Below is a monthly candlestick chart for the HUI which is made up of black and white candlesticks. When you see a string of black candlesticks all in a row you know you’re in a strong impulse move down and when you see a string of white candlesticks all in a row you know you’re in a strong impulse move up.

Note the four white candlesticks all in a row from the January low made this year. If you see a black candlestick that forms during a strong impulse move up, many times it will show up on the daily chart as some kind of consolidation pattern. The black candle formed right on top of the 2013 support and resistance line that had reversed its role from resistance to support on the backtest.

The higher this initial impulse move goes up before a good correction takes hold, will have a direct impact on the consolidation patterns and impulse moves that will follow down the road. This first impulse leg up is giving us previews of coming attractions. The higher and stronger the better.

Lets start off by taking an indepth look at the INDU as a proxy for the other US stock markets. A year ago this month the INDU put in an important low which has held support. A very strong rally ensued which took the INDU up to the 17,975 area where it topped out and began another strong decline. This next decline ended in the same area as the August 2015 low and formed a double bottom which is a reversal pattern.

The next rally phase took out the previous high by 200 points up to 18,167 where the next decline began, but this time the bears could only push the price action down to the 17,330 area which looked like it might be an important low. Then came the infamous BREXIT vote which made a slightly lower low with the INDU closing that day below the 200 day moving average. If you recall markets from all over the world were tanking hard but that decline ended just as fast as it began.

This first daily chart is just a simple look at the price action I described above, with one trendline which I’m calling a support and resistance line, above is bullish and below is bearish. That simple S&R line could also be called a double bottom trendline, which would be a five month double bottom reversal pattern.

Next lets put some Chartology on the daily chart to see what chart patterns are building out. First notice the brown shaded S&R zone at the top of the chart, which is the all time high. Looking to the upper left hand corner of the chart you can see the INDU broke out above the brown shaded S&R zone and backtested from above.

Next there are two double bottoms. There is the big five month double bottom and then there is the smaller double bottom which formed earlier this year. The double bottom that formed earlier this year formed a double head of a H&S bottom formation.

The left shoulder formed a seven point bearish falling flag reversal pattern while the right shoulder formed the blue bullish expanding falling wedge consolidation pattern. We can connect the highs for each pattern which gives us a neckline. A month ago the INDU broke out above the top rail of the blue expanding falling wedge and then took out the neckline and the brown shaded S&R zone. Last week we got a backtest to the neckline which held initial support and we got a pop. As you can see there were three important resistance lines that were all broken to the upside as shown by the BO symbol with one complete backtest. It’s possible we could see a second backtest which may form a small consolidation pattern on top of the neckline. So far nothing is broken.

This next daily chart shows three separate price objectives based on the Chartology. First without using the neckline and just using the blue expanding falling wedge as a halfway pattern, the price objective would be to the 19,725 area as shown by the blue arrows, which is called the impulse method. The second price objective is called the breakout to breakout method, which measures the distance from the breakout point of the small double bottom to the first reversal point in the blue expanding falling wedge. The measurement is then added to the breakout point of the blue expanding falling wedge which gives us a price objective in the same general area as the impulse method, which is not that unusual.

The third price objective is based on the height of the H&S bottom which is up to the 20,875 area. I know at this point in time it seems impossible, but when we look at the longer term charts it doesn’t seem so far fetched.

This next chart is a five year weekly look at the INDU which puts the price action on the daily charts above in perspective. There is a bigger chart pattern which is a one year black triangle consolidation pattern. If it wasn’t for the BREXIT vote the backtest to the top rail of the black triangle would have been dead on the money. So again nothing is broken at this point as long as the neckline holds support if it gets backtested again. Most are looking at this one year trading range as a reversal area for the bull market that began in the spring of 2009. It may very well be, but to get things started to the downside the neckline will have to be broken first.

This next long term weekly chart for the INDU goes all the way back to the 2007 bull market high and the inverse H&S bottom that formed during the 2009 crash low, and the bull market that followed. From a Chartology perspective our current blue one year triangle looks more like a consolidation pattern than a reversal pattern. Time will tell.

This next chart is a 20 year monthly chart which shows how the bull market that began in 2009 reversed symmetry back up until the price action traded above the old bull market high made in 2007. How many could have imagined during the 2009 crash that the INDU would be trading above 18,000 in 2015?

Below is another 20 year look at the INDU which shows the one year triangle forming on the top rail of the Jaws of Life consolidation pattern.

The 40 year quarterly line chart shows a beautiful breakout and backtest to the top rail of 13 year bullish expanding Jaws of Life consolidation pattern.

I would like to leave you to ponder this last chart for tonight which is a 75 year quarterly chart for the INDU. Many who study and invest in the stock markets live in a negative world. All they can see is the world is a mess and we are about to go into a black hole at any time . This attitude seems especially prevalent amongst those most interested in the Gold Markets.

But  for those that can think outside of the box these charts are suggesting  the future looks bright. Technology is going to change our world in more ways than one could ever imagine. It’s never going to be a perfect world, but we’re living in the best of times regardless of all the naysayers IMHO.

All the best…Rambus

Below is a daily chart we’ve been following which shows the six point flat bottom expanding triangle consolidation pattern. The top rail may look a little sloppy but there is a reason for that. First, note the big breakout gap that was accompanied by a very large increase in volume and then the first backtest several days later. It’s always important to adjust your trendlines when you get new information in case there is another backtest or pull back later down the road. So the top rail reflects the backtest point which then defined the top rail. As you can see GLD started to rally which looked like the impulse move was beginning but it had one more backtest it needed to do to put doubt and fear into investors. As you can see the second backtest was just a tad sloppy but held nicely.

Everyone is talking about how overbought the PM complex is right now and it has to rest before it can go higher. What this six point bullish expanding flat bottom triangle is telling us that the correction has been taking place for six months already and the consolidation pattern is finished building out and the next impulse move higher is just beginning. More confirmation will be when GLD takes out the previous high made on the initial breakout. Take a second and look at this chart and try and understand what it really means for the PM sector. Remember we’re in a new bull market and each consolidation phase will have a bullish outcome. Doing nothing can be the hardest part of trading sometimes.

I forgot to add this monthly candlestick chart for the HUI to the post below which shows the 2013 S&R line and the string of white candlesticks that have formed since the bull market began in January of this year. The only candlestick that is black formed during the backtest to the 2013 S&R line. The neckline extension rail is where we may see some overhead resistance come into play. Note the big black candlestick that formed in 2013 when the HUI broke below the neckline of its massive H&S top. Reverse symmetry suggests the HUI may move up over that same area in a strong move to the neckline at 380 or so.

Its been several weeks since we last looked at this combo chart which has the HUI on top and GLD on the bottom. I call this chart the 2013 S&R chart because all the price action below that very important S&R line started to build out after the big gap down in 2013 which many at the time called manipulation but from a Chartology perspective it was a perfect breakout. I’ve been showing the price action below the 2013 S&R line as a bullish falling wedge which is true but when you boil it all down the 2013 S&R line is the most important trendline on this chart, above bullish and below bearish.

The HUI and GLD both broke out above their respective 2013 S&R line at different times with GLD breaking out just ahead of the HUI. They both broke out above their 2013 S&R line with a breakout gap and both had a nice backtest also.

Since the PM complex is in a new bull market it was only a matter of time before each would breakout from their first consolidation pattern to the upside, which was the blue bullish rising wedge on the HUI and the blue expanding triangle on GLD. Again you can see a breakout gap above their respective top rails of their blue consolidations patterns. Once you know the big trend, bull or bear market, the consolidation patterns will breakout in the direction of the prevailing trend. That is an important concept to grasp. Many times a consolidation pattern can morph into a bigger consolidation pattern which will have the same out come as the smaller consolidation pattern. Eventually though the consolidation pattern will finish building out and the next impulse move will begin in the same direction as the previous move.

One last thing to recognize on this combo chart below. Note how much stronger the HUI is vs GLD if you go back to the 2013 gap area. The HUI is currently testing the bottom of the gap while GLD is still significantly below its 2013 gap area. This ties into the thesis I’ve been showing you on the ratio combo charts that are showing this time the PM stocks are finally going to have their day in the sun after 20 years of under performing gold.

Below is a long term weekly chart which puts everything in perspective. First, you can see the big breakout below the bottom rail of the six point blue rectangle consolidation back in 2013 which many called manipulation at the time but it was a clear breakout from a very well defined six point rectangle consolidation pattern.

Then there is the three year seven point bullish falling wedge reversal pattern. It’s a reversal pattern because it has an odd number of reversal points.

Lastly you can see the little red expanding triangle that has been forming on the top rail of the bullish falling wedge which we know from past experience is usually a bullish setup. More confirmation will be given when gold makes a new higher high made just several weeks ago.

The markets have a way to push you just beyond your limits to get you to do the wrong thing at the wrong time and then reverse on a dime. The bearish sentiment from just a casual observation over the last few weeks has felt like there was no way the bulls could rally the PM sector higher before there was a decent correction. In a new bull market the surprises come to the upside and not the downside.

The rally we’re currently experiencing in the PM complex right now and especially the Junior Miners is a potential once in a lifetime event for most investors. Sometimes we get lucky and experience several of these kind of bull markets over a lifetime, but generally your first experience is a learning experience if you can survive long enough to have learned something. I was lucky enough during the tech bubble in the 1990’s to have had just enough experience to play the last five years well enough to be able to retire at 50 years of age. Had I not had any experience before the tech bubble burst I would have most likely not gotten out at the top and rode the whole thing back down.

I didn’t become aware of the bull market in the PM sector until the spring of 2002. My whole focus up till then was the stock market. I still remember very clearly the first time I really looked at a chart for gold and seen a beautiful inverse H&S bottom. I didn’t even know what a junior gold stock was back then as the PM sector was so far off my radar screen. I began to study everything I could on this, way off the radar sector, knowing that the Chartology would be just as clear as the many different tech stocks I traded in the 1990’s.

It didn’t take me long to find some of the junior PM stocks with some really nice Chartology to start trading this new area for me. I felt like I had died an gone to heaven again as I thought nothing could ever beat the tech stocks.The chart patterns the PM stocks were making were just as beautiful as the many different tech stocks I traded.

So I got lucky twice in my investing career by finding two great bull markets in which to invest. Now we have entered the third great bull market of my lifetime which is the bull market that started in the precious complex in January of 2016. To be able to get in on the ground floor of a brand new bull market is only a dream for most investors but to get in at the bottom of the small cap junior PM stocks can change your life forever if you can trade accordingly, which is easier said than done as I know some of you are finding out.

It’s very easy to trade in hindsight when you look at a chart and see a top or bottom already in place but living day by day as a pattern builds out can be very challenging at times. It can take patience beyond what most have , to sit tight and let the pattern mature out , as sometimes they can morph just to throw you a curve ball. Knowing what the big trend you’re trading in, either a bull market or bear market, is the most important aspect of investing. Rule #1 is don’t short a bull market and rule #2 is rule #1. Let the bull market work for you. If you buy too early in a bull market you’ll be saved as the bull market progresses.

The first six months of our new bull market is now over and there is no way to get it back. Many have missed the bottom and have been waiting patiently for a pull back to get in . This strategy is not working. Many have tried to trade in and out of this new bull market and are left standing at the train station waving goodbye to the conductor as the train leaves. Personally I sold my positions a few months back and quickly realized this was a mistake and scrambled to buy them back at somewhat higher levels . This is how a new bull market works taking as few along for the ride as it can. At some point there is going to be a correction which will end up forming some type of consolidation pattern which will be needed to get the overbought condition back to normal. However predicting when and how this will occur will prove to be very challenging.

I have a ton of charts I could post tonight but I’m going to leave this Wednesday Report just the way it is. This is the first time since we opened up our doors at Rambus Chartology in which I didn’t post a chart , which is weird for me. What is most important to understand is this new bull market that is already six months old and isn’t waiting around for you to make up your mind if you want to participate or not. Only you can determine for yourself how you want to play this new bull market in the precious metals stocks. For some it will be a life changing event and for others it will be a should of or could of kind of bull market. Take what you’ve learned during the first 10 years of the PM bull market and the recently completed 5 years of PM bear market and use that experience to guide you through this next leg of the secular bull market. As always I will be right here analysing the Chartology of this most interesting and frustrating and exiting little market that we have all come to have a love / hate relationship with  , The Precious Metals Junior Miners .

All the best…Rambus

Whenever you begin to feel uncomfortable about the short term price action always look at the weekly or even the longer term monthly charts to gain perspective about your feelings.

Below is a four year weekly combo chart which we’ve been following for years as the bear market unfolded before us. Always keep in the back of your mind the magnitude of those three year bullish falling wedges and what they mean for the new bull market that started in January of this year. During the bear market years there were all lower lows and lower highs made. Since the breakouts above their respective top rails you can see a series of higher highs and higher lows. This is a simple concept to understand but hard for many see.

It looks like SLV is forming a small H&S top similar to the one it formed back in May of this year. The minimum price objective for this H&S would be a measured move down to 17.48.

The long term daily chart for SLV shows the big double H&S bottom. Note the small H&S top that formed at the May high which led to the backtest to neckline #1. A backtest to neckline #2 would come in around the 17.05 area. This is where one needs to decide if they want to play the swings or hold on for the intermediate to longer term ride with a portion of your trading capital. SLV has a well defined breakout point and price objective if one chooses to try a short position. Just don’t get greedy.

This week the Japanese Yen backtested neckline #2 of a possible triple H&S bottom at the 94 area. Below is a weekly line chart which shows the price action closed right on the neckline. To say this weeks backtest was critical is an understatement. How the yen goes so does gold for the most part.

Below is the exact same chart as the one above except it’s a bar chart that shows the subtle differences. The reason this backtest is so important, is because if neckline #2 holds support then the low for the third right shoulder will have formed. Reverse symmetry suggests we could see a ping pong move between neckline #2 and neckline #3 as shown by the black arrows, before we see a resolution to this 2 1/2 year pattern. The yen has made a series of higher highs and higher lows since the head was put in place a year ago.

This next long term weekly chart shows a pretty symmetrical H&S bottom as shown by the neckline symmetry line which shows the low for the left and right shoulders. The backtest this week was a little sloppy but so far the neckline is holding support.

This next chart I overlaid gold on top of the daily line chart for the yen which shows why this currency is so important for gold. Sometimes one can be a bit stronger or weaker than the other but they tend to move together so you can see why the 94 area on the charts above is so important. If the backtest to the neckline holds support then there is a good chance that gold will also be finding support. It looks like next week is shaping up to be another very important week in the precious metals complex. Have a great weekend. All the best…Rambus