Wednesday Report…Prosperity as Far as the Chartology Can See : Secular Bull Market Part 2

Tonight I would like to finish up with the long term secular bull market we discussed in the Weekend Report for the US stock markets. Long term secular bull markets just don’t begin and end for no good reason. There has to be a catalyst that drives the markets higher over a long period of time.

Part 1 : https://rambus1.com/2020/07/05/weekend-report-213/

When the previous secular bull market began at the 1974 bear market low no one could have imagined then what was about to take place over the next 25 years. The news from a fundamental perspective couldn’t have gotten any worse which is the case at an important low. Even during the first 10 years of the bull market no one could have known that one of the greatest bull markets of all time lies ahead except for maybe a few tech geeks who understood some of the technology that was being born.

The 1980’s was the birth of a new technological revolution that everyone takes for granted today. Computers were only for big corporations that had the man power and money to run them. The average person in the early 1980’s may have heard of computers but the internet, what is that? Again, the average person back then didn’t have a clue of how the new technological revolution was going to change their life.

There were stocks likes MSFT, Dell Computer, CSCO and a host of other stocks too numerous to mention that began life as an embryo back then. By the time the 1990’s rolled around some of the winners like AAPL and MSFT for instance started to become familiar names in the trading community. I can’t remember how many times I traded in and out of APPL and MSFT not having a clue of what they would eventually become.

As the 1990’s wore on more and more names in the tech sector became better know to the average investors. People were finally beginning to realize that something major was taking place that was going to change lives in ways no one back at the bottom in 1974 could have imagined. Once the realization sunk in that life as we knew it was going to profoundly change the way we do things began the bubble phase that lasted from 1995 to 2000.

During those last 5 years was the craziest times to be an investor. Every week a new IPO would come to market which was advertised to open up at say $25 but on the day the IPO became public it would open up over $100 dollars or higher. This went on for most of the 5 year parabolic run into the 2000 top. Many of the new IPO’s had no earnings or had any prospects of having any earnings that were bid up into the stratosphere on pure speculation. It was that mania phase that I’ll never forget. We haven’t even come close to those days in our current secular bull market.

For me personally, there was a chip stock that had a patent that was going to make this company more money than anyone could imagine. They were going to get royalties from just about ever chip maker in the world or so the story goes. In the last 2 years of the bubble phase I traded this stock called, Rambus, exclusively. It would go up and double and then split 2 for one and then go right back up again and split again. If you think the junior miners can be volatile they don’t even come close to what Rambus, the chip stock was doing. The end came for me in early 2000 when RAMBUS the chip stock, more than doubled  and then split 4 for 1 taking the price back down into the mid 50’s. In a matter of a couple months it had almost tripled and got up to the high 130’s where this time I wasn’t going to take any chances and called my broker, because online brokers were just being born. I  put in a hard sell/stop in the high 120’s and let the chips fall where they may. It was just a couple weeks later that my sell/stop was hit and as they say, the rest is history.

That was a life changing experience for me that allowed me the financial freedom I still enjoy to this day. It wasn’t easy as the volatility could be massive but the Chartology never let me down. Big gains don’t come from being timid in the stock markets.There is a time to be cautious and then there are times to be aggressive. Knowing which one, comes with time. I’ve had 5 life changing events the stock market has offered me and in each case I had to be aggressive to get the results I was looking for. Please keep in mind this is my psychological makeup and is NOT for everyone.

Now I would like to discuss our current secular bull market that began at the 2009 crash low. If you were trading the stock markets back then you know it felt like the end of the world and the next great depression was upon us. Most investors that got caught in that bear market were scarred for life and will never trust the stock markets again. They will never be able to look at the stock markets objectively ever again. When we get to the mania phase of our current secular bull market they will finally give in and feel it is safe to start trading again because the profits will be too big to ignore. Same story but different time frame.

Everybody knows the FANG stocks now like the back of their hand but I can assure you that there are going to be new FANG type stocks that are just being born right now as we speak but very few investors have a clue of who they are right now. As time goes on they will start to emerge from the darkness one by one until they become a household name. The key is to understand the new technology that is going to change our lives in ways we can’t comprehend right now.

Our current secular bull market is now over 10 years old and we should start to see the emergence of some of the companies that are going to lead us into the future. The last secular bull market was the birth of technology which had a profound impact on our everyday lives. The current secular bull market is also going to change our lives in ways we can’t even imagine yet. Artificial intelligence, robotic, super computers, to name just a few. Then there is the biotech arena that is going to find a cure for cancer, heart disease, and extending the average lifespan again, to just name a few. There will be new technologies that we can’t even comprehend right now that are going to emerge from the shadows of the new technologies that are just getting their feet wet.

I probably seem naive to many of the harden bears that can only see the dark side of life and politics that so permeates our society right now. Even with all that is going on right now in the world it will not change the evolution of the profound changes that are coming our way whether we like it or not. It’s these new technologies that are driving this secular bull market that can’t be stopped no matter how hard we try. The human species is the only animal on the planet that keeps on improving life for the better which is part of our DNA. Just think of how much progress we’ve made in the last 100 years. Now with super computers and artificial intelligence the speed at which change comes will be much faster than most can imagine. Anyway my cup is always half full regardless of all the negativity  that we are seeing all around us.

Lets look at a few more charts which are suggesting that our current secular bull market is not dead yet. This first chart is the daily look at the COMPQ which is backtesting the top rail of its blue bullish rising wedge.

The longer term perspective with the blue rising wedge forming the backtest to the neckline.

Below is the NDX and GDX combo chart we’ve been following which shows a pretty positive correlation taking place.

Below is a daily combo chart which has some FANG stocks with GLD on the bottom. Again some pretty close positive correlation.

Is this long term monthly chart for the NDX showing us just another consolidation pattern in the 2009 secular bull market? As you can see the price action has completed the all important 4th reversal point. Note the capitulation volume at the 2009 crash low and the 2020 crash low.

The long term daily chart for the SOX.

The long term weekly chart for the SOX for perspective.

What is the difference between these black consolidation patterns vs the ones we’ve been following in the PM complex? Nothing.

We are not going to be the only stock market that continues to moves higher as this secular bull market takes hold. Monday of this week the EEM, emerging markets, gapped above its double H&S neckline.

Next is the VEU, all world stock markets ex the US stock market. After breaking out of its right shoulder blue triangle the price action is now testing the neckline.

The SSEC, Shanghai stock market, has come to life over the last 2 weeks.

The FXI is the China big cap etf which is breaking out from its bullish falling wedge.

The NIKK is slowly getting close to the the top rail of its flat top expanding triangle.

The ITB, US home construction etf, has broken out of the possible right shoulder triangle.

The IWB, Russel 1000 growth etf, has broken out of its possible right shoulder triangle consolidation pattern.

This weekly chart for the XBI, biotech etf, is still producing some great Chartology with the breaking out and backtesting of the important trendlines and making a new all time high today.

This daily chart for the XLC, Communications service fund is breaking out from its bullish expanding falling wedge as the backtest to neckline #2.

The long term daily chart for perspective.

Just like many of the right shoulder triangle patterns we’ve looked at tonight the XRT, Retail etf, broke out of its possible right shoulder triangle late last week.

This last chart for tonight is a combo chart which has the XLY on top with the SPX on the bottom. Normally when the XLY is doing good so is the SPX.

So far there is nothing in the charts that is suggesting the end of the secular bull market that began at the 2009 crash low. We will have more confirmation when many of these potential H&S bottoms finally breakout above their necklines. Once that occurs there should be no doubt in our minds that the next impulse leg in the secular bull market is truly underway. All the best…Rambus

 

 

 

 

 

5 Top Picks Poised For an Explosive Upside

The PM stocks have moved nicely over the past 2 weeks.  Many gold investors wanting in on the next big move have been left on the sidelines under invested.  It’s my view that this has occurred because everyone and his brother has had one eye on the often published  gold and silver seasonality chart. This chart is a composite of 40 years of action and shows gold weak until late July and silver weak until late August:

As a result, many investors have been waiting for lower prices before accumulating their positions. The market however rarely satisfies the crowd so apparently it began its move earlier than expected.

It is time to review the strategic big picture; we are now over 4 years into the bull market in the gold stocks. It began in Jan 2016 with an across the board vertical 7 month 150% rally propelling all PM sectors.  The market then went on to sort out the winners and losers over the next 2 years in a protracted painful consolidation. This three year event may be classified as Phase I.  This consolidation ended in September 2018 and the next leg-up began and is still ongoing today. The market is now in early stage Phase II prior to the point of recognition (POR), the public still hasn’t recognized the bull market.  The POR however, appears to be fast approaching as the market’s steam boiler has now gotten up a full head of steam and is about to unleash its power and propel the bull upward.  This is the “Impulse Move” that Rambus has been chronicling.

The bull is now maturing to the point that it is about to express the raw power of a primary bull market.  Bull markets surprise to the upside and Wall Street is about to be shocked and awed over the next 6-12 months in a potent display of the breadth and rise of a bull market.

Institutional players are now beginning to sense this and have been buying gold futures contracts and standing for delivery. This is a major shift in psychology from the past as gold is being substituted for bonds in big money portfolios.  In the past gold has been such a misunderstood asset, but fund managers are beginning to realize that when a bond yields nothing it becomes an inferior asset to gold. At zero interest a bond becomes the definition of pure risk with no return, why not just own gold. Shifting a portfolios gold holdings from 1% to 5% on a system wide basis would require gold’s price to zoom multiple thousands of dollars.  It’s coming.

Bullion banks must keep a lid on the gold price for their end of quarter reporting.  But come July 1st the price may become unrestrained.  This time around, it is doubtful that the bullion banks will dare put their heads into the lions mouth by shorting gold. The gold price suppression scheme appears about to end and the gold market is about to come unglued.

Let the FED buy all the financials and bonds that they want, the private sector is beginning to buy gold and gold can take care of itself as it has a mind of its own with no master.

Let your mind wander a bit

Chris Vermeulen recently laid out his price forecast. He stated that once gold hits its old high of $1900 it may hesitate, but it’s not stopping there.  Gold is going to run all the way up to $2500-2700 and silver to $30+.  Now here is the attention grabber, he says this is going to happen THIS YEAR! 

So let your mind wander just a bit.  If it unfolds in this manner where do you think the gold and silver stocks are going to be?  I suggest spending some time thinking about this eventuality.

With this in mind, I would like to present 5 top-pick stocks poised to explode to the upside over the next 6-12 months.  These stocks are chosen strictly from the technical set-up they are in right now. Their selection is not based on fundamentals, just technicals. These stocks were selected for their positioning, they have not taken off yet…it’s not too late in case you find yourself on the sidelines because their move has not yet begun.  These stocks are just finishing up a lengthy consolidation process.  They have been coiling energy for some time now and when they break out this energy will be released to the upside and their breakout is set to occur in the near term.

Five Top Picks: BTG, PAAS, MAG, SSRM, SA

Keep in mind these were not chosen from fundamentals, but from their technical set-up.  The criteria is primarily two fold

  1. The narrowing tightness of the Bollinger Bands
  2. The ADX line dropping to 12 then turning up

When these two events occur it is a measure of the explosive power about to be unleashed.  Once all the indicators bottom then turn up the move is typically powerful and extended.  All of these picks are at the cusp of a big move.

Before we review our top 5 let’s first look at an example of what one looks like once the move has already begun.   SAND provides a great example as it has already left the station and is a good model of what we are looking for:

Note below how the BBs have begun to expand after narrowing into a tight cinched squeeze of the price bar range.  This is graphically measured by the BB Width index indicator second from the bottom. It got down below 10 indicating a very tight (explosive) set-up.

Next we see the ADX line bouncing off the 12 level line that is drawn in.  When the ADX declines all the way to 12 it indicates explosive power potential once it turns up. It has done so and SAND is now on the way.

Below we see the technical set-up of ALL the indicators turning up showing its now fully aligned and underway.

The TOP 5 Picks:

BTG-Coiled and Ready- First choice for potential power

Tightly narrowed BB’s shows when it breaks out it should release a powerful impulse of energy.  In addition, the ADX is deeply under the 12 line. When it turns up hold on.

Below we see all of our indicators at the cusp of a turn and the bull flag is presently being broken out from.

Long term BTG appears to be in the midst of extending a halfway pattern measured move:

PAAS- Senior Quality Producer now ready to rock

The ADX line still needs to turn up, but it is now getting into final position.

This is still slightly early, possibly signaling one more cycle down in its blue pennant.

MAG Silver- Now on the golden runway ready for lift off.

ADX is yet to turn up, but when it does fireworks await. It’s all there.

Indicators below signal a turn is imminent.

SA-Seabridge

BB cinching down to 10, ADX soon to go below 12, this will be a powerful extended move.

Here we go knights:

SSRM

Beautiful:

Breakout in progress:

All of these 5 stocks should enjoy powerful extended moves over the next 6-12 months.  It’s not too late for any of these as all of the move remains in front us.  During this period the PM bull market should experience the POR when the public wakes up and realizes they must own some of these stocks.  That’s the time when the bull begins to fully express himself. I emphasize this has not yet occurred and its outright display of power will be humbling to watch.  The time to buy and hold is now.

 

Wednesday Report…Precious Metals Complex : The Big Picture

From the March 23rd low in the PM complex we’ve enjoyed the first easy part of this rally that should have many years to run yet. Every bull market will consist of an impulse move followed by a consolidation period, rinse and repeat until the bull market ends with some type of reversal pattern. Normally in a secular bull market the turning points will generally be very large to buildup the energy to advance to new highs.

The current 2nd leg up in the secular PM complex bull market actually began in January of 2016 after the first leg up ran from 2000 to 2011. There was a cyclical bear market within the secular bull market that ran from the 2011 high to the January 2016 low. It’s important to understand which part of a bull market one is in as to not get confused on what may lay ahead.

Tonight I would like to show you some long term quarterly line charts that I use when looking for big chart patterns that usually show up at important long term reversal points that can take years to complete. I usually only post these charts just a couple of times a year as change comes very slowly but when change does come it’s important to pay close attention because the change usually represents a major trend change.

Keep in mind when looking at these long term quarterly line charts that only the quarterly closing price is used which makes the chart patterns not very symmetrical looking. When I do spot a long term chart pattern on the quarterly line chart I will switch it over to a bar chart which will make the patterns a little more clear. Again, it is the major trend we want to trade with unlike a salmon swimming upstream using up all of its energy before it reaches the spawning grounds.

When looking at these charts to follow we still have over 3 weeks of trading yet before these quarterly line charts complete their 2nd quarter results which will then be put into stone. Also, since these are line charts you will be able to see more clearly reverse symmetry. How a stock goes down is often how it can go back up over that same area, which  can play an important role in understanding the potential sweet spots where the price action can easily move with little in the way of resistance.

This is the  HUI secular 2000 bull market uptrend channel that I will use as reference to the quarterly line charts to follow.

Lets start with the quarterly line chart for the GDM which begins in the early 1990’s. Keep in mind we are just looking for big chart patterns. It took almost 10 years to complete the double H&S bottom which launched the first leg of the secular bull market that ended at the 2011 high. That first leg of the secular bull market ended with the formation of a very symmetrical multi year H&S top, not so much on this quarterly line chart, but on a bar chart. That H&S top led to the bear market that ended at the January 2016 low. From that low the GDM carved out a 7 year H&S bottom reversal pattern with the long term breakout taking place this quarter. The blue arrows show you how reverse symmetry looks. The reason reverse symmetry works is because there were no big consolidation patterns that were made during the long term rallies and declines. If you look at the bear market decline out of the 2011 H&S top you can see a straight line down without any quarterly rallies. Now look at the current breakout taking place above the neckline. As you can see there is little in the way of slowing down any rally until the price action reaches the 2011 H&S top neckline.

I’m going to show you the exact same chart as the one above but this will be a bar chart so you can see how these two compliment each other.

Next is the quarterly line chart for the HUI which is just beginning its breaking out process.

As we all know gold has been the leader during this second phase of the secular bull market. This quarterly line chart should give you a preview of coming attractions. Note how  gold reversed symmetry over the same area on the way down as shown by the blue arrows.

Silver is set up a bit differently than the other areas in the PM complex. As we know silver has been the lagging component within the PM complex. The price action is currently testing the top rail of its 5 point 2016 triangle reversal pattern. A breakout above the top rail will confirm it has joined the second half of the secular bull market in the PM complex.

You may have noticed that some of the 2016 H&S bottoms could also be considered a 5 point bullish rising wedge reversal pattern. I have put both pattens on this quarterly line chart for the XAU so you can see both patterns.

The HGU.TO doesn’t have a lot of history but it appears to be forming a large double bottom reversal pattern.

Next is the GDX which looks like many other big bases we’ve looked at tonight with the combo unbalanced H&S bottom with the 5 point bullish rising wedge reversal pattern. Also notice the possible reverse symmetry that lies just above.

We also know that the GDXJ has been slightly weaker that most of the other PM stock indexes but its now getting close to testing its multi year neckline.

The other weakest component within the PM complex is SIL. If it can close out the month of June right where it is currently trading it will have put in a higher high and higher low which is the first sign of an uptrend.

The GOEX is another area within the PM complex which doesn’t have a lot of history but it does have enough to show a 5 point triangle reversal pattern that is beginning to breakout.

There is no such thing as a guarantee when it comes to the stock markets but the closest thing I can say is that I will get the big picture and trend right which is the most important part of trading. Getting the big trend right is half the battle. All the best…Rambus

 

 

 

 

 

 

Wednesday Report….Part 2…The Anatomy of a Gold Stock Bull Market

Before we look at tonights charts I would like to go over some challenges that we’ll face as the current impulse move in the PM complex continues to move higher. It’s not everyday that you will find yourself getting in close to the bottom of a multi month rally. One of the biggest problems I’ve witnessed over the years, especially with PM stock investors, is they grow complacent as the rally phase starts maturing. They believe they are invincible as their profits rise and everything is right with the world. That complacency usually means not getting out close to the end of the impulse move which is extremely hard to do even if you’re looking for a top. They will either sell in panic as the correction takes hold or hang on to their positions during the entire correction which is emotionally hard to do.

I know many here traded in the 2000 to 2011 bull market in the precious metals complex. During that great bull market how many actually made any serious money? By making serious money I mean actually taking it out of the market to payoff debt or take a major vacation or help someone in need or whatever to actually use it. What the markets give us during the impulse rally will usually take it back during the following consolidation phase as investors aren’t aware of what is taking place until it’s too late. It’s just the nature of trading the markets.

Now more than ever is the time to be on our toes looking for anything that could go wrong. That means we have to have discipline and focus to stay on top of our game and not get carried away by counting our profits before we actually take them. How rare is this current rally in the HUI for instance? There has only been 2 impulse moves since the 2008 crash low. The 2008 rally that ended the bull market in 2011 and the other impulse move that only lasted 8 months from the January 2016 low to the August 2016 high. For the precious metals investors that could’t bring themselves to trading the stock markets life in the PM complex has been hell and I don’t think I’m exaggerating. Again, after all these years we finally find ourselves at the start of a brand new impulse move that is very likely the start of the 2nd half of the secular bull market in the PM complex.

There is one more point I want to bring up. When I began to put our PM stocks portfolio together I said I was going to be unconventional and not buy the big cap PM stocks not because I don’t like them but because this is a unique sector. Compared to most sectors in the stock markets, which are very huge, the PM stocks make up a small universe of stocks that you actually get to know personally tracking and trading them for many years, at least from 2000 to 2011.

If you didn’t trade the PM stocks in the 2000’s bull market then you are not aware of how differently the big cap and juniors would trade. What I learned back then and why I structured our portfolio like I have is because the juniors can catch fire and have large percentage gains VS the big caps. The large cap PM stocks are going to really do good during his impulse move and you’ll be happy in the end. For me personally, I won’t be satisfied with just matching what the PM stock indexes do or for that matter what the big caps will do. My game plan is to massively outperform the PM stock indexes and the big caps because this sector offers that possibility. You may have already noticed some nice percentage moves in several of the juniors in the PM stock portfolio.

There is one last little point I want to mention. Many PM investors believe that the only real important money you make trading the PM complex is to only trade the big caps. For some reason, because you are invested in the big caps that money is more important than the money you will trade the juniors with. If you understand this sector nothing could be further from the truth. When all is said and done at the end of the day your play money used to trade the juniors and the big caps will have the same value but the junior portfolio could have a much bigger percentage gain.  Please understand this is only my opinion and each investor will have to decide for themselves on how they want to play the PM complex.

Tonight I would like to show you what some of the impulse moves looked like during the 2000 to 2011 bull market up close and personal. These charts should give you an understanding for what may lie ahead. There is no way we can know every twist and turn an impulse move will make only that it will be very powerful. We do know that there will  generally be several small consolidation patterns that will form along the way that should be recognizable.

First let me show you the history chart for the HUI so you can see the consolidation patterns that formed during the 2000’s bull market. Each 4 point consolidation pattern has a red number on it  so you can match up each consolidation pattern with the charts to follow. This is a general guide of how our current impulse move may unfold over the next many months.

Below is the history chart for the HUI showing the consolidation patterns that were made during the 2000 to 2011 bull market.

 

This first chart shows you the very end of the bear market and the beginning of the 2000’s bull market. Back in the old days during the start of the bull market there was a 6 month time cycle that was usually dead on the money but over time it lost some of its luster. Here you can see the very first impulse move up that formed 3 small consolidation patterns and ended 6 months later at in May of 2001 at 79.63. Note the vertical move out of the small H&S consolidation pattern that led to the first phase of the new bull market. From that May 2001 top came the first consolidation phase in the new bull market that formed a very symmetrical triangle and lasted 6 months until the low 6 months later in November of 2001.

Reversal point #4 on the blue triangle consolation pattern was the beginning of the second impulse move in the new bull market that formed 3 small red consolidation patterns before it came to an end. That 2nd impulse move lasted from November of 2001 to the top in June of 2002 which was just a little over 6 months. This chart shows you 2 separate impulse moves with the blue triangle as a halfway pattern between the 2 moves. All halfway patterns don’t measure out perfectly but they do give you an idea of where you may start looking for an end to the impulse move.

This next chart shows you the triangle consolidation pattern labeled with the red #2 on the History Chart For the HUI. This chart starts where the previous one above stops at the June 2002 high. As you can see the 2nd consolidation phase lasted quite a bit longer than the 2001 consolidation phase. The 4th reversal point on the June 2002 triangle was actually the beginning of the next impulse move. You can see the small red bull flag that formed just below the top rail of the blue triangle which we have seen many other times in the past which will strongly suggest the breakout of the consolidation pattern is going to take place.

This impulse move formed 2 small consolidation patterns but not a good measuring pattern. There is another measuring technique I use sometimes especially with rectangles and sometimes with triangles. You measure the width of the triangle between reversal points #1 and #2 and add that distance to the breakout point above the top rail to get your price objective and in this case it was dead on the money at 255.

This next chart starts where the one above left off at the 2003 top. Here you can see the HUI built out another very symmetrical triangle to consolidate the previous impulse move. Again the impulse move began at the 4th reversal point. This impulse move completed 2 red consolation patterns before it finished moving higher. What you may have noticed is that each consolidation pattern is getting a bit bigger and each impulse leg is getting longer.

I can’t find the last impulse move in the 2000’s bull market but I do have the 2008 H&S top and the 2008 crash that followed the completion of that H&S reversal pattern. When I mentioned complacency early in the post this is a good example of what I meant. When this H&S top was building out I strongly suggested it could be a very symmetrical H&S top which could reverse the bull market that began in 2000. I was literally booed off the stage for making such a statement. No one wanted to see the party come to and end so no one was looking for any type of reversal pattern. I alway say I didn’t know how strong the impulse move would be only that the trend was reversing from up to down. I wasn’t expecting the crash scenario but that is what we got, when no one was expecting it. The crash was short and sweet but could you have held all your pm stocks then? And if you did hold your PM stock how would you have felt during the crash sequence?

Now is the time to be focused and not take our current impulse move for granted. These moves don’t come around everyday. This could be a life changing event for some of you if there are no serious mistakes made. We’ll take it one day at a time keeping an open mind to what the PM complex throws at us. Stay safe and all the best…Rambus

 

Weekend Report…Hi Ho Silver : Away

Tonight I would like to focus in on silver which remains one of the best bargains in the PM complex right now. When I first became acquainted with the PM complex back in early 2002 I learned quickly that just because gold may have had a good rally sometimes the PM stocks move very little which was confusing to me as I thought they should move in tandem. Then there were other times when the PM stocks would rally and gold didn’t move that much. It didn’t make a lot of sense at the time, but markets can be fickle like that.

Another thing I noticed back then was that silver was very weak and wouldn’t respond at all if the PM stock and gold were in rally mode. That has stuck with me all these years. Currently with the PM complex bottoming on March 23 we are seeing a similar scenario playing out where gold and the PM stocks are having a decent rally but silver is still lagging very badly. The thing about silver is that once it’s ready to move the rallies and declines for that matter, can be breathtaking. When the PM complex ended their bull market in 2011 silver was the first one to complete its bull market in April of 2011 while gold and the PM stock indexes didn’t complete their bull market until September a full 5 months later.

As you know I’ve been accumulating silver using the USLV under $15 since the first of April 2020. Using the weekly combo chart which has the USLV on top with our 3 current positions with SLV on the bottom. We’ve discussed many times in the past that if there is a false breakout and the price action can trade back into the pattern most of the time you can get a big move in the opposite direction and in this case up.

The main reason I began accumulating USLV was when the price action formed a massive breakout gap below the bottom rail of its 2016 falling wedge. The following week the price action fell even further to the downside and things were not looking good for silver. And then out of the clear blue silver put on a rally like we had not seen in a very long time. As it turned out SLV only spent one full week under the bottom rail before closing back into the 2016 falling wedge which negated the breakout.

Looking a little closer at the breakout below the bottom rail you can see that massive breakout gap which looked like a breakout gap but instead turned out to be an exhaustion gap with very different implications moving forward. Instead of continuing the bear market that exhaustion gap on massive volume ended the bear market with one final capitulation move that gave investors in silver a chance to get out and ask questions later. IMHO I think we’ve just seen the low in silver that won’t be seen again in at least my lifetime if ever.

It’s been awhile since we last looked at this long term 50 year quarterly chart for silver which has some beautiful symmetry.  Over a 30 year period from the 1980 high to the April 2011 high silver has built out a potential massive cup and handle formation. The bear market that began at the high in 2011 may be completing the handle. You would have to go all the way back to October of 2008 low to match the low put in last month In April. To say silver is undervalued compared to the rest of the PM complex is an understatement.

If you have looked at the gold:silver ratio recently you know that gold has been massively outperforming silver. The ratio is currently at new all time highs which makes silver undervalued vs gold. Below is a combo chart with the gold; silver ratio on top with gold, silver and the XAU below. Normally when the gold:silver ratio drops below 80 that is generally a good time to buy PM stocks. As you know, currently the PM stock indexes have broken out of a 4 1/2 year triangle reversal pattern with the gold:silver ratio at all time highs. If silver ever gets its mojo back and starts to outperform gold the ratio will start to drop which should put a headwind behind the PM stocks. The only question is when will silver start to outperform gold.

Next is a ratio combo chart with the Gold:Silver ratio on top with gold, silver and the XAU below. This combo chart is another reason I began accumulating silver. It’s not everyday that ratios can get so far apart but the Gold:Silver ratio is at historic extremes right now. Can it get more extreme?  Yes, but the odds are favoring a revert back to the norm.

What the ratio chart on top is showing is that if it can drop below the 80 area that usually bodes well for the PM stocks. Note the XAU which doesn’t seem to be waiting for silver to start outperforming gold. Maybe it’s an earlier sign that the XAU is going to led the ratio lower instead of the other way around.

This last chart is an old weekly chart for silver which shows the 2008 crash low and the rally phase that went near parabolic into the April 2011 high. First note the combo 2008 bottoming patterns. Of course the H&S consolidation pattern is the dominate pattern but it’s made up of several other chart patterns which is common in big trading ranges. The left shoulder consisted of a small double top with a small rectangle. The right shoulder formed 2 patterns the bigger blue bullish rising wedge with the smaller red triangle forming at the apex which was strongly telling us the breakout to the upside was going to take place.

What came next was a classic breakout sequence with 2 individual price objectives based on 2 different patterns. The 2008 H&S consolidation pattern had a price objective up to the 49.33 area. The other measured move is called the breakout to breakout method where you begin from the recent low to the first reversal point in the next consolidation pattern which in this case was the red bullish rising flag. To get your price objective you take that first measurement and add it to the last reversal point in the red bullish rising flag HP that gave us a price objective up to 44.89 as shown by the blue arrows. The beauty of the final rally into the bull market high was the symmetry of the last two impulse moves as shown by the pink rectangles. Those two rectangles are exactly the same size that measure time and price.

There are times to be conservative when trading the markets when things aren’t quite as clear as they should be and then there are times to be bold and take on more risk than normal. I believe the PM complex is giving us a chance to be more aggressive and take on more risk than normal which hasn’t been the case since the 2011 highs. Stay safe and all the best…Rambus

Wednesday Report…How Will You Play the Precious Metals Stock Bull Market ?

There are as many ways to play the PM sector as there are investors. Some will only buy the big cap PM stocks for safety. Others will only buy the mid cap producers. Some will only buy a mix of big caps and mid cap producers. And then there are the PM stock investors that will only play the juniors. Each has its own advantage depending on your risk tolerance. Some of you are wondering why is Rambus’s portfolio structured like it is with hardly any big caps?

After a great run during the tech bull market that ended in 2000 I was able to basically retire and build our dream home. After that bull market ended I was left looking for another area in which to invest. It wasn’t until early 2002 that I saw a chart for gold which was showing a very large base that caught my attention. Whenever I see a big base I have to study it more to see what is behind the price action. The more I looked, it became apparent to me, that a new bull market may be starting to form in the PM complex.

Keep in mind I knew very little about the PM complex back then as I only traded the big cap tech stocks. I only knew a few of the really big cap PM stocks like Newmont, Barrick, ASA and just a couple of others. I didn’t even know there was a sector called the juniors. It didn’t take long after I immersed myself in studying all I could about this new area to invest that I became hooked. I still remember my first trades in the PM sector which were Newmont, Barrick and ASA.

I kept studying this new and exciting area for me and found out about the juniors and the possibility they could offer. I read several articles about how many of the juniors went through the roof in 1997 I believe, when BRE-X supposedly found the Mother Lode. Juniors were going up 100’s of percent and many going up 1000’s of percent. There are few areas in the markets that a sector can go up that much so I had to study more. The more I studied this little sector the more convinced I became, that for me, this is where I wanted to trade. The rest they say is history.

I already had the foundation for identifying chart patterns so it was just a matter of finding as many juniors as I could and look at their chart patterns. Since the first leg up in the new bull market had ended there were many juniors with some decent consolidation patterns already in place. I was lucky that I was able to catch most of the 2nd leg up in the new bull market before it ran out of gas and needed to consolidate its gains. When I put my first PM portfolio together I bought 10 juniors all under a dollar and hoped for the best. By the time the correction began that portfolio was up 273% in just under 8 months which was more than I had hoped for.

During the next impulse move up that began in 2005 I had bought 20 juniors all under a $1.00 and when that impulse move ended that portfolio was up 328% in less than a year. Needless to say I had found a new home in which to trade.

What I learned trading back then was that the tide would lift all boats to a certain degree with the juniors that had good looking chart patterns 100’s of percent. What I also learned back then was that when the impulse move ended it was time to get out of those juniors as they could give back a large chunk of the profits during the next consolation phase.

So that brings us up to my current portfolio. One thing about the PM stocks is that it is a small universe and following it through the years you begin to learn about their individual characteristics and how they may behave during an impulse move. Some would call my current portfolio very speculative because I don’t have any really large PM stocks, but I do have a decent mix of some mid caps and juniors.

Sir Plunger’s 4 horsemen are going to do very well and make a lot of money for those that invest in those 4 stocks. For me personally and what I learned in the first half of this secular bull market that ended in 2011 was that the juniors is where I want to mostly trade. If I don’t make at least 250% to 300% on this trade, which I finished up the buying today, then I will be disappointed. I hope it will be more but I’ll be satisfied with the 250% to 300% profits.

Another important lesson I would like to make is that once you are in a confirmed impulse move the last thing you want to do is try trading it. That was a lesson I learned the hard way though the years. For whatever reasons once you get out of a trade in an impulse move the idea that you are going to buy back at a cheaper price very seldom works out. My experience has been you usually pay up if you want to get that position back.

I posted this history chart for the HUI several weeks ago which shows all the consolidation patterns that formed during the first half of the secular bull market that ended in 2011. The red arrows show you where the impulse move actually began. As you can see most of the impulse moves between each consolidation pattern lasted for many months before they became exhausted. If you recall the last time I posted this chart I put the red arrow under the 5th reversal point on the 2016 triangle reversal pattern. I said I wasn’t going to wait for the breakout before I got positioned which so far has worked out well. The price objective for the 2016 triangle is above the 2011 all time high over 700 but I’ll be satisfied to reach  the all time high before the next consolidation period begins.

So how does the 2016 triangle reversal pattern look on the long term secular bull market uptrend channel? It has been forming right on the bottom rail of the 2000 bull market uptrend channel. Where will the HUI be trading if the top rail of the bull market uptrend channel is reached in the future? Stay safe and all the best…Rambus