This week the yen is backtesting the neckline on a possible three year H&S base at the 94 area. This is the first critical test of support.

Below is a longer term weekly chart for the yen which puts the H&S bottom on the chart above into focus. The lower portion of the base was the seven point inverted roof reversal pattern. On the completion of the inverted roof pattern the yen rallied back up to the bottom of the blue bearish falling wedge where we seen a small decline. That small decline built out the possible right shoulder of a pretty big H&S bottom. You can follow the price action which shows the yen is now at the backtest point to the neckline from above. So far this is exactly what we would expect from a Chartology perspective. Now we need to see the neckline hold support.

This next very long term weekly chart is the reverse symmetry gap chart as shown by the green circles. If you recall we were looking for a possible reverse symmetry gap above neckline #2 after the bottom of our current right shoulder was put in place. We didn’t get the gap but the price action did have a clean breakout right at the neckline with no overlap to the downside. As you can see the backtest is taking place right now at the 94 area. If the inverse H&S bottom plays out we should see the yen rally up to the 112 area at a minimum. Neckline #2 also shows you a good example of how a support and resistance line works going all the way back to 2008. The price action is either above it or below it but the breakouts are clean with no overlapping of the neckline.

This first chart for tonight is the GOLD:XAU ratio combo chart we’ve been following very closely. I just want to make it perfectly clear what this ratio chart is telling us. The ratio chart on top is telling us that gold is in a parabolic collapse vs the XAU after 20 years of out performance. Even though they can both go up together the XAU stocks are going up parabolic to gold as shown by the vertical move down in the ratio and the vertical move up in the XAU.

When the ratio broke down from its double top all time highs at 24.33 there has only been one month, May, that the ratio had a small rally and backtested to the bottom of the S&R zone at 15. You can see the same thing happened on the XAU chart at the bottom, where it just went sideways in May. We are witnessing an unprecedented rebalancing of the precious metals stocks to gold. This started in January of this year and shows no signs of abating.

If you’ve been a precious metals complex investor, or as some like to call them gold bugs, this is the absolute best buying opportunity in 20 years to buy your favorite precious metals stocks. The unwinding of the parabolic 20 year arc is something you don’t see everyday and to be on the ground floor of the rebalancing move should be very rewarding if one can stay in the saddle.

Below is another ratio chart in which I compare the HUI to gold. When the ratio is rising the HUI is outperforming gold. If the ratio chart above has any validity then we should see the HUI rising in a near vertical move vs gold. After building out a Diamond reversal pattern at the bear market low, this ratio has been in a strong impulse move higher. Note the breakout and backtest to the top rail of the current bullish rising wedge. As long as the apex holds support we need to let this ratio fulfill its destiny.

This next chart is a 10 month daily chart for gold which shows the breakout and backtest to the top rail of its six point bullish expanding rising wedge. If gold is just now breaking out in a brand new impulse move up, what does that say about the GOLD:XAU ratio chart we just looked on the first chart above? In order for the ratio to keep falling in a near vertical manner, as it has been doing since January of this year, the PM stocks are going to have to go up faster than gold itself which they’ve been doing since January.

Note the huge volume bar on the breakout from the six point bullish expanding rising wedge. Also note the backtest to the top rail that took place this morning. These are major clues that this consolidation pattern is mature and ready to make its next move.

This chart also has what I consider to be the most important moving averages for gold. The 50 day simple ma has held support except for the move below it at the sixth reversal point in the bullish expanding rising wedge. It even held on the big volatility day when gold broke out from the bullish expanding rising wedge. As you can see all the moving averages were slopping down coming into the December 2015 bottom. It took until last month June, for all the moving averages to have a positive crossover when the 200 finally moved above the 300 day moving average which was the last piece of the puzzle for the moving average alignments. They are now all proper aligned for the new bull market and pointing up.

The longer term daily chart for gold shows the rally off the 2008 crash low and how all the important moving averages aligned to show the bull move that took place. During that big bull run up to gold’s all time highs the 150 day moving average was the one moving average that held support the best. It was never violated until the first move down from the 2011 top which also tested the 200 day moving average for the first time during that epic run.

The 20 year monthly chart for gold shows how well the 10 month ema held support during the bull market years and resistance during the bear market. Note how the 10 month ema has reversed its role back to support on the rally out of the bear market low at 1035.

I think the charts are showing us, now is the time to be strongly invested in the precious metals stocks. To try and trade in and out of a strong bull move like we’ve been seeing  since the first of the year can take one out of the market just when the time is right to take advantage of a possible life changing event. Opportunities like this don’t come around very often in ones investing career and to be on the ground floor, well that’s just the frosting on the cake. The general pubic isn’t even aware of what is taking place in the PM complex right now. If you have been following the PM complex for 10 to 15 years then yes, you should be aware of what is taking place right now and taking advantage of what you have learned through the years. I believe most gold bugs see the rally that is taking place but aren’t  fully aware of the magnitude of what is really taking place right now in the PM complex. As always we’ll know in the fullness of time if these charts are telling us the truth. Have a great weekend. All the best…Rambus

Several weeks ago we were looking at a couple of consolidation patterns that were forming on some of the PM stock indexes. One was the bullish rising wedge and the other was a H&S consolidation pattern. Below is a daily chart for the HUI which shows the black five point expanding triangle as the bear market reversal pattern. From that reversal pattern the HUI built out its first real consolidation pattern which is the bullish rising wedge. I commented just before the breakout gap of how the battle was shaping up between the bull and the bears at the top rail which had been holding resistance. I mentioned that we would see how strong the bears were by how well they could defend the top rail. We got our answer a day or two later when the price action gapped above the top rail of the bullish rising wedge. Keep in mind these patterns show up in strong trending markets, so it’s something I always look for when I know the move is strong.

The GDX bullish rising wedge.

Below is a daily chart for the GDXJ we looked at earlier this week when it gapped above the top rail of its own bullish rising wedge. It has six reversal points instead of four for the other PM stock indexes.

The other consolidation pattern we were looking at was a strongly slanted H&S consolidation pattern as shown on the daily chart for the $GDM. I said it was very symmetrical as the neckline symmetry line was showing the low for both the left and right shoulders. The H&S consolidation pattern also formed on top of the big brown shaded S&R zone which was a very good place to look for support.

Below is a long term daily combo chart which has the HUI on top and GLD on the bottom. The most important point on this chart is the 2013 S&R line on each chart. You can call the price action below the 2013 S&R line anything you want. What is most important is the breakout gap above that three year S&R line. As you can see the HUI has formed its first consolidation pattern of its new bull market which was the bullish rising wedge. GLD also formed the first consolidation pattern of its new bull market which is a bullish expanding triangle. Note each consolidation pattern shows a breakout gap above the top rail. Maybe we’ll get a backtest to the top blue rails before these two go higher but I wouldn’t count on it as these guys are mean reverting back to some kind of normalcy.

Last week we looked at a weekly chart for the GDX which showed a gap made during the 2013 impulse move down. This week the GDX has finally arrived at the gap area as shown by the two brown shaded rectangles. This is the point where we’ll want to watch how the price action interacts with the gap area. First, the bottom of the gap my hold resistance for awhile and we may see a ping pong move between the bottom of the gap at 30.65 and the horizontal S&R line at the 26.75 area. The other possibility is we may see a reverse symmetry gap over the 2013 gap. Interesting times to say the least.

Tonight I would like to update some of the precious metals stock indexes as they have been basically consolidating for the last couple of months. This has been healthy for this sector which has been on fire since the middle of January of this year.

The first chart for tonight is one of the laggards but you couldn’t tell it by looking at the daily chart. The $CDNX, which is a Canadian small cap index, is made up of  many precious metal and oil stocks. We’ve been following this one since it broke above the S&R line back in February. In March it built out its first consolidation pattern for its new bull market which was the blue expanding rising wedge. The blue arrows measures the first impulse move up. After the initial price objective was hit in early May the $CDNX built out another bullish consolidation pattern which was the bullish rising wedge. The price objective for the blue bullish rising wedge is shown by the red arrows. On Monday of this week there was a fairly strong backtest to the top rail but today’s price action has now cleared the top rail again after forming the red bull flag as the backtest. It’s always a good sign when you see a consolidation pattern sloping in the direction of the main trend.

The monthly chart shows just how low this index was when it finally bottomed out in January. While most of the other precious metals stock indexes have already traded well above their 2008 crash lows the CDNX is just now breaking above that important S&R line. There is a good chance we may see some reverse symmetry to the upside as shown by the red arrows. The decline out of the red expanding rising wedge was straight down with no consolidation patterns. Now it should be much easier for the CDNX to reverse symmetry back up over that same area.

This next chart is a monthly chart at the $GDM which shows the bull market years and the consolidation patterns it made. At some point we’ll see some type of consolidation pattern form that will take months to build out but for now the impulse move up remains in place. When that massive H&S top finished building out I called this chart, the reverse symmetry chart, as the rally out of the 2008 crash low was so steep. It’s not a perfect correlation but it gives you a feel on how the move may play out.

There is one other bit of interesting information on this chart as shown by the black rectangles. The inverse H&S bottom in 2000 is the same height as the 2011 H&S top. I put the same black rectangle on our 2016 bottom for comparison.  Unlike the 2000 and 2011 rectangles our 2016 rectangle has run much further. The other two formed their right shoulders which took over six months while our current rally hasn’t begun to correct yet.

The $XGD.TO has been one of the strongest of the many different PM stock indexes since the January low. It will most likely be the first one of the major PM indexes to test the neckline from that massive H&S top. This will be a good study in how it interacts with that very important trendline.

This next chart is a monthly look at gold and shows the rally to the bull market peak at 1920, out of the 2008 crash low. From that September high in 2011 gold has formed a series of lower lows and lower highs until five months ago. Note how the top rail of the bullish falling wedge has reversed its role to what had been resistance to now support. Also gold has made a new monthly high this month which is something it hasn’t been able to do since the 2011 high. The 10 month ema has also helped out in the support department during the backtesting phase.

I built out this next 20 year monthly chart right after the top was put in at 1920. I was looking for some reverse symmetry to the downside and built out the brown shaded support and resistance zones. The reverse symmetry down didn’t work out as well as I had hoped on the front end but the brown shaded S&R zone labeled #4, prove to be the bottom of the bear market. When gold was testing the 4th S&R zone I was looking for one last capitulation move down to the 5th S&R zone to complete the bear market. As you can see that didn’t happen. Now with gold making a higher high and a higher low, with the breakout from the blue falling wedge and support on the 10 month ema, gold found its bear market low at the fourth S&R zone.

I call this next chart for gold, Just Another Brick in the Wall, as it shows every consolidation pattern that was made during the bull market years. I know this doesn’t sit well with a lot of gold bugs, but when I look at all the beautiful consolidation patterns that formed during the bull market it looks like the work of a free market and not manipulation. If this market was manipulated we wouldn’t see such nice symmetrical chart patterns.

That was one magnificent looking rally out of the 2000 low, one consolidation pattern forming on top of the next. Note the breakouts and backetsts when each consolidation pattern finished building out. They’re hard to see but there are little green triangles that formed at the halfway point in each impulse move up. Note how similar our current breakout and backtest has been vs those during the bull market. Not every consolidation pattern had a backtest but the majority did. Is our current black expanding falling wedge a bigger clone to the one that was made at the 2008 crash low?

This next monthly chart shows just the bigger consolidation patterns that were made during the bull market years. Note how each consolidation pattern formed at roughly the halfway point in each impulse move up. It may not feel like it but gold is up over 100 points with one day of trading to go for this month of June. From a Chartology perspective this is a pretty as it gets.

This next chart is a ratio chart which compares the INDU:GOLD going all the way back to 1980. When this ratio is rising the INDU is outperforming gold and when it’s falling gold is outperforming the INDU. This chart shows a good example of the old expression, The Trend is Your Friend. During the bull market in the stock markets that began in 1980 or so, that was the place to be invested as the ratio was rising. Then in 2000 the bull market in the stock markets came to an end and a new bull market in gold began. Again, from the 2000 high the place to be invested was the gold complex until 2011.

As you can see the INDU outperformed gold starting at the 2011 low when the ratio was a 5.5 or so meaning, it took five ounces of gold to buy one share of the INDU. The rally out of the 2011 low looks like it maybe running out of gas it the H&S top plays out to the downside. If that happens will the ratio make it all the way down to the infamous 1:1 ratio where the INDU and GOLD are the same price? That has happened several times in the past with the last one being in 1980 when the INDU and GOLD were price around the 850 area. If we see the 1:1 ratio come to fruition down the road, it may signal a shift out of the PM complex. Just another piece of the puzzle to keep an eye on.

Lets switch gears and look at a monthly chart for silver which also shows some nice Chartolgoy. Silver topped out in April of 2011 a full five months ahead of gold. The bear market consisted of two consolidation patterns and one reversal pattern at the bottom of the chart. This chart should also give you some perspective of where silver is in its bull market.

I have time for just one more chart for tonight which will be the long term monthly look at the $XAU which goes back 20 years. Because this index is made up of both gold and silver stocks it actually made a new all time low in January of this year. That low didn’t last very long as the XAU built out a 5 point bullish falling wedge reversal pattern.

I have many more charts to show you but they’ll have to wait for this weekend. I hope these few charts show you the difference between a bull market and a bear market and how the trend is your friend until it isn’t. These trends can last a very long time before they exhaust themselves.Remember the first real correction will come at some point . It won’t be the end of the new bull market but it may feel like it.

All the best…Rambus

GLD is currently testing the top rail of its blue expanding flat bottom triangle completing the sixth reversal point. This consolidation pattern, that has been forming on the top rail of the seven point bullish falling wedge, is now in its fifth month. Once the price action can break the gravitational pull from that big three year falling wedge the next impulse move higher should begin in earnest.

It’s been awhile since we last looked at this combo chart which has the HUI on top and GLD on the bottom. I’ve labeled the most important trendline on this chart, the 2013 S&R LINE. That most important S&R line separates the bear market from the bull market. The black dashed vertical line on the left side of the chart shows where they both made a big gap down to start the three year S&R lines.The right side of the chart shows where the HUI and GLD broke back above that three year S&R line with GLD doing it in February and the HUI two months later in April of this year.

Think of the 2013 massive S&R line as your line in the sand. Knowing there is such an important line in the sand should make it much easier for you to ride out the chopping action that is inevitable. There is always pain in the markets because nothing ever goes straight up or down for that matter. That is one thing each and every investor has to deal with in their own way. This is my game play for the PM stocks I own and I expect some pain along the way.

This next chart is a combo chart which shows the three H&S bottoms for the HUI, GLD and SLV. Last weeks price action was very positive as it confirmed for me the necklines are properly placed by the way these three were tested again, for the second time, building out their right shoulders. We now know where support lies on the combo chart above and we now know where resistance is to be found on the chart below. Knowing where you’re at, at any given time, is important to know as it will easy some of the psychological baggage that affects everyone trading the markets.

Surprises in a new bull market come to the upside. Below is the daily chart we’ve been following for the HUI which shows the top rail of the blue expanding falling wedge being broken to the downside yesterday. We are still not of the woods just yet as we need to see the HUI take out the previous highs but this is a positive development.

The combo chart shows all three testing the underside of their respective necklines. To breakout above their necklines that would create a higher high which is what we want to see.

Below is a daily line chart for GDX which shows the backtest held on a daily closing basis. So far so good.

The daily chart for the GDXJ shows an expanding flat top triangle. I could have connected the top rail to reversal points one and three which would have given me an up sloping top rail. The reason I didn’t do that is because of where the breakout gap occurred and how the backtest to the horizontal top rail fits the pattern better. It’s always important to tweak your charts when you have new information to work with.

The CDNX has been leading the US precious metals stock indexes even though it’s not entirely made of small cap PM stocks. One thing I like about his index is that it’s showing speculative money flowing into the markets in general. When money is flowing into the small caps, investors are looking for a bigger bang for their buck which is positive overall.

The monthly chart for the CDNX shows it has finally broken back above the 2008 crash low which is a big deal.

Lets review some charts for the HUI and see where we’re at in the short to longer term horizons. Below is the 2 hour chart we’ve been following which shows the three brown shaded horizontal support and resistance zones. The HUI made an attempt to breakout above the top S&R zone but failed to follow through. The next area of possible support should come in at the previous S&R zone between 208 – 210 which is also the bottom rail of the possible uptrend channel. The lowest S&R zone between 182 – 187 is the most important area for long term support.

This next chart is a daily look which shows the top rail of the small expanding falling wedge giving way today which is not what I wanted to see on the very short term chart. This failure opens up the door for another reversal point to the downside to begin. Below the current price action are three possible areas of support, the 20 and 50 day ema’s with the 38% fib retrace at 183 or so.

This second daily chart for the HUI shows where I laid out a possible bigger trading range with the top at 235 and the low around the 190 area. This last rally up to the 235 area completed the second reversal point with the possible 3rd one to the downside beginning. When I laid out this possible scenario I said we had to see one more decline to complete a consolidation pattern of some kind. The fourth reversal point is always the hardest to spot in real time because it doesn’t show its self until after the fact.

Below is another daily chart we looked at recently which shows the potential bullish set up with the rally off the January low being the flag pole and the flag which is currently in the developing phase right now.

Lets look a few longer term charts to put everything in perspective. This first weekly chart shows the rally out of the January low this year and the blue trading range that is developing between 190 and 235. From a long term view this looks like a good place for the HUI to catch its breath and consolidate the massive first impulse leg up.

This next weekly chart for the HUI shows that important S&R line which I labeled the 2013 S&R line, as it held on the last backtest from above so we know it’s hot. The 20 week ema is also moving up to the 2013 S&R line and should help with support.

Next I would like to show you a couple of combo charts which has the HUI on top, Gld in the middle and SLV on the bottom. This first combo chart we’ve been following for a very long time which shows the big three year falling trading ranges finally breaking out to the topside this year. This chart gives you a sense of how close all three are trading to the top of their recent move up.

This next combo chart shows how all three may very well be forming a very large inverse H&S bottom. All three have been testing their respective necklines from below  for several months now. The black vertical line shows where they all began to build out their possible H&S bottoms.

Below is the long term monthly chart for the HUI for perspective. It looks very possible that the HUI may be building out a consolidation pattern between roughly 190  and 235 or so. For those that want to try and trade this consolidation area have some decent lines in the sand in which to place your sell/stop. If you short up here you can use the top of the range at 235 or so to place your sell/stop. You can then take profits at the bottom of the trading range and reverse to the long side just under the 200 area. The main thing is not to get greedy at the bottom. There are no grantees it will play out exactly like this but the trading range looks like it’s still developing which is a good thing in the bigger picture.

This is also a good place to decide if you want to take a few chips off the table up here, as the HUI is only about 12 points or so from its first impulse move high. This has to be a personal choice on how you want to play this new bull market. Probably for most folks it would be wise to hold on for dear life but for some of you, trading these trading ranges may be the way to go. For the time being I’m going hold on to my positions and let the trading range develop further as I know there will be some pain to come. This is my personal choice.