The internet is slower than molasses in January and hard to annotate charts, but I got a few updated. Below is the combo chart for the PM complex we’ve been following which shows the dominate pattern being the triangle consolidation pattern. Just before I left the price action was breaking out below the bottom rail and I was looking for a possible backtest to the underside to take one last position. Some had a complete backtest but others didn’t. If you were lucky enough to get that last position great job.

When a consolidation pattern breaks out and the backtesting process begins that starts the impulse move down. As you can see most have built a small red consolidation pattern just below the bottom rail of their respective triangles which is usually a bearish setup. Today they gapped below the bottom rails of their small red consolidation patterns of which there are several different types, but all consolidation patterns. The next phase is now beginning in this impulse move out of the bigger blue triangle consolidation pattern.

GLD has been the strongest in the PM  complex but today it’s joining the party to the downside gapping below the bottom rail of its bearish rising wedge. Before I left I showed a possible double top forming on SLV with a double top neckline which was tentative. Monday the price action broke below that potential double top trendline which is strongly suggesting the double top is in place. I still left a couple of untouched charts at the bottom of the combo chart which still shows the possible H&S bottom that a lot of PM investors believe is still working out. Again, if you see the low of the right shoulder violated that is a very strong warning the H&S pattern has failed.

After 4 months of waiting SLV is cracking the bottom rail of its 6 point diamond consolidation pattern.

One last chart for SLV which shows the bear market downtrend channel with the diamond consolidation pattern.

I just want to thank Sir Plunger for his excellent Weekend and Wednesday reports along with Sir Fullgoldcrown for keeping everything under control. All the best…Rambus

Uranium part I revealed the ultimate bullish fundamentals of the uranium market, but also emphasized the importance of exercising patience. Ultimately bull market fundamentals exist, but the market doesn’t trade on fundamentals, at least in the short and intermediate term. It trades on liquidity, and for now the bid is not there. The sector is in the process of forming a bottom, but it would be unwise to go in whole hog with an entry position just because one can see a bullish eventual outcome. This past week proved that!

So before going any further analyzing the uranium sector I would like to review some investing concepts pertinent to establishing an investment position in such a volatile sector.

Volatility– One should not think of risk as the same as volatility. The two are not one and the same. Just because a stock moves up and down in large percentages does not make it risky. Most don’t understand this and think volatility is risk- it’s not. Volatility is actually the opposite side of the coin as liquidity. Illiquidity generates volatility. Since most think of volatility as risk it mentally blocks them to be able to use volatility as a tool to be used in their favor. Instead, volatility rattles them and often shakes them out of positions.

Using volatility to our advantage, we must be able to ride up and down through a trading range without getting rattled or shaken out and to be able to see it as an advantage for us. This skill set is particularly relevant in the uranium sector since they’re the most volatile stocks in the universe. The uranium sector, more than any other, requires one to be either a contrarian or be a victim.

Contrarianism– Such a misunderstood concept. How many investors love to spout the phrase “I am a contrarian” as if that somehow makes them a genius investor. More often than not it just means they are about to get run over by a truck. You can’t just be a contrarian just of the sake of it. Be one when it makes sense to be one. You must do your homework, you must asses the probabilities of the market being wrong. You can’t just be a dumb ass and think everyone is wrong because you are right.

The way to make the real money is to realize that price may be a liar. Price does not predict as well as everyone thinks. This is where doing your homework comes in since price often doesn’t tell you what you need to know. One should create his own investment thesis, if it is against the crowd, well then I guess that makes you a contrarian. If your trade is not priced into the market that’s where the value ultimately is if you are right. You make an asymmetric bet where the probability has been not been priced in and it’s the pricing in of those probabilities where all of the money is to be made.

Being a contrarian is such a challenge since being ahead of the trend often means being wrong for a while. However, one needs to be seasoned enough to understand the difference of being wrong and not being right-yet. One must develop a sense of how the world is changing. The average person is unable to understand change and instead just extrapolates the current trend.

Trade Sizing– A fundamental concept that separates the amateur with the seasoned investor. Without proper trade sizing one stacks the odds against oneself for an ultimate successful outcome. This is particularly applicable to the uranium sector due to its inherent volatility. Determining the correct size of a position is related to why I caution against making grandstanding bottom calls as it encourages a deep plunge into a sector where one really can’t know for sure if the bottom is in fact in. Better to take an initial position and look for bottoming action.

If a position is too large you will likely get knocked out, whereas if it is right sized you can ride the volatility and hang in there. You will be in a position to press your bet when conditions dictate. You must consider and match your time horizon with your investment thesis. This is particularly applicable with uranium as we know its not yet prime time, but it will be, it’s just a matter of time. The question is in how much time and when will the market begin pricing higher price in? If the thesis requires 5-7 years to run then we need to size our position for this time period. Stated differently your investment horizon must match your idea horizon

This uranium sector is a wile beast. We can use it to make huge returns, but we need to bring our best game to the fight. Equip yourself with the appropriate tools and we can harness the power of this sector.

The Cycle

The uranium sector can fly higher than you can imagine and fall further than one can predict. Due to the inherent volatility the way to make a fortune in the sector is to buy in the bottom of a cycle. The best way to do this is to wait for a bust. We have now seen such bust as was described in part I so we know that we are now in the buy zone. It’s just now a function of refining the entry point.

Uranium- The incredible metal.

Uranium is a super concentrated metal. It is so dense that a one gallon milk carton filled with uranium would weigh 150 pounds. 13 of those milk cartons of uranium produces the same amount of energy as 80,000 barrels of oil. It’s relatively plentiful, with 40 times more of it in the earth’s crust than silver.  In a future powered by electricity uranium is an indispensable metal.

All markets are cyclical… So it helps to know where you are in the cycle-Plunger

I spend a lot of time thinking about how price fits into the big picture. It is why I have expanded Robert Rhea’s psychological phases of markets into a Chartology model. I find it’s an essential element in my tool box which gives insight into where a market is in its cycle. Applying this skill set towards uranium is somewhat problematic since its such a small sector and there are only limited data samples. So I am going to use Cameco as a proxy for the industry in my analysis. Cameco produces 20% of all industry production and is a company which must ultimately survive on its own as it’s not subsidized by a national government. Production from Kazakhstan however, is somewhat artificial as initial exploration and development occurred under the Soviet model where cost was not a prime consideration. Much of the development would not have occurred using a profit and loss discipline. So I think an analysis of the price action of Cameco offers us the best proxy of industry performance.

Uranium Stocks Secular Bull Phases

As Rambus often says nowhere else in the world are you going to get the following insight and analysis. It’s unique and not to be found anywhere else. IMO it’s the principle benefit of what this site delivers. In order to identify the cycles of the uranium market I will adapt some major assumptions which as of yet are unproven. My chief assumption is that we saw a major bear market bottom in late 2016. Later on I will show you the model and analysis which leads me to this tentative conclusion. In Part I we saw the long duration bull markets that have occurred in the uranium price. It is my premise that we are currently in the third secular bull market in uranium and it began in the year 2000. Phase I, the accumulation phase, lasted from 2000 to 2002. Phase II, the mark-up phase, lasted from 2002 to 2007. In phase II Cameco went from under $3 to $48 and whenever sectors have such huge gains it typically requires prolonged periods to consolidate those gains. This consolidation period appears to have taken 10 years in this sector. This is similar to the rise in oil from 1972-1980, undergoing a rise from $2 to $40 requiring a consolidation lasting 24 years before it could break out of its consolidation trading range.

A long term secular bull market typically has several cyclical bull and bear markets within it. Since its top in 2007 CCJ has been in a long term 10 year consolidation of its massive move from 2000-2007. This consolidation has consisted of 2 cyclical bear markets and one cyclical bull market. Strung together this retraced 85% of its move from its 2000 low. A brutal retracement, but recall these are the most volatile stocks in the universe remember? Using this model what lies ahead still is phase III, the blow off or mania phase. Typically in Phase III price breaks through the previous top of phase II and accelerates from there. Capital is drawn into the sector and valuations go to previously unimagined levels. Recall NASDAQ in 2000, or oil in 2008.

Phase II Consolidation (takes form as Cyclical Bear & Bull markets from 2007-2016)

The chart below zooms in on the 10 year consolidation of the massive 2000-2007 move. Here we have 3 clear phases of a bear market. Phase I (Distribution Phase) includes the crash of 2008, but in retrospect the crash was just a temporary diversion of the distribution process. This bear phase actually included a cyclical bull market within it. This all sounds contradictory, however one can see that despite price rocketing upward for 2 years it was really all part of a distribution phase… or phase I. Shares were distributed from informed forward looking investors who understood market cycles to the suckers all lathered up through positive price action.

Cyclical Bear Phase II- This began in early 2011 in what I call a head test or bull trap. Price often spikes pulling in the last bulls prior to a major decline. Note the point of recognition (POR) came early in phase II. POR’s always come in phase II and was particularly violent due to Fukashima. But note that last bar before the gap down occurred before Fukashima. It occurred on 7 March 2011, whereas the earthquake was on 11 March 2011, so the downtrend was already asserting itself, Fukashima just added a big push. As we saw in the gold market in 2013 following the Goldman raid markets typically enter a consolidation after a phase II POR crash. We see this in the 10 point diamond consolidation that lasted 3 years.

Mr. Bear gets devious.

In typical fashion before doing a slice down through the APEX of the diamond Mr Bear delivered a bull trap in the form of a false breakout to the upside of the diamond. After the breakdown we then see a backtest and then  price resumed its bear market decline. Having spent 3 years in a bear market consolidation and then sucking in latent bulls in its bull trap it was now fueled up to resume a relentless 2-year decline. This decline was in fact a measured move impulse coming out of its diamond consolidation. Note the impulse moves entering and exiting the diamond are virtually equal, a vicious 59.5% decline.

Cyclical Bear Phase III- Annihilation

The separation between phases is observed with a counter trend move. Here we see in Jan 2016 a 7 week BMR which relieved downward selling pressure. Now recharged Mr. Bear pulled out all the stops and applied the thumb screws. That’s right, the dreaded capitulation of phase III… the annihilation. This is where severe bear markets end. Non-stop selling crescendos into an annihilation drive. All hope is lost for a turn, liquidity is removed and comical selling asserts itself. Its a pretty ugly affair. We see this in the depicted 8 month annihilation drive where Cameco having already dropped 73% from its highs went into a 44.8% crash. Simply brutal.

A completed Bear Cycle

The above analysis is the main reason I believe the bottom of October 2016 was THE bottom. The price action since October up until today doesn’t convince me that we are in a bull market, however its the fullness of the process leading into the October price level which speaks the most to me.  We simply saw enough to recognize the worse is likely behind us. Certainly we could double back and retest that bottom, as painful as that would be, but if we have  sized our positions corectly we can survive that process.

It is not my intent to mark up the entire uranium sector and provide recommendations. I regard it more important in the early stages to focus on the process instead, that’s why we have covered the ground we have. Once the bull asserts itself we will get larger gains from companies moving projects into production. Discovery companies will delight, but it’s the producers that will deliver the big gains. Therefore that’s my focus and US based companies may be the biggest performers due to the wild card factor.

Cameco

It’s the Big Dog. 20% of the world’s production with 3 of the world’s top mines. Unbelievable grade in a safe jurisdiction. Will no longer do long term contracts at existing prices. If you are in Uranium this should be your core holding. Looks to still be in a bottoming process. Note the 30 W EMA is now tilting down. Give it some time.

Energy Fuels

After CCJ this is my preferred company. US Based production with permits in place. Able to ramp production the most and the fastest of all the companies. This is the spec play to own IMO. But look at the power dive its been in over the past 8 years…Gosh. Appears to be attempting a bottom but the 30 W EMA is rolling over and stochastics are still plunging. Keep watching it and nibble a little down the road. Management tends to deliver surprises with financings when they run out of cash.

Dennison

Its been a dog of the sector. A resource royalty family owns and controls it through the Lundeen family. Rick Rule refuses to get too excited as he told me there is not a rush to own it. Chart wise, maybe we have a double bottom in the making. Keep an eye on it.

Uranium Energy Corp.

Amir’s little US based Uranium play. ISR production, with a thin balance sheet. Fortunately for them they pulled off a decent financing during the pop. But they desperately need a higher uranium price to make it work. They are in a battle with the clock. Tic Tic Tic.
But if you want a US Based super leveraged play you have it all here. Amir is a very well connected capable operator. Don’t ever sell him short. Like the song says, he’s a smooth operator.

Fission

Yesterday’s darling. Just seems like yesterday this was the go-to explorer. Things have cooled down as this Athabaskan play is not as high grade as once thought. But it could be bought out at some point. Like the others more bottoming action with a 30 W EMA that’s rolling over.

GoviEx Uranium

Can you say Bull Flag?  That’s what it looks like we have here. This is Robert Freidland’s little project that he is training his son on. I have met the kid and I thought he was a mini-me arrogant jerk. But that’s what one would expect if you were Freidlands son right? But that doesn’t mean you can’t make a fortune with this company. Ausie based seems to have now finished up its much needed correction.

NexGen Energy

This is currently the go-to discovery play. High grade, and it will be a mine. It’s obviously marching up the ladder of chartology consolidation patterns. Looks ready now to impulse up into its next. Might want to start buying this one right here.

Conclusion

I have discussed the tools to approach this sector. Think about time horizon, position sizing and bottoming action. It does not serve us well to say the bottom is in let’s go whole hog. But having said that I do think we are in a bottoming process. We don’t know how long it will last as there is a certain amount of game theory going on between utilities and producers. Utilities don’t want to believe what suppliers are telling them. Secondary supply is dwindling, while there is still a supply overhang. Will the market slowly discount the positive future fundamentals or will it wake up to the future reality all at once and have utilities all respond to new purchases at the same time? Could it develop into a buyers panic?  That’s the game!

It appears the broad sector is in Weinstein stage I. It has not entered stage II. The big bet is when that moment will come.

The PM complex has been taking up most of my time the last couple of weeks so tonight I would like to update you on some of the stock market indexes. No matter how one wants to spin it the US stock markets have been in a bull market since 2009 by any trading discipline. It has climbed the proverbial wall of worry which is needed to create such a dynamic bull market. Most of the charts will be long term in nature which puts the bull market in perspective.

The first chart is a 20 year monthly chart for the INDU which shows you “The most hated Bull Market in History”. Below the INDU chart is just a plain chart for Gold with no annotations on it. One is in a bull market and the other isn’t. Where has your money been ?

We’ve been following this next chart since the day it broke out above the top rail of the “Jaws of Life” pattern back in November of 2013. Little did I know at the time that the backtesting process would take nearly 2 years to complete, but in the end it was worth the wait. https://rambus1.com/2014/11/19/wednesday-report-49/

The quarterly line chart shows the beautiful Jaws of Life consolidation pattern with a perfect breakout and backtest to the top rail.

To understand what is really taking place right now in the big picture, this 75 year chart for the INDU puts everything in perspective and is probably the most important chart to view. Very few investors on the planet can even grasp what a chart like this is saying let alone let alone invest their hard earned money in what it’s saying. Keep in mind we’ve been following this Jaws of Life consolidation pattern actually before the INDU finally broke out in October of 2013. Compare the breaking out and backtesting process of our current Jaws of Life to the massive H&S consolidation pattern of the 1970. We are currently in the early stage of an impulse leg up which takes place after a consolidation pattern is finally matured.

Below is a 20 year monthly chart for the SPX which broke out of its massive 13 year flat top expanding triangle in 2013 and has never looked back.

This 75 year quarterly chart for the SPX that is similar to the 75 year quarterly chart for the INDU we looked at earlier. During its 1970’s consolidation period it formed a bullish rising wedge which led to its secular bull market. The 2000’s built out it’s recent massive consolidation pattern, the flat top expanding triangle. Note how small the 1987 crash looks on this long term chart, It was was the end of the world back then.

If the 75 year charts for the INDU and the SPX are showing us that we are in a secular bull market then we should see the Transportation Average confirm the bull market is for real. Below is a  20 year monthly look at the Transportation Average which shows a very symmetrical H&S bottom with the head forming at the 2009 crash low. Note the price action at the top of the chart that broke out of a smaller well defined H&S consolidation pattern.

The 100 year quarterly chart for the Transportation Average is trading up close to its all time highs after breaking out from is large H&S consolidation pattern we just looked at on the chart above.

The reason the RUT has been lagging a bit lately is because it has been testing the top rail of its almost 5 year black expanding triangle. The H&S that makes up part of the expanding triangle strongly suggests that the RUT is going to breakout to new all time highs which it is doing this week.

Below is a 20 year monthly chart for the RUT I’ve never published before. It’s similar to the Jaws of Life, but this big consolidation pattern is a 15 year bullish expanding rising wedge. Again, note the big H&S consolidation pattern that is making up part of the blue expanding triangle we looked at on the chart above. That is telling us that the breakout above the top rail of the blue expanding triangle is going to take place.

Lets now look at a few “foreign” markets to see what they look like starting with the $DAX. Just like the US stock markets the DAX built 12 year black triangle consolidation pattern with the smaller blue triangle pattern building out toward the apex letting us know the big pattern was going to breakout to the upside. Six months ago the DAX broke out of the blue bull flag on its way to new all time highs.

The FTSE built out a massive 15 year rectangle consolidation pattern. Note the small H&S bottom that formed just below the breakout point which told us the breakout would happen.That right shoulder was formed during the night of the BREXIT vote when it looked like the end of the world for England.

There are a few individual sectors that have been consolidating for some time now which look like they may be ready to make a move. This first sector is the $BKX, banking index, which broke out of a black expanding triangle late last year and has been in backtest mode testing the 30 week ema this week as support.

Another important sector that is just breaking out of a large consolidation pattern is the XHB, Homebuilders etf. Last month it broke out above the top rail of a beautiful 4 year 8 point diamond consolidation pattern.

The XLV, healthcare sector, has built out a year and a half triangle consolidation pattern. As this sector was one of the strongest out of the 2009 crash low it needed to consolidate those gains by building out the blue triangle consolidation pattern.

Probably the strongest sector of all out of the 2009 crash low was the $BTK, biotechnology sector, which has been consolidating for the last year and a half forming a blue expanding bull flag.

For the last year and a half the $SOX, semiconductor index, has been leading the tech sector higher.

This last sector we’ll look at tonight is the $DRG, Pharmaceutical index, which is building out a possible bullish falling wedge which has formed at the top of massive impulse leg up out of the black 12 year bullish falling wedge.

When I look at all these charts above it’s hard for me to see a long term bear market on the horizon. We are going to get the inevitable corrections along the way which occurs in any bull market, but knowing the main trend is the most important part of being successful when it comes to the markets. Shorting this bull market consistently has been a tough game to play vs just going with the bull market. All the best…Rambus

Just a quick update on the weekly chart for the HUI which shows the blue shaded areas are all the same percent bear market rallies. The last time we looked at this chart the HUI had just rallied back up to the top of the blue shaded area at #6. What we needed to see happen is for the HUI to rally no higher than the top, which it came close. If you look at all the other bear market rallies none ever went higher that the preceding one. The only time the price action went higher than the preceding bear market rally high was at the low at #5 which was the biggest rally of the bear market. If this bear market rally plays out similar to all the other ones we should see lower prices ahead.

Great News

Plunger has accepted an offer from Sir Rambus to do some of the Weekend Reports.

Who is Plunger >?  See his bio at the end of the Post.

Fullgoldcrown

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As you know reverse symmetry plays a key role on how I sometimes interpret chart patterns or impulse moves. Below is the 60 minute chart for the HUI which shows the bearish rising wedge with the small H&S top that showed itself yesterday. After gapping down below the neckline and the bottom rail of the rising wedge some type of backtest should be anticipated, but not always. As you can see both necklines are taken from inside the bearish rising wedge to create the right shoulders, a form of reverse symmetry. A complete backtest to neckline #1 would come in around the 209 area if we get one. The next bit of confirmation will be when the price action breaks below neckline #2 which will create a bigger H&S top. Many times with a bearish rising wedge you will see the left shoulder and the head form inside the rising wedge while the backtest to the underside of the rising wedge forming the right shoulder.

Below is another 2 hour chart for the HUI which shows the H&S top that formed at the August 2016 high. After declining down to the December 2016 low the HUI then rallied back up to the February high where it completed another H&S top to reverse the direction down into the March low. From that low we got another counter trend rally back up to the April high which now looks like another H&S reversal pattern is building out. The potential black triangle that is building out shows you the battle taking place between the bulls and the bears. As the battle continues both sides become exhausted, but whichever trend was in place before the consolidation pattern started will normally reassert itself again. That’s the basic principal for bull and bear markets only on a much larger time frame.

The daily chart shows how the potential triangle is building out. The all important 4th reversal point won’t be complete until the price action hits the bottom rail. Next week I’ll be looking for a backtest to the bottom rail of the blue rising wedge. If the backtest holds resistance the next area to watch will be down to the bottom trendline. If everything works out and the HUI finally takes out the bottom rail of the triangle that will be the place where I will add another small position with the Kamikaze stocks. Keep in mind it may take several weeks or longer of chopping action before there is a resolution to the triangle either up or down so some patience will be required. Have a great weekend. All the best…Rambus

Before we look at tonight’s charts I would like to thank Sir Plunger for putting on the short oil trade this week while I was recovering from surgery. You won’t find a more through and in depth look at oil than what Sir Plunger offered. And wouldn’t you know it his timing as usual was impeccable. Oil dropped almost 4% today.

Now lets turn our attention to the sector which many members have a love hate relationship with.

There is a potential new pattern forming on some of the precious metals stock indexes which is only coming to light today. Before today’s price action there was only a guess of what may be forming with no confirmation. After today’s big gap breakout another piece of the puzzle is falling into place. Nothing is ever guaranteed when it comes to the markets, so all we can do is get the odds in our favor and try to recognize a potential pattern as soon as possible. Once you think you may have something figured out you then put together a game plan and work it until it either plays out or fails.

Lets start with the 60 minute chart for the GDX which shows the now completed bearish rising wedge. We got the H&S top which formed at the top of the rising wedge as the 4th reversal point making the rising wedge a consolidation pattern to the downside. It’s still possible we could see a backtest to the 24 area before the impulse leg down begins in earnest, but there are no guarantees. Note the inverse H&S bottom that formed in March which reversed the decline from the August 2016 high, a H&S at the bottom and a H&S at the top, both of which are reversal patterns.

This next chart is a one year look we were watching during the big impulse leg up out of the January 2016 low to the August 2016 high. Here you can see another H&S top which reversed the 2016 rally. After forming several smaller consolidation patterns the GDX bottomed out in December of 2016. That 2 month rally produced the first blue bearish rising wedge with the 200 day ma offering resistance. If you recall we went short on the backtest to the underside of the rising wedge until the Fed announcement, which spiked GDX higher at the beginning of our current and smaller blue rising wedge. Today we shorted the PM stock indexes again, as the price action is in a similar spot to the bigger blue bearish rising wedge.

During the formation or any consolidation pattern there needs to be at least 4 reversal points to make it valid. Sometimes there are 6, 8 or more reversal points before a consolidation pattern is finished building out. Many times a consolidation pattern can be created with several smaller patterns which shows the reversal points. With today’s breakout below the bottom rail of the smaller blue bearish rising wedge it puts a possible triangle consolidation pattern in play. Now you can see how a potential game plan may start to develop.

The first thing we’ll look for is a possible backtest to the underside of the blue rising wedge and then a fall away. Next we’ll need to see how the price action interacts with the bottom rail of the nearly 4 month black triangle consolidation pattern, which still needs to complete the 4th reversal point. One piece of the puzzle at a time, but as long as the game plan keeps playing out there is no need to change things.

The weekly chart for the GDX shows how the potential triangle consolidation pattern fits into the big picture.

Lets look at one more PM stock index to see how its price action is building out. The 60 minute chart for the HUI shows it broke out today below the bottom rail of its bearish rising wedge.

In a confirmed downtrend one needs to see lower lows and lower highs. This daily chart below shows the August 2016 high, followed by the Feb 2017 high, followed by our most recent high in April, all lower highs. As you can see there is still more work to be done in building out the black triangle, but as long as things keep following the script we need to let things play out.

Below is the $XAU and its potential black triangle consolidation pattern.

This weekly chart shows how the triangle consolidation pattern has built out just below the neckline, which has been holding resistance.

Below is the daily chart for the SIL which shows its downtrend channel firmly in place.

Lets change it up a bit and look at gold. If I had only one chart to use it would be this weekly chart which shows gold’s bear market downtrend channel. Since the first of the year I’ve been waiting patently for gold to rally back up to the top rail of the downtrend channel. I’ve been showing 1305 as the price objective for close to a year, which is now at hand. This is where the neckline and the top rail of the downtrend channel intersect. If gold can trade above that area then the bulls will be in charge.

Ironically enough SLV is also testing the top rail of its bear market downtrend channel. The top rail of the downtrend channel may also be part of the 6 point diamond consolidation pattern.

Below is a longer term weekly chart for SLV which shows the top rail of the downtrend channel holding resistance at the 6th reversal point in the blue diamond. To say this is a critical spot on this chart is an understatement.

If the HUI is going to show some bullish price action the first thing it will need to do is trade above the top rail of its major bear market downtrend channel

The same can be said for the GDX.

Below is the downtrend channel for the GDXJ.

This next chart is a ratio chart which compares the GDX to the SPX. When the ratio is falling GDX is under preforming the SPX. After another backtest to the neckline this week we could be seeing a potential triangle consolidation pattern building out.

Lets look at one last chart for tonight which is a weekly combo chart which has the US dollar on top and gold on the bottom. The brown rectangle shows the H&S bottom on the US dollar and the H&S top on gold. Both are at important inflection points at their respective trend channels.

The charts above show a game plan that will need to be followed. As long as the game plan continues to play out having some patience will be important. That is much easier said than done. There are usually a couple of times a year when one can get the intermediate term trend right and ride it for all its worth. Hopefully we are on the brink of such a move. All the best…Rambus

As there seems to be a lot of interest in some of the currencies I would like to show you some charts we’ve been following for a very long time. Most of the charts will be long term in nature which won’t do us much good in the short term, but they will keep us in tune to the direction these currencies are most likely to take

Knowing what to expect in the Longer term is important not only to currency and commodity traders but to the very Countries who’s currencies are impacted and to their exporters and importers as well.

Long time members may remember some of these massive tops in 2011 which led to the sharp decline in the PM complex and commodities. I won’t spend a lot of time on these charts as they’re pretty self explanatory.

The $CAD, Canadian Dollar, has built out a massive double top formation, broke below the double top trendline in 2015, followed by a backtest.

You may have noticed the H&S top which formed the right top. Below is the weekly chart which shows the double H&S top in more detail.

The weekly chart for the $XBP, British Pound, was one of the first times I showed how a triangle can morph into a bigger consolidation pattern, as shown by the red circles. The backtest to the bottom rail produced a H&S top which launched the multiple impulse moves down followed by a consolidation pattern.

The 30 year monthly chart for the $XBP is setup a little different than some of the other major currencies. In the 1990’s the $XBP built out a double bottom which had a measured move up to the 211 area. After the small H&S top was in place the $XBP basically crashed below the double bottom hump all the way down to the previous multi year lows. After chopping sideways for almost 5 years the $XBP took out the multi year lows on the BREXIT vote.

Next is the $XAD, Australian Dollar, which shows its 2011 H&S top with several odd numbered reversal patterns.

This monthly chart shows the double H&S top and the blue triangle that is currently under construction.

The $NZD, New Zealand Dollar, has been holding up better than most currencies, but it may be getting ready to decline once again, as it looks like it’s breaking down from the blue bear flag that is forming the right shoulder of a large H&S top.

Below is the monthly chart for the $NZD building out the right shoulder.

Next is a monthly chart for the $XEU, which shows its massive double H&S top and the blue triangle that is building out the possible right shoulder of the 2nd H&S top.

This 7 year weekly chart for the $XEU shows the one year blue triangle that has been building out with a breakout and multiple backtests to the bottom rail which would also be the right shoulder on the chart above.

The weekly chart for the $XJY, Japanese Yen, shows its double H&S top. The green circles shows the gaps made on neckline #2 telling us the neckline is correctly placed.

This next chart for the $XJY is a 35 year look whch shows the H&S top that ended its bull market in 2011.

This next currency is a weekly look at the $XSF, Swiss Franc, which looks much different than most of the massive H&S tops we’ve looked at. Starting at the spike high in 2011 you can see a series of lower highs and lower lows which constitutes a bear market.

Whichever way this multi point black falling wedge breaks out a big move will follow.

I’m going to focus in on the US dollar and some of the the US dollar currency crosses in the Weekend Report as there are just too many charts to put into one post. You will see some charts I have not posted before, so stay tuned. All the best…Rambus

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In the Wednesday Report the title read, What Type of Investor are You? My main focus was to show some intermediate to long term buy and sell signals based on the 21 month simple moving average and the MACD-Histogram. Tonight I would to take it one  step further and look at the Chartology for some of the big stock market indexes which shows the intermediate to longer term perspective. There is one dominate chart pattern that has built out a consolidation pattern for the 2015 to 2016 correction.

Lets start by looking at a 4 year weekly chart for the $SPX which shows the dominate H&S consolidation pattern that was needed to consolidate the last rally phase. It could have been any number of different consolidation patterns, but this time it was the H&S consolidation pattern. Back in December of last year the SPX broke out above its neckline and has rallied strongly without much of a correction. Four weeks ago the SPX hit a high of 2401 and has been going nowhere which is suggesting the first real correction may be at hand since the rally out of the November elections low.

The blue shaded areas shows the size of some of the previous corrections on a linear scale. If our current consolidation phase is similar to some of the previous corrections then we could see the SPX dip down to the 2280 area, which would also be a 38% retrace from the right shoulder low. If a deeper correction is in the cards then a complete backtest to the neckline would come into play. The red 30 week ma is rising strongly and is now just above the neckline. The H&S consolidation pattern has a price objective up to the 2556 area, at a minimum.

The 25 year monthly chart for the SPX shows a blue bullish expanding falling wedge which has the H&S consolidation pattern as part of it. Keep in mind the 13 year black flat top triangle that consolidated the bull market that ran from 1976 to 2000, which I view as a halfway pattern to the upside.

The 75 year quarterly chart for the SPX shows you why I believe the 13 year flat top triangle is a halfway pattern to the upside. Note the near 20 year bullish rising wedge which formed in the 1970’s, and the huge bull market that took place after the breakout and backtest were finished. If you think things are bad right now and there is no way the stock market can go up, you should have been trading the stock markets in the 1970’s when inflation was out of control and interest rates were up over 20%. The 2009 crash low is equal to the low in 1982 which launched one of the biggest bull markets of all time. Big consolidation patterns equals big moves.

Next lets look at the H&S consolidation pattern that the INDU has built out on the weekly chart. As you can see that was one heck of an impulse leg up when the price action finally broke out above the neckline. A 38% retrace from the right shoulder low to the recent high comes in at the 19,899 area. The two blue horizontal trendlines represents the possible new consolidation area that may build out. There is no way to know at this time what type of consolidation pattern may form, but this looks like a good place to start.

The 75 year quarterly chart for the INDU shows a similar long term setup to the SPX chart we looked at earlier. From the mid 1960’s to the breakout above the neckline in 1982 the INDU built out a massive H&S consolidation pattern, which led to its greatest bull market of all time. Note the beautiful breakout and backtest to the neckline which led to the first impulse leg up that lasted almost 5 years until the infamous 1987 crash, which is still one of the worst declines for one day, on a percentage basis, in history.That definitely felt like the end of the world back then, but it did very little to slow down the secular bull market as the bullish rising wedge began to build out.  Note how similar the breakout and backtest looks on the Jaws of Life expanding triangle to the 1982 breakout and backtest.  The blue bullish rising wedge formed as a halfway pattern during that secular bull market. The only real bullish analysis back in 1982 was Robert Prechter, who made the outlandish prediction that the INDU would trade up to 5000 or so if I remember correctly. As it turned out he got out way to early and missed the best part of the bull market during the 1990’s.

Now lets look at the $RUT, Russel 2000 small cap index, which is showing a H&S consolidation pattern on its weekly chart. The small caps were actually the strongest sector during the rally out of the right shoulder low. It was also the first index to stall out. There are 3 possible areas of support. The first is the 38% retrace off the right shoulder low to the recent high, which comes in at 1315 which is also the area where the 30 week ma average comes into play. The 3rd area of support is at the neckline at 1290 or so. Note how the neckline symmetry line shows the low for the left and right shoulders.

The $NYA is a good proxy for the overall health of the stock markets as it has over 1900 stocks that make up this index. A backtest to the neckline comes in at the 11,100 area with the 38% retrace 35 points higher at 11,135. The 30 week ma is also coming into focus at the neckline.

This last index we’ll look at tonight has been the strongest sector which is the $COMPQ, tech stock index. Instead of a H&S consolidation pattern the $COMPQ built out the black bull flag. I’m using the 13 and 34 week ema’s which have done a good job of showing support, especially the 34 week ema.

After a strong rally out of the November elections low, it looks like the first consolidation phase is beginning. As Always there will be hysteria and calls for an impending Market Crash, but examination of these charts should show the higher probability is that this is a well needed and healthy time of digestion of the recent strong gains. This is simply how bull markets work.

The weekly charts above show where we should expect strong support to materialize. Keep in mind if this is the beginning of a consolidation phase we should see a low fairly soon with a counter trend rally, and then one more reaction low to form the fourth reversal point to complete whatever type of consolidation pattern may build out. For those that feel the correction might be too strong for them , take some chips off the table and try buying back your shares toward some of the support zones laid out above. It’s always easier said than done. All the best…Rambus