Below is a weekly chart for the $SOX which is under going an important breakout and backtest of the one year blue triangle consolidation pattern. Reversal points #2 and #4 were both double bottoms for the blue triangle which formed on the 13 year S&R line at 545. The next area of overhead resistance will come in at the previous high at 690 or so.

The monthly chart shows why the 545 support and resistance line is so important to the big picture. It extends back in time 13 years or so when the blue 5 point flat top triangle reversal pattern formed and broke to the downside. The support and resistance line  then reversed its role to support once the SOX broke back above it in 2014. There is also some nice Chartology on this long term monthly chart as shown by the 10 year bullish falling wedge. Note the little red bull flag that formed just below the top rail right  before the breakout and then the blue triangle that built out as the backtest. This sector has lagged some of the other areas within the technology sector but it may play catch up going forward as long as the S&R line at 545 continues to hold support.

Today I would like to show you some more charts on some if the different stock market indices we looked at in the last Weekend Report. Last weekend we looked at alot of the bull market uptrend channels that are still in place since the 2009 crash low. It’s always important to keep an open mind no matter how strongly we believe things to be when it comes to the stock markets. Everyone can’t get in at the bottom and everyone can’t get out at the top and then there is the consolidation phase that trips up both the bull and the bears alike.

Lets start with a daily chart for the INDU which I’m showing a large trading range that began during last August’s big decline labeled with the red #1. The INDU then rallied back up to the 17,950 area, red #2, and started to form that seven point bearish falling flag which I thought was going to be a bull flag until the price action broke below the bottom rail which led the the second low in January and February of this year which formed a double bottom, red #3. The INDU has rallied strongly again and is within 435 points of reaching the top of the trading range again. Just for argument sake, if the INDU reaches the top of the trading range it will have  completed the third reversal point at 17,950 which would be an odd number of reversal points creating a possible big double bottom. Keep in mind this is only one scenario at this time and there is a lot of work to do before we can even begin to call the price action a double bottom.

Below is basically the same chart as the one above which has the moving averages on it. This past week the 20 day ema crossed back above the 200 day simple ma with the 50 day ema now rising strongly. During big trading ranges like this it’s not uncommon to see them cross back and forth before either the bulls or the bears setup the next impulse move out of the trading range. Once that happens they will get a nice alignment to them that will show the impulse move.

This next chart is a weekly look at the INDU which shows an even bigger trading range going back over two years. It’s not the cleanest trading range I’ve ever seen but the brown shaded support and resistance zones, as large as they are, have held on multiple test. As strongly as the bears have tried they have not been able to move the INDU below the bottom of the support zone on numerous occasions starting way back in 2014. No matter how bearish things become, when the price action is trading down in the support zone the bulls manage to find a way to rally the INDU higher. The same thing is happening at the top of the big trading range at the resistance zone. One slight advantage the bears have right now is they have created a lower high at reversal point #3 which maybe deceptive as I’ll show you in a minute.

I know many don’t see this next daily chart for the INDU as a possible outcome but regardless of what I may think or anyone else for that matter a setup is taking shape that could blow the roof off the INDU. Last week the INDU tested the top rail of a possible triangle consolidation pattern and backed off a bit telling us it’s hot and to be respected at this point in time. This is a critical inflection point for both the bulls and the bears. The bears need to reverse the price action and create another leg down and complete the 5th reversal point which would make this a triangle reversal pattern to the downside. On the other hand if the bulls are in control they should be able to move the INDU above the top rail creating a triangle consolidation pattern to the upside. Again this scenario is still on the table with no confirmation in either direction yet but it gives us a road map we can follow which is better than no road map at all. This big trading range is going to be one of two things a consolidation pattern or a reversal pattern.

I would like to show you how this possible triangle consolidation pattern fits into the big picture of the bull market that began at the March 2009 crash low. As you can see from this longer term perspective the blue triangle pattern is showing an indecisive trading range with a lower high and a higher low. Until we see some type of reversal pattern form the bull market remains intact. Maybe the 5th reversal point will hold and the triangle will end up being the reversal pattern. But, and there is always a but, since the INDU is in a bull market until proven otherwise the odds favor a breakout to the upside. It’s also possible that the INDU declines from this point but finds support on the bottom rail of the blue triangle forming a sixth reversal point similar to the bullish rising wedge which formed between 2011 and 2012.

One thing I’ll be watching very closely over the next several weeks will be to see how the price action interacts with the top rail of the blue triangle. The perfect breakout scenario would be to see the price action hit the top rail and have a mild decline. Then if the bulls are truly in charge the next rally attempt would take out the top rail on heavy volume. Then for confirmation I would like to see a backtest of the top rail from above.

The 20 year monthly chart for the INDU does a good job of showing you the bull market that began in March of 2009. Until we see a reversal pattern form of some kind it is what it is until proven otherwise.

I promised myself I wouldn’t post this next long term monthly chart for the INDU as it has been frustrating watching the breakout and backtesting process over the last several years when I first posted the bullish possibility. As long term members know I call this very large pattern on the INDU, THE JAWS OF LIFE, which is the opposite of how most analysis see it. Most call it the JAWS OF DEATH. You can see the blue triangle that is basically forming on the top rail which is generally a bullish development. This is about as clear a picture you’ll see anywhere on the long term perspective for the INDU.

This last chart for today is the exact same chart as the one above but this time I’m showing it as a line chart. I really do know how bearish most folks are on the stock markets right now but when I look at this long term chart for the INDU I can’t make a bearish scenario at this very moment. If anything it looks super bullish especially if the blue triangle gets broken to the upside. This isn’t my opinion it’s what the charts are strongly suggesting.

It’s time to go out and hide some Easter eggs for the Grand kids. Bottom line, keep an open mind to any eventuality that may arise. All the best…Rambus

Today felt like a short covering rally during the bear market years in the PM complex only in reverse. Days like today can make one think that the rally over the last two months is all she wrote for the new bull market.. Did the baby bull die at birth ? Maybe , but I’ll need to see more proof that the bear market for the precious metals stocks, that ended on January 19th of this year is back.

During a bull market it’s nice to see new highs being made even if it’s for the short to intermediate term time frame. Then to confirm a new uptrend we need to see higher highs and higher lows being made. Since the January 19th low we’ve seen the PM stock indexes making higher highs but we’ve not seen a higher low put in yet because the rally has been so strong. Tonight I would like to show you the new bull market for the GLDX, global explores, using horizontal support and resistance lines. You can apply the same principal to the other precious metals stock indexes like the HUI or the GDX.

During the bear market years it was very rare to see a higher high made on any of the precious metals stock indexes. I believe during the 4 1/2 year bear market there were just a couple occasions when we saw a slightly higher high made before the bears took over and moved the price action lower. That hasn’t been the case since the January 19th low.

Lets start by looking at a daily eight month chart for the GLDX and then work our way back in time to see how the bear market unfolded and how the potential new bull market may unfold over time using just the horizontal support and resistance lines. On this daily chart you can see the two month rally off of the January 19th low that only had a one or two day decline before the bulls took over and rallied the GLDX higher. Finally during the end of February of this year the GLDX has begun to consolidate that first rally phase chopping out a sideways trading range that is still in progress. Note the bullish crossovers of the 20 day ema, 50 day ema that have crossed above the 200 day simple moving average. Now note the two previous highs labeled #1 and #2 which the GLDX took out with no problem at all. Note how the GLDX gapped above both S&R lines and then backtested them from above before the price action moved higher. It’s subtle but it shows resistance reversing its role and turning into support. There is no doubt that this index is overbought but that’s why consolidation patterns form, to relieve the overbought condition. This eight week rally has taken out two previous highs which is bullish.

Looking at the 14 month daily chart for the GLDX it shows the price action taking out a third high that was made during the bear market. It could barely make a higher high during the bear market years, but now in less than two months it has taken out three previous highs without any hesitation whatsoever. This is a change in character that hasn’t been seen in over four and a half years which needs to be recognized at a minimum. The new trading range that is forming between 21.00 and 24.50 is healthy and should be expected. Nothing goes straight up without correcting from time to time.

This next chart goes back 18 months and shows a fourth high was taken out with this first impulse move up in the GLDX. After breaking above the fourth high by a little over a point, exhaustion finally set in and the current consolidation phase is taking shape.

This next chart shows 30 months of price action which is now starting to put our first impulse move up in perspective. The middle of our current trading range is forming on the fourth support and resistance line. Once our current trading range finishes building out a move up to the fifth high should be in order. If we’re truly in a bull market the GLDX will have to make higher highs and higher lows along the way.

This last chart for the GLDX shows the entire bear market starting at the head in 2011 all the way down to the recent low in January of this year. The brown shaded support and resistance zone, red fives, is where I think we may see a lengthy consolidation pattern build out which will be much bigger than our current one. Once our current trading range ends it should be a fairly easy run up to the brown shaded S&R zone between 31.00 and 33.00 as there were no consolidation patterns that formed on the way down.Some call that area a thin zone I call it reverse symmetry as shown by the red arrows. Once the GLDX breaks above the brown shaded support and resistance zone with the red fives on it, the next price objective would be the old neckline at 47 that formed its massive H&S top which this chart only shows the head, right shoulder and neckline.

Below is a weekly chart for the HUI which shows a similar setup we just looked at in detail on the charts above. When I first labeled the bear market low as a double bottom I used the red arrows to show how the HUI might move up to the next S&R line at 185 or so. Well here we are with a consolidation pattern under construction. This is actually what we want to see happen at the beginning of a new bull market. If the HUI crashes through the previous high at 140 that is where I will have to reconsider the new bull market thesis until then I’m in the bull camp. All the best…Rambus

This is one of the leaders in the new bull market for the precious metals stocks. As you can see it never formed a reversal pattern at its bull market high, it just chopped out a sideways trading range consolidation pattern. There was no bear market for this PM stock. The strongest lead the way for the rest to follow.

Last week I showed you this potential H&S top forming on the USDU which is a more evenly balanced index for the US dollar which actually trades as an ETF.

http://www.wisdomtree.com/etfs/fund-details-currency.aspx?etfid=91

I built this chart using a line chart and then leaving the trendlines in place I converted to a bar chart. As you can see it has been backtesting the neckline for the last week or so along with the 200 dma. This chart shows a reversal pattern which sets up a downtrend of some kind. This is an important development.

Below is the exact same chart shown as a line chart. Note how much cleaner the trendlines look.

The weekly chart shows an end around the apex move which is also bearish.

It’s been awhile since we last looked at the US dollar which has been consolidating its big impulse move up. The reason I haven’t posted it much is because it’s stuck in a sideways trading range going back over a year now.

99.9% of Market participants are either Bullish the Dollar , with all the implications including Lower Gold Prices or Bearish the Dollar, with the opposite implications .

However there are not two but THREE possible outcomes to this present trading range.

For the Bulls , the breakout is in progress with a present backtest of the bullish flag .

For the bears , if the 200 day ma fails to hold support in this general area for the bottom of a right shoulder, a move back down to the bottom of the trading range would then setup the possible rectangle consolidation pattern around the 93.25 area. The least likely, but is possible, is a huge double top if the price action breaks below the bottom rail.

The third possibility , the one most don’t consider , is a prolonged trading range.  At this point I favor the sideways trading range that forms a rectangle consolidation pattern as I explain below.

Note the three smaller red consolidation patterns that formed during its big impulse move up from mid 2014 to the early part of 2015. That’s what a strong impulse move looks like. Normally in strong impulse moves you’ll see at least three smaller consolidation patterns and on rare occasions four which strongly suggests you’re getting close to the end before a much bigger consolidation pattern starts to form. As you can see that is what has taken place so far.

Below is a static chart for the US dollar which shows more details of that massive impulse move up. The blue arrows shows the beginning and the end of that rally phase. You can see how several smaller consolidation patterns formed a bigger bullish rising wedge which is centered about in the middle of that uptrend. The blue arrow at the top of the chart shows the beginning of our current one year trading range as shown on the daily chart above.

For newer members, who may not have witnessed that big impulse move up,  below is a monthly candlestick chart which shows a string of nine white candlesticks all in a row when the US dollar broke out of that massive base. Note the blue falling wedge that looked like it could have been the perfect consolidation pattern for the next leg up but the failure to take out the high suggested that the consolidation pattern was going to be more complex and take longer to build out. The top blue rail of the falling wedge was backtested in February, but again the price action couldn’t take out the high of the pattern.

Below is a monthly combo chart that has the US dollar on top and gold on the bottom. The last time we looked at this chart gold was still trading inside of the parabolic downtrend channel. Gold had a nice clean breakout of the top rail of the parabolic downtrend channel in February, and has continued to move higher this month. When I look at the blue falling wedge on the US dollar chart I see a failed pattern for two reasons. The first reason is that it couldn’t take out the first reversal point high, the second reason is with this type of pattern the US dollar should have risen strongly after the initial backtest four months ago. The failure to make a new high after the initial backtest says to me that the trading range is going to take more time before it matures out.

There is one more important aspect to see on this combo chart. The red arrows on the left side of the chart shows where the US dollar bottomed and gold topped just before the 2008 crash in gold. Now look at the two red arrows in 2011, which shows where gold’s bull market topped out after a nearly parabolic rise while the US dollar actually made a higher low vs the 2008 low. That was a big positive divergence for the US dollar which also shows that gold can rally on a relative basis to a strong US dollar. There is no way to know how long the US dollar will work on its consolidation pattern. Its already taken one year and with the impulse move being so big it’s seems likely that the US dollar will be working on this trading range for much longer than we can imagine.

This next chart may give us a glimpse on how long our possible trading range may take to mature out. Below is the 30 year fractal chart we were watching before the US dollar broke out from big base #2 which launched its massive impulse move. Note the big blue bullish rising wedge which formed as a halfway pattern when big base #1 broke out. That big blue rising wedge began to form in 1997 and the breakout came just less than three years later in March of 2000. Again there is no way to know for certain how long our current trading range may last but if the fractals keep playing out like they have the US dollar could be in a lengthy trading range giving  the precious metals complex time to flex their muscles. Note the H&S top on the US dollar in 2000 which marked the beginning of gold’s bull market.

Below is another combo chart which has the US dollar on top and gold on the bottom. Lets start by looking at the gold chart on the bottom. The brown shaded support and resistance zone is built from the top gold made in 2008 before it crashed to just below 700 or so. Note where the 7th reversal point on the falling wedge formed on gold, right on the very top of the brown shaded S&R zone at 1035. The bottom of the S&R zone is at 1000. After almost three years of building out that blue falling wedge on gold, it finally looks like the wedge has broken to the upside and has had one backtest so far. As long term members know I was looking for one last capitulation move down to finish off the bear market but when I look at this chart it’s very clear to me that gold found support right on top of the 2008 high, resistance turning into support.

Note that massive rally the US dollar had that started in the middle of 2014 and ended in the first part of 2015. While the US dollar was rallying in a near vertical move , gold just kept on chopping out the blue falling wedge, which in hindsight now, we can see was a positive divergence for gold to the US dollar. IMHO the setup for gold couldn’t be anymore bullish with a nearly three year seven point bullish falling wedge which formed on the brown shaded support and resistance zone at 1035 and has had a breakout and backtest to the top rail. We have a very clean line in the sand with the top rail of the seven point blue falling wedge reversal pattern similar to the breakout and backtest gold had when it broke out of the blue bullish expanding falling wedge in early 2009. That top rail was tested multiple times and held support which eventually led to the biggest rally in gold history. So the next time you’re feeling bearish on gold bring up this chart and see if gold is trading above the top rail of the falling wedge. As long as it is, all systems are go. All the best…Rambus.

Last week I showed you a daily line chart for GLD which I called a coiling triangle as the price action was getting more compressed as it traded toward the apex. This daily line chart shows the breakout and backtest. Most technicians are aware of the triangle consolidation pattern but its implications may not be understood by most.

Now I would like to show you a daily bar chart for gold which shows you the power of this particular triangle. If you recall last week I showed many bullish rising wedges in many of the precious metals stocks that looked very bullish. They have morphed a bit but the essence of the bullish rising wedges are still there. This brings us up to the triangle that has been forming in gold. Just like all the bullish rising wedges we looked at on many of the PM stocks, gold has formed it own halfway pattern which is the triangle that everyone now sees. What makes this triangle halfway pattern so important is the way it formed. Whenever you get a vertical move in a short period of time that is called a flag pole. The price action then consolidates that vertical move with a small, usually less than three weeks, flag, wedge or triangle. In gold’s case it formed a triangle.

There are several ways we can measure out for a price objective. The first method on this daily log scale chart is what I call the BO to BO, breakout to breakout method. The measurement starts at the breakout of the lower consolidation pattern which in this case is the bullish rising wedge, up to the first reversal point in the blue triangle halfway pattern. You then take that measurement and add it to the breakout point of the blue triangle halfway pattern to get your price objective which is up to 1391 black arrow.

The other measurement technique I use is the impulse method which measures the impulse move from the lower consolidation pattern, again the blue blue bullish rising wedge, which starts at the last reversal point before the breakout. Take that measurement and add it to the last reversal point in the blue triangle halfway pattern to get a price objective up to 1382 as shown by the blue arrows.

Below is the same chart but this one is in linear scale. The linear scale measures out about ten points lower but it still measures up to the 1400 area which is a nice big round number that should offer some resistance on the initial hit. If you look at the move leading into the triangle halfway pattern, which is nearly vertical, we should see something similar as the price action leaves the blue triangle in time and price.

Lets look at one more piece of the puzzle using the blue triangle as a consolidation pattern. Below is a six year bar chart for gold I’ve shown you many times which shows the breakout above the top rail and the backtest that has been taking place. That backtest area, just above the top rail of the bullish falling wedge, is the blue triangle consolation pattern we just looked at on the daily charts above. From a Chartology perspective all the clues are now in place for another impulse move higher. Gold is just now breaking out from the massive four and a half year consolidation pattern.

When you look at this long term weekly chart you can see where the first real area of resistance comes in which is the bottom rail of the blue rectangle that formed the first consolidation pattern with the bottom rail coming in around the 1530 area. So what the price objectives are suggesting and the first real area of resistance at the 1530 area shows it will be interesting to see just how high this impulse move goes. Gold may very well form another consolidation pattern just under the 1400 area that will lead to a move up to the underside of the blue rectangle at the 1530 area. One step at a time.

Some folks are worried that the indicators are all getting overbought but in moves like this they can give you a false sense of security as they can get embedded and just go sideways until the move finally runs its course. The bottom line is that we’re experiencing something very special here. It’s like we’re in the top of the first inning of a new baseball game and the bulls are up to bat. Once the bulls side is retired it will be time for the bears to play their bottom half of the first inning. The game is just getting started folks. All the best…Rambus

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Fully

Tonight I would like to update a few of the ratio charts we’ve been following that are still showing an important low or bear market low is in place for gold. There are so many things we read where this analysis says this and that analysis says that but the more one reads the more confused they become. There is no Holy Grail when it comes to trading the markets although everyone is looking for one. Every trading discipline has its own unique characteristics that if one has the discipline to study it long enough they may eventually get pretty good at interpreting what it’s saying. Find something that matches your own personality and through trial and error you maybe surprised at what you may discover.

Keep in mind we’re playing the hardest game on the planet to win. There are investors from all over the world that want your money and they wont’ be satisfied until they get every last penny. There are computer programs, hedge funds, you name it and they want to win just as badly as you if not more so. It’s a dog eat dog business we’re in and to the victor goes the spoils.

This first chart for tonight is the ratio / combo chart which has the TLT:GLD ratio chart on top and GLD on the bottom. The TLT:GLD ratio chart has served me well through the years. Lets start on the left hand side of the chart which shows the bottom for GLD during the 2008 crash low. As you can see GLD formed a beautiful and very symmetrical H&S consolidation pattern while the ratio chart on top formed a H&S top. It wasn’t until GLD broke above the neckline in 2009 that the bottom was confirmed from a Chartology perspective. Even though the breakout didn’t occur until October of 2009 there were still alot of clues that GLD was forming a very large H&S consolidation pattern. Waiting for the breakout would have cost you some good low risk entry points in many of the PM stocks that had crashed.

Study the breakout and backtesting sequence on GLD when it broke out above the neckline, red circle. Put yourself back in 2009 at the breakout point keeping in mind this is a weekly chart and each bar represents one weeks worth of trading. You can see right after the initial breakout GLD backtested the neckline about four weeks later and the neckline held support which told us the neckline was hot. GLD then rallied for about eight weeks which looked like the impulse move up was starting only to see a second backtest the neckline. That second backtest took about 12 weeks or so to complete but knowing the neckline was hot gave us something positive to look for and not let our emotions get in the way of what was going to be a near parabolic rise in gold to its bull market peak in September of 2011 at 1920. The reason I’m showing you the breakout and backtesting sequence in such detail is because our current breakout of the seven point bearish rising wedge is only in its third week. Patience is one of the hardest things to learn when it comes to trading the big trend. I will post the ratio chart here and look at it again for the bull market peak in 2011.

Now lets look at the exact same chart and follow the price action up on GLD and down on the ratio chat into the 2011 high for GLD and low the for the ratio chart. The red arrows shows how they both found their respective reversal points which led to the bear market in GLD. As the TLT:GLD ratio was rising GLD was falling. The bear market for GLD had been going on for well over four years until just recently. About three weeks ago the ratio chart on top broke below the bottom rail of the seven point bearish rising wedge while GLD broke above the top rail of a five point bullish falling wedge. This is where patience will come into play. Until either the ratio chart on top or GLD on the bottom breaks below their breakout trendlines the bull market is in place for GLD. Mentally prepare yourself for a backrest to the bottom rail of the seven point bearish rising wedge on the ratio chart and the top rail of the bullish falling wedge on GLD. We now have a very clean line in the sand in which to watch for a backtest to occur. Until those important trendlines fail it is what it is, a bull market for GLD. This is also the point where you have to have faith in your trading system in order to take advantage of the possible brand new bull market in the precious metals sector. This is also where the bargains are found.

Below is another ratio combo chart which has the Gold:$XAU ratio chart on top and the $XAU on the bottom. We’ve already gone over this combo chart recently so I just want to focus in on the top right hand side of the chart. It doesn’t look like much on this monthly chart but the ratio chart on top looks like it’s putting in a double top reversal pattern which maybe reversing the uptrend that actually began in 2006. What that means is that gold has been outperforming the $XAU for ten years. That’s pretty amazing when you think about it. Relative to gold the PM stocks have never been cheaper compared to gold.

During the bull market years I would add a blue arrow when the ratio chart would rally up to the 5.10 area where I would be looking for a reversal to the upside on the $XAU. As you can see I haven’t added any blue arrows since the one that failed in 2008 which led to the crash, blue arrow with the green circle around it. That failure in 2008 on the ratio chart, when it broke above all the previous highs blue dashed horizontal line, was a history making event for the PM stocks. As you can see I’ve added a blue arrow at the double top high for the ratio chart and a blue arrow at the the recent low on the $XAU chart at the bottom.

Note the purple annotation I wrote back in 2008 right after the crash. I said this was the highest the ratio had ever been in history thinking it would move back down into the old trading range between 3.70 and 5.10 or so. Little did I know that was only the beginning of the move all the way up to the 24 area on the ratio chart. There was no way to know back in 2008 that the PM stocks would underperform gold on the magnitude it has. If there was ever a once in a lifetime event to get positioned for a new bull market this is it.

I had been looking for one last capitulation move down in the PM complex but with the recent developments on these ratio charts I have to go with the new information as it comes in. As the information changes so do I. If you have ever wondered what it feels like to buy at the bottom of a bear market I think now is a good time to find out. It always looks easy in hindsight but to live through the moment is another matter altogether.

In the Weekend Report we’ll look at some of the changes that are taking place on some of the precious metals stocks which will show some more clues that the bear market low may well be in place. Have a great weekend. All the best…Rambus