Below is the daily chart for the GDXJ which shows the diamond trading range that has been building out since the first of July. For three days the price action traded below the bottom rail which is shown by the thin blue dashed line. This morning the GDXJ gapped above the blue dashed rail and the 20 and 50 day ema’s and closed the day above the top rail, which now shows a six point diamond which is a consolidation pattern instead of reversal pattern. Sometimes it’s a fine line. We’ll get more confirmation if we see the GDXJ trade above the 5th reversal point making a higher high along with a higher low.

The diamond is still the valid chart pattern and with a completed 6th reversal point it becomes a consolidation pattern. There was also heavy volume today. The 20 and 50 day ema’s are now kissing. It’s always nice to see the price action trading above those two important daily moving averages on a closing basis.

This silver miners etf has been one of the strongest sectors within the PM complex. It’s currently forming a very ominous looking H&S top not to be taken lightly.

It wasn’t until yesterday that I could draw in a possible bottom rail of a possible diamond pattern on the GDXJ. This potential diamond pattern has been forming since the first of July. As it stands right now the diamond pattern has completed five reversal points which theoretically puts it into a reversal pattern category. With that said the bounce yesterday may have started the all important 6th reversal point to the upside which if completed would make this diamond a consolidation pattern to the upside. Keep in mind this potential diamond is still developing with no resolution either way yet.

This next daily chart for the GDXJ is a longer term daily look which shows the sloppy 5 point rectangle reversal pattern which formed at the bear market low. The false breakout through the bottom rail of the 5 point rectangle reversal pattern was the shakeout before the breakout. So far this first new leg up of the bull market is picture perfect with one consolidation pattern forming on top of the next. At some point the last pattern to form before we get a decent correction will be a reversal pattern and not a consolidation pattern. It’s not unusual to see a string of three or four consolidation patterns form within a strong impulse move. The diamond at the top of the chart will most likely tell us the direction of the next important move for the GDXJ and the rest of the PM complex.

Below is a daily line chart for a slightly different perspective. Note how the bullish rising wedge formed below the support and resistance zone and the expanding triangle above which is one way to take out overhead resistance.

This weekly chart puts everything in perspective. The diamond pattern is forming right in the heart of overhead resistance going all the way back to the 2013 breakout gap to the downside ping ponging between the two S&R lines.

Some of our long term members may remember some the diamond consolidation patterns that formed during the bear market years that seemed to take forever to complete. Some were not that pretty and had a false breakout above the top rail like the GDXJ. I believe the $XAU ended up with the most symmetrical diamond consolidation pattern of all the PM stock indexes. This weekly chart for the GDXJ shows the end of the bear market and the beginning of the new bull market with the five point rectangle reversal pattern reversing the bear market. Our current diamond pattern is going to tell us if the next move is going to be to the upside or we get our first real correction. Stay tuned as things are getting interesting in this red hot sector.

The INDU is finding initial support at one of the older chart patterns we use to look at. For the time being the INDU is doing a ping pong move between the neckline and the double top trendline. Something to keep a close eye on.

Welcome to PM Trader’s Nightmare.

We’ve been following the GDX as a proxy for the rest of the PM stock indexes which is showing the on going correction or consolidation phase of the first big move up off the January low. This first daily chart shows the unbalanced double top which is the first reversal point in this new consolidation phase. The double top has a price objective down to the 24.50 area which was almost touched late last week. As you can see the double top trendline has held resistance on two separate occasions with the second one taking place this week. At this point we still don’t have a confirmed low which could launch the second reversal point to the upside yet. The price action is in the middle of no man’s land presently.

Below is a longer term daily chart we’ve been following which shows a possible trading range between 24.50 at the bottom and 32.00 at the top. Again, we still don’t have confirmation yet on the low for this first reversal point to the downside.

This third daily chart shows the fib retracements with the 38% retrace coming in at the 24.33 area. If, and that’s a big if at this point, but the double top trendline could be the neckline for a small H&S bottom which would fit in nicely with this potential trading range as the start of the second reversal point back up to the top of the trading range. It’s possible we could see a double bottom form at the bottom of the potential trading range which would be a reversal pattern also. Right now the price action is in neutral territory. As I mentioned previously these trading ranges can whipsaw a person to death trying to trade in and out. At least once the top and bottom of the trading range can be established then there is a chance to try and play the swing trades within whatever consolidation pattern may develop.

This next chart is a weekly look at the bull and bear market counter trend moves during the bull and bear markets since 2009. The red rectangles measures the same percentage moves down in a bull market but not time. On the left side of the chart you can see the bull market corrections, red rectangles, that punctuated that rally out of the 2008 crash low.  If our current correction is fairly close to the other corrections then price wise the 200 area should provide good support. There is also the 50 week ema that is rising and is currently at 204.

On the weekly chart above you can see the rally out of the 2008 crash low was very strong but even during that strong bull move it had three corrections, one forming on top of the other. Try to put yourself back in the HUI during that strong bull move and how you may have reacted to each correction within the red rectangles. It’s easy to look back in hindsight and see the corrections and say I would do this or that but it’s abstract and not reality. Reality is our current trading range which may very well be just the first correction in the mother of all bull markets, only time will tell.

Editor’s Note: This was posted  intra dayAfter the close GDX can be found closer to the Bottom of “The Zone” at 26.41

Tonight I would like to show you a long term 40 year monthly chart for the $COMPQ which I call the history chart. Some of you were not even born when some of these significance events happened. At the time they seemed significant enough that most thought the end of the world as we knew it was near. Some of the older members will remember some of these events like they just happened yesterday.

I was personally involved in the stock market during each one of these times, and I can assure you it did feel like the world was coming to an end.  When one observes some of these stock market events from a distance they hardly matter in the big picture. Perspective is everything.

Take the 1987 crash for instance. The $INDU was down over 500 points in a single day, but in 1987 that was over a 20% drop.The world didn’t come to an end and the markets began to rally off that historic low for several years. Then in 1991 there was the savings and loan crisis, and the market crashed again on the magnitude of the 1987 crash but this time it took a little longer to complete the move down. Also what made the 1991 low so dramatic, besides the saving and loans crises, was the start of the first Gulf war.

I still remember most of the analyst were taking about what could happen to the stock market if the war didn’t go well. Crash was the most widely used term back then as no one really knew what would happen as the US was going up against the 5th largest army in the world. After the first night of bombing, it was very clear the next day that the  Iraqi army was no match for the US. That was the first time I heard the word smart bomb. As you can see on the chart below the 1987 crash low, and the 1991 low, marked the two lower reversal points in the green bullish rising channel. That green bullish rising channel or flag really was the beginning of one of the biggest bull markets in history for the $COMPQ – tech stocks.

How many remember the LTCM, Long Term Capital Management debacle which occurred in 1998? It’s only a blimp on this chart, but at the time the word crash was being thrown around as no one knew what would happen. What happened was the continuation of the parabolic run from 1995 to the bull market high in 2000.

In March of 2000 the great bull market was over and one of the strongest bear markets for the $COMPQ began. Many tech stocks  that were bid up to astronomical levels during the mania phase went bankrupt . The bull market in the $COMPQ ended in 2000 at 5200 and just over two years or so later it crashed all the way down to 1100 before the bear market ended. It didn’t help that 9 11 2001 happened in the middle of this crash however that bear market low was also accompanied by the second Iraqi war.That massive bear market, which seemed like the end of the world back then, was actually the beginning of the ten year blue triangle consolidation pattern.

The last reversal point in the ten year blue triangle consolidation pattern was another end of the word event that most investors still haven’t gotten over yet, which was the 2009 housing bubble crash low. Only the great depression compared to it. That 10 year blue triangle consolidation completed in late 2010 with a nice clean breakout and backtest. That was over seven years ago and the markets haven’t looked back.

The last consolidation pattern on this chart is the red bull flag which I labeled as the BREXIT pattern. This little shakeout was very mild compared to some from the past. Maybe this little red bull flag is going to finally be the pattern that is going to end the world as we know it, but from a Chartology perspective it looks just like another consolidation pattern in the ongoing major bull market uptrend channel.

Maybe I’m being to optimistic but I don’t see the end of the world coming anytime soon, but just the opposite. I believe we’re entering into a new period of human ingenuity where technology is going to change the way we live from biotechnology, green energy, robotics, nano technology, artificial intelligence, super computers that will make today’s computers look like slide rulers from the past, space travel and exploration, and a host of other things that the best science fiction writers haven’t even thought of yet.

This is all possible because of the bull market that started in 1982, which in hindsight was the birth of the information age. Many tech stocks during that bull market went up multiple times of their initial public offerings and had many splits. If only some of our precious metals stocks, over the course of the now 16 year secular bull market had moved even a fraction of what some of the tech stocks did back then, it would be an amazing sight to behold.

One never knows when a black swan event may strike that turns our civilization into a Mad Max society. Maybe tomorrow or in 5 years, 20 years or maybe never. My point is I’m not going to live my life waiting for a Mad Max event that may or may not happen. There are enough people out there that will keep a close eye on it if does happen. I’m more interested in what the future holds and how society and the economy progresses moving forward.

I’m not painting a world without problems as that would be foolish. Since the beginning of time human society has moved two steps forward and one step back always gaining a little ground each time to get to where we are today. I realize that many members are fearful that the world monetary system is  going to implode any day now but we have been hearing a variation on this theme from the doom and gloomers  for as long as I have been alive. I grew up in the Vietnam era. Now if that didn’t feel like the end of the world I don’t know what does. And before that my early childhood was during the depths of the cold war (think backyard bomb shelters). These times make the present seem like a walk in the park.  Regardless of what many of the naysayers may think on how bad everything is today, I can’t think of a better time to be alive than the present. I see a future that will astound us in what the human species will achieve. Good or bad changes will come whether we like it or not.

I’m hopeful society will benefit from the changes that are going to take place, just as we have benefited from all the previous changes that happened before us. To leave this world just a tad better than when we entered it would be a great accomplishment. For me personally the future looks bright and full of wonder on what will be achieved by the human race. You may call me naive, ignorant or whatever else you want, but I’m going to embrace the future with eyes wide open. All the best…Rambus

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The other day I showed you this 2 hour chart for the UUP (US Dollar ETF)  which had completed an expanding rising wedge pattern when the price action hit the bottom rail at 5? which completed the pattern. The pattern was completed at that time but we still don’t know if it will be a consolidation pattern to the downside or if the UUP can rally back up and through the top rail which would make it a 5 point reversal pattern to the upside as it has formed in the downtrend.

I speculated on a possible H&S pattern forming inside the expanding rising wedge drawing a horizontal line from the top of the left shoulder to the right side of the pattern, looking for a possible high for the right shoulder using the red letters to make it easier to see what I was trying to convey. So far that possible high for the right shoulder is still in play. If and it’s still a big if yet, if the H&S neckline / bottom rail of the expanding rising wedge gets broken to the downside, we’ll have two consolidation patterns in one.

The daily chart for the UUP shows why this potential expanding rising wedge / H&S pattern is so critical to the big picture. As you can see the combo pattern has formed right on top of the brown shaded S&R zone. For those folks that have been with us for several years will remember when the US dollar finally broke out of the multi year base  and began that very strong impulse move up which you can see on the left side of this daily chart.

During that strong impulse move up all the important currencies of the world along with most commodities got taken to the woodshed for a beating. As we’ve seen in the past, when you see a consolidation pattern pointing in the same direction of the trend and not against it, that is usually a very good indication you’re in a strong impulse move. Note the blue bullish rising wedge that formed during the 2014 – 2015 impulse move up.

What makes our present situation so interesting is that if the combo expanding rising wedge / H&S pattern turns out to be a consolidation pattern, then we can expect to see a strong move down over the same area during that strong impulse move up in 2014 – 2015 as show the red arrows which I call reverse symmetry. Why that would be so important is because we should see the currencies and commodities, that were affect by the US dollar on the way up, should now see them move inversely to the US dollar which would be up as the US dollar goes down.

Keep in mind the current pattern is still building out for the UUP with no confirmation yet on which way the eventual breakout may occur but we have something tangible to keep a close eye for more clues that will eventually show us the way.

Sometimes a stock will do something that makes you scratch your head in wonderment. There usually isn’t any rhyme or reason why it happens but it works until it doesn’t. Usually though by the time you finally figure out a certain sequence or a fractal type situation it will change just when you want it to work the most.

I was going over some old charts from the bear market years in the PM complex that I haven’t looked at in quite awhile and came across this old weekly chart for the $HUI. I updated it this afternoon to make it current. If this chart doesn’t make you scratch your head in amazement then I don’t know what will. Again it is what it is until it isn’t.

Below is an eight and a half year weekly chart for the $HUI in log scale. You will see ten rectangles that just measures height and not time. The blue arrows shows the bear market rallies and the red arrows shows the bull market declines.

Starting at the 2008 crash low at 150 you can see there were three corrections up to the left shoulder high as shown by the red arrows and rectangles. The HUI continued to rally all the way up to the 2011 top which ended up forming the head of that massive H&S top. The first decline down from what eventually became the head of the H&S top, fell just shy of reaching the bottom of the rectangle before the next rally took hold. That rallied failed to take out the precious high and made a lower high which was the actual beginning of the five year bear market that followed. Once the price action fell below the bottom of red rectangle #4 the HUI made a lower low for the first time since the 2008 bull market began. The new bear market was underway.

During the course of the bear market years there were five bear market rallies that were all exactly the same percentage move up as shown by the blue arrows and rectangles. When the HUI broke above the top of blue rectangle #5, at the bottom of the chart at 137.40, that showed a major change of character. That was the fist time since the 2011 top that the HUI made a higher high and broke the sequence of bear market rallies. That failure then led to one of the strongest bull market rallies in history for the HUI.

Now on to the present which shows the bull market rally and our first correction taking place since the January low of this year. I have to ask the question, what are the odds that the current red rectangle is going to show us the low for this first correction around the 200 area? Keep in mind all these same sized rectangles are showing us the size of the move in price but not time. What this means is that once the low is set that should be the low for this correction but time wise it could still take many weeks to complete the correction.

The brown shaded area shows where a confluence of support comes in at the 2013 S&R line, the top of blue rectangle #4 at 205 and the 50 week ema currently at 202. So price wise it looks like the low for the first correction is just below at the 200 area which would be a good place to pick up a few more shares of your favorite PM stock. All the best…Rambus

I’m going to use the GDX as a proxy for the rest of the PM stock indexes. I can now say with a fair amount of confidence that the first consolidation phase is taking place. Lets start with just a simple daily chart for the GDX which is showing a small unbalanced double top with the right high being higher than the left high. Five days ago the price action gapped below the double top trendline and last Friday the GDX backtested the double top trendline from below. The price objective for the unbalanced double top is down to the 24.50 area.

This is how the beginning phase of a consolidation pattern begins to build out. In fairly large consolidation patterns there is generally a small reversal pattern that forms at the reversal points within whatever consolidation pattern ends up building out. This small double top is likely to be the the start of the first reversal point down. The double top price objective down to the 24.50 area would be a minimum decline we should expect before the GDX finds support and begins the next rally back up to the top of the new trading range around the the 32 area. If a triangle is forming then the price action won’t make all the way back up to the top before the bears take over again.This would  be labeled as the start of reversal point #3. Then one more move back down to the bottom of the trading range where ever reversal point #2 is located where we should see the fourth reversal point begin to form.

This next daily chart for the GDX is a longer term look which shows the previous small blue consolidation patterns that formed the first impulse move up. What we have to work with right now is the completed small double top and its price objective down to the 24.50 area. It’s possible the GDX could go lower than the double top price objective before the price action reverses back up. The 24.50 area would be the minimum price objective to start the second reversal point back up to the top of the new trading range. Also there is still no way to know what type of consolidation pattern may build out but whatever the pattern, it will have a minimum of four reversal points.

Also whatever consolidation pattern builds out will be much bigger than any of the smaller consolation patterns that formed during the first impulse move up. Something else to keep in mind if you’re feeling beaten down for not selling at the exact high. Once this consolidation pattern is finished building out it will most likely be a halfway pattern to the upside. A rally similar to the first impulse move up in time and price will take the GDX to the next level higher where we should see another consolidation pattern form.

This next daily chart for the GDX shows the fib retracements. The double top and the 38% retrace of the first impulse move up would be around the 24.50 area. A 50% retrace would be down to the 22.00 area.

Below is a long term monthly chart for the HUI I posted recently which shows all the consolidation patterns that formed during the bull market years and how our possible consolidation pattern may look. Normally, but not always, the first reversal point down can produce the strongest move within a consolidation pattern. As the consolidation pattern builds out the swings can become less volatile as the bulls and the bears get tired of beating on each other and volume usually tappers off. Once we can establish the reversal point #2 low, there is a good chance that that low will mark the low of  the consolidation pattern especially in a bull market. Establishing the first two reversal points in a consolidation pattern can then open up the door for a couple of short term swing trades within the consolidation pattern which will still have to form the 3rd and 4th reversal points. If you plan on shorting within the consolidation zone don’t get greedy as the reversals back up are just as strong the reversals down.