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

Flags produced with Permission from http://www.theodora.com/flags/

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

There is a combo chart for the PM complex I’ve been following, on the short term 10 month daily look, which shows a potential H&S bottom forming. I put a neckline symmetry line on the charts to get a feel for where the low for the right shoulder may form. Some are fairly parallel to the neckline like GLD, SLV and the HUI with GDXJ and SIL being the most unparalleled. The CDNX is showing the most weakness as it probably has to do with some of the small cap energy companies.

GLD is trading the closest to the neckline so it may give an early heads up for the PM stock indexes. Keep in mind these potential H&S bottoms won’t be complete until the necklines are broken to the upside.

This next chart is a long term weekly look at the HUI which shows the potential big trading range with the first reversal point starting at the August 2016 high. Reversal point #2, which may be underway should take the HUI up toward the 286 August high which would be the area to look for the 3rd reversal point to the downside.

Note how the top of the trading range formed a H&S top for the first reversal point and now it looks like a H&S bottom for the 2nd reversal point. Interesting to say the least.

Below is a daily chart for the HUI which shows the potential H&S bottom forming inside the large trading range.

The 20 year monthly chart for the HUI shows you a good look at all the consolidation patterns that formed during the bull market years. During the bull market the HUI formed one consolidation pattern on top of the next. I have all the reversal points labeled on each consolidation pattern. Most of the consolidation patterns lasted anywhere from 14 to18 months or so. On that basis we are likely less than half way through this present pattern . The red numbers on the left side of the chart shows the same height for each consolidation pattern. As you can see our current  pattern is also the same height.

This is a good area to see a H&S bottom build out just like the H&S top that built out at the first reversal point which is defining the trading range.

Markets are live entities, Each day new patterns can slowly emerge Chart patterns are the sum total of actions of all the traders who participate. With an open mind , we must evaluate and re evaluate and  constantly  be on the lookout for clues . Stay tuned , as the Precious Metals Markets are getting interesting once again.

All the best

Rambus

In this Weekend Report I’m going to update some charts I posted back in November of last year before the PM complex bottomed in late December. What I was showing back in November were many of the H&S tops that were breaking down in an impulse leg to the downside. The lows in December of last year is where they bottomed and began a counter trend rally that took prices back up to the February 2017 highs. From a Chartology perspective all we’ve had so far was a backtest to some of the necklines at this point in time. Maybe it will end up being more, but for now the backtests are holding resistance.

I would like to start with one of the more important ratio charts which compares Gold to the US dollar. During the bull market years this ratio chart built out a parallel uptrend channel that was a thing of beauty. In 2000 this ratio started to build out an inverse H&S bottom which reversed the bear market to a bull market. For the next 11 years this ratio built out one consolidation pattern on top of the next, which is bull market action. Even the crash in 2008 built out a H&S consolidation pattern which launched the rest of the bull market into the 2011 high.

The bottom rail of the major uptrend channel was broken to the downside in April of 2013 which was the defining point on the chart, which reversed the bull market to a bear market. Note the H&S top that formed just below the top rail of the downtrend line in 2016. That is the same H&S top I showed you back in November that had already broken down. You can see the backtest to the underside of the neckline which so far has been the counter trend rally out of the December 2016 low. So from a Chartology perspective nothing has broken yet in regards to the bear market downtrend channel and the backtest to the neckline.

This next chart focuses in on the parallel bear market downtrend channel that began to build out in 2011 and the consolidation patterns that have formed. If the bulls can take out the top rail of the bear market downtrend channel they will be speaking to us loud and clear and I will pay attention to what they’re saying. Until then the bears are in charge.

This next ratio chart I compared the HUI to the SPX to see which one was stronger. After breaking down below neckline #2 this ratio found support at the late December 2016 low and built out the blue bearish rising wedge as the backtest to neckline #2. Note the double H&S top that formed back in 2015 which led to the double bottom low. A stock does one of three things. First, it’s either building out a consolidation pattern, a reversal pattern or is in an impulse move. The double bottom in 2016 reversed the downtrend up to that point. The H&S top in 2016 reversed that impulse leg up. What we don’t have yet is a reversal pattern in place to reverse this current leg down in this ratio.

Below is a long term weekly look at the HUI:SPX ratio which puts the H&S top we just looked at on the chart above in perspective. This long term chart also shows you which index would have been a better place to have invested over the last five years or so. When this ratio is falling the HUI is under preforming the SPX.

This next ratio chart we looked at is a very long term chart which compares the INDU to Gold going back almost 40 years. As you can see the place to have been invested was in the INDU from 1980 to 2000. Then for the next 11 years or so the place to have been invested was in gold. Since the low in 2011 the place to have been invested was the INDU. One doesn’t have to be a rocket scientist to understand what this chart is strongly suggesting. What I’m looking for is to see the price action making a new high just above the previous one.

Below is a 10 year weekly chart for the INDU:Gold ratio which is showing two massive H&S patterns. The INDU:Gold ratio chart on top is showing a potential very large H&S bottom, meaning the INDU will outperform gold. The lower chart shows a potential very large H&S top on gold which will lead to a protracted bear market decline. Again, note the smaller H&S top on the Gold chart we’ve been following since shortly after the US elections in November. The bulls will have to rally gold above that neckline to negate this potentially very bearish setup.

This next chart is a ratio combo chart which compares the HUI to gold on top with gold on the bottom. I won’t go into detail on the ratio chart, as we’ve been following this chart for many years which shows just how badly the HUI has under preformed gold. Looking at the gold chart on the bottom, notice the H&S top again that has formed just below the top rail of the downtrend channel, and the top rail of the potential blue expanding falling wedge. It’s up to the bulls to negate this potential bearish setup on gold.

This next ratio combo chart I compare the HUI:Silver on top and silver on the bottom. Just like the HUI:Gold ratio chart the HUI has under performed silver in a very big way going all the way back to top in the ratio in 2003. In order for silver to start going to the upside it will need to take out the brown shades support and resistance zone which has capped silver’s rally since 2014. If silver can trade above the S&R zone that would be a very bullish development.

Below is another chart we looked at last fall which compares the HUI to the REMX, rare earth index. This ratio built out a double H&S top which is showing how much weaker the HUI vs the REMX is. The ratio found initial support at the late December 2016 low and had a counter trend rally building out the blue bearish rising wedge.

This next chart is for the bulls. So far the bottom rail of the bull market uptrend channel, that began in 2000 still remains intact. There is a possible inverse H&S bottom trying to build out. The head is the December 2015 low and the possible right shoulder is the December 2016 low. Right now the price action is testing the 10 month ema which has done a good job of showing support and resistance going back to the 2000 low. The top rail of the expanding downtrend comes in at 1305. If gold can breakout above 1305 then the potential neckline will come into play next. If gold can take out the neckline to the upside then the bull market is alive and well with a very large H&S base to ensure a big move up.

These last few charts will get me very bullish on the PM complex if they can breakout above the top rail of their bear market downtrend channel that began in 2011. Until that happens I have to remain cautious regardless of all the reasons the PM complex has to go higher.

GDM weekly bear market downtrend channel.

HUI weekly bear market downtrend channel.

GDX weekly bear market downtrend channel.

GDXJ weekly bear market downtrend channel. The GDXJ will be the one to watch as it’s the closest to the top rail.

SLV weekly bear market downtrend channel.

This last chart for tonight shows the weekly bear market downtrend channel for gold. There is nothing I would like more than to be able to trade the PM stocks again especially the juniors. If I’m wrong about the direction of the PM complex then I will have to pay up to get involved again. On the other hand if I’m right that the PM complex is still in a bear market then I will be able to buy the PM stocks much cheaper. What I do know is that the stock markets are in a bull market as they’re making new all time highs unlike the PM complex which is way below their all time highs. Maybe this is the bottom, and if it is, there will still be plenty of time to catch the bull market train before it gets too far down the tracks. All the best…Rambus

In this Weekend Report I would like to show you a chart pattern that seems to be showing up in a lot of different area’s of the markets, in particular the commodities complex. We looked at some of them in the last Weekend Report which were maturing, but in some cases hadn’t broken down yet. The chart pattern I’m referring to is the bearish rising wedge.

Some of the bearish rising wedges have a common theme which is the late 2015 low, when commodities and the PM complex finally bottomed out after that massive impulse move down. At a minimum the price objective for a rising or falling wedge is the first reversal point in which the wedge began to build out. Prices can go much lower, but the first reversal point is a good first price objective.

Lets start with some commodities indexes to see what last weeks price action did to this one plus year consolidation pattern. The CRB index has been around longer than most and gives us a good general feel on how commodities are doing in general. Last Tuesday the price action broke below the bottom rail of its bearish rising wedge and continued to fall for the rest of the week. The big clue that the CRB index was in trouble was when the small H&S top at reversal point #4 gave way. You can see there was a quick bactest to the underside of the neckline at 191.50 which led to the test of the bottom rail of the big bearish rising wedge. The price action bounced off of the bottom rail for three days before breaking below that very important rail on Tuesday of last week. It’s still possible we could see a backtest to the bottom rail at the 189 area before prices break lower.

Below is a long term daily chart for the CRB index which shows how the bearish rising wedge fits into the big picture. That massive impulse leg down that began in 2014 took almost 2 years to complete and produced a parabolic downtrend. Since the minimum price objective is down to the first reversal point at the 2016 low it’s possible we could see a double bottom build out at the 150 area as one scenario.

This last chart for the CRB index is the 75 year quarterly chart that I built in 2015 which is still relevant. After breaking below the upper brown shaded S&R zone the price action has rallied back up to the top of the brown shaded S&R zone, but has failed to go any higher and is on the verge of breaking back below again. Note the double bottom that formed in 2000 which led to a massive leg higher. This is one chart I’ll be watching very closely.

Next is the DBC commodities index which is probably the most actively traded of all the different commodities indexes. As you can see it is setup just like the CRB index. Note the blue triangle that formed in the middle which at the time looked like it could be a consolidation pattern to the upside, which even had a breakout gap. After the price action failed to move much higher that was a clue that the blue triangle might not be what it looked like. Again, the big clue that it might be failing was at the 4th reversal point in the bearish rising wedge. As you can see last week the DBC broke below the bottom rail of the rising wedge and the top rail of the blue triangle, which should have acted as support.

This weekly chart for the DBC shows the original H&S bottom which looked like it would work as a reversal pattern reversing the massive impulse leg down. The symmetry was very good originally as shown by the neckline symmetry line, which showed the low for the left and right shoulders. Again, after breaking out above the neckline prices failed to move much higher, but nothing was actually broken yet. As you can see last weeks bar broke below the neckline and the bottom rail of the bearish rising wedge. I can now say we have a bearish rising wedge because the price action has broken below the bottom rail and not above the top rail.

Next lets look at the energy sector which is showing a similar setup to the commodities indexes above. Last weekend we looked at the $WTIC oil index, which was testing the neckline of its small H&S top at reversal point number 4 in its bearish rising wedge. Unlike the commodities indexes we looked at above, WTIC landed on the bottom rail of its rising wedge on Friday and has not clearly broken below it yet. There is still the possibility that we could see a backtest to the neckline before prices break lower at the 52.75 area, but no guarantee.

This next chart shows the massive H&S top which we followed for several years before it finally broke down. As I’ve mentioned in the past, recognizing big patterns like this can be a double edged sword. You can see the big pattern building out, but you don’t know when the actual breakout is going to occur. Patience is required to wait for the actual breakout. The thin red line in the blue rising wedge at the bottom of the chart shows how the massive H&S top on the long term look could very well be a fractal on the short term daily chart, at the 4th reversal point in the rising wedge. Both H&S tops produced unbalanced patterns with more right shoulders forming than left shoulders.

Lets take a look at natural gas as it actually broke below the bottom rail of its bearish rising wedge two weeks ago, ahead of the commodities indexes and oil. The breakout was accompanied by a very large breakout gap on heavy volume, which is what one likes to see when an important trendline gives way. Last Friday the price action backtested the neckline at the 7.35 area which is normal. Now we need to see the bottom rail hold resistance going forward.

This weekly chart shows the big breakout gap and the backtest last Friday. Note how the 30 week ema does a good job of defining the trend, but lets you know when you’re in a consolidation phase when the price action trades above it or below it. You can see how well the breakout and backtesting process worked on the two patterns above the black bearish rising wedge.

Lets look at one last stock for the energy sector which is the XLE. Like all the bearish rising wedges we looked at above this one to began to build out in early 2016. I had high hopes for this index and even went long at one point, when the price action broke out above the top rail of the 10 point bullish rising flag late last year. Ten reversal points in a pattern doesn’t happen all that often, but when they do it usually leads to a good move. Again, like all the patterns we looked at above the XLE produced a breakout which failed to take prices much higher before turning down. The last time we looked at this chart the XLE was in backtest mode to the bottom rail of the black bearish rising wedge, the top rail of the 10 point flag, and the top rail of the downtrend channel. We can also add the 20 and 50 day ema’s for good measure.

Next I would like to show you a couple of bond charts which also shows a bearish rising wedge in play, but on a longer term time frame. Below is a 15 year monthly chart for the TLT which broke below the bottom rail of its bearish rising wedge 4 1/2 months ago. As this rising wedge formed in the uptrend it needed 5 reversal points to become a reversal pattern, unlike a consolidation pattern which needs an even number of reversal points as shown by the two blue lower patterns.

This next chart is a 45 year quarterly chart for the $USB, 30 year bond chart, which shows a multi year blue bearish rising wedge which is the reversal pattern that is reversing the 35 year bull market uptrend channel. I believe the price action above the top rail of the 35 year uptrend channel was a bull trap sucking in the very last of the bond investors before moving lower.

The bearish rising wedge on the weekly chart.

Now I would like to show you some bearish rising wedges in the precious metals sector starting with gold. I know most of you don’t want to believe that gold could still be in a bear market and that’s OK. For me personally this daily chart for gold shows the black bearish rising wedge that started to build out in late 2015, which corresponds to many of the rising wedges we looked at above, and shows its leading the way lower. This bearish rising wedge broke below the bottom rail back in October of last year much earlier than the rest of the rising wedges we looked at. Also note the smaller blue bearish rising wedge which broke below the bottom rail a week or so ago and is now trading back below all the important daily moving averages.

Below is a ratio chart which compares gold to the CRB index that shows how much weaker gold is to the CRB index. This ratio built out a 5 point triangle reversal pattern that reversed the rally out of the 2014 low. Last week it looks like the backtest to the underside of the bottom rail of the black triangle reversal pattern may have completed. When this ratio is falling, gold is under performing the CRB index.

Below is a daily chart for SLV which shows a bearish rising wedge that broke below the bottom rail 8 days ago and began moving lower after a quick backtest to the bottom rail.

Below is a weekly chart for SLV which doesn’t show a bearish rising wedge, but it does show the backtest to the neckline which occurred 2 weeks ago about the same time as the bearish rising wedge was breaking down. Two bearish patterns back to back.

This next long term weekly chart for SLV doesn’t show a bearish rising wedge, but the bear market downtrend channel and the 6 point diamond consolidation pattern that is building out. The diamond won’t be complete until the bottom rail is broken to the downside.

The HUI has broken out of a much smaller bearish rising wedge back in early February.

GDX bearish rising wedge.

GDXJ is finding some initial support on the center dashed mid line.

The precious metals stocks have taken it on the chin since the high on February 8th and need to start building out some type of consolidation pattern to relieve the oversold condition. If the bulls are in charge they need to build out a reversal pattern reversing the decline out of the February high. If the bears are in charge we should see a consolidation pattern of some kind form. As it stands right now the bulls are on the ropes and need to step up to the plate and do what they do in a bull market, make higher highs and higher lows. All the best…Rambus

One of the biggest questions investors have is what type of environment are stocks and the economy in, deflation or inflation? Knowing the answer to that question can give you a heads up on what different sectors to invest in and what sectors to stay away from. Tonight I would like to update some of the different commodities indexes to see if they can give us any clues on which way the deflationary or inflationary pendulum is swinging.  Commodities are often an under analysed asset class as compared to Stocks and Bonds. However they are the nuts and bolts , the real stuff  supporting human existence.

Lets start with one of the oldest commodities indexes around the $CRB index. After the huge impulse move down that began in the middle of 2014, the CRB index finally bottomed in early 2016, putting in a small double bottom which was going to be part of a bigger inverse H&S bottom. After breaking out above NL1 the CRB index then rallied higher stalling out below the 2016 high and began to decline once more. That decline found support at the neckline symmetry line which was a good place to look for a low for the right shoulder of a much bigger double H&S bottom. After trading below NL2 for six months the price action finally broke above it with just a small rally.

From a Chartology perspective nothing is broken yet on the double H&S bottom, but the price action has been very laborious since the December low of last year. Again, nothing is broken, but I see a yellow flag waving that is signaling caution in regards to the double H&S bottom, which we’ll look at in more detail on the next chart to follow this one.

Whenever a breakout becomes very laborious it can be a sign of a failing pattern, not always, but sometimes, so it’s important to pay close attention. This second chart shows the price action from the 2016 low with a possible ascending triangle building out. Note the price action at reversal point #4 in which the CRB index went nowhere since December. Last week the price action broke below the black dashed trendline and found support on the bottom rail of the black triangle last Friday and got a bounce. Now we have a support line at 188.79 with a resistance line just above at 191.50 which is the the black dashed S&R line or NL of a small H&S top. The price is converging into a very tight range which will show us which way the CRB index wants to go depending on  which direction the breakout occurs.

This next daily chart for the CRB index goes back almost 5 years and shows the parabolic downtrend we followed during the last deflationary decline that began in the middle of 2014. Taking a step back and looking at the bigger picture the 2016 triangle looks more convincing than the H&S bottom we looked at previously. If the triangle breaks out  topside it will be a reversal pattern because it has 5 reversal points. On the other hand if the blue triangle breaks below the bottom rail it will have 4 reversal points and be a consolidation pattern to the downside. If that were to occur the price objective would be down to the 2016 low at a minimum.

Below is a 75 year quarterly chart we were watching very closely during the last impulse move down, because it broke below the brown shaded support and resistance zone going all the way back to the early 1970’s. When the price action was trading below the brown shaded S&R zone I speculated that we could see some reverse symmetry to the downside, as the rally back in the early 1970’s was so vertical. Here we are a year or so later and the CRB index has rallied right up to the top of the brown shaded S&R zone at the 200 area. What had been support since the 1970’s is now turning into resistance at the 200 area? Again, another important area to keep a close eye on.

Below is a 10 year chart for the $GNX, another commodities index, which shows how volatile the price action was between 2007 and 2009. After a strong counter trend rally that lasted 2 years from 2009 to 2011, the price action built out the blue triangle reversal pattern which was responsible for the decline into the 2016 low.

This 15 year monthly chart shows the 2 patterns that are building out at the 2016 low which is the possible inverse H&S bottom or the bearish rising wedge. At some point we’ll get our answer, but patience is sometimes required.

This next chart is a 20 year look at the $GYX which is an industrial metals index that  has been backtesting the neckline from the previous H&S top. Another critical area to keep a close eye on.

Of all the different commodities indexes out there the DBC is probably the most actively traded one. Here too you can see the possible bearish rising wedge building out. The blue triangle failed to deliver the impulse leg up that should have taken the price action much higher.

Like the other commodities indexes we looked at, is the DBC building out an inverse H&S bottom or the bearish rising wedge? Each pattern will have a profound effect on which way the price action will go, the inverse H&S bottom up and the rising wedge down.

There is one commodity that has broken out below the bottom rail of a bearish rising wedge, which is the $NATGAS index. About 3 weeks ago the price action gapped below the bottom rail of the rising wedge with a quick backtest 2 days later. I can’t rule out a backtest to the bottom rail at some point. Note the complex bottom that formed at the 2016 low at the end of that massive impulse leg down.

The weekly chart for NATGAS shows the big H&S top which led to the big impulse leg down which had a price objective down to the 1.86 area. The big question we have to ask, is this just a bear market rally out of the 2016 low?

Below is a 30 year quarterly chart for NATGAS which shows the price action testing the top of the brown shaded S&R zone during the big decline that ended at the 2016 low. As you can see it now has been tested two times since 2012. The black arrows shows how it could reverse symmetry all the way down to its all time low around the 104 area. It’s not going to happen over night because this a a long term quarterly chart, but the possibility exists.

Now lets look at a daily chart for the $WTIC, oil index, which also shows a potential bearish rising wedge building out. Just like the CRB index the price action has been chopping around in a very tight trading range just below reversal point #4. Last Friday the price action tested the bottom rail of the small trading range for the 5th time telling us that rail is hot. These types of patterns can wear your patience out waiting for a breakout. If the WTIC breaks below the bottom rail of the rising wedge the price objective would be down to the previous February 2016 low.

This next chart is a 10 year daily look at WTIC which shows the massive H&S top which led to the big oil decline into the 2016 low. That massive H&S top went on and on and on before it finally gave way. The pattern I showed you on the daily chart above at reversal point #4 could be considered a fractal to the massive H&S top on the chart below. The red trendline inside the rising wedge would be the fractal.  How long will it take for the smaller daily H&S top to complete is unknown, but it will probably take longer than we think.

This last chart for tonight is a 15 year monthly chart for the US dollar. What we know for a fact is that the possible bearish scenarios on all the charts we looked at above won’t take place if the US dollar declines. The commodities will only decline if the US dollar rallies, so the bulk of the proof lies with the US dollar. How the US dollar goes, so will the commodities complex. All the best…Rambus

I try to post this combo 10 chart for the PM complex at least every 3 weeks or so as it gives you a good sense of which areas within the precious metals sector are the strongest or weakest. Since the rally out of the December 2016 low the juniors have been leading the way higher including the $CDNX which is a Canadian small cap index that has many precious metals stocks.

Looking at the sidebar you can see this was the first down week for the $CDNX since the December 2016 low which is pretty amazing. What else is amazing is how the precious metals and the miners have diverged in a big way over the last two weeks. Again looking at the sidebar, which gives you a close up look at the last four months of trading, note the price action in GLD and SLV which are still rallying hard to the upside. Now look at the rest of the precious metals stock indexes which are showing a massive divergence taking place over the last two weeks as they are moving lower. Normally this isn’t a good sign for the overall health for the PM complex.

In this Weekend Report I’m going to take an in depth look at many of the precious metals stocks looking for clues as to the health of this sector. Many of these stocks make up the big cap PM indexes like the HUI, GDX, XAU and GDX. How these stocks trade so do these indexes. Have a great weekend and all the best…Rambus