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

Before we look at some of the 2009 bull market uptrend channels there are a couple of more big consolidation patterns I would like to show you on some of the stock market indexes. The $DAX, German stock market, broke out of its 13 year triangle consolidation pattern back in 2012. Late last year it broke out of the blue bull flag with a nice clean backtest to the top rail. The big triangle consolidation pattern also had a smaller triangle as part of its internal structure.

Next up is the $FTSE, London Financial Times index, which is in the process of breaking out from a 15 year rectangle consolidation pattern. Just like the $DAX the FTSE also built out a triangle consolidation as part of the much bigger rectangle. The key to the breakout of this massive rectangle is the H&S bottom that formed just below the breakout area. The right shoulder was formed during the BREXIT vote. The shakeout before the breakout.

The $BVSP, Brazilian stock market, is still working on a 9 year triangle consolidation pattern. We last looked at this chart in December of last year when it was backtesting the top rail of a multi year downtrend channel.

Lets look at a couple of US stock markets that we’ve been following for many years starting with the $SPX. This index was actually one of the first of the major stock markets to breakout of its massive consolidation patterns. The breakout in 2013 was accompanied by the breakout from the blue bullish rising wedge. There was a very short one month backtest to the top rail of the flat top expanding triangle before the impulse leg up began in earnest. That impulse leg ended in 2015 where the next consolidation pattern was needed to consolidate those gains, forming the blue bullish expanding falling wedge. Again notice the clean breakout and backtest to the top rail which has led to our current impulse move higher, which is making new all time highs.

I commented on this exact same chart as the one above back in May of 2009, two months after the bottom was put in at the fourth reversal point. I was speculating on how this big trading range may play out over the years, as described in the notes. There was no way to know how things would play out back in 2009, but a big consolidation pattern was one of the possibilities.

Below is the quarterly chart for the SPX which goes back 75 years and puts the bullish  flat top expanding triangle in perspective. There were only 2 times since 1942 that the SPX closed below its 84 quarterly simple moving average. The first time was at reversal point #2 back in 1974, which was the low for the bullish rising wedge. The second time was during the 2009 crash at reversal point #4 in the bullish flat top expanding triangle. At the time the 1987 crash felt like the end of the world and we were going to enter into another 1929 scenario. As it turned out the 1987 crash was just the first reversal point in the bullish rising wedge, which led to a very powerful rally which took the SPX up to its bull market high in 2000.

Recognizing a big consolidation pattern before the breakout actually takes place to confirm the pattern can be a double edged sword. In big consolidation patterns like the INDU has, The Jaws of Life, can be very trying. The breakout took place back in mid 2013, but unlike the backtest that only took one month on the SPX chart we looked at earlier, the INDU took its sweet ole time with multiple backtests that took several years to complete. The backtesting process built out the blue triangle consolidation pattern and when the price action broke out above the top rail it confirmed for me the Jaws of Life had finally completed all the work, and the next major bull market was underway.

The 75 year quarterly chart for the INDU puts everything in perspective. Note the breakout and backtesting process out of the 1970’s H&S consolidation pattern which only took about 2 years, vs our current breakout and backtesting of the top rail of the expanding triangle, which took about three years before the impulse move is finally gaining some legs. Big patterns equals big moves.

Next lets look at several of the 2009 bull market uptrend channels which shows you what a bull market looks like. Most of the US stock markets have a very nice bull market uptrend channel, but for now I would like to focus in on a couple of the stronger ones that are leading the way higher.

The XLF is a financial sector etf which had built out a very tight uptrend channel out of its 2009 crash low. After breaking out and backtesting the top rail of the blue triangle consolidation pattern, the XLF rallied back up to the top rail of the uptrend channel where it should have stopped to consolidate that move. When you see a nice channel like this and the price action breaks out above the top rail it’s usually a good sign that the lower channel is going to double in size as shown by the black rectangles. Just like any resistance line, you will see a breakout and a possible backtest before prices move higher in this case.The breakout occurred in December of last year and the backtesting process has been ongoing to the center dashed trendline, which was the top rail of the original uptrend channel. Besides the tech stocks the banking stocks are one of the strongest sectors in the markets right now.

The $COMPQ has formed a nice parallel uptrend channel and is testing the top rail after breaking out from the blue bull flag. This tech index has been very strong recently and I’ll be watching the top rail very carefully for a breakout and a possible doubling of the lower channel.

The $NYA is a broad measure of how stocks in general are doing. As you can see it’s breaking out to new all time highs, but is still way below the top rail of its 2009 uptrend channel.

This 35 year monthly chart for the $OEX 100 shows its 13 year bullish expanding falling wedge consolidation pattern.

$OEX 100,  2009 bull market uptrend channel.

IYR, Real Estate etf.

$XVG is another good proxy for how the stock markets are doing in general.

AWCI, all world stock market etf.

VEU, all world stock markets minus the US stock market.

The last chart for tonight is the VWO, emerging markets etf, which is building out a 6 year trading range which still hasn’t broken out. If the price action can breakout above the top rail then there is a good chance that the big trading range will be a halfway pattern to the upside.

In the Wednesday Report we’ll look at some individual stocks that have produced some big multi year trading ranges that have broken out and are moving higher. Many of the stocks will be from the tech sector which are household names that were born back in the 1980’s and 1990’s during the birth of the information age. All the best…Rambus

Tonight I would like to update the US dollar as its been testing critical support since breaking out from the nearly 2 year horizontal trading range in early November of last year. The daily line chart shows there was a nice clean backtest about a month later to the top rail which looked like breaking out and backtesting process was complete. After a short rally and making a higher high the US dollar declined once more to the top rail causing a lot of uncertainty for many traders. After a slight breach of the top rail the US dollar is now trading back above that very important trendline. So far at this point there is nothing to conclude the bull market that started in 2011 is over at least accordingly to the daily line chart.

This next daily chart for the US dollar is just as important as the horizontal trading range we looked at on the chart above. I don’t believe anyone else has recognized the double H&S bottom that has formed on the right side of the horizontal trading range. As you can see there were two backtests to the neckline which came in at the same area about 2 months apart which have held support. The six week correction from the recent high has given most of the indicators time to reset as shown by the red circles. The neckline at 98.85 still remains critical support.

Next lets look at some longer term weekly charts and the bull market that began in 2011. This first weekly chart shows the US dollar in linear scale and the 2 consolidation patterns we looked at on the charts above. The bottom rail of the major uptrend channel has done an excellent job of holding support as shown by the many touches which tells us that rail is very hot and to be respected. The bottom rail of the major uptrend channel also helped in the development of the double H&S bottom as the head and both the bottoms for both right shoulders formed on that trendline. One last note on this weekly chart which shows the 30 week ema held support during the US election spike and then again 2 weeks ago when the price action was backtesting the neckline.

Below is another weekly look at the bull market uptrend channel that is slightly converging in log scale. Big bases lead to big moves and with the 5 1/2 year, 8 point diamond this bull market in the US dollar should have a long ways to run yet. This log scale chart also has a slightly higher price objective than the linear scale chart for this next impulse move up which should be to the 117 to the 120 area as shown by the blue arrows. As I’ve said previously, if the US dollar breaks below the bottom rail of the major uptrend channel I will wave the white flag and surrender to the bears, but until that happens I have to remain a bull regardless of all the reasons the US dollar needs to collapse.

This next weekly chart is a combo chart which has gold on top and the US dollar on the bottom. This chart shows the major positive divergence for the US dollar to gold made back in 2011 as shown by the purple arrows. In 2008 gold was topping out just before the big crash while the US dollar was bottoming. From the 2008 crash low gold went on to make its bull market top in September of 2011. As gold went nearly vertical into its all time high you would have thought that the US dollar was crashing and burning. As you can see the US dollar actually made a higher low vs its 2008 low which is where the positive divergence took place and the beginning of the US dollars bull market.

Since the bull market top in 2011 gold has been declining in a bear market with the top rail holding resistance. That top rail comes in currently around the 1305 area which will be the defining line between the bull and bear market for gold. If gold can trade back above that 2011 bear market downtrend line that will be a very big positive that the bull market is back in earnest. On the other hand if gold fails to take out that very important top rail of the bear downtrend line the bear market lives on.

Below is another weekly combo chart which has the US dollar on top and gold on the bottom. This combo chart shows the major 2011 uptrend channel for the US dollar and the major 2011 downtrend channel for gold. Over the last year or so you can see the inverse correlation between the US dollar and gold as shown by the H&S bottom on the US dollar and the H&S top on gold, brown rectangle. The neckline and the top rail of the 2011 bear market downtrend channel intersect at the 1305 area which again is going to be the inflection point between the bull and bear market IMHO.

The weekly chart for the UUP US dollar fund, shows the nearly 2 year correction as a bullish falling flag. A complete backtest to the top rail was almost achieved two weeks ago at 25.50.

The longer term look at the UUP shows a previous bull flag that formed at the end of the major downtrend channel and gave the UUP the energy it needed to finally breakout and begin its new bull market.

This last chart for tonight is another proxy for the US dollar which is the USDU index which has a more equal weighting of currencies. This index hasn’t been around very long but it to is showing an uptrend channel with the 30 week ema offering support two weeks ago.

The last time the US dollar embarked on its impulse move up starting in the middle of 2014 and ran to March of 2015 currencies and commodities took a big hit. This is why it’s so important to get the major direction of the US dollar right as so much depends on which way it moves especially in the intermediate term.  All the best…Rambus

Today the TNA is finally breaking out from is 10 week consolidation pattern.

MIDU is also breaking out of its 10 week consolidation pattern today.

SPX is breaking out of a 10 week bullish rising wedge today.

INDU is breaking out of a 10 week expanding triangle today.

The backtest to the neckline comes in around the 16.50 area. The 200 day ma so far is holding resistance.

Just a quick update on GLD which shows the possible backtest to the top rail of the blue expanding triangle at the 116.50 area. I wouldn’t like to see the price action breaking below the top rail.

The US dollar has now closed lower for 6 weeks in a row which is testing the patience of the bulls. This week the price action cracked the top rail of the horizontal trading range which is a negative, but not confirmation yet the trend has reversed down. There are several more layers of support that will need to be hit before I throw up the white flag and surrender to the bears.

This first chart is just a simple daily line chart which shows the US dollar closed just below the top rail today at 99.84.

Below is the daily bar chart which shows the price action closing below the top rail of the horizontal trading range matching the low set back in December.

There is another pattern we’ve been following which is the double inverse H&S bottom that took about one year to build out. A complete backtest to neckline #2 would come in about a point lower than this weeks low at 98.85.

Below is the 35 year monthly chart which shows the two massive bases labeled big base #1 and big base #2 which are fractals of each other. Big base #1 launched the US dollar up to it bull market high in 2000 at the 120 area. The US dollar also formed a beautiful bullish rising wedge as a halfway pattern.

If big base #2 is just about equal in time and price to big base #1 then there should be enough energy to propel the US dollar at least up to the 120 area which would be the measured move from the blue rectangle trading range. That would also equal the high of the 2000 top where the US dollar built out a H&S top to reverse that bull market. At this point in time I don’t see a topping pattern building out yet. It’s possible that this trading range could morph in to some type of top but it should show itself at some point.

This next weekly chart for the US dollar puts all the pieces of the puzzle together. This chart shows the blue trading range with the double H&S bottom with neckline #2 almost being backtested this week. The major uptrend channel began in 2011 at the same time gold topped out. If the bottom rail of the major uptrend channel gives way that’s where I wave the white flag and surrender to the bears.

This next chart is a combo chart which has the US dollar on top and gold on the bottom. Looking to the right hand side of the chart you can see a long brown rectangle. That long brown rectangle shows you the inverse correlation between the US dollar and gold at least over the last year or so. If the US dollar is building out a H&S bottom then there is a good chance the gold is building out a H&S top which the brown rectangle shows.

Instead of having a horizontal trading range the UUP has built out a bull flag as its consolidation pattern. A backtest to the top rail would come in around the 25.50 area which was almost hit this week with neckline #2 just below.

After putting in its bear market low in 2011 the UUP ( US Dollar ETF) has been in a strong bull market creating its first consolidation pattern just below the top rail of the downtrend channel. After completing that first impulse leg up, that started in the summer of 2014, the UUP went on a vertical move up to the first reversal point in the upper blue flag where it need to rest.

Sometimes backtests can be quick and clean while other times they can try your patience and makes you question whether you are right or wrong. As long as support continues to hold I have to remain a bull, but if I see support being broken in a serious way I will have no problem reversing my stance from bullish to bearish on the US dollar.

Have a great weekend and enjoy the Super Bowl. All the best…Rambus

In this Weekend Report I’m going to show you some updated charts on the US dollar which has been in a bull market since the low in 2011. It’s hard for a lot of investors to admit, but until the charts change the bull market continues. A bull market is characterized by a series of consolidation patterns forming one top of the next, until the last pattern is a reversal pattern which reverses the bull trend. The old expression, the trend is your friend, also applies to the US dollar as well. Until the US dollar negates the series of higher highs and higher lows on an intermediate term basis, we have to assume the bull market is in tact.

Lets start by looking at a daily line chart for the US dollar which shows the horizontal trading range beginning back in March of 2015. The breakout topside of the horizontal trading range took place a little over 2 months ago in November of last year. After the initial breakout there was the initial backtest which could have been the beginning of the next impulse move up, but the US dollar stalled out a month later and is currently backtesting the top rail around the 100 area again.

This is getting a lot of investors bearish on the US dollar, but nothing is broken yet. So far the top rail of the rectangle consolidation pattern is still holding support and until it’s broken this is still just a backtest before the next impulse move up begins in earnest. It’s all about playing the odds.

Below is a daily bar chart for the US dollar which shows the price action backtesting the top rail of the sideways trading range. Last Friday the US dollar closed right on the top rail. A worst case bullish scenario for the US dollar would be if the price action declined down to the center dashed mid line, that can happen in sideways trading ranges before the move you were looking for finally takes place. A close below the center dashed mid line would negate the bullish breakout that is currently underway.

There is another consolidation pattern that has formed during the last year of trading inside the horizontal trading range which is a double H&S bottom. Neckline  #1 was broken to the upside in October of last year with the backtest to the neckline being the US election spike. From that backtest the US dollar rallied strongly and broke out above neckline #2, which was also backtested from above with the 50 day ema giving support at the neckline. Neckline #2 support now comes in at the 98.85 area.

This next chart is a weekly look which puts our year and a half horizontal trading range in perspective. In a bull market there is an impulse leg up followed by a consolidation pattern that leads to the next impulse leg up, so on and so fourth, until the bull market exhausts itself and a reversal pattern builds out.

There are 3 important trendlines which should offer support. The first one is the top rail of the blue trading range which is now being tested. The second important trendline is neckline #2. If neckline #2 fails, then the last bit of support will come in at the bottom rail of the major uptrend channel.

This next chart is a weekly combo chart which has the US dollar on top and gold on the bottom. On the right hand side of this combo chart you can see the 2 H&S patterns that formed on both the US dollar on top, and gold on the bottom, that have formed inversely to each other complete with the US elections spikes. There is also a short term inverse correlation taking place at the December 2016 low on gold that corresponds with the high made on the US dollar, which has now fallen back to the top of the trading range. The bottom line is,, whatever direction the US dollar goes, gold will most likely go in the opposite direction until proven otherwise.

This next chart for the US dollar is a long term monthly look which shows a massive 10 year base which launched the US dollar’s bull market. From a Chartology perspective the bigger the base the bigger the bull market. I would expect that at a bare minimum we should see at least one more impulse leg up before the bull market exhausts itself, with the possibility of several more consolidation patterns forming before the bull market ends.

Below is another combo chart which has the US dollar on top and gold on the bottom. The most important aspect of this chart is shown by the two sets of red arrows. The red arrows on the left side of the chart shows where the US dollar bottomed out in 2008 and gold topped out just before the crash. The two red arrows in the center of the chart shows the positive divergence the US dollar had to gold in 2011. Note that massive rally gold had out of the 2008 crash low which led to the bull market peak at 1920 in 2011. While gold was going parabolic the US dollar should have been declining in a significant way taking out the 2008 low, but it didn’t. As you can see the US dollar actually made a higher low vs the 2008 low, creating the positive divergence for the US dollar to gold. That is the point where I mark the beginning of the US dollar’s bull market. Since that 2011 low the US dollar has been in a bull market while gold has been in a bear market.

Now lets look at a couple of charts for the XEU. If the US dollar is backtesting an important trendline then the odds are high that the euro is also backtesting an important trendline. Note the H&S top that formed within the sideways trading range that matches the inverse H&S bottom on the US dollar chart we looked at earlier.

This long term monthly chart for the XEU shows a massive H&S top in place. The impulse move down out of the blue bearish rising wedge is the same impulse move up in the US dollar, which started in 2014. After slicing through the brown shaded support and resistance zone the euro began to consolidate that big move down by building out the red triangle consolidation pattern just below the S&R zone. If the next impulse move down takes hold, there is a good chance that we will see a move similar to the one when the price action broke below the blue bearish rising wedge, right shoulder.

The weekly chart for the XEU shows a close up view of the 2014 impulse move down and the current blue triangle consolidation pattern building out. I have been looking for a backtest to the bottom rail to come in around the 107 area, which was hit this past week.

The last chart for the XEU shows why we need to pay attention to what this currency does as gold tends to trade in tandem. It’s not a perfect correlation but close enough.

The XJY, Japanese yen, is another important currency to follow if you want to know what the PM complex is up to. In 2011 the yen built out a H&S top about the same time gold topped out. Just like gold, the yen has also been in a bear market, forming a small base in 2015, which gave the yen its first counter trend rally. This counter trend rally took the price action back up to the top rail of the black 5 point triangle pattern which now became the apex. The apex of a triangle is where all the energy is located between the bulls and the bears. Normally they will hold support or resistance depending on the direction of the move. If the apex of a triangle fails to hold support or resistance then you have an end around move, which can be bullish if the move is up, or bearish if the move is down. This chart shows the apex holding resistance.

This next chart I overlaid GLD on top of the XJY which shows it has an even closer correlation than gold and the XEU. So how the yen moves, so will GLD.

This last chart for the yen I overlaid the HUI on top so you can see the correlation which is pretty strong. You can see there is some interesting price action on the right hand side of the chart as shown by the thin black dashed trendlines. If the yen bounces then the HUI should bounce too. If the yen puts in a double top then there is a good chance the HUI will breakdown below its dashed trendline. It looks like this week is going to be very interesting in regards to these two.

The UUP is a proxy for the US dollar which shows its trading range was a black bull flag. A backtest to the top rail would come in around the 25.50 area where the 34 week ema would also come into play.

The 10 year weekly chart for the UUP shows its entire history. Note the year and a half blue bullish falling flag that formed at the end of the major downtrend channel which gave the UUP the energy it needed to finally take out that top rail of the downtrend channel. After breaking out of that major downtrend channel the UUP has been consolidating in another blue flag which broke out late last year, and is deciding if it wants to do a complete backtest to the top rail and the 30 week ema.

This last chart for tonight is a weekly look at the USDU which has a more equal weighting for the US dollar. We’ve been following the breakout from the blue diamond for three months or longer which is still in play. The 30 week ema does a good job of showing you where support and resistance lies.

The bottom line is, how the US dollar trades will have a direct impact on currencies and the PM complex. They can move together for short periods of time, but in the long run they tend to move inversely to each other. The US dollar is doing a critical backtest that is going to give us some important clues by how it interacts with the top rail of its nearly 2 year trading range. If the US dollar fails to follow through to the upside then the PM complex will enjoy another very strong bull market. Right now the US dollar is at an inflection point in regards to the big picture, which will come to an end at some point. All the best…Rambus

Tonight I would like to update the Basic Materials sector as this area now looks like it’s ready to resume its bull market. Also with the stock markets breaking out today, especially the INDU, this adds another layer of confirmation that the breakout is the real deal. As we’ve discussed previously there are many big cap Dow stocks that make up the XLB, Basic Materials fund, and with the INDU making a new all time high today there will be some individual components making new all time highs as well.

Lets start by looking at a weekly chart for the XLB, Basic Materials fund, that is breaking out of a bullish rising flag this week. This bull flag has been building out since last spring and now the price action is trading into new all time highs. There was a conventional  bull flag that formed between 2015 and 2016 that sloped down. That down sloping black flag started to form after the 7 point bearish rising wedge completed.

This 20 year monthly line chart shows the entire history for the XLB. In 2015 this basic materials fund built out a double bottom which launched the recent impulse move up. That double bottom formed right on top of the multi year support and resistance line.There was a bigger double bottom that formed back in the early 2000’s which launched the bull market.

There is one last point I would like to make on this monthly line chart which compares the 2008 top to the current price action. As you can see the XLB is considerably higher than the 2008 top. If you compare this chart to the HUI, the HUI is still a long ways off from breaking out to a new all time high.

Now lets look at some big cap basic materials stocks that help make up the INDU. This first chart is a monthly look at DD, DuPont, which is trading at a new all time high but still hasn’t broken out above the top rail of it blue expanding triangle. When it does this stock will add a lot of fuel to the INDU’s bull market.

Below is a 20 year chart for DOW, Dow Chemical, which broke out topside of its blue expanding triangle consolidation pattern and is hitting new all time highs.

This next chart is a monthly look at IP, International Paper, which is also trading into new all time highs.

Lets look at some other basic materials stocks that have been showing some strength recently. Last fall I posted this chart for BHP, which was starting to breakout above the neckline of a strongly slanted inverse H&S bottom. This week the price action is trading above the bottom rail extension line taken from the bearish expanding falling wedge.

Another big mining company is RIO which is taking out some overhead resistance this month. Note the breakout from the nearly 9 year blue triangle consolidation pattern and the the old neckline from the unbalanced H&S top. The bulls are starting to take control.

The steel stocks have been doing very well over the last year or so and have been one of the stronger areas in the basic materials sector. Below is the SLX, steel etf, which built out an inverse H&S bottom. Note the two smaller blue consolidation patterns that make up the blue bullish rising wedge separated by the neckline which is usually a bullish setup.

In November of last year NUE, steel company, broke out of a massive triangle consolidation pattern and is currently in backtest mode.

SOIL is a fertilizer company that just broke out from a blue 5 point triangle reversal pattern.

POT is another fertilizer company that is also breaking out from a 5 point triangle reversal pattern.

After breaking out of an almost 1 year black triangle reversal pattern Copper has been chopping out a blue rectangle trading range. Many times during the formation of a rectangle consolidation pattern, after the 4th reversal point is in place, there can be one more small decline which will take the price action down only to the center mid dashed line before the breakout occurs. That just happened over the last week or so.

COPX is a Copper Miners etf which formed an inverse H&S bottom with the red bullish rising wedge as the backtest. It’s currently making a new 2 year high.

These next three stock aren’t in the Basic Materials sector, but are in the natural resource area. Below is a weekly chart for LIT, Lithium etf, which broke out of an inverse H&S bottom 3 weeks ago.

The weekly chart for REMX, Rare Earth etf, is breaking out from a complex H&S bottom this week.

The long term monthly chart for REMX shows its entire history which is comprised of the massive downtrend channel. It’s currently in breakout mode above the top rail.

This last chart for tonight is a weekly look at the URA, uranium etf, which broke out above its double bottom trendline 3 weeks ago on heavy volume.

All these charts tonight show that something of a bullish nature is happening in the basic materials/commodities sectors, that has been a long time coming. These charts also bode well for the INDU which has a lot of these basic materials stocks in its makeup. So as long as the XLB, basic materials index, is making new all time highs then the INDU shouldn’t be to far behind. All the best…Rambus