…………………………………………………………..

I haven’t posted much on the US dollar lately as I’ve been waiting for the dust to settle, as the price action completed another reversal point in its nearly 2 1/2 year trading range.

Tonight I would like to update some of the charts we’ve been following to see if we can gain any insight into what the US dollar is currently telling us about which way it wants to go. We’ll also look at some other currencies that may shed some light on the direction for the US dollar.

This first daily chart for the US dollar starts at the 2017 top and down to the bottom of the 2  1/2 year trading range.

I’ve been showing you this technique with some of the stock market indexes that are doubling the size of their 2009 uptrend channel. With the US dollar it’s just the opposite, where I used the black rectangles that are exactly the same height, to look for a place to add the bottom rail of the downtrend channel. As you can see there were no touches on the bottom rail until the very bottom of the downtrend channel was hit.

All it really tells us at this point is that we have a parallel downtrend channel in place. What we need now is to see some type of reversal pattern building out to reverse the downtrend that has been in place for almost a year. We have a potential inverse H&S bottom building out, but we need to see the neckline broken to the upside before we have confirmation that the downtrend may be over. It’s close, but not quite there yet.

Now I would like to add the downtrend channel from the daily chart above to the big 2 1/2 year trading range so you can see how it fits into the big picture. You can see why  for a dollar bull case we need to see a reversal pattern build out right here and now. What this chart is also telling us is that we had a false breakout above the top rail of the 2 1/2 year trading range and one below. I have shown you many charts in the past on how these false breakouts are what I call false symmetry breakouts. What this generally means is that the original 2 1/2 year trading range is still valid and to be respected. It’s important at this point in time to see the price action continue to trade above the bottom rail of the 2 1/2 trading range, above the 93.00 area.

Below is a long term weekly chart which shows the massive 10 year base that launched the previous impulse move up and how our current 2 1/2 year trading range fits into the big picture. Again, you can see how important a reversal pattern is for the life of this 2 1/2 year blue trading range. That big massive 10 year base is strongly suggesting to me that our 2 1/2 year trading range should be a halfway pattern to the upside, vs a top that many are willing to see . Time will tell.

This next long term chart for the US dollar is a long term 35 year monthly look which shows the two massive fractals labeled, big base #1 and big base #2. Long term members should remember this chart as it seemed like it took forever for the big base #2 S&R line to be broken to the upside. It was a case of discovering this big pattern well before the breakout, so a lot of time went by before we got confirmation that big base #2 was indeed valid. Once the breakout occurred the US dollar wasted little time and rallied in an almost vertical move before our current trading range began to buildout.

There is also another piece of fractal information on this chart which is shown by the two thin black dashed horizontal lines at 92 and 104. What those two lines represent is the size of the 1998 – 1999 bullish rising wedge halfway pattern. If big base #1 was big enough to launch that bull market up to the 120 area you would think our big base fractal #2 should also be big enough to launch a similar rally. If that is the case then our 2 1/2 year trading range should be a halfway pattern to the upside.

We’ve been following this next very long term chart for the US dollar that shows its 30 year falling wedge with reversal points #2 and #4 being our two big fractal bases. Reversal point #3 was the H&S top at the 2000 high. It took a lot of energy for the US dollar to breakout above the top rail of that 30 year falling wedge, which was needed to consolidate that move by forming our current 2 1/2 year trading range right on the top rail of that 30 year falling wedge. There is another line of support that comes into play at the 92.00 area, which is the neckline extension rail taken from the bigger H&S top, which formed at the 2000 high. So far it has held support on three separate occasions.

Before we move on there is one more long term chart for the US dollar that I’ve only posted several times in the past. I’ve been keeping a close eye on the neckline symmetry line to see if it would hold support as a possible low for the right shoulder. Keep in mind this possible massive H&S bottom is going to take time before it’s confirmed one way or the other. This is one of those cases that if I’m right, we aren’t going to know for many months if it’s valid or not, but we will be able to follow the price action in real time and monitor it going forward. As they say, stay tuned .

Also for this bullish scenario ,we need to see some type of reversal pattern buildout right here to reverse the price action off the neckline symmetry line. The H&S bottom we looked at on the daily chart is our best option at this time. That potential small H&S bottom is so critical to so many different areas we looked at on these US dollar charts above.

Lets look at some other currencies to see if they can give us any clues on what the US dollar might do. Below is a 20 year monthly chart for the Canadian Dollar that is showing a  very large double top with a strong backtest to the double bottom hump which is forming a  possible bearish rising wedge.

This long term monthly chart for the Swiss Franc is showing us a 6 year falling wedge which may have had a false breakout above the top rail. If the price action trades back into the falling wedge it will negate the breakout for now.

This weekly chart for the $XSF is showing a possible rectangle consolidation pattern building out within the downtrend.

Next up is the Australian Dollar which may be in the process of building out a bearish rising wedge halfway pattern to the downside if the bottom rail is broken.

With the US dollar testing critical support then there is a good chance that the $XEU should also be testing resistance somewhere. When the $XEU broke below the neckline I was initially looking for a quick backtest to the underside of the neckline, but little did I know it would take almost three years before we would see a complete backtest at the 120 area. At any rate we now have a complete backtest in place. Now we’ll see if the neckline has reversed its role to what had been support to now resistance.

Below is a weekly look at the $XJY which is showing it breaking down from a morphing rising wedge formation as shown by the red circles. If we get a backtest it would come in around the 89.15 area.

Below is another longer term weekly chart for the $XJY that we’ve been following for many years which is getting quite busy now. First, notice how the price action interacts with big Neckline #2. There was an initial gap made on the left hand side of the chart when the $XJY gapped up to start forming the left shoulder of that massive 6 year H&S top #2. There was a breakout gap when the price acton broke below the neckline 6 years later confirming the double H&S top labeled reverse symmetry gap.

After the initial decline the $XJY built out the 7 point inverted roof reversal pattern which led to a countertrend rally back up to the neckline. When we got back up to the neckline I thought the backtest was complete when the price action declined for about 3 weeks or so, but then it decided to rally once again, this time breaking above the neckline which looked like the neckline had failed to hold resistance. After trading above the neckline for several months and backtesting it from above, the XJY built out the red 5 point triangle reversal pattern, which led to the move back below the neckline I then called that trading range above the neckline a bull trap. Note the green circle on the far right hand side of the chart which shows the XYJ gapping below the neckline once again, telling us the neckline was properly placed.

About 6 weeks ago the price action backtested the neckline from below once again,  forming the red bearish rising wedge which is the same rising wedge we looked at on at the weekly chart above.

This next chart is a long term chart which compares the $USD to the $XJY. For the last several years the neckline symmetry line has been holding support for the right shoulder low. It’s possible that this ratio may be building out 13 a year triple H&S bottom. We won’t have a definite answer until neckline #3 is broken to the upside, but we can follow the price action for more clues as time marches forward.

Below is a combo chart which has the $USD:$XJY ratio on top and gold on the bottom. The neckline symmetry line on both charts have done a beautiful job of showing us where the low for the right shoulder on the ratio chart is, and the high for the right shoulder on the gold chart is located. Again, we won’t have confirmation that the possible H&S patterns are complete until we see the necklines broken. At any rate this combo chart may have some profound  implications if these two H&S patterns play out. Have a great weekend and all the best…Rambus

Today we are getting some more follow through to the downside as most of the necklines have now been broken. Note the breakout gap yesterday on the HUI which tells us our neckline was properly placed. The next important line of support is the bottom rail of the nearly one year triangle trading range. Keep in mind a backtest to the underside of the neckline can occur at anytime which should be expected, but not necessary. We could even see a ping pong move between the bottom rail of the triangle and the neckline before all is said and done.

With this H&S top forming at the 4th reversal point it’s telling us that the bottom rail of the triangle trading range is going to be broken to the downside by its measured move. Using the HUI as a proxy for the rest of the PM stock indexes the H&S top at the 4th reversal point measures down to the 174 area which is well below the bottom rail of the triangle trading range.

The last bit of information this combo chart is showing us is that GLD and SLV are showing relative strength to the PM stock indexes as they are still trading well above their respective necklines. Normally you would like to see the PM stocks leading GLD and SLV in a strong rally which isn’t the case right now.

Tonight I would like to update you on some of the longer term gold charts we’ve been following which are still hanging in there from the bullish perspective. Keep in mind these are long term charts so changes come slowly.

Lets start by looking at the long term weekly chart for gold which shows its 2011 bear market downtrend channel we’ve been following for a long time now. Back in July of this year the price action broke out above the top rail and just recently the top rail was backtested from above and we are getting a bounce exactly where we needed to see a bounce.

Normally at the end of a long protracted bull or bear market you will find some type of reversal pattern buildout. As you can see the 2011 top built out the 6 point rectangle just below the all time highs. Currently gold has built out the blue triangle with the 5th reversal point falling just shy of reaching the bottom rail. I have seen in the past that sometimes when the 5th reversal point fails to reach the bottom rail it can be a sign of strength, meaning the bulls are not waiting around, red circle. If the bulls are truly in charge the next thing we’ll want to see is a new high above the previous high that was made on the initial breakout.

This next chart is probably the most important chart for gold as it shows the possible H&S bottom building out. We’ve discussed in the past that big patterns lead to big moves. This potential H&S bottom is 4 years in the making and is big enough to lead the next leg of gold’s bull market much higher if the neckline is broken to the upside. Currently the neckline comes in around the 1350 area.

There are several other possibilities we been follow as well for gold. This next chart is a monthly look which shows the ping pong move taking place between the top rail of the blue expanding falling wedge and the bottom rail of the black expanding falling wedge. Again, we are seeing gold bouncing right where we need to see it bounce.

The blue expanding falling wedge without the top rail of the downtrend channel or the much bigger black expanding falling wedge.

Almost 2 years ago gold broke out above the top rail of the blue 7 point falling wedge with the top rail holding support on two backtests. It would be nice to see a white candlestick form at the end of this month and if the breakout is going to really take hold we should see a string of white candlesticks form all in a row which tells you the impulse is very strong. In a strong move down you will see a string of black candlesticks all in a row.

Gold’s major bull market uptrend channel with the 2011 bear market downtrend channel with the possible 2015 H&S bottom.

Gold’s long term monthly chart showing the potential H&S bottom.

Gold’s 40 year chart.

All the different stock market indexes have now broken out above the top rail of their rising patterns except for the two tech indexes. The IWC, micro caps, continues to be the strongest sector. I know it may not feel like it, but rising wedges and flags that slope up in the same direction of the uptrend tells us the uptrend is very strong.

Tonight I would like to update some of the different commodities and emerging markets we took some positions in back in late July of this year. First, let me say that as investors we like everything to line up in perfect harmony so we can make some sense out of what is actually happening in the markets. It’s just human nature. For example, if the US dollar is doing this then the PM complex or the commodities should be doing that. There is a general rule that there is an inverse correlation between the US dollar and the PM complex or commodities, but it’s not always accurate.

Many times we can get bogged down trying to make everything fit perfectly before we make a trade. This can sometimes lead to missed opportunities as what we were expecting didn’t take place. For the most part this is one of the reasons why I prefer Chartology. When a pattern is building out the bears and bulls are making their side known by the battle they’re having with each other, which eventually creates a consolidation or reversal pattern. All the fundamentals that a stock has is also priced into the chart pattern.

Many times as investors we have to know why a stock is doing what it’s doing, from a fundamental point of view, which can begin to complicate things to the point where we become more confused than ever and can’t see the forest for the trees anymore. For me personally I try to keep it fairly simple by looking at what chart pattern is building out and base my buy or sell points by what the chart is suggesting. Nothing is perfect when it comes to trading the markets, but sometimes less is more.

I know right now many investors are seeing a stronger dollar and expect that commodities will head much lower based on the inverse correlation these two generally have which may in fact turn out that way. From a Chartology perspective many of the different commodities built out very large reversal patterns, which is going to be very hard to reverse those patterns. So regardless of what the US dollar is doing I have to go with what the chart patterns are suggesting.

Lets start by looking at a weekly chart for Copper which built out a very large 3 year inverse H&S bottom. About 3 months ago we got the breakout above its neckline telling us the bottoming process was complete. After a strong breakout move Copper is now pulling back to the breakout point forming a backtest to the neckline which will come in around the 2.75 area along with the 30 week ema. Until something changes this bullish setup I have to respect what the chart is saying regardless of what the US dollar is doing presently.

The 20 year monthly chart for Copper shows a very symmetrical H&S bottom forming after an almost 7 year decline. This is the area one would be looking for some type of reversal pattern to form.

When one looks at this 45 year quarterly chart for Copper you can begin to see how our current H&S bottom fits into the very big picture. Note the beautiful H&S top that formed at the 2010 high. It took approximately 3 quarters for the breaking out and backtesting process to play itself out before the impulse move down began. Before we leave this chart Copper built out a 25 year flat top triangle which led to that strong impulse move up. Also note the blue bullish rising wedge which formed just below the top rail of that 25 year flat top triangle which gave Copper the energy it needed to finally take out that massive resistance line.

Another very important commodity is Oil, which is building out its own 3 year H&S reversal pattern after an almost 5 year decline. This weekly chart shows the price action is currently testing the neckline. Many times a line chart will give you an early heads up when a breakout is about to take place vs a bar chart.

When looking at these H&S bottoms make a mental note of the price objective which is taken from the bottom of the head straight up to the neckline. That distance is then added to the breakout point to get a minimum price objective.

Next lets look at a weekly chart for the XLB, basic materials sector, which is hitting new all time highs.

In the past we’ve looked at how the lower channel can morph into a bigger channel that can double in size. In the case for the XLB it looks like a possible 3rd equal channel maybe in the process of building out.

Next lets look at several different commodities indexes to see what they may be telling us. This first commodities index is the old CRB index which has built out a double H&S bottom that experienced a breakout gap above its neckline earlier this month.

This next commodities index chart is monthly look at the $GNX which is in the process of breaking out above its neckline. Note how this H&S bottom is forming at the 4th reversal point in its 10 year falling wedge.

The $GYX, industrial metals index, is building out a double  inverse H&S bottom at the 4th reversal point in its 10 year triangle. A backtest to the neckline would come in around the 320 area which should be expected, but not necessary.

Another base metals index is the DBB which broke out of a double H&S bottom about 8 weeks ago with a breakout gap. A backtest to the neckline would come in around the 16.75 area along with the 30 week ema.

Now lets turn our attention to the emerging markets which is generally affected by the US dollar. The rule of thumb is that when the US dollar is weak it’s good for the emerging markets and vice a versa. Below is a 10 year look at the EEM, emerging market etf, which broke out of a massive 7 year expanding falling wedge. A backtest to the top rail would come in around the 41.85 area along with the 30 week ema.

Believe it or not there is an even a bigger chart pattern building out on the EEM which is a 10 year triangle consolidation pattern. As you can see the breakout occurred 3 months ago with the possible backtest to the top rail in progress.

There is another emerging market etf I follow which is the VWO that broke out from its 6 year flat top expanding triangle and is now in the process of backtesting the top rail. Note how the blue bullish rising wedge formed just below the to rail just before the breakout. Classic Chartology.

This monthly chart shows a complete backtest would come in around the 41.75 area.

This last chart for tonight is a 10 year monthly look at the VEU which is an all world etf minus the US stock market. This chart gives you a good idea of how the rest of the world is doing, which looks very bullish as this index is making new all time highs within its 2009 bull market uptrend channel.

When looking at many of these commodity charts above you can see many H&S bottoms playing out on a large scale. Think of all the shares that had to trade by millions of investors to build out these reversal patterns. Regardless of what the US dollar is going to do these huge bottoms are going to be very difficult to change into something bearish. Trying to figure it all out from a fundamental point of view will be harder still. The patterns are there and until something changes these pattern, they are what they are. All the best…Rambus

Just a quick update on the KRE, regional banking etf, which is breaking out from a bullish falling wedge today.

Tonight I would like to show you some new and old charts for oil which is starting to look positive again. I know it seems counterintuitive that a strong oil price is good for the Transportation Average and to a certain degree the stock markets, but that is generally how it works unless oil goes parabolic. A strong economy puts pressure on the consumption of oil and you generally get a rising price. Same thing for Copper which I think these two commodities are telling us.

This first chart for oil is one we looked at last week which shows the classic H&S bottom with the left shoulder and head forming inside the bullish falling wedge and the right shoulder low forming on the backtest to the top rail. Oil has now spent 7 days trading above the neckline.

There are many ways to look at oil from a Chartology perspective. Below is a year and a half daily line chart which shows the H&S bottom we just looked at on the chart above as the right shoulder of a much bigger H&S bottom. So we have 2 H&S bottoms building out a bigger H&S bottom which I will show you later is part of a much bigger H&S bottom. Big reversal or consolidation patterns are generally made up of several smaller patterns.

Now I would like to show you a third pattern that has formed since the first of the year which is the blue bullish expanding falling wedge. As you can see part of the bullish expanding falling wedge is the H&S bottom that formed on the daily line chart above, along with the small H&S bottom, that makes up the right shoulder being the first H&S bottom we looked at on the daily bar chart. Also the $WTIC is trading back above the 200 day moving average which is positive.

Now lets work our way back in time and look at a 3 1/12 year weekly bar chart for oil which puts the blue expanding falling wedge in perspective. As you can see the bullish expanding falling wedge is part of a much bigger pattern which is year and a half  expanding rising wedge that is working on its 4th reversal point. Oil is also trading above the 30 week ema.

This next chart is an old chart I’ve had for many years which shows the parabolic rise into the 147 high and the parabolic decline that followed. The countertrend rally took over 4 years to complete and built out a massive unbalanced H&S top. When you spot big patterns like that early on it can be very frustrating because each time the price action hits the neckline or support and resistance line you would get another rally. This went on for several years with each rally being more frustrating than the previous one as I was looking for a breakdown at any one of those lows.

When the breakdown finally happened in late 2014 oil had one quick backtest to the neckline and then collapsed in a vertical move down. All that negative energy was finally released in one massive impulse leg.

Now lets turn our attention to the bottom of the chart. The chart patterns we looked at earlier in this post are hardly visible on this 20 year chart which make up part of the right shoulder of an almost 3 year inverse H&S bottom. What I find fascinating is how similar that massive H&S top is to the inverse H&S bottom. By that I mean the H&S top was an unbalanced H&S top and our H&S bottom is also unbalanced.

Below is another old chart I was using during the topping process which was a weekly line chart. This weekly line chart shows the topping pattern as a 5 point triangle reversal pattern with a H&S top which built out the last half of the 5 point triangle. Our inverse H&S bottom looks a little clearer using a weekly line chart.

This last chart for oil is a 20 year monthly look that shows the bull market uptrend channel into its parabolic run to 147. The last consolidation pattern oil made before it ran to 147 was a H&S consolidation pattern which formed in 2007. It’s hard to see on this chart but the high at 147 was a H&S top which reversed the parabolic uptrend. Then oil formed that massive unbalanced H&S top to reverse the counter trend rally which brings us to our current inverse H&S bottom. If our current H&S bottom plays out we should see a move of about 25 points from the breakout point which would put oil up around the 75 to 80 area.

As I mentioned at the beginning of this post, if we see oil in a nice move higher, not too strong and not to weak, it would suggest that the world economies should be doing very well as they demand more oil. I also believe that the Transportation Average and the PM complex could also do very well. Just look at oil’s bull market from 1999 to 2008 and compare it to what the PM complex did during those same years. As long as oil doesn’t go parabolic on us I think oil will be a good proxy for the world economies. I also believe oil is presenting us with a big money making opportunity that doesn’t come around very often. If one can find a large pattern early enough that’s where the big money is made if one can have the confidence to ride the price action to completion. Have a great weekend. All the best…Rambus

Just a quick update on the daily chart for GLD which shows the price action gapping below the top rail of the expanding triangle this morning. This gap matches the breakout gap on the way up which is now creating an island reversal pattern. Today’s price action also gapped below the 50 day ema. With the price actin now trading back inside the expanding triangle I have label the breakout back in August as a false breakout.

This is the Short version :

On the 2 hour charts I’ve spotted several small H&S bottoms building out on some of the stock market indexes. It wasn’t until Monday of this week that they began to show themselves when several broke out above their necklines. Some of these small H&S bottoms are part of a bigger pattern that has been building out for most of this year. At a minimum their price objectives should get some of the stock market indexes back up to the top of their 2016 uptrend channels.

Lets start with a 2 hour chart for the SPX which shows it gapped above its neckline on Monday of this week and closed at a new all time high today. A backtest to the neckline would come in around the 2482 area.

Several weeks ago I posted this chart which was showing how the original rising wedge, blue dashed trendiness, was morphing into a bigger pattern as shown by the red circles with a symmetry false breakout of the top and bottom blue dashed rails. It’s getting pretty busy in the apex, but you can see how the small H&S bottom fits into the bigger pattern that began building out back in February of this year. If that little H&S bottom plays out it strongly suggests the SPX is going to breakout topside from that 7 month morphing rising wedge in a new impulse leg up.

Below is a 2 year daily chart for the SPX which just shows its 2016 uptrend channel. On many of the stock market indexes the 200 day moving average does a good job of showing you the angle of the uptrend channel.

Perspective is everything when you discover what may be an important chart pattern. The weekly chart below shows the 2 year H&S consolidation pattern that corrected the last impulse move up. Now you can see how the blue morphing rising wedge fits into the very big picture. Keep in mind the rising wedge hasn’t broken out yet so the pattern isn’t complete. The reason I think the rising wedge is going to breakout topside is because we are in a bull market and patterns like this tend to form in strong bull markets. If we do get the upside breakout from the rising wedge I would view it as a halfway pattern that would have formed between the neckline and the ultimate price objective.

As I mentioned earlier perspective is everything. Below is a 20 year monthly chart for the SPX which we’ve been following before the top rail of the 13 year expanding flat top triangle consolidation pattern was broken. On this chart I’m showing the 2014 and 2015 consolidation period as a bullish expanding falling wedge halfway pattern. I have to tell you that it has been pretty lonely being a long term bull, but it has even been harder over the last several months as the rising wedge has been developing on the daily charts above. It’s these long term charts that take out all the noise that give me the confidence to hang in there when most say the bull market can’t keep going up. This chart shows you the wall of worry since the breakout from the blue bullish expanding falling wedge.

Again perspective is everything when you look at this 75 year quarterly chart for the SPX. The blue expanding falling wedge on the chart above is the small red consolidation pattern at the top of this chart. This chart along with the Jaws of Life on the INDU has given us a look into the future that few want to believe. For whatever reason investors love to hear bad news or that the markets are going to crash. Fear sells where bullish scenarios go by the wayside. For all the reasons this bull market that began in March of 2009 can’t keep going up, it keeps going up regardless of all the reasons it can’t, and there are a millions reasons why it can’t keep going up. The price action above all else has the final say when everything else is boiled away.

This weekly chart shows the INDU’s H&S consolidation pattern with the breakout and impulse move higher.

The monthly line chart for the Jaws of Life.

Below is the 75 year chart for the INDU which shows the Jaws of Life and a glimpse into the future.

The Most Hated Bull Market in History chart for the INDU.

Below is a 25 year look at the NDX which shows some beautiful Chartology. Note the bullish rising wedge which formed just below the all time highs that gave the NDX the energy it needed to finally move on to all time highs. Classic Chartology

There’s always a bull market In healthcare

This next chart is for our many long term holders that don’t like to trade every little wiggle a stock makes and are looking for something to hold on to. This was one of the big leaders during the first leg up and then built out the blue triangle consolidation pattern.

The long term monthly line chart. Think of the blue triangle as a halfway pattern

I had planed on showing you some charts on oil, but I’ve run out of time. The bottom line is that until something changes the bull market, it is what it is and all the negativity about the economy or fundamentals or whatever one uses to gauge the health of the stock markets is not going to make you a dime. Trying to short a bull market is one of the hardest things to do as many have found out. Realize that everybody who has tried to catch THE Top of the Most Hated Bull Market in History since 2009 has lost money.

. It’s much easier to go with the price action and what it’s telling you to do than to fight it. Maybe we crash into October like so many are predicting, but on the other hand what if we don’t? All the best…Rambus