Before we look at a bunch more PM stocks tonight I would like to say something about the Kamikaze Stocks. First when I take a position in one of the Kamikaze stocks it’s based on the underlying index. For instance when I take a position long or short in the juniors it’s based on the GDXJ. For the big cap miners it’s based on one of the big cap PM stock indexes such as GDM, HUI or the GDX. The same goes for gold and silver. Believe me I’m fully aware of the depreciating aspect these Kamikaze stocks have over the longer period of time. Some may think it’s a total waste of time looking at the Kamikaze stock but they can gives us some good clues based on their own individually chart patterns.

Let me show you an example of what I mean. Below is a 2 hour chart for DUST going back to July of this year. The first thing I would like you to note are the black dashed support and resistance lines. One thing I learned the hard way is to respect those black dashed S&R lines because when they get broken a big move generally occurs. Sometimes waiting a day or two to pull the trigger can cost you dearly. Up until today our current black dashed S&R was still holding support which I also showed you on the HUI chart earlier today which was holding resistance. DUST was probably about four hour or so ahead of the HUI in respect to the black dashed trendline. When I seen DUST cracking its black dashed S&R line it put me on high alert to keep a close eye on the HUI’s trendline. Knowing what can happen when one of these S&R lines gives way it was time to exit the DUST trade right or wrong.

Next I would like to add some Chartology to the same 2 hour chart for DUST to show you why today was time for me to exit this trade. Generally when I draw in a top rail of a rising channel I like to look for a gap first and then if there is no gap a previous small high or low to start the trendline. DUST had formed a nice gap on the way down so that’s where I started the top trendline of what had been a pretty good looking parallel uptrend channel. As you can see the bottom parallel trendline held support on five separate touches which makes it very important. The price action cracked the bottom black rail of the uptrend channel today which is something I didn’t want to see because of the possible consequences that may transpire.

Until today’s crack of the bottom trendline the corrective decline that began around the 10th of November looked just like a normal correction within an uptrend channel. After finding support at the bottom black trendline DUST broke above the top rail of the blue downtrend channel and began what looked like the next impulse move higher. After a short rally DUST declined again and found support once more on the bottom rail of the black uptrend channel. A second rally attempt was made but it ran out of gas at the previous little high and rolled over testing the bottom black rail of the uptrend channel again. When you’re looking for a strong impulse move, that’s what you want to see, a strong move. Note the strong impulse move in late October of this year that started the uptrend channel.

Here you can see DUST was hesitating and not showing the stuff of a strong impulse move which throws up a red flag to keep a close eye on things. Actually up until today DUST was finding support exactly where I wanted to see it but with the failure to really launch an impulse move it demanded my close attention.

This last chart for DUST now shows you why I had to exit this trade today. Instead of the black parallel uptrend channel with the blue bull flag as the halfway pattern we now may very well have made a six point red bear flag sitting in the middle of the blue downtrend channel. So today’s break of the initial black dashed S&R rail we looked at on the first chart above, the break of the bottom rail of the black uptrend channel and now the breakout of a possible 6 point red bear flag tells me today’s crack is very important and not to be taken it lightly.

Some may think the failure of this trade to workout is a done deal. Sometimes the picture becomes much more clearer when you see a failure like this which now opens up the door for another trade with more clarity. I’ve added the red arrows which shows a price objective down to the October lows around the 11.50 area as shown by the brown shaded price objective zone using the red bear flag as a halfway pattern. Tomorrow is a new day with new opportunities if we can keep an open mind. I’ll have more later on tonight in Part 2 of the PM stocks. All the best…Rambus

HUI 2 hour chart. Is the top rail just cracked or has the HUI broken out above it? Tomorrow we should know the answer to that question.

I was just going over some old charts and came across this one which is a ratio chart that compares the HUI to gold going all the way back to the bear market low that was made back in 2000. I use to show this chart quite a bit when the blue triangle on the right side of the chart broke down. This chart shows you a good example of how weak the HUI has been vs gold. The initial impulse move out of the 2000 bear market low shows the HUI really kicking gold’s butt until late 2003. The ratio then declined into the 2005 low which ended creating a  double top hump. There was no way to know back then that the 2005 low would be a double top hump until much later. From the 2005 double top hump the ratio rallied up to the previous highs made back in 2005 around the .60 area. As hard as the HUI wanted to it couldn’t break through the double top highs and traded sideways until the infamous 2008 crash. From there the HUI rallied back up to the double top hump but could go no further even tho the HUI was making a new bull market high back in 2011. It then formed a blue triangle consolidation pattern just below the double top hump which matched the one that formed during the bull market back in 2002. At the time I labeled them symmetry triangles, one going up and one now coming down in the same place.

You don’t have to be a rocket scientist to see how badly the HUI has under performed gold since the 2011 high.

This ratio  built out a second reverse symmetry pattern at the 2008 crash low. Note the red flat top expanding triangle on the left side of the chart and then coming down the equally small red bearish rising wedge on the right side of the chart. Long term members may remember that I was always looking for ratio to hit .13 to see what would happen there. It was a place where the HUI may start to outperform gold again and the ratio could start to rally but that wasn’t the case. As you can see the ratio built out a small H&S consolidation pattern right on top of the 2000 bear market low and then broke below that all important .13 on the ratio. Now this ratio is building out another possible H&S consolidation pattern just below the 2000 bear market low at .13 or so. Who could have ever imagined back in 2011 or even going all the way back to the late 2003 ratio high that the HUI would under perform gold in such a massive way for such a long period of time? As a matter of fact this chart has had 4 major impulses down , one every year for the last 5 years .  There is still no end in sight yet that this ratio is bottoming out or reversing this grizzly bear market that really took off in 2011 IMHO.

Below is a 2 hour chart we’ve been following since the bear flag broke to the downside. With yesterday’s and today’s price action I can see a possible 6 point blue Diamond consolidation pattern forming with the breakout today. A backtest would come in around the 101.60 area. I’m also looking at the Diamond as a halfway pattern to the downside as the second leg down from the double top at the bear flag high. Keep in mind the shorter term charts you use the bigger the chance they can morph into something bigger.

Below is the 2 hour chart which is showing the possible right shoulder forming as part of the reverse symmetry from the left side of the chart. A backtest to the small H&S neckline would come in around the 392.45 area. That backtest could be forming a second small right shoulder. With the fed news today we could see some wild price action for a half hour or so before things settle down.

Below is the daily chart for the GDX which shows you what reverse symmetry would look like in a perfect world, black arrows.

I wanted to wait until the end of trading today to update the INDU. It was a very interesting day in the INDU. Below is the daily chart we’ve been following which shows the potential H&S bottom. After the INDU bounced off the lower neckline symmetry line today it’s now showing a possible bull flag forming as the right shoulder. I haven’t had time to update the annotations yet but you can see how the bottom blue rail now slopes down slightly which is now parallel with reversal points one and three of the top blue trendline.

Below is another daily chart we’ve been following very closely which shows the rounded top. Note how today’s price action stopped right on that important support and resistance line around the 17,100 area. So far nothing is broken on this chart from a Chartology perspective.

Below is the down to up volume chart which shows us when there is some capitulation taking place. Note the last two red arrows on the right side of the chart which shows some mild capitulation at both of the two recent lows.

I know it’s not a popular idea to be bullish on the stock markets with the possible rate hike coming this week but the weekly chart for the INDU is still showing a beautiful H&S consolidation pattern with price action testing the neckline symmetry line today. We now have a nice clean line in the sand at today’s low at 17,138. Keep in mind this possible H&S consolidation pattern is pretty big with a price objective over 20,000 or so.

Below is a daily chart for the UUP which shows a possible H&S consolidation pattern forming that I touched on last night with the US dollar. As you can see it’s testing the 200 dma and the neckline symmetry line as a possible area of support.

Here is the daily chart which shows the combo blue falling wedge and the possible H&S consolidation pattern. Again either pattern would have a bullish outcome if the UUP can breakout above the March highs.

The weekly look.

First I would like to apologize for not having any posts on Friday as I had a previous commitment made several weeks ago. I told Fullgoldcrown Thursday night, of all the days to miss work it would have to be Friday. That’s one of the reasons I exited the stock market trades as I know how volatile these 3 X etf’s can be and with the numbers coming out Friday morning I wanted to play it safe right or wrong.

All in all we had some pretty interesting price action in the stock markets on Friday that was very positive. Lets start by looking at the INDU which I’ve been showing a H&S consolidation pattern forming. Thursday’s the price action closed below the 200 dma which is another reason I exited the stock market trades but Friday’s rally closed the day just below of the neckline and back above the 200 dma. What I find interesting is Thursday’s low was a reverse symmetry low taken from the left shoulder’s higher low on the far left hand side of the chart that matches the higher right shoulder low on the right side of the chart, Friday’s price action. We now have two neckline symmetry lines. The neckline symmetry lines are just parallel lines taken from the big neckline that sometimes shows us where to look for the lows for the right shoulders. So at this point the reverse symmetry is as pretty as it gets as shown by the S’s.

The volatile choppiness over the last 3 weeks or so, since the INDU first made contact with the neckline, looks like a triangle formation which I would view as a halfway pattern to the upside. Below is the exact same chart as the one above but this one has the blue triangle on it that is creating the right shoulder. So when we look at the Chartology since the August low we can see a double bottom with the small blue bullish rising wedge and now the potential bigger blue triangle forming the right shoulder. This is all bullish price action in which the INDU has made higher lows and higher highs except for the top rail of the blue triangle which has a slightly lower high at this point. To confirm the H&S bottom or the blue triangle consolidation pattern is in place the INDU will have to breakout above 17,900 area. This is a fairly large H&S consolidation pattern that stretches back over six months to June, so I would expect a rally of intermediate term proportions at least up to the 20,000 area as a minimum.

One more thing before we leave the daily charts for the INDU. I’m sure most of you have heard the expression “shaking the bush, used in the markets. It refers to a sharp decline which shakes everyone off the bush, the markets turns right around and rallies backup leaving most in disbelief. It only took three trading days to shake the bush once the blue bearish falling flag gave way to reach the August low. How many calls have you heard or read that this is the beginning of a new bear market in the stock markets?

Some of you may remember this daily epiphany or moment of clarity chart I posted back in October of this year the day before the INDU broke out above the rounded top trendline in the Wednesday Report. What I was trying to show you at the time was how nice and clean the breakouts and backtests were. Note the breakout above the double bottom hump and clean backtest. Then there was the breakout of the big black dashed support and resistance line also with a clean backtest as shown by the red circle. Since the breakout above the rounded top trendline the INDU made one more attempt to backtest the big support and resistance line around the 17,100 area. The latest price action shows the potential blue triangle consolidation pattern that is building out.

The next chart for the INDU is a weekly look that shows the 2007 H&S top, the 2009 H&S bottom and how our current H&S consolidation pattern fits into the big picture. What’s interesting is that all three H&S patterns are close to being the same height. Our current H&S consolidation pattern is actually the tallest of the three. I don’t know how many of you remember the 2011 correction, which was pretty scary at the time, but we just experienced the same thing in 2015.

Below is another weekly chart which shows how support and resistance works as shown by the black dashed horizontal lines. This chart also shows our potential H&S consolidation pattern more clearly.

This first monthly chart for the INDU shows its bull market that started in 2009 as a parallel uptrend channel. You can see there was a crack of the bottom trendline in August of this year, shaking the bush, which has been corrected.

I wasn’t going to show you this long term monthly chart for the INDU but it’s part of the very big picture so here it is again, THE JAWS OF LIFE. The top rail of the bullish expanding triangle was originally broken to the upside two years ago in November of 2013. It now has had three successful backtests to the top rail with the August low cracking the top rail but not breaking it. Again shaking the bush?

Most investors have their own set of indicators they like to use to gauge the health of the stock markets. This first indicator chart I have shown you many times that measures the down to up volume or capitulation volume when I’m looking for a low. The red vertical dashed lines shows a modest amount of capitulation while the black dashed vertical lines shows a more pronounced amount of capitulation volume. Note the number of black arrows that were made during our latest bottom. There was alot of capitulation taking place which suggested to me that a healthy bottom maybe forming. Note the last small amount of capitulation that took place in November of this year as shown by the red dashed vertical line that marked the latest low. What I find interesting is that with the big drop on Thursday of this past week, there was very little capitulation volume taking place which I’m reading as those that wanted to sell have already done so. So is the path of least resistance now to the upside.

This next chart measures the number of stock in the $NDX that are trading above their 50 day moving average. Basically it shows when the number of stocks is trading below the yellow shaded area you have a sell signal. When the index trades back above the yellow shaded area you have a buy signal. As long as the number of stocks in the NDX stays above the bottom of the yellow shaded area this index remains on a buy signal. So far we’ve had three touches to the top of the yellow shaded buy and sell zone which remains on a buy signal.

The next indicator chart shows the broader measure of health in the stock markets by using the $NYAR200 which shows the number of stocks trading above their 200 day moving average. The SPX is on top and the $NYA200 is below. Everyone has their own interpretation on how to use an indicator chart like this. For me I like to use when looking for an important bottom and nothing else. First note the bear market low in 2008 and 2009 which formed a double bottom on both charts. Here the indicator chart shows a positive divergence as the SPX made a lower low and the indicator chart made a higher low. Then again at the important low in 2011 where the indicator chart made a positive divergence to the SPX. Now on to our most recent low which shows no divergences but a double bottoms on both charts. Many are looking at this as weakness for the stock markets as the SPX is trading near its all time highs while the indicator chart is still way below its highs. What I see when I look at this chart is that the stock markets have had a small correction while the indicator chart has had a major correction which now leaves plenty of room for the stock market to rally before they become overbought again as shown by the other two double bottoms.

Below is a monthly look at the same two charts. Here the brown shaded area shows where general support comes into play. Normally during a run of the mill correction the indicator chart will drop down to the brown shaded general support zone. When we see a bigger correction the price action on the indicator chart will drop below the general support zone. When it does that you know you have a strong correction taking place, vertical yellow shaded areas. Generally I like to see the indicator chart trade back above the brown shaded general support zone for confirmation the correction is over. As with the daily indicator chart I like to look for divergences at the lows. If you recall we had a big correction in October of 2014 which looked like the end of the bull market was near but the stock markets rallied sharply out of that low. Now look at the indicator chart and our most recent correction into the August low. Here you can see the indicator chart at the top traded well below its October low of 2014 while the SPX made a higher low, positive divergence. I could be wrong but this chart tells me the SPX has a full tank of gas and can now rally up to new all time highs. One last note on the chart below. The reason why I only use this chart for finding important lows is because the stock markets can stay overbought for a very long time as shown by the indicator chart at the top.

Lets change gears now and look at the US dollar which had a big move last week. Below is the original daily chart I’ve been showing you which shows the blue falling wedge as the main consolidation pattern. You can see the red rising flag that formed right at the top of the March highs that broke to the downside which I was thinking would breakout topside. It ended up with 5 reversal points so it’s now a bearish rising flag. The US dollar still could be in backtest mode to the top blue rail of the falling wedge which would come into play at the 96.50 area. That area would also be the top of the blue rectangle which should show strong support.

Many times when I see a failure like the chart above is showing I start to look for the original pattern to morph into a bigger pattern. The longer term daily chart below shows a potential large H&S consolidation pattern that maybe forming. The reason I think this could be a possibility is because of all the tops that come into play at the 97.50 area which should produce some strong support. We also have the 200 day moving average coming in at the 97.50 area as well which should help with support.  The bearish scenario would be if the US dollar breaks down to all the previous lows at the bottom of the trading range which would then create a rectangle type of consolidation pattern.

The longer time frame one uses the less damage seems to be done to the overall chart pattern.

Below is the very long term monthly candlestick chart for the US dollar which is showing the major breakout of the massive base. At this point the US dollar is showing us a black candlestick which isn’t what I want to see during a strong impulse move up, see all the white candlesticks on the breakout move above the massive base. The month is still very young yet so the last candlestick can still end up being white. If we do close the month of December with a black candlestick it will tell us the consolidation pattern is still building out.

The very long term 30 year monthly chart for the US dollar shows the current price action as just a backtest to the top rail of the blue falling wedge and nothing more at this point in time. This is similar to the backtest to the top rail of the blue bullish rising wedge in the late 1990’s.

Below is a long term monthly chart for the $XEU which is showing it has broken down from a blue bear flag and is finding some support on the bottom dashed center line of a possible bear market downtrend channel. As the US dollar is looking for support on the top rail of its blue falling wedge the euro is looking for a backtest to the underside of its blue bear flag.

Looking at the long term daily chart for oil we can see it’s building out a combo blue falling wedge/H&S consolidation pattern. So far the backtest to the neckline has held resistance.

Below is a slightly different look at oil on the long term daily chart which is still bearish.

Below is a daily chart for $NATGAS which is showing it has broken down from a H&S consolidation pattern with a possible backtest to the 2.22 area.

This next chart is a combo chart which shows the CDNX, HUI, GOLD and SILVER. This chart has no chart patterns on it just pure price action. I did put a support and resistance line at the low made back in November of 2014. I don’t want to discourage anyone from taking any positions in the precious metals complex. That is not the point of this chart. This chart is merely to show you the price action and how close the PM complex is to its lows. Is the bear market over? Only time will tell.

Below is a daily line chart for gold we’ve been following which is showing the rally last Friday took the price action back up to the daily closing price at the late July low at 1085 or so. This is the very first obstacle gold will need to over come to show the bulls are back in charge.

This last chart for tonight is a combo chart I posted a week or two ago which shows the big picture for the HUI and gold. As you can see the bulls and the bears have been at each other for the last 2 1/2 years with the bears having a slight advantage as both the HUI and gold have falling patterns in place. How many more reversal points will we see before these consolidation patterns are finished building out?

I have many more charts that I will show you this week in regards to the stock markets and the PM complex. There is alot of interesting price action taking place in both sectors of the markets. These chart should bring you up to speed for now. All the best…Rambus

The Key Principle of this market analysing discipline we call Chartology : What makes the markets go up and down and sideways is investor’s and trader’s emotions.

From the little guy trading on his laptop to some big hedge fund manager that has an office full of people telling him what to do. The sum total of everyone’s psychology and conviction is what creates the many different chart patterns we are constantly searching for. Take for example the principle of  Reverse Symmetry , how a stock goes up is often how it comes back down. Something one needs to look for when you’re analyzing a chart for the purpose of discerning the next probable move . It doesn’t make any difference what time frame you’re looking at either. This is the reason, when you have a parabolic rise in a stock, you’ll see a very similar decline which many times is faster than when it went up.  The reason for this is because the stock  spent very little time consolidating the impulse move , only taking the time to form very small consolidation patterns which don’t have the staying power of a big consolidation pattern. There is nothing to offer support once the reversal takes place.The conviction (psychology again) of the market players is not there .

The weekly chart below shows you some nice reverse symmetry on the combo chart that has the HUI on top and Gold on the bottom. Don’t pay any attention to the top chart, CDNX:Gold ratio chart. The two lower charts for the HUI and Gold are what I want to focus in on.

What do I really mean by Reverse Symmetry? First lets look at the HUI’s massive H&S top and the price action above big neckline #2. Think of the massive H&S top on a piece of paper on your desk. Then think of the bull market highs for both the HUI and Gold as the center of your piece of paper, black dashed vertical line. Next grab the right hand side of your piece of paper and fold it to the left side of the chart using the bull market highs, black dashed vertical line, as the center of your piece of paper. You can see how the right shoulder lays right on top of the left shoulder. There is your reverse symmetry.

Another good example of some reverse symmetry is on the lower half of the weekly gold chart starting at reversal point #6 on the bullish rising wedge on the left hand side of the chart and the #1 reversal point on the bearish falling wedge on the right side of the chart. Note the left side of the chart has a bullish rising wedge and the right side of the chart shows a bearish falling wedge, reverse symmetry.

This combo chart also has some very telling price action on it. Note where the HUI’s current price action is relative to its 2008 crash low. The HUI is trading well below that very important low. Now look at where Gold’s current price action is trading relative to its 2008 crash low. It’s trading way above its 2008 crash low which tells us the HUI is much much weaker than Gold. The only relative strength I see for the HUI is that it’s trading just above its bottom trendline while gold is trading right on its bottom trendline. Don’t make the mistake of thinking that if gold breaks down from here the HUI is not going to suffer. Gold is actually leading the HUI now by a small margin so if it breaks down the HUI won’t be far behind.

If one is bullish on the HUI the first thing you will need to watch for is for the price action to break back above the blue falling dashed trendline that is showing the tops for reversal points 4, 6 and 8. If the HUI can do that then the 2008 crash low comes into play as the next area of overhead resistance around 150 or so. Gold is ever so close to breaking below the 2 1/2 year bottom rail of its bearish falling wedge. I don’t think anyone is looking at these very large consolidation patterns on the HUI and Gold, and what the consequences are if they break below their respective 2 1/2 year bottom trendlines. It has been a relentless bear market making lower highs and lower lows especially during the 2 1/2 year blue consolidation patterns. The only thing that is missing is the capitulation phase which finally takes out those that have been hoping every low was the start of the next bull market. One can only imagine the pain and fragility that must be felt by those still holding losing positions for over four years now. The last 2 1/2 years has lulled many into thinking things have to get better in this beaten down sector. Everyone who has bought an ounce of gold since the bull market high in September of 2011 and still holding has a losing position as of the close today.  As a matter of fact everyone who has bought an ounce of gold at any time in the last 6 years has a losing position . Maybe this is the bear market bottom which will prove them right but I will have to see more evidence before this bear market is over for me.

This next chart will give us the next important clue that the impulse move that began at the fourth reversal point in gold’s blue bear flag, about six weeks or so ago, has finished up with its first small red consolidation pattern and is beginning the next leg down for Gold and up for the US dollar. I know its hard to believe but this impulse move down for gold is already six weeks in the making. One never knows how a move will ultimately play out but I have shown you a countless number of chart which shows these very small red consolidation patterns, that slope in the same direction of the prevailing trend, usually show up in fast moving markets. We are as close as we can get to starting next important move for these two stocks.

Below is the long term daily combo chart we’ve been following on the stock markets in which I was showing you reverse symmetry taking place after the double bottoms were formed, red arrows. As you can see its not a perfect science but more of an art thing. It’s just another tool we can put into our Chartology toolbox. Have a great weekend. All the best…Rambus

About a month or so ago I started posting regularly on the possible inflection point I was seeing in regards to the deflationary trend that has been on going since 2011. As you know stocks move from a reversal or consolidation pattern in an impulse move which is much different than a sideways chopping action of a reversal or consolidation pattern. Impulse moves are the stored up energy that is released once a reversal or consolidation pattern is finished doing its job. About four weeks ago it looked like the most recent consolidation phase was coming to an end which would then leave the door opened to an impulse move.

At the first writing of the possible inflection point the US dollar was still trading within the confines of its possible bullish falling wedge which I viewed as a consolidation pattern to the upside. Shortly after that first post on the possible inflection point the US dollar broke out of its bullish falling wedge and is now approaching its previous high just above 100 or so. The US dollar is the key driver for this deflationary spiral that has been in place for over four years now with no light at the end of the tunnel for the commodities complex yet.

You’re probably getting tired of all the post on the US dollar but this is where the truth lies in regards to the falling commodities complex. Without a rising US dollar the deflationary scenario would not have a chance of playing out. Some of the more important commodities have now started their next impulse move lower which could very well be the capitulation phase where the baby is thrown out with the bathwater. If this is the beginning of the capitulation phase it should be relentless in nature whereby investors just throw up their hands in disgust and exit their positions at any price.

The first chart of many tonight is a short term one year daily chart for the US dollar that shows the bullish falling wedge in detail. The breakout was just a tad on the sloppy side but the top rail of the blue rectangle, that formed out toward the apex, held support which has led to the current move higher. As you can see the price action is approaching the high made back in March of this year which the US dollar will need to take out to confirm then next impulse move higher is truly underway.  So far so good.

The longer term two year daily chart for the US dollar shows the previous impulse move up out of the five point blue rectangle reversal pattern in 2014. That impulse move created three smaller red consolidation patterns which is what one likes to see during a strong impulse move.

Below is a daily line chart which shows the previous impulse move up with a nice clean breakout and backtest of the bullish falling wedge. Again you can see the three smaller blue consolidation patterns that formed in that strong impulse move up.

This next chart is a 30 year monthly bar chart I showed you many times once the top rail of the blue bullish falling wedge was broken to the upside. This chart is a very important to understanding the longer time view. Note the breakout and backtest to the top rail of the 30 year bullish falling wedge which shows the small red bullish falling wedge which is the same falling wedge we just looked at on the daily charts above. Pieces of the puzzle.

This next chart is a weekly combo chart which has the US dollar on top and gold on the bottom. Note how close the US dollar is to testing its recent high while gold is testing its recent low. If the US dollar is getting ready to breakout to a new high then it stands to reason that gold will break to new lows as the inverse correlation comes into play.

If the US dollar can close out the month of November right where it’s now it will be at a 13 year high on the long term monthly line chart and a new high for its bull market.

Lets look at one last chart of the US dollar which is the monthly candlestick chart. This chart clearly shows that when the US dollar is in a strong impulse move up it will produce a string of white candlesticks and when it’s in a strong impulse move down it will form a string of black candlesticks. The previous impulse move up created nine white monthly candlesticks in a row.

If the US dollar is breaking out of a bullish falling wedge then there is a good chance that the $XEU is breaking out of a similar pattern only in the opposite direction. The long term monthly chart for the $XEU shows this to be true.

The long term monthly chart for the $XEU shows a different pattern that has the same implications as the chart above if it breaks below the black dashed down slopping trendline which would be showing us this latest impulse move down is just halfway finished.

If the US dollar is showing strength in here then we should see some weakness in some of the commodities indexes. The daily chart for the $CRB index shows it has broken down out of the blue bearish rising wedge complete with a backtest.

The monthly chart for the $CRB index shows it has broken down below the brown shaded S&R zone with a backtest to the underside currently testing its bear market lows.

The very long term 60 year quarterly chart for the $CRB index now shows how close it’s to breaking below the brown shaded support and resistance zone going all the way back to the early 1970’s. That’s pretty incredible when put it  into perspective.

After breaking out from a five point black triangle reversal pattern as its bear market top the $GNX has created one consolidation pattern below the next showing us its bear market is still intact.

The DBC is probably the most actively traded commodities index to track. It too buillt out a black 5 point triangle reversal pattern as its bear market top. After breaking below the 2008 crash low the DBC then built out the red rectangle just below that very important support zone which has recently broken out to the downside making new all time lows.

Lets now look at the most important commodity on the planet the $WTIC, oil index. The daily chart below shows a possible blue bearish falling wedge / H&S consolidation pattern forming. Last week oil was backtesting the neckline of a small H&S top that is forming the possible right shoulder.

Below is a daily chart for oil which shows the possible stand along H&S consolidation pattern.

If you recall I used this daily chart for oil to take our first short position when the price action rallied up into the top rail of the falling wedge and the bottom blue rail of the bearish rising wedge.

Below is a weekly chart which is showing us two wedges. There is the smaller blue bearish rising wedge forming inside of the possible very large black  bearish falling wedge.

The 20 year monthly chart for oil shows how the larger falling wedge fits into the bigger picture as a possible halfway pattern to the downside within a possible downtrend channel.

Natural Gas is another commodity that has taken it on the chin recently. The weekly chart shows a multi H&S topping pattern with a recent breakdown of the third neckline and a backtest to the underside last week.

The 10 year chart for natural gas shows a H&S top with a huge breakout black candlestick signaling the H&S top was completed. You can see how the red Diamond pattern is forming as a possible halfway pattern.

The very long term 25 year monthly chart for $NATGAS shows how the smaller H&S top, on the weekly chart above, fits into the big picture. As you can see it’s just part of a massive topping pattern that actually topped out in 2005 or so.

Next lets look at several more important commodity charts that gives us a feel for how long this deflationary episode may play out at a minimum. The long term weekly chart for copper shows a massive seven point blue triangle reversal pattern that is the head portion of an even bigger H&S top. The backtest to the neckline formed the small red triangle consolidation pattern which just broke down two weeks ago. It looks like the next impulse move down has begun.

The 20 year monthly chart for copper shows how the breakout from the six year H&S top is really just getting underway to the downside after completing the backtest.

The 40 year quarterly chart for copper shows us a possible low on top of the massive black flat top triangle around the 1.47 area. As this is a quarterly chart you can see there is still some considerable time left for the 1.47 price objective to be reached.

The monthly chart for KOL, coal etf, shows it has really declined sharply since topping out in 2011 with a huge H&S top. It’s now trading below its 2008 crash low.

There are a couple of long term charts I would like to show you that relate to the commodities being in a weakened state. The monthly chart for BHP shows it’s in a well entrenched impulse move down.

RIO looks like it’s finishing up with the breakout and backtesting process of a massive H&S top formation. During the bull market years it formed a parabolic uptrend which came to an abrupt halt leading into the 2008 crash lows.

POT is another stock that looks like it’s completing a massive H&S top that has broken below its neckline.

X in the steel area shows it’s closing in on its 2003 low.

I’ve been positing this long term chart for FCX since the second right shoulder was building out on the unbalanced H&S top.

The last chart for tonight will be a long term monthly chart for gold which formed a bearish expanding rising wedge formation as its bull market. We still have another week of trading yet but you can see the last bar on this chart is currently making an ever so slightly new low for this bear market.

What these charts suggest to me is that there is still plenty of room to move lower in the commodities complex before we see a significant turn around. Nothing goes straight up or down but as many of the charts above show most have massive topping patterns followed by downside breakouts that are in some cases just getting started. Going forward is going to be interesting to say the least. All the best…Rambus