn out topping patterns that would take 5 years to complete. Similar to the 6 year H&S consolidation pattern that we’ve been following on gold, the WTIC touched it neckline on many occasions but just couldn’t break through. The big advantage of recognizing a large pattern like this early on is that you can prepare for the eventual breakout when it occurs which we did. Keep that big impulse leg down out of the unbalanced H&S top because most commodities experienced a similar fate back then.
Note the 2016 bearish rising flag that has completed the breaking out and backtesting process. At a minimum the WTIC should reach the 2016 low around the 25 area.
This second chart for WTIC is a long term 35 year quarterly chart which shows the 2014 – 2015 impulse move down. At the time we were looking for initial support to come into play in the brown shaded S&R zone which was hit. For awhile when oil spiked below the brown shaded S&R zone it looked like it could move to the bottom of the very large trading range but support was finally found and the counter trend rally began negating that possibility.
When I first posted this chart years ago I showed how the WTIC had traded in a large trading range between 10.50 and 40 for many years. I labeled that very large trading range as a double bottom. That massive double bottom had a price objective up to the 146 area as shown by percentage change indicator which was 277%.
Note the blue bullish rising wedge which formed just below that massive 20 year brown shaded S&R zone which was needed to help get oil over that long term resistance zone. The current blue bearish rising wedge could give the WTIC the energy it needs to break below the brown shaded S&R zone in the future as a halfway pattern.
Natural Gas produced its own massive H&S top which has led to a 10 year bear market since the neckline was broken. Just like oil on the chart above natural gas also formed two well defined brown shaded support and resistance zones. The 2014 – 2015 impulse leg down traded to the bottom of the upper S&R zone before the price action began to bounce. Since then the NATGAS has built out a very large blue bearish rising wedge which is showing some inverse price action in regards to the bullish falling wedge which formed in the second half of the 1990’s. Is it possible that NATGAS could trade down to the lower brown shaded S&R zone on this go around?
This next chart for Natural Gas is a monthly look which shows a little more detail than the quarterly chart we just looked at on the chart above. A move down to the 1.63 area will put natural gas at a 25 year low. No inflation here.
There is one more very long term chart I built out years ago which is the 75 year quarterly chart for the CRB index. It looks very similar to the long term quarterly chart we looked at earlier for the WTIC. What this long term quarterly chart shows are two distinct trading ranges. The lower one formed between the mid 1950’s to the early part of the 1970’s. Once the CRB index broke above the 1965 highs it was off to the races in a vertical move that finally came to and end about 2 years later in 1973. For the next 40 years or so the upper brown shaded S&R zone held strong support until the impulse move down from mid 2014 to the first half of 2015.
As you can see the price action has failed to rally back above the brown shaded S&R zone but instead has formed the blue bearish rising wedge just below the S&R zone. What is taking place is that the 40 year S&R zone held support for all those years but during the 2014 – 2015 decline that support zone was broken. Now it has reversed its role to resistance which is what you would expect. Since the multi year blue bearish rising wedge has broken down below its bottom rail is it possible we could see the lower brown shaded S&R zone come into play sometime in the future? I can tell you that if the blue bearish rising wedge plays out as a halfway pattern the price objective would be down into the middle of the lower brown shaded S&R zone. The Chartology is there now we just need to watch the price action and see if it plays out.
This last chart for the CRB index is a 20 year monthly chart which shows more details vs the quarterly chart above. Here you can see the H&S top that formed in 2011 with the strong impulse move to the downside once the neckline was broken. That impulse move ended in January of 2016 which led to the rise of the 2 1/2 year bearish rising wedge which has completed the breakout with a backtest in place. What we want to see next is for the price action to take out the previous low which will set up a new downtrend.
I know this is hard to digest as it means the benchmark commodity index the CRB looks likely to be back at levels last seen in the 1970s. Back to the Future ?
I’m just scratching the surface of all the charts I have for commodities and a possible deflationary event that could come to pass. I will be on the road for the next two days but when I get settled in I’ll have many more charts to post. Al the best…Rambus