This first precious metals combo chart is one I try to show you at least twice a week so you can follow the price action as it’s unfolding in real time. Except for SLV the other indexes have now traded below their respective neckline for five weeks now.  If you look at the sidebar you can see which sectors are doing the best and which ones are weakest. As you can see GLD has been by far the weakest of the four while SLV has been the strongest. To negate these H&S tops we would need to see the price action close back above the necklines. The necklines are your lines in the sand, above is bullish and below is negative.

This next combo chart is also one we’ve been following very closely which shows the multi year trading ranges which were broken to the upside earlier this year. Those big top rails should reverse their role from what had been resistance to now support which they’ve done so far.

Now lets look at the thin black dashed horizontal lines which represents support and resistance. During the strong bear market move back in 2013 you can see how they reversed their role to what had been initial support to resistance once the price action broke below those S&R lines. Looking at the right hand side of the chart you can see the same thing taking place since the August highs.

Following the price action is just that, following what the charts are showing us and not trying to second guess what we may think we want to see,, which is a lot harder than it seems. Note how the HUI and GLD are now testing their top rails from above. As long as those top rails hold support then all is good for the PM complex. On the other hand if we see those top rails broken to the downside then the PM complex will be talking to us from a bearish perspective regardless of all the reasons why the PM complex can’t go down.

Tonight I would like to update the INDU we’ve been following which continues the upside move since the night of the US elections. Keep in mind some of these consolidation patterns began to form back in 2015 which had nothing to do with the US elections. It’s the billions upon billions of shares that were traded which produced this breakout move that is now being recognized for what it is. Even at this stage of the breakout move, there will be many doubters who will never recognize what is actually taking place. It can be very difficult to think outside of the box when we are bombarded everyday on how bad things are and how bad things are going to get. There has to be the proverbial wall of worry in order to have a bull market. Once the bull market becomes mature then the wall of worry comes down, and everyone is invited to invest in the markets, which will be at the blow off phase like in 2000.

I would like to start by looking at a daily chart for the INDU which I first showed you back in early November of this year, which was consolidating in an eight point bullish falling wedge. Just before that bullish falling wedge the INDU built out another small consolidation pattern which was a bullish expanding falling wedge. Note the breakout from the bullish expanding falling wedge which failed to rally very strongly before the INDU began to correct, and formed the eight point bullish falling wedge. Whenever you see a nice tight consolidation pattern fail to reach its price objective it tells you one of two things. First, the original pattern may be morphing into a bigger pattern. The other possible scenario is a second small well defined consolidation pattern that forms on top of the lower one, which can produce a rising wedge which is the case for the INDU.

The last time I posted this chart I suggested most would see this rising wedge as a bearish rising wedge, and the INDU would collapse into a bear market. Through the years I’ve shown you countless rising wedges that broke to the upside, which always suggest the move is very strong. A consolidation pattern that is slopping up in the same direction of the uptrend instead of against the trend, would be your typical bull flag.    Today the INDU finally broke out of the bullish rising wedge with a nice long bar. If we get a backtest to the top rail it would come in around the 19,250 area. One last note on this daily chart, which shows reversal points #2 and #4, on the bottom rail of the black bullish rising wedge, were the BREXIT and US Elections Shocker. Now ain’t that something !

I’m going to work backwards in time so you can see how this small bullish rising wedge fits into the big picture which is most important to understand from the intermediate to long term perspective. Below is a two year chart for the INDU which shows all the trading patterns which led to today’s breakout move.

This next chart for the INDU is a five year look which starts to paint the bigger picture. From the middle of 2015 to the middle of 2016 the INDU built out a nice big triangle consolidation pattern. The breakout and backtest to the top rail was the bullish expanding falling wedge we looked at on the first chart above, with the bullish falling wedge just above it. This is what an impulse move looks like starting at the January 2016 low.

This next chart is a long term weekly look which shows the H&S top that formed back in 2007 before the crash, and then the 2009 inverse H&S bottom which started the most hated bull market in history. Note how the current blue triangle consolidation pattern is starting to stick out like a sore thumb. The markets do one of three things. First, they are building out a reversal pattern, secondly a consolidation pattern, and thirdly they are in an impulse move between a reversal pattern or between consolidation patterns.

Below is a shorter term weekly chart which shows a simple trend following technique using just the 30 and 88 week moving averages. During the formation of our recent one year triangle consolidation pattern we did get a negative crossover, but that was negated when the 30 crossed back above the 88 week ma. Keep in mind I’m trying to trade the intermediate to the longer term horizon, which is where I feel most comfortable. Once the moving averages become properly aligned there is little to do but follow the price action. As you can see a buy signal was given way back in late 2009 and we didn’t get a sell signal until late 2015. There were several tricky areas when the price action traded below the moving averages for a short period of time but they never crossed to give a sell signal.

Here is a twenty year look at the monthly chart for the INDU which shows you the most hated bull markets in history. From a Chartology perspective it has to be one of the prettiest bull markets which is now rivaling the great bull market in gold from 2000 to 2011.

This next twenty year chart for the INDU is where I have for a long while  disagreed with just about everyone else. I’ve been showing this 13 year black expanding triangle, JAWS of LIFE, for several years now waiting patiently for all the work to be completed between the breaking out and backtesting phase. I can honestly say I finally feel vindicated after all these years watching this pattern which was being called the “Jaws of Death” develop and waiting for the INDU to make new all time highs above the blue triangle that formed as the backtest. Remember big patterns equals big moves.

This next chart for the INDU is a 75 year quarterly look which I don’t expect anyone in there right mind to believe except those that have their mind open. With that said the INDU is embarking on a multi year secular bull market that began in 2009. Note the beautiful H&S consolidation pattern that formed in the late 1960’s and 1970’s that finally broke out in 1982, with one last backtest to the neckline, which began the greatest bull market of all time. Now you can see how the Jaws of Life pattern fits into the very big picture. The 2009 crash low actually started our current secular bull market that will run for many years to come. It won’t come without any corrections, but the big trend is up after a nearly ten year consolidation pattern, Jaws of Life. Note how the top rail of the Jaws of Life has held support as the backtest and now the INDU is making new all time highs almost on a daily basis now.

This last chart for the INDU is a quarterly line chart which really brings things home, IMHO. As you can see there are four reversal points made within the Jaws of Life consolidation pattern. There was a nice clean breakout with an equally clean backtest to the top rail. I can guarantee you that you will not see the INDU presented in this fashion anywhere else on the planet. I have many more charts, in different areas of the markets that I’ll post in the Weekend Report that will give credence that the Jaws of Life is in fact the real deal, and the secular bull market that started in 2009 has a long time to run albeit, with some corrections along the way.

I know how hard it is for most folks to even imagine that the stock markets are in a  secular bull market, but just think back to the bottom in 2009. Could you have imagined the INDU would be pushing 20,000 in 2016? If the markets have taught me one thing through the years, that would be to keep an open mind above everything else. All the best…Rambus

I’ve been showing you this long term weekly chart for the HUI which shows the all important 2013 support and resistance line. As you can see it held resistance as shown by the black arrows pointing down. Then back in the spring the HUI broke out above the 2013 S&R line with a nice clean backtest which was a very bullish setup. Once broken to the upside the S&R line should reverse its role to support which it did until four weeks ago when the neckline gave way after the US elections.

Note the big long bar that formed during the breakout from the H&S top. That breakout move not only took out the neckline it also took out the 65 week ema, the 2013 support and resistance line and the top rail of the five point expanding triangle reversal pattern that reversed the bear market. Note how the top rail extension line from the expanding triangle and the 2013 S&R line have now been working as resistance over the last four weeks. Anything is possible in the markets, but when you see critical support being taken out like this you don’t have to be a hero and try to catch a falling knife so you can claim you called the bottom. JMHO.

Wednesdays trading in the GLD produced an interesting gap. I added the brown shaded support and resistance zone back in the summer months after it became apparent that GLD had broken out to the topside. The brown shaded S&R zone was tested several times from above and held just as one would have expected. After GLD topped out the price action began to decline into the fall where GLD then built out a bearish expanding rising wedge as a right shoulder that matched the left shoulders bullish expanding falling wedge.

Note the last bar that formed inside the bearish expanding rising wedge right shoulder which was the election spike. The next day the price action broke out below the bottom rail of the expanding rising wedge which was a negative development. The very next day GLD broke below the neckline which was another negative development. The very next day GLD traded down to the top of the brown shaded S&S zone and could only muster a very small rally that quickly petered out. Wednesday of this week GLD gapped below the brown shaded S&R zone with a little follow through today. It looks like Wednesday’s gap to the downside may be a continuation gap which suggests there is more downside to follow. The brown shaded S&R zone should now be a very good line in the sand, below is bearish and above is bullish.

The weekly chart for GLD for perspective.

The moment of truth has arrived for the $GDM. Is the small possible double bottom at the 62% retrace at the 560 area going to hold support and start the next reversal rally backup toward the 875 area, or is the potential H&S top reversing the big move up out of the January low? The 50 day ma has just recently crossed below the 200 day ma. For those that believe the double bottom and the 62% retrace is going to hold, this is a very low risk setup to go long putting your sell/stop, to your own risk tolerance, below the 62% retrace.

We started to follow this energy sector etf very closely at the fifth reversal point in its rising flag formation. Today it’s completing the tenth reversal point putting this rising flag back into the consolidation pattern to the upside category. There is still no breakout but it would be very bullish the energy sector if it was to breakout to the upside.

The weekly look:

The weekly chart for the OIH shows a sideways trading range that is attempting to breakout today.

For the last two weeks, since the US elections, we’ve been discussing the possibility of  strong inflection points building out on many different areas of the markets. These are areas where the markets can turn on a dime leaving those folks looking one way while the markets go the opposite way. Important inflection points are more of a price thing than a time thing. An inflection point can last days or weeks before they finally resolve themselves.

Lets start by looking at the US dollar, as it plays such a key role in so many markets. Below is a three year daily chart which shows its major impulse leg up out of the mid 2014 low, and topped out in the spring of 2015. For just under two years the US dollar has been chopping out a sideways trading range, rectangle consolidation pattern, and closed above the top rail this week. The breakout is not actually confirmed yet as the price action would have to close above the 103 area and then a backtest to the top rail around 100 would have to hold. For the time being, we have to give the benefit of a doubt, to the US dollar bulls until proven otherwise.

There is one thing I would like you to show you before we move on and that is the backtest to the neckline, which occurred during the US elections. That sharp reversal off the neckline needs to be respected, as that spike shows up in other areas of the markets.

I’m going to skip over the longer term charts for the $USD, as we have been following them pretty closely. There are two other proxy’s for the $USD I would like to show you which may be giving us some confirmation the breakout may be the real thing. Below is a weekly chart for the UUP, which shows its sideways trading range as a bull flag. Note the big breakout gap that occurred last week on heavy volume. A backtest to the top rail would come in around the 25.75 area, which should be expected but not required.

This next chart for the UUP is a longer term weekly look, which puts the bull flag in perspective. Again, if the UUP is truly breaking out in its next impulse leg up then we should see the backtest hold support at the top rail at 25.75. We have a very clean line in the sand, above the top rail is bullish and below is bearish.

The USDU is another index I like to track for the US dollar. The USDU has a more equal weighting than the $USD. This proxy for the USD actually broke out of a six point diamond consolidation pattern about eight weeks ago. Note how the 30 week ema has done a good job of showing us where support and resistance comes into play. To really confirm the next impulse leg up is truly underway, we’ll need to see the price action takeout the old high at reversal point #3. As the charts above show, this is the strongest the US dollar has been since the beginning of the last impulse leg up in the summer of 2014.

Keeping these US dollar charts in the back of your mind I would like to show you what I think may be happening in the precious metals complex. First, I’m fully aware that the PM complex and the US dollar can rise in tandem for short periods of time, but in a general sense they pretty much move opposite to each other. As I have stated many times in the past, “the only rule in the markets is, there are no rules.” This is an important concept to understand. It means there are no guarantees of what may have worked previously will work again.

This next statement may sound a bit counter intuitive, but one has to have a game plan, right or wrong, in which to invest in the markets. As long as ones game plan keeps working you stay the course, but when you start to see things develop that shouldn’t be, then you have to reassess the situation with an open mind and figure out why the original game plan is not working as it should. This can be one of the toughest parts of trading, knowing when something might not be working out as originally expected. One has to be totally honest with themselves in order to see the charts for what they may be showing. It’s easy to sweep the dirt under a rug but that doesn’t solve the problem it just masks the problem, so keeping an open mind is critical in understanding what a chart may be showing you.

Now that we have that out of the way lets look at some charts for gold, which hasn’t been behaving very well lately. Last week we looked at the important moving averages chart, which as of Thursday shows gold is now trading below all the moving averages including the 300 day moving average. It’s not the end of the world but it does throw up a red flag as the 300 day moving average has done an excellent job of holding support during the bull markets years.

Less than two weeks ago, before the US elections, gold along with the rest of the PM complex looked fairly healthy, but that now looks deceptive. Below is a daily chart for gold which shows a black bearish rising wedge. You can see the initial breakdown was pretty strong, but on the night of the elections gold put on one of the biggest rallies in years, which we can now see was a backtest to the underside of the black bearish rising wedge. That is the same spike we looked at on the US dollar chart. You can see the 50 day ma has already crossed below the 150 day ma, and is close to breaking below the 200 day ma. This is not what you want to see during an impulse leg up. Also, gold has now closed two days in a row below the 300 day moving average, which is definitely something you don’t want to see during a bull market.

This next long term daily chart for gold shows a possible horizontal trading range that may develop between 1370 and 1185 to match the left side of the chart. There is one issue with that scenario. The price objective for the bearish rising wedge would measure down to the beginning of the bearish rising wedge, which would put gold at the December 2015 low at 1050 or so.

As we move further out in time by looking at the eight year weekly chart for gold you can see how the bearish rising wedge fits into the big picture. On the positive side there is the top rail of the three year falling wedge, which comes into play at the 1165 area. Gold also broke below the 65 week ema which usually does a good job of holding support during a bull market. Also note the indicators at the bottom of the chart, which are starting to roll over.

I’m going to start putting the pieces of the puzzle together by looking at this next weekly chart for gold which begins to show you a potential bearish setup taking place if the 1185 area fails to hold support. Note the top rail of the bear market downtrend line that began to form in September of 2011. What makes that top rail so compelling is the way the price action interacted with it, just before and right after the US elections. I’ve shown you on the daily combo chart for the PM complex the possible H&S tops that may be forming. I don’t show it on this chart, but the potential H&S top would be forming just below the top rail of the downtrend line, which is another reversal pattern forming at a most critical place. Some of you may be starting to see a potentially very large pattern developing, which I don’t believe anyone else sees yet.

I’ve been showing you this next chart for gold’s bear market since the 2011 top which shows an expanding falling wedge. Inside the expanding falling wedge is a rectangle consolidation pattern toward the top of the chart, and the seven point bullish falling wedge reversal pattern at the bottom of the chart. Up until the US elections everything looked fine with a backtest to the top rail at 1240 in place. As you can see, the price action closed out the week below that important top rail, which is not what I wanted to see at this point in time. Until last Thursday it looked like the top rail was going to hold support, but that day marked the break below the top rail and the 300 day moving average, which has to make one question what’s going on.

We are now at the point where we have to be honest with ourselves and put away all our preconceived notions of what we believe is really taking place in the PM complex. As they say, “honesty is the best policy.”  Believe me I don’t like this next chart anymore than anyone else but the potential is there for one more move lower in gold”s bear market. When you look at the Chartology of the black falling wedge it begins to make some sense. A move to the bottom rail would come in around 975 which would create panic in the bull camp, and euphoria in the bear camp. It would also complete the all important fourth reversal point which is needed to create a consolidation pattern. Gold will still be in a bull market with a slightly different consolidation pattern. Note the price action at reversal point #3 with the hit at the top rail, and the breakout below the bottom rail of the blue rising wedge we looked at earlier. The inflection point is the backtest to the blue rising wedge that was made on election night.

This next chart is a long term monthly look at gold which shows its bull market uptrend channel we’ve been following that is still in play, as long as the bottom rail holds support at the 1125 area. There is still a week and a half to trade this month but for the moment gold is trading under its 10 month ema, which is a negative.

The potential negative looking charts above are predicated on a strong US dollar breaking out of its year and a half trading range. Below is a ratio chart which compares gold to the US dollar. When the ratio is rising gold is outperforming the US dollar and vice versa. You can see this ratio topped out in 2011 along with the rest of the PM complex and has been building out a parallel downtrend channel. Note the small H&S top which just broke down last week. That was bearish.

Below is a ratio combo chart with the INDU:GOLD on top and gold on the bottom. This chart shows how these two tend to move opposite to each other, not always but in general. Note the big breakout gap that occurred less that two weeks ago on the ratio chart on top, and how gold broke below its neckline at the same time. Was that just a coincidence? I doubt it.

I have many more charts I could post to make a case for caution ahead in the PM complex. It’s not what I want that matters, it’s what the PM complex wants that matters. There is no doubt that the price action since the August highs in the PM complex has stumped most trading disciplines. Sometimes the markets are tough to trade but having a game plan to follow is critical in understanding what to do, right or wrong. Up until two weeks ago the PM complex looked like it was ready to move higher right after the elections, but the price action has shown us a potential different scenario, which we need to heed.

This last chart for tonight is a combo chart which puts everything in perspective. On top is the USD and on the bottom is GOLD. I’m not going to argue with what this combo chart is strongly suggesting, which is that the US dollar is breaking out from a big rectangle consolidation pattern, and gold is breaking down from the top rail of a, what we can still call, a bullish falling wedge. I know this Weekend Report isn’t what everyone wants to see but it’s an honest opinion of what may take place over the coming weeks. All the best…Rambus

One of the most important charts on the planet is the US dollar as it has such a big impact on many different areas in the markets. This week the US dollar hit a new high and closed above the top rail of its sideways trading range. A true breakout is generally confirmed when the price action closes at least 3% above the top rail of a consolidation or reversal pattern.

I expect to see some backing and filling above the top rail of the black rectangle and if the breakout is going to be valid the top rail of the rectangle consolidation shouldn’t be violated by very much. The setup is there for the rectangle consolidation pattern to be a halfway pattern to the upside measured from the May 2014 low.

There are a lot of pieces of the puzzle I’m going to try and put together in the Weekend Report to show how these possible inflection points, we’ve been following now for several weeks in the PM complex, may develop. The US dollar will be playing a key role on how things may payout. Have a great weekend. All the best…Rambus

The inflection point in many of the different markets still continues to develop. The precious metals complex is approaching a very critical backtest to some important necklines we’ve been following. I added the GDXJ to the combo chart which shows the HUI, GLD, SLV and the GDXJ have all broken down below their respective necklines and are now in the process of backtesting those necklines from below. I can’t emphasize enough how critical this backtest is to the overall health of the impulse move out of the January low this year.

From a Chartology perspective the price action trumps everything else. It’s possible that these H&S tops may fail but until the price action can trade above those necklines the H&S tops are in place. I have the backtests labeled on the charts that need to be broken to the upside to negate those potential topping patterns. On the other hand if the backtests to the necklines hold I also have the price objectives for those would be H&S tops.

If the price action blasts up through those necklines that would be very positive but if I see the price action starting to stall out around those necklines I will be forced to exit the remaining 50% of the PM portfolios. This could very well be the shakeout before the breakout higher but these necklines will have to be broken to the upside first.