Tonight I would like to show you a couple of long term charts for Silver that puts where silver is currently trading into perspective. We can look at the hourly charts or even the daily charts for the short term patterns, but if you really want know where a stock is relative to its history we need to look at the long term view. The more history a stock has the more relative the current price action is.

Lets start with a 16 year monthly chart for silver which seems like a long time but in the big picture it only shows us a small part of its history. The dominate chart pattern is the 2011 bear market downtrend channel which is almost perfectly parallel. I purposely left the top rail of the 2011 downtrend channel and the top rail of the 2016 triangle thin so you can see the critical area silver is now trading at, red circle. So far this month silver has traded as high as 15.95 which puts it right against the top rail of the 2011 bear market downtrend channel and the top rail of the 2016 triangle.

I have viewed the 2016 triangle as a halfway pattern to the downside for well over a year or so but with the price action hitting the top rail this month that completed the 5th reversal point which now puts the triangle in the reversal category. I can now take the question mark off of reversal point #5 and add it to the possible reversal point #6. All this means is that we now have 5 reversal points in place to create a reversal pattern if the bulls can punch through the top rail. If they can’t and silver begins to decline all the way down to the bottom rail then a consolidation pattern will be in the picture again. An odd number of reversal points creates a reversal pattern and an even number of reversal points creates a consolidation pattern. The bottom line right now is that we have a triangle reversal pattern in place until it is negated if silver trades backdown to the bottom rail.

This next chart shows you why the more history a stock has the better perspective one gets when it comes to really big chart patterns. This chart is one of the very first charts I ever  posted publicly back in the old days before Goldtent was born. There is a website named Gold Eagle where I posted this chart for the first time which was probably around the 2004 – 2005 timeframe. At the time I showed this massive 25 year H&S bottom that was building out that was showing some nice symmetry. The double neckline looks similar to the double necklines we’v been following on some of the US stock market indexes which I hope will give us the same results as this 25 year double neckline H&S bottom.

Note the blue bullish rising wedge which formed between the two necklines which gave silver the energy it needed to finally break free from 25 years of resistance. Neckline #2 also came in handy during the 2008 crash which gave me a place to look for initial support.

Our 2011 bear market downtrend channel doesn’t look so daunting when compared to the rest of this 50 year chart. As I mentioned earlier when we looked at the monthly chart above for silver that I was looking at the 2016 triangle to be a consolidation pattern to the downside until we just completed the 5th reversal point. As I’ve said so many times during this bear market, it’s now up to the bulls to take out the top rail of the 2011 bear market downtrend channel and the top rail of the 2016 triangle trading range. It is a trading range because neither the upper or lower trendline has been broken. We are close but no cigar just yet.

Sir Plunger will be doing the Weekend Report so stay tuned as his reports are always filled with a lot of history and well thought out objective analysis. Have a great weekend and all  the best…Rambus

Plunger (at the Chartology Forum) has received some questions about his work.

His responses are so poignant that I feel they should be posted here at Rambus1.

Happy New Year to all Members : May 2019 be a prosperous trading year for all.

FGC

……..

Questions answered

Plunger

The Weekend Report seems to have made somewhat of a stir, as one would have expected. Making a call that a secular bear market has begun and will be in force for likely well over 10 years might just scramble some brains I suppose. Also the result of this is there will be a “changing of the guard”. This phrase simply means different asset classes will come to the fore and will be favored by the market. A bull market in real money will eventually come to dominate along other assets which reflect their intrinsic store of value features. Innovative technologies which serve to improve society will of course always be subject to attracting capital and will see their own bull markets from time to time.

Below I will address some of the questions asked referring to the recent weekend report:

Question #1– You say that stock markets are now in a secular bear market. At the same time, at the beginning you have the following: “In this phase of the bear market that’s about all you need to know. The market’s going lower until it gets its drugs. But then what? Well, we get a hellacious rally, but then investors should finally come to their senses.”

Answer #1
The rally which you refer to is a bear market rally? I assume that it would not be higher than the highs we have seen before in 2018 else it would not be bear market rally?

ANS. Yes, a BMR or a full blown secondary reaction in a bear market. Typically SR’s last 3 weeks to 3 months. How high could it go? Well, keep this in mind this future rally would come from a market level much lower than today. We know this because the FED has said no QE until the market falls significantly further. So let’s speculate with some numbers: say early next year the market rolls back over and heads down. It violates the late December lows and starts to cause panic. By then we start to get some confirming negative economic numbers coming out which is what the market has been discounting over the past 3 months. Say the DOW drops below the psychologically important 20,000 level. That means the DOW is now down -26%, Baby boomers are starting to panic as they realize they are screwed and their retirement plan now looks to be going up in smoke. Have you seen those E-trade ads where they show old geezers in the work force? That then becomes the fear. It causes a market rout, the DOW free falls 2000 points in a day. The FED makes its move, here they come to the Rescue… Thank god they are going to save us! (small g intended, for the financial god’s)

They announce QE4. It is a multi faceted program with different elements for everybody. It alleviates many fears. Not only is the FED now going to buy treasury debt but they are going to monetize state pension funds so government workers will be able to retire comfortably. Furthermore the FED announces that in later years they will introduce other QE programs, QE5 which will buy back all student debt which will allow the younger generation to be able to focus on their own self-actualizing needs with the side benefit of advancing the economy. The millennials will now be able to concentrate on their “experiences”. Later still, QE6 will introduce UBI (Universal Basic Income) addressing the lower strata of societal needs. As a minimum every citizen will be entitled to $1,800 per month in addition to already existing social welfare programs. UBI will now will be considered a “human right”. Buried in the fine print of QE6 is the language that corporations can now write off the value of stock buybacks as a corporate expense.. Again a little bit for everyone.

So of course the market loves all of this and puts on an impressive surge. How high? Well we are just going to have to see, but likely it would fail prior to exceeding the all time highs. It would be a rally that the boomers welcome as something they can sell into having the bejesus scared out of them just months before.

Now obviously the above can be considered as “making shit up”, but I think you get the idea. Who knows how the FED will respond, but the bottom line is the market has now been broken, all rallies should be used to sell into. We are in a secular bear market and you should get on to the correct side of the market. Future rallies should be failing rallies. How high will they go? That’s unknown but we will use our tools to measure them, Fib retracement guidelines, moving average resistance and levels of compression (ROC). Nobody ever said this is easy and if you are looking for a soothsayer to guide you accurately then I have a news flash: There are none and if someone claims he is then he is a crank.

Question #2 “Is this your first call for a secular bear as of now which is a pretty big deal or were you fooled many times in the past and made the same call and changed your mind. I say that because gold bugs always see the sky falling and have been burned so many times and have heard these calls before so I say that with all due respect, just curious. And if we are really entering this time zone do we really abandon stocks altogether”

ANSWER #2
Quite a wordy question so let me rephrase it: How reliable is this secular bear call? I don’t really know you, so are you just another gold bug nut job making incendiary claims for attention? Just to get a sense of you let me ask, have you already prepared your doomsday bunker or do you already have a shack in the woods in northern Idaho? How many rounds of .223 do you have stored and how many pallets of MRE’s do you keep stacked in your garage?

First off over the last 100 years there have only been 2 secular bear market triggers, 1929 and 1966. So it’s a bit difficult to establish a track record making these calls, I was only 11 years old the last time and my notes were not detailed enough to get that call off. Have I ever stated we were entering a secular bear market in anything before? Ans: No. In the summer of 2017 I briefly thought we may be putting in a cyclical bull market top in the DOW, but that was quickly proven not to be the case. The great analysts of past eras said a top call is far more difficult than a bottom call. Some of the greatest market observers of the past made a few erroneous early calls of market tops. William P Hamilton, probably the greatest market prognosticator ever thought the bull market was over in 1925. He later went on to amazingly call the turn of the tide in October 1929 against all public sentiment. Roger Babson thought the DOW topped in the Summer of 1928, he was one year early, but he later came back and called the ultimate top within a few days of it in Sept 1929.

By no means am I inferring I am in the same league as these gentleman, I am just a guy offering insights from a life of non-professional market study. Frankly, if anyone wants to consider me a fringe character I really don’t give a damn since I only trade for my own account and do not give market advice. Personally, I have no interest advancing any false narratives. I am not trying to uphold a narrative trying to sell a product whether it be an investment vehicle or even newsletter advice. I am just giving the unvarnished truth the way I see it. If that comes across as suspect, well that’s fine I don’t really care as the only thing I have to prove is accounted for in my own personal balance sheet. I am held to account by Mr. Market.

Question #3 (follow on question). “To me even if we are entering a secular bear we have a market of QE junkies that will refuse to believe it at all cost and will listen to their dealers on CNBC so there seems to be many opportunities if one were nimble enough not to be crushed by a new tweet or headline of the hour. I hope more people begin to talk on this forum”

ANSWER #3. Of course they will refuse to believe it. This is really just a statement of the obvious, as this has always been the case. It’s why the bear market doesn’t end today. If they all believed we were in a bear market then they would sell and the bear market would be over-period. But the historical record shows that retail investors buy one third of the way into a bear market. They still believe the bull market narrative and see the lower prices as bargains. They are buying the dip. But over time this dip buying quits working since it’s a bear market it becomes increasingly painful. They get worn down over time until eventually they are like Roberto Duran the “hands of stone” fighter. On November 25, 1980 the legend states he simply stated “No Mas”. But that is not what he really said, the truth is (stated by Duran) he said “No Sigo No Sigo No Sigo”. which translates to ” I am not going any further”. Well that describes perfectly the course of the retail investor in a bear market. He has now prepared himself for the point of recognition. When it comes soon thereafter there will be a panic to get out of the market. Welcome to Phase II of the bear market.

This is how it has always been and if one thinks the “QE Junkies” can hold out against the great tide of the primary trend then you are going to get a history lesson.

Question #4 Is uranium now the flavor of the month and since KL wasn’t on the buy list is it a non-starter?

ANSWER # 4
Uranium is in a long term bull market. Look at the charts of the quality names. Massive bases taking 3-4 years to form. The bigger the base the bigger the move. So after the quality stocks put on moonshot moves coming out of their bases then pull back to trend we get screaming and panicked claims that the bull market never started and it was all just a flash in the pan. Let me say this: This sector is not for 98% of all investors. I have stated numerous times that uranium stocks are the most volatile stocks in the universe…. more volatile than silver, canibis or anything. If one gets rattled by a pullback to trend then he should not be in this sector. Often times a technical analysis site is ruled by the “what have you done for me lately” syndrome. Janet Jackson would be proud.

I am at the heart a value driven long term investor with a technical bend who doesn’t mind trading targets of opportunity as they present themselves. But don’t lose site of the reality that the big money is made in the long term full cycle steady as you go approach. I suppose the technical analysis element confuses many into thinking ya gotta make money this week or this month and if you are not then the asset should be abandoned. I would think the position I have held in Scandium over the past 3 years might dispel this notion as it pulled back 70% and I held it through the cycle purposefully because I believed the story had not changed. This is one man’s approach, you can do what you think best for you.

Kirkland Lake: First the best info on Kirkland comes from Eric Sprott. Put him on your Yahoo newsfeed. It is not my intention for my opinions to be a recommended buy list. I am not doing that as anything I mention just consider as an investment idea. I can’t recommend anything for anybody as I mentioned I trade for my own account only. There are many great investments in the gold space I don’t mention or even know about. As far as Kirkland it’s a great investment, but it has moved too far for me to be interested. It’s just a percentage move thing that’s all.

Question #5 Will the EU and Euro Break down like the Soviet Union?

ANSWER #5
I doubt it, but I would avoid it. These are deep geopolitical questions that even the Henry Kissinger’s of the world can only guess at. Hey they all missed the breakdown of the Soviet Union anyway. But if there was any one signal that foretold the breakdown of the Soviet Union let me ask what would it have been? It would have been market related. It was the collapse of oil from $40 to $10. The rot in the system had built up for 70 years but it was the cutting off of revenue that kept a propped up system which allowed it to fail. So we avoid Europe and watch the charts. They are in a deep bear market now, watch it from the sidelines. We can only guess what it leads to.

Answers to some of Lawrence’s questions:. I concur with Fully’s response “if you are counting on uranium stocks to make your retirement….” Actually I would add if you are counting on your uranium stocks for retirement you are screwed! Why? Because Mr. Market knows this and he will use the importance you have placed of this investment against you. You have placed so much importance in the performance of these stocks to make up for the past that the inherent volatility will blow you out and leave you worse off than you were before despite it being a bull market. That’s what people don’t get that investing is more a psychological game than anything else. And the worse enemy is oneself.

Dave Collum’s year in review article had a great principle. He says one should save for retirement and invest to mitigate the effects of inflation. I think this is a sound investment principle. Also in Dave’s report he quotes Howard Marks as saying the biggest mistake investors make is their reach for yield. Sounds to me that this is a pitfall you may be setting yourself up for.

Updated: December 31, 2018,3:13 pm — 3:13 pm
← Previous PostNext Post →
5 CommentsAdd a Comment
Afasilver15 December 31, 2018,3:08 pm at 3:08 pm Edit
Thanks Plunger … we appreciate your thoughts and expertise … please keep them coming. 2019 will be interesting for sure! Happy New Year.

Reply
Bleu9 December 31, 2018,4:58 pm at 4:58 pm Edit
Thank you Plunger, and no I am the furthest thing from a goldbug, after being burned in 2008 I am trying to learn from wisdom filled people such as yourself but I am kind of blown away that if one were to use Dow theory as the basis of the call then why aren’t more people chiming in but perhaps in my ignorance I`m not reading the tea leaves right. Thank you for the responses …I appreciate it !

Reply
Plunger December 31, 2018,6:06 pm at 6:06 pm Edit
Surprised by people not understanding the significance of what Dow Theory is saying?…. Really? Well, you shouldn’t be. Actually that is what one would expect…ignorance.

First off I am only aware of one other person sounding off on Dow Theory and it has been Trader Vic. He is not what one would refer to as a main stream guy. Plus his reference was actually incorrect when he made it. He mentioned a Dow Theory sell signal occurred in early December . No it didn’t because it only triggers on a closing basis his call was based on intra day numbers. It actually occurred on December 14th as I pointed out at the time. But that is a somewhat minor technicality since it eventually triggered.

But Dow Theory does not make secular bear market calls. It only makes bear market calls since it does not distinguish between the two. Dow Theory is based on the study of valuations and market actions. Many would point out that the decline occurring in 2015 was a Dow Bear Market trigger as it completed all of the technical hurdles we have talked about. But it was an invalid signal as the only Bear Market signals that are valid are those that come in Phase III of a bull market. In 2015 we were not in Phase III we were in Phase II, therefore the decline could be classed as a mid-point slowdown.

So DT has declared we are in a bear market currently. This fact combined with the universal levels of extreme valuation super imposed on the upside blowout in RSI momentum gives me enough data to declare a secular bear market is now in effect. Elliot wave indicators also give validation to this pronouncement.

You should not be surprised that you don’t hear about this from any quarter. Trust me few people in the past were aware of this in past secular market tops.

Reply
paul G December 31, 2018,7:59 pm at 7:59 pm Edit
Plunger…..and you answered all questions with such complete composure!
You are the man,

Slowly but surely the PM complex keeps inching its way up. So far the only PM index to breakout above its 2016 falling wedge is the $XGD.TO. The GDX and GDXJ look like they will be next to breakout of their 2016 falling wedge as they testing the top rail. SLV has completed its small double bottom and is now trading into its pink shaded support and resistance zone with GLD showing the most strength. Most are now trading back above their 30 week ema except for the $XAU which is currently trading right on its 30 week ema. SIL is trading just below its 30 week ema. So far the bulls are doing the right thing to keep the uptrend alive.

In order to get the whole family together we are celebrating Christmas this afternoon. If you have a big family you know what I mean. I have two grandson’s overseas with one making it home for the holidays so today is our day to celebrate Christmas.

This Weekends Report is going to be short and sweet as there are not enough hours in the day right now to get everything done. There will be some slow time after Christmas to get more in-depth on what I see happening in the markets. Today’s chart for the SPX which gives you a glimpse of what could be possible.

After the 2000 bull market ended the SPX began to build out a massive 13 year flat top triangle consolidation pattern. The breakout occurred in March of 2013 at the 1555 area which began the second leg of the 2009 bull market. After the initial breakout above the top rail of the flat top expanding triangle at 1555 there was a quick backtest which launched the SPX on its next impulse move up to the first reversal point in the blue bullish  expanding falling wedge halfway pattern at 2135.

After that impulse move up to 2135 it was time to consolidate that impulse move with the SPX forming the blue expanding falling wedge halfway pattern. Without even measuring for the price objective for the expanding falling wedge halfway pattern you can visually see how it formed in the middle of the two big impulse moves from the top of the 13 year expanding flat top triangle at 1555 to our most recent high at 2940.

To measure the blue expanding falling wedge halfway pattern I used the breakout to breakout method to get the price objective up to 2911. To get the breakout to breakout measured move you start with the breaking of the 13 year flat top expanding triangle at 1555 and measure up to the first reversal point in the blue expanding falling wedge which is 2135. You then take that measurement and add it to the breakout point on the blue expanding falling wedge halfway pattern to get your price objective us to the 2911 area as shown by the blue arrows.

After the price objective was met at 2911 there was a strong possibility that it was time to begin consolidating that second leg. If you recall, after the February low this year was confirmed, I began to label the price action as a new trading range knowing there were two possible outcomes. Either the SPX was going to buildout another consolidation pattern in its 2009 bull market or the price action would buildout a top. Those are the only two options. As you know I’ve been in the bull camp for a long time so I was leaning towards our current one year trading range being a consolidation pattern that would eventually breakout topside.

We’ve discussed many times in the past that a stock does only one of three things from a Chartology perspective. A stock can buildout a consolidation pattern, a reversal pattern or is in an impulse move. This past week the price action is showing us that the trading range that began to buildout in January of this year is not going to be a consolidation pattern to the upside but instead is going to be double top reversal pattern which is ushering in a brand new bear market.

The reason I’m showing you this 25 year chart for the SPX, is how the top rail of that 13 year flat top triangle at 1555 could come in play as possible support if the new bear market gets going to the downside. What had been resistance for 13 years should now be support on a backtest.

This second chart for the SPX is exactly the same one as the chart above but I’ve added the Fib retrace. The fib retraces the beginning of the bull market that started in 2009 to our most recent high at 2940. What’s very interesting is that the 61.8% retrace of the 2009 bull market comes in at the top rail of the 13 year flat top expanding triangle at 1535 just 20 points lower than rail the top of the expanding flat top triangle which is 1555.

During the bull market years the RSI would declined down the the horizontal line where it found support which would lead to the next rally phase. This past Friday the RSI closed right on the bull market RSI line. A breakout below the horizontal bull market support line would be a major change of character for the RSI. The green circles show where the RSI bottomed in 2002 and 2009. Will we see that same general are hit again during our new bear market?

I would like to wish everyone a happy holiday season with your family and friends. All the best…Rambus

Just a quick update on the daily chart for AAPL one of the largest of the big cap stocks on the planet. After building out a H&S top in September of this year AAPL declined very quickly to the downside where it began to consolidate the recent impulse leg down. The consolidation pattern that AAPL built out is a pattern all of you have seen many times in the past which lets us know that a stock or market is in a hurry to move, in this case down, the pattern is the bearish falling wedge which slopes in the direction of the downtrend.

Today AAPL is breaking out from the bottom rail of the bearish falling wedge. Keep in mind this pattern is like any other consolidation pattern as it shows roughly the halfway point in a bigger impulse move. Note the bigger combo H&S – black bullish rising wedge that built out earlier this year on the left side of the chart. For those that have the ability to short this stock or buy put options you can use the top rail of the bearish falling wedge as your sell/stop.

I used the breakout to breakout method to get a price objective for the bearish falling wedge halfway pattern which would be down to the 128 area shown by the blue arrows. Again, these patterns show up in fast moving markets.

This weekly chart puts everything into perspective. The price action leaving the falling wedge should look similar to the price action leading into the falling wedge so we could see this move lasting another two to three weeks before the falling wedge price objective is reached.

Yesterday I posted this daily chart for the UUP suggesting that it could very well be building out a new uptrend channel with the current price action trading at the top rail where it has been chopping out the small blue rising wedge. Today we are getting some follow through to the downside.

Below is the weekly chart which shows how the new uptrend channel could still be bullish over the longer term as long as the price action can stay above the bottom rail. Today the PM complex is definitely trading inversely to the US dollar’s decline.