There are two patterns I’m watching very closely in here on the HUI which will be a proxy for the rest of the PM stock indexes. This first chart is daily chart which shows the three small consolidation patterns that have formed since the January low. The top pattern basically completed its fourth reversal point today which is an expanding falling wedge. One of two things will most likely happen tomorrow. If this is the correct consolidation pattern then we will most likely see a breakout gap above the top rail which should lead to the next impulse move up. The second scenario would be to see the top rail hold resistance and a move down to the bottom rail of the expanding falling wedge where the 38% retrace would come into play around the 183 area. This pattern is complete except for the breakout.

Below is another daily chart we’ve been following which shows a possible bigger consolidation area forming with the second reversal point coming into play at the top of the trading range. If and that is a big if, if the top of the trading range does hold resistance then we’ll need to see one more decline toward the bottom of the trading range to complete the 3rd reversal point, which would then setup the all important area to begin the fourth reversal point back up to the top of the trading range to complete whatever consolidation pattern develops. We won’t know what pattern we have until we have the four reversal points in place. As bullish as this sector seems right now it’s hard to imagine that big gap getting filled but it’s a possibility. There are no laws though that says the gap has to get filled, it’s just that most of the time they do get filled at some point.

This next daily chart for the HUI would be the most bullish pattern we could ask for. The initial rally that began at the January low to the April high could be called a flag pole. Whatever consolidation pattern we get starting from the April high would be called the flag. The blue trendlines shows the two most likely patterns that may form the flag. I’ve also added a horizontal dashed line at the top and bottom of the trading range that would show a rectangle. So there is a possible triangle, falling flag or rectangle that could form the flag. The most important thing to watch right now is what happens up here at the top of the trading range.The blue arrows would measure the halfway point from where ever the last reversal point takes place in the bull flag. The higher the last reversal point the higher the price objective.

If the HUI gaps up big tomorrow morning then the first chart we looked at, the expanding falling wedge, will most likely be the next consolidation pattern that leads the next impulse move up. The bottom line is to be prepared for either scenarios.

I’ve been watching the $CDNX for clues also, which may have given us a big one today. I wanted to wait for the end of the day to see if the price action held above the top rail of its small blue rising wedge. It did and closed at the high for the day. The blue bullish rising wedge would equate to the first pattern we looked at on the HUI which was the falling expand wedge.The blue arrows measures the first impulse move up that was separated by the bullish expanding rising wedge as the halfway pattern. The red arrows measures the second impulse move up if the blue bullish rising wedge works out as a halfway pattern. The rally would probably last four to five weeks before the price objectives are reached. Again have your favorite PM stocks ready to go in case this scenario plays out.

Lets get right into the charts tonight as last weeks price action showed a possible inflection point in the US dollar, precious metals complex and the stock market indices which I pointed out in the Wednesday Report I did last Tuesday. While the US dollar was strongly testing the bottom of its 14 month trading range gold had been consolidating in an almost four month rising flag formation. These two were at critical support areas on their daily charts which suggested one support area was going to hold while the other would most likely give way. As it turned out gold was the one breaking support while the US dollar, with a false breakout through the bottom of its big trading range, reversed direction and rallied strongly telling us the false breakout was indeed a bear trap.

I know some of you are wondering, how could I change my mind so fast. Inflection points are just that which is a place on a chart where the price action can break either way signaling a continuation of the prior move or a reversal. Up until the inflection point  shows its hand the prevailing trend has to be respected which was up on gold and down for the US dollar. Once an inflection point shows its hand I’ve learned not to fight it and go with the new trend regardless of how bullish or bearish I might have been. The charts are always right but It’s the interpretation of the charts which can be hard to understand sometimes so when they change I have to change as well.

Lets start with the daily chart for gold which I’ve been showing has been building out a rising flag formation over the last four months or so. The rising flag was actually pretty symmetrical except of the small false breakouts of the top and bottom trendlines. The last time we looked at this chart I pointed out that it had completed five reversal points so far which makes it a reversal pattern to the downside. I also said that a possible sixth reversal point could form at the bottom trendline which would then put the rising flag back into the consolidation pattern camp if it could rally back up to the top rail.

A rising flag or wedge, that slopes in the same direction as the current trend, can be one of the most powerful formation in Chartology. Looking at gold’s rising flag you can see each reversal point made a higher high and higher low which is bullish. I can almost guarantee that most folks seen something different than a rising flag formation as the possible consolidation pattern or even a reversal pattern for that matter. How the price action interacts with an important trendline is very important to understand as it lets you know if the trendline is hot and to be respected.

I’ve added a red circle around the breakout area through the bottom rail of the five point, now I can call it, a bearish rising flag. Note the last touch of the bottom trendline just before the breakout which shows gold got a small one day bounce which told me the bottom trendline was properly placed. That one day pop then led to the drop and breakout which occurred four trading days ago, last Tuesday with a big long daily bar. Up until that point the rising flag was still in play as a possible consolidation pattern. The breakout through the bottom rail now confirms a the rising flag as reversal pattern that has five reversal points. A backtest to the underside of the rising flag would take place around the 1250 area if we get one. Also one more important point to make on this daily chart is that gold closed below the 50 day ema which had been doing a great job of holding support during this strong move up in gold. As you can see it’s now starting to roll over to the downside. The next area of possible support will be the previous high at the 1190 area.

Now lets look at the daily chart for the US dollar we’ve been following which shows it had a false breakout through the bottom rail of its 14 month trading range only to close back above the bottom rail negating the breakout. The US dollar has continued to rally and broke out above its next area of resistance, the top rail of the blue downtrend channel. What is important to note here is that the US dollar hasn’t completed its fourth reversal point yet. It’s on its way but until the top rail is hit around the 100 area we can’t  confirm the 14 month trading range is in fact a rectangle consolidation pattern. This daily chart for the US dollar is another reason I decided to go to cash in the precious metals complex. Note the blue bullish rising wedge which formed roughly at the halfway point of the big impulse move up that started in the middle of 2014. That’s a similar pattern to what I had hoped gold would complete.

As we know, how the US dollar generally behaves, has a direct impact on the precious metals complex and how other currencies trade has direct impact on the US dollar. Lets look at several of the more important currencies of the world and see what has been developing on their respective charts starting with the $XEU.

As the XEU has the biggest weighting in the US dollar index it will have the closest look to the greenback of any other currency. If the US dollar is building out a consolidation pattern the XEU will generally have an inverse looking pattern. The weekly chart below shows the XEU building out a sideways trading range similar but inversely to the US dollar. Like the US dollar, it’s working on its all important fourth reversal point to the downside which won’t become complete until the bottom trendline is hit.

Next I would like to show you several long term monthly chart for the XEU, we’ve been following for several years, which shows two different bearish setups. This first monthly chart shows the massive double H&S top with a ping pong move taking place between neckline #1 and neckine #2 which is building out the 14 month trading range. Since the red trading range is forming in a downtrend, the odds favors the breakout will be to the downside.  The upper H&S top has a price objective down to the 84.90 area which is close to it previous major low which formed the inverse H&S bottom back in 2001.

This next long term monthly chart for the XEU shows a different look but with bearish implications if the blue horizontal trading range gives way to the downside. As you can see the XEU topped out in late 2008 and has been trading in a well defined downtrend channel. If the blue trading range is going to be a halfway pattern to the downside then the current bottom rail of the downtrend channel will give way and many times a lower channel will develop of equal size to the upper channel as shown by the black rectangles labeled measuring sticks.

Below is an example of how a doubling of a channel can take place. Most probably won’t remember this chart for the US dollar but I showed how the lower channel may double in size when the US dollar was building out the blue bullish rising wedge right on the top rail of what was the lower uptrend channel at the time. With the blue bullish rising wedge forming where it was it became clear to me that if the rising wedge broke out to the topside there was a good chance the bottom channel would double as shown by the blue rectangle measuring sticks. The price objective for the top rail of the upper trend channel was 98.60. An interesting side note. Notice how the top rail of the original uptrend channel, blue dashed trendline, held support for the US dollar at its most recent low.

This last chart for the XEU is a daily line chart in which I overlaid gold on top of the XEU. It’s not a perfect correlation as sometimes they can invert but on the whole if the XEU is declining or rallying so is gold. If the trading range on the XEU does indeed break down there is a good chance that gold may follow. No guarantees though just probabilities.

Another very important currency that can affect gold is the $XJY, Japaneses Yen. Below is another very long term weekly chart for the XJY we’ve been following for years now which shows the massive H&S top which reversed its bull market. Again, some of the longer term members may remember when the yen was interacting with the big neckline after forming the second red triangle which was building an even bigger bearish falling wedge. The two green circles shows what I called at the time, reverse symmetry gaps, one on the way up and one on the way down. The one on the way down was the breakout gap below the massive H&S top neckline.

Late last year and earlier this year the yen formed what I called a seven point inverted roof reversal pattern. Measuring the width of the inverted roof pattern gave me a percentage move at a minimum of 8.7% from the breakout point. As you can see the price objective came right in line with the big neckline which is labeled as the NECKLINE EXTENSION RAIL. So far the neckline has done its job of holding resistance which is an important line in the sand. If the yen can trade back above the big neckline that would be a bullish development but until that point is reached the neckline is resistance.

This next chart for the yen is a 35 year monthly look which has some nice Chartology on it. The main feature on this long term chart is the ten year five point triangle reversal pattern. Since the triangle formed below the previous high it had to have an odd number of reversal points to reverse the downtrend at the time. Over that long term time span the yen built out two red bullish rising wedges and one red bearish falling wedge. The very top of that bull market was marked by the multi year H&S top. Note the backtest to the bottom rail of the five point triangle reversal pattern that occurred last month.

Below is a daily line chart in which I overlaid gold on top of the $XJY. Again, it’s not a perfect correlation but close enough that one needs to pay attention. I’ve added two support and resistance lines. The brown one shows gold breaking below its S&R line and the black one which shows the $XJY breaking below its S&R line.

This next chart is a long term weekly chart in which I overlaid the $XJY on top of the HUI so you can see how these two tend to preform together. This chart looks a little busy but the HUI is in red and the XJY is in black and shows how they both built out massive H&S tops to reverse their bull markets back in 2011.

This next currency I would like to show you is the $XSF, Swiss Franc, which has been doing a laborious backtest to the neckline and has formed a red six point rising flag. A break below the bottom rail will complete the consolidation pattern and will usher in the next move lower if the breakout takes place.

Below is a daily line chart in which I overlaid gold on top of the Swiss Franc which shows a similar correlation to the other currencies we looked at. What got my attention last week was when gold, on the daily line chart, broke below its support and resistance line while the XSF declined in a similar fashion.

The weekly chart for the CAD, Canadian Dollar, shows its massive H&S top which reached its price objective down at the .72 area. The CAD threw me a curve ball as it initially broke below the bottom rail of its blue bearish falling wedge only to reverse direction with a strong rally. Since the price objective has been hit it’s now time to see what develops as far as a reversal pattern or another consolidation pattern.

The Canadian Dollar has been one of the stronger currencies since the January low. Initially it bounced off the multi year support and resistance line as the pop and then the drop through that very important trendline with a clean backtest about four months later. It then, what looked like the start of its next impulse move down, failed to deliver. The CAD bottomed about the same time as gold in January of this year and had a very strong rally that took the price action back above that mulit year S&R line which looked like it was failing. As you can see the CAD is now trading back below that very important horizontal S&R line which is negating the previous months move. Again we have a very important line in the sand to keep a close eye on.

The long term look for the $XAD, Australian Dollar, shows it too completed its massive H&S top price objective down to the 66.75 area. It then formed what looked like a double bottom and broke out above the double bottom trendline only to decline once more below that small but important line in the sand. So now we wait and watch to see what develops.

The very long term monthly chart for the XAD shows its massive H&S top and a series of lower highs and lower lows.

Lets look at one last currency which is the $NZD, New Zealand Dollar. This long term weekly chart shows it has been building out a blue rising wedge and if broken to the downside will create a bearish rising wedge which may bring the 2008 crash low back into the picture.

The monthly chart for the NZD shows some nice symmetry taking place which is forming a possible big H&S top. The head is a double top with the left shoulder forming a bull flag while the right shoulder may be forming a bearish rising wedge. Note how the neckline symmetry line came pretty close to showing us the height of the right shoulder. As this is a monthly chart there is still a lot of work to be done yet but the basic H&S top is beginning to show itself. One to keep a close eye on.

The first chart I posted tonight was a daily bar chart for gold which showed it breaking down form the five point bearish rising flag formation. Below is a daily line chart which shows a clearer picture of the bottom of the four month trading range. Until gold broke below that bottom rail it was still all systems go. Now we have a broken S&R line in place which is not what you want to see happen in a strong move up. The S&R line is now our line in the sand, below is bearish and above is bullish. It’s possible we could see a bigger consolidation pattern start building out once we see what happens at the brown shaded support and resistance zone between 1170 and 1180. If that area gives way we’ll have a bigger correction on our hands to deal with.

It’s been about six months since I last posted this long term monthly chart for gold which we followed since I first built it back in 2013. This chart is based on the H&S consolidation pattern neckline which formed at the 2008 crash low. After the major top was put in in 2011 I extended the neckline to the far right hand side of the chart labeled, neckline extension rail. Even tho I’ve been bullish on the PM complex since February of this year, this chart always caught my attention when I would go through all my gold charts. As hard as gold tried it couldn’t break out above the neckline extension rail and ended up forming the five point bearish rising flag instead on the daily chart. Is gold throwing us a massive curve ball completing the second back test to the massive H&S neckline? Is the capitulation move I was looking for finally going to take place? I’ve shown the price objective down to the 685 area as measured by the potential H&S top. Again we have a very clear line in the sand at the 1300 area, below is bearish and above is bullish.

With the way many of the more important currencies of the world are trading I can’t rule out a strong move down for the PM complex. It’s the charts that are speaking and not my opinion because if it was up to me I would much rather see a bull market to trade than a bear market. We have our lines in the sand which should keep us on the right side of the PM complex going forward. When the lines change so do I. There are still some important trendlines that have been offering support that I’ll be watching very closely for more clues. Have a great Memorial Day and all the best…Rambus

PS: Below is a daily chart for the GDXJ which shows it closed right on its possible neckline last Friday after putting in a small double top.

We’ll be leaving for home sometime tomorrow afternoon so I won’t be able to do a Wednesday Report. By the movements in the markets, today is actually a better day to do a Wednesday Report.

There are several times a year when the markets gives you an important inflection point.  Today I believe we just witnessed one in regards to the PM complex, the US dollar and the stock markets. Even though the US dollar didn’t have an extremely big up day it did show its hand by breaking out of a downtrend channel while the PM complex had a tougher day breaking down from a small topping pattern we looked at earlier today. Also the stock markets had a very good day to the upside with some completing small double bottoms or falling wedges.

As the US dollar is the key driver going forward lets take a look some charts which are showing it has likely bottomed and is reversing back up. Below is a daily chart which shows the one plus year trading range. We’ve discussed in the past that a false breakout, of an important trendline, can lead to a big move in the opposite direction. Remember the false breakout the HUI and other precious metals stocks had back in January of this year that led to this massive rally we’ve enjoyed up until today? I believe we are seeing the same thing taking place on the US dollar right now. One has to respect the breakout but when the price action trades back above the breakout point the breakout in negated.

This daily chart also shows another reason why I believe the US dollar has bottomed. It just recently broke out above the top rail of its blue downtrend channel and looks like it had a short and sweet backtest. As I explained earlier today on the possible consolidation pattern that maybe forming on the HUI, there has to be four completed reversal points, at a minimum, before we can conclude we have a consolidation pattern. As you can see on the US dollar chart below it has completed three reversal points so far with the possible fourth reversal point just beginning. The fourth reversal point won’t be complete until the price action reaches the top of the trading range, around the 100 area.

This next chart puts the one plus year trading range for the US dollar in perspective. There were nine white candlesticks that formed the massive impulse move up when the US dollar finally broke out above the massive bases. We still have a few more days to trade  for the month of May but it looks like the US dollar will most likely form a white candlestick. In and of itself it’s not a big deal when a consolidation pattern is still building out but it is something to keep an eye on. Also when looking at this chart from 35,000 feet, with the big base in place and the current trading range building out, we have to respect the potential outcome when all is said and done. The potential outcome could still be a double top if the price action begins to fail fairly soon but when I look at the massive base it looks like a  consolidation pattern seems like the probable outcome. Keep in mind we could see several more reversal points build out before the possible consolidation pattern is completed.

Below is a 35 year chart for the US dollar showing the two fractal bases labeled BIG BASE #1 and BIG BASE #2. Back in the mid to late 1990’s the US dollar built out a big blue bullish rising wedge as a halfway pattern that took roughly three years to complete. That major uptrend finished off with a H&S top which was the beginning of the bull market in the precious metals complex. As you can see our current uptrend channel is less steep than the 1990’s which could take several more years to build out. The big question for me is how well will the PM complex do during this consolidation phase in the US dollar? We will most likely get our answer if or when the US dollar trades back up to the top of its trading range. In the meantime as the US dollar consolidates so should the PM complex as both are reversing direction right now.

This next chart is a weekly combo chart with the US dollar on top and gold on the bottom. As the US dollar has been consolidating sideways gold put in a nice low right on top of the 2008 highs at the 1035 area, brown shaded support and resistance zone. You can see gold’s red rising flag that we’ve been following on the daily chart that has formed above the top rail of the multi year falling wedge. Both the US dollar and gold are at critical inflection points right now.

Below is the daily chart for gold we’ve been following which shows the rising flag that had created five reversal points. The breakout below the bottom rail is the main reason I exited half of the mining shares today. Gold still had a chance to bounce off of the bottom rail to start the possible sixth reversal point to the upside but that was not the case. With five reversal points in place gold now has a five point reversal pattern which is a bearish rising flag. Gold also closed below the 50 day ema for the first time since this impulse move up began.The next possible area of support may show up at the previous high at the 1190 area. The bottom line is we now have a reversal pattern in place which has to be respected regardless of what we may think. With the way the US dollar is looking now, there is a good chance I will exit the reaming shares tomorrow now that the dust has settled and we can see more clearly now.

I’m going to post this part of the Wednesday Report now and will do another post after while on what the stock markets are saying. I know most don’t want to trade the stock markets but while the PM complex is consolidating the stock markets may offer us a good trading opportunity for the time being.

PS: So many charts to look at tonight I forgot to post this long term chart for the US dollar I haven’t posted in quite awhile. The US dollar is finding support on the top rail of the 30 year bullish falling wedge and the neckline extension rail taken from the previous H&S top. It’s hard to argue with what this chart is suggesting.

Below is the two hour chart for the HUI which shows the horizontal S&R zone around the 210 area which is being strongly tested this morning. If you look real close you can see a gap below the S&R zone this morning which I didn’t want to see. This is the first time since the bull market began in mid January that the price action is close to trading below a previous low.  The next area of critical support is the 182 to the 187 area.

This next chart is a daily look at the HUI which shows two completed consolidation patterns with the third one testing the critical bottom rail of the flag formation. Today’s price action is trading below the 20 day ema with the 50 day simple moving average coming in at the 200 area. I’ve also added the fib retracements which shows the 38% retrace at 183 or so which is the second area of support on the 2 hour chart above.

So far, since this bull market began in mid January of this year, we have yet to see a real consolidation pattern develop of importance form.. This daily chart below shows you where I would expect a consolidation pattern to form  based on the current information we have. In the bigger picture this would be a healthy development and not hurt the bull market in anyway.

In bigger consolidation patterns you will normally see some type of reversal pattern form at the reversal points. Sometimes they are hard to spot in real time but in hindsight they will usually show up pretty clearly. On the daily chart below  I’ve added the possible new trading range or consolidation area with what now looks like a small double top with a breakout and backtest completed. The double top measures out to the 190 area which would be an area to look for  the second reversal point to show up. Based on the lower brown shaded S&R zone, on the two hour chart above, and the fib 38% retrace down to the 183 area, should offer some solid support. For the time being I’m going to call the top in the possible new trading range or consolidation area at 235 and the bottom at 180 or so. What type of consolidation pattern that may build out is still not known yet as the HUI has just started to consolidate the first impulse move up. The consolidation pattern could be a triangle, rectangle, flag or wedge.

Bigger trading ranges like this can be traded if one doesn’t get too greedy. We should see some type of reversal pattern develop at the lower boundaries of the trading range between 180 and 190 or so.

Below is the daily line chart we’ve been following which shows the current S&R line being strongly tested today at the 205 area. If this area gives way then the lower S&R line at the 182 area comes into play which is also the 38% fib retrace of the bull market.

The weekly chart below shows the three year S&R line going back to April of 2013 which comes into play at the 205 area.

For the time being I’m going to hang on and see what happens if this possible first consolidation pattern begins to build out between 180 and 235. It will be somewhat painful but that is the nature of a consolidation pattern, to inflict as much pain as possible before the next impulse leg up can begin. Some of you who have some decent profits may want to take a few chips off the table and see if you can reenter at a lower price. Normally though it seems like one always pays a higher price up to get back in again.

If this is really the beginning of a bigger consolidation pattern the volatility will be very strong in both directions until the pattern is complete. Also keep in mind in a trading range we’ll have to see a minimum of four reversal points so even if we see a reversal down at the 180 area we’ll have to see another rally followed by one more decline to complete the minimum requirements of a consolidation or continuation pattern.

Earlier this morning I told Sir Fullgoldcrown that my wife and I were going on a short road trip to Atlanta GA to see her nephew get married this weekend. I also mentioned that when I usually plan something like this the markets always seem to go against me until I get back. At that time the HUI was only down a couple of points. It’s kind of funny that I hardly got the email written and then the plunge in the PM complex. Murhpy’s Law it seems.

Anyway, there are some interesting charts to look at which I haven’t shown you yet, as I was waiting for more price action before I posted them, but tonight seems like as good of time as any to show you a few of them.

This first chart for Gold is one that I have shown you which is the rising flag formation, which has been in place since the first of February. The rising flag has completed four reversal points so far and is working on its fifth, which will be complete when the bottom rail is hit around the 1235 area. At that point gold will have completed five reversal points which would make the rising flag a reversal pattern to the downside. That’s the bearish side of the equation.

The bullish side of the equation, which I’m still leaning towards, would be for gold to find support at the 1235 area, and then reverse direction to the upside, creating a sixth reversal point, building out a bullish rising flag which I would view as a halfway pattern. So far the red 50 day ema has done a good job of holding support during this consolidation phase. The first signs of trouble would be if gold breaks below the 1235 area which would then bring up the old high at 1190 or so.

The weekly chart for gold shows the three year seven point bullish falling wedge with a breakout, and one backtest to the top rail. If we happen to get a second backtest it would come in around the 1190 area where the 55 week ema comes up to join it.

This monthly chart for gold shows the 10 month ema offering support at the 1200 area.

As long as the bottom rail of the bull market uptrend channel, which began to form back in 2001 remains unbroken, I will be a bull, and if it breaks then it’s back to the drawing board.

Lets now take a look at a daily chart for silver which is showing a potential H&S top. Near term support comes in at the top rail of the blue bullish rising flag and the 50 day ema at 16.47 or so. It’s not the prettiest H&S top I’ve ever seen, but if it plays out it will have a price objective down to the 15.87 area.

This next one year daily chart for silver has a brown shaded support and resistance zone which comes into play between 16.00 and 16.20, which should act as support if it’s reached.

Just over a month ago silver broke two important areas of resistance, the top rail of its bear market downtrend channel, and the neckline of an inverse H&S bottom. A backtest to both trendlines would be at the 16.00 area. Note the big two year H&S consolidation pattern that formed during the 2008 crash low, which led to the parabolic move up to the 50 area.

This last chart for silver is the long term monthly look which shows its bull market uptrend channel that began to form back in late 2001. The bear market downtrend channel stands out like a sore thumb that transverses between the top and bottom rails in a nice parallel downtrend channel. Silver also formed the blue five point bullish falling wedge reversal pattern at the end of its bear market, which is a good place to see such a pattern.

Next lets look at the $XAU which has two different reversal patterns for its bear market low. This first chart is a weekly look, which shows a five point expanding triangle reversal pattern. Some of the long term members may remember the big eight point blue Diamond consolidation pattern that seemed like it would never complete. Then there was the H&S consolidation pattern that formed below the blue Diamond which ended up being the last consolidation pattern in the five year bear market.

The $XAU also formed another reversal pattern which is a five point bullish falling wedge. Today the price action landed at the top of the big falling wedge, and the top rail of the potential blue bullish rising flag, which comes in around the 82.60 area. From a Chartology perspective this is an important area to keep a close eye on.

Next is a weekly chart for the GDX which shows a similar setup to the $XAU chart. It took a lot of work for the GDX to breakout above the brown shaded support and resistance zone, which it’s now in the process of backtesting from the top side. There is also the potential blue bullish rising flag which formed as the backtest to the five point black expanding triangle. The 22.95 area is an important area to watch for support.

Next up is the weekly chart for the GDXJ which also formed a bullish falling wedge as its bear market reversal pattern. The GDXJ formed a six week blue bullish rising wedge which broke out to the topside. The current and possible consolidation pattern is still only on week number four, so a little more backing and filling would be normal at this point.

Just like gold and silver the long term chart for the HUI shows it to is in a nice secular bull market uptrend channel. The HUI has been finding some resistance at the apex of the blue triangle around the 230 area. It stands to reason that a rally like the HUI has had since the middle of January of this year, a little backing and filling should be expected, nothing goes straight up forever.

Lets end this Wednesday Report by looking at the Combo 10 chart which is showing some pretty impressive price action by most of the PM complex. Use the red arrow as a reference point, which shows the bottom of the 2014 consolidation area for most of these indexes, with the black arrows showing the top of the consolidation areas. What is so impressive is how most of the PM stock indexes have rallied above their respective red arrows, which would have offered strong resistance during the bear market years. The two strongest of the PM stock indexes still remain the XGD,TO and the GLDX, which have broken above their resistance line as shown by the black arrows. The SILJ has made a strong run up to the top of its 2014 trading range, and is taking a break in the action. Silver still remains the weakest sector within the precious metals complex, as it has still failed to close above it’s 2014 horizontal resistance line, red arrow. Looking at gold and the rest of the PM stock indexes you can see they have rallied strongly into resistance, which is the middle of their 2014 consolidation patterns. That is a lot of overhead supply that has to be eaten through.

Today may have felt like the end of the world for most folks, but from a Chartology perspective, this is normal price action in a new bull market. Two steps forward and one step back should be expected.

As I mentioned in the first paragraph I’m going to be on the road for the next week. I will have my laptop and will post when I get some time.  All the best…Rambus

Below is the daily line combo chart we’ve been follow for quite awhile now which has four of the US stock markets on it. A week or two ago I posted this chart which was showing a possible H&S top forming on the INDU and the SPX. I drew in a horizontal neckline for starters because there wasn’t a right shoulder arm pit yet. I haven’t tweaked the possible necklines yet so you can see how this potential H&S top is building out. Thee QQQ on top shows the red expanding triangle which broke down with the bottom rail getting backtested earlier this week. The RUT is still inter acting with the top rail of the black expanding falling wedge and the bottom rail of the red rising flag that has completed seven reversal points with a false breakout above the top rail.

Below is the now updated combo chart which is showing the RUT, INDU and the SPX forming a H&S top with all three testing the neckline at the moment. The potential H&S tops all formed above the top rail of their bigger one year black falling patterns which would now show a false breakout. To get bullish again I would have to see the price action trade back above the right shoulder high. Until that happens a defensive posture is warranted.

Below is a long term weekly chart we’ve been following which shows the breakouts and backtesting that have been going on for several months with gld and slv, and just 5 weeks or so for the HUI. This big picture look from 35,000 feet shows how infant this new bull market is right now. It was basically born back in January of this year and is just opening its eyes. What we want to see now is a higher high in the coming days and weeks.

When looking for support and resistance many times I will build out a horizontal zone which will generally have several previous highs or lows depending on what direction the move is taking place. For instance, on the HUI two our chart below, the previous small tops that formed in April shows the latest brown shaded S&R zone which comes into play between 208 and 210. There was another brown shaded S&R zone that worked well with the March highs as support. If the 2008 to 210 S&R zone gives way then I’ll be looking at the March S&R zone for critical support. If that one gives way then we’ll know a bigger correction is in order.

This next chart for the HUI is a two year daily line chart which shows how the reverse symmetry is building out. The blue circles shows how the price action hit the horizontal support and resistance line and then built out a small consolidation pattern just below it  before the breakout. This is perfect Chartology. This rally off the January low has been very strong and near vertical. The failure of the price action to reach the top brown shaded S&R zone between 245 and 250 suggests it needs a rest which it has been doing by correcting down to the previous S&R line at 208.

I know it’s not fun to be in the markets when the inevitable pull backs take place but that’s part of the game. Having a game plan and an idea of where to look for possible support makes riding the corrections out much easier. When one is in the dark with no idea of where possible support may show up, that’s when emotions will take hold, making you do something you might not want to do. For the time being the new trading range now exists between roughly 200 and 250 where anything can happen in the short term which will be just noise.

Below is a shorter term daily bar chart which shows the two brown shaded support and resistance zones. The 50 day ma has now risen up to 188 which should offer some support if needed.

This next daily line chart for the HUI shows the massive H&S top that led to the five year bear market and the double bottom that ended the bear market. Note how the apex of the blue triangle showed resistance on the initial hit at 235 which then led to the decline to the lower S&R line at 208 or so. This may be a good place to see some ping pong action take place between 235 and 210 which may end up forming some type of consolidation pattern which would be healthy. The 200 day moving average is still pretty low but it has turned up strongly. This chart also gives you a feel for the magnitude of this impulse move up.

The weekly chart below shows what I would consider to be the worst case scenario which would be a complete backtest to the top rail of the black expanding downtrend channel and the top rail of the blue expanding triangle reversal pattern at 180 or so. The 180 area would also represent a fib 38% retrace of this first impulse move up. Will the HUI go that low? I don’t know but I’m prepared mentally if it does.

Below is the two year daily chart we’ve been following very closely. Last week the price action broke below the bottom rail of the small red bear flag that formed right on top of the brown shaded support and resistance zone. That little red bear flag has given the UUP the energy it needed to break below the S&R zone. Note the gap below the bottom of the S&R zone. The brown shaded S&R zone may also be the double top hump which should now reverse its role to what had been support to now resistance if the double top is going to play out to the downside. It’s still possible we could see a backtest to the underside of the S&R zone between 24.20 and 24.45 that should now act as critical resistance.

The other very important feature of this two year daily chart is the possibility that we could see some reverse symmetry to the downside. Note the eight month impulse move the UUP made from July of 2014 to March of 2015 which was nearly parabolic in nature. Longer term members will remember how we tracked that big impulse move up and how many small consolidation patterns formed a rising wedge or flag which is the sign of a strong move when they slope in the same direction as the trend and not against it. If the PM complex and commodities are going to have a strong rally it will be because the US dollar will be in a strong impulse move down. We now have a very clear line in the sand as shown by the brown shaded S&R zone between 24.20 and 24.45. Above will be negative for the PM complex and below positive.

The weekly line chart shows the double top in place with a breakout and backtest to the double top trendline. A reversal pattern always has an odd number of reversal points so a double top or bottom will have at least three reversal points. This weekly line chart also shows how steep that impulse move up was in 2014 and 2015. This is the kind of setup to see reverse symmetry down over the same area as the rally. As you can see there were only a couple of weeks that were down over that eight month rally so there isn’t much in the way to halt a decline once it gets going.  Again the double top trendline is our line in the sand for the PM complex and commodities in general.