Today the RUT is breaking above the top rail of a potential 5 point bullish rising wedge reversal pattern. All the indicators are looking good as well along with the 20 ema.
The TNA is a 3 X long etf for the $RUT which is showing the same pattern but the volume is very very light. We’ll see what happens after the fed announcement.
Lets get right to the charts tonight as there is so much happening right now in the markets. The first chart we’ll look at is $WTIC, oil. Today oil finally completed the triangle consolidation pattern I’ve been waiting for. Below is a daily chart for the game plan I laid out several weeks ago in which I was looking for a halfway pattern to form in this general area. This red triangle should give oil enough gas to move up to the brown shaded price objectives between 54 and 56. That’s where the bigger picture comes in. Many times the right shoulder will be of an equal height as the left shoulder as shown by the horizontal black dashed trendline at 53.85. That is what I’m shooting for. The 54 area will also be the place where I will reverse positions, selling UWTI and buying DWTI which is a 3 X short oil etf. As you can see if oil does put in a right shoulder around the 54 area we’ll have a very large H&S consolidation pattern. So far so good.
Natural Gas is another 3 X etf we have that backtested the bottom rail of the blue Diamond yesterday where we took our third position in DGAZ. I’m using UNG as the proxy for Natural Gas. UNG does have a bearish setup with the red expanding triangle forming just below the bottom rail of the blue Diamond. I plan to take a fourth and final position when the bottom rail of the red expanding triangle is broken to the downside. I’m using UNG to set my sell/stop for DGAZ at 13.33.
The $NATGAS spot price chart also shows a blue Diamond consolidation pattern with a backtest yesterday to the bottom rail.
The weekly chart for $NATGAS shows its massive H&S top which is the main reason I’ve been hanging on to our DGAZ trades. You can see how the blue Diamond consolidation pattern is forming right in the middle of the lower price objectives. You never know 100% for sure if the backtesting process is finished but it does look like it on this weekly chart. We need to see a new weekly closing price for more confirmation the pattern is complete.
We have several positions, long the biotech sector, using LABU, which is a 3 X long etf. The 2 hour line chart below shows an inverse H&S bottom that has broken out above the neckline.
The daily chart for the XBI shows a strongly slanted inverse H&S bottom in place. We could still see a backtest to the neckline and the 200 dma at around the 74.08 area.
Next is a long term daily chart which shows the H&S top which led to the recent decline. Now we have an inverse H&S bottom which should reverse the short downtrend. The neckline is our line in the sand, above positive and below negative.
Lets now look at the 60 minute bar chart we’ve been following for the GDM which shows the gap up this morning above the brown shaded S&R zone and now we can see a small H&S bottom neckline was also gapped at the same time. This is the reason I exited our Kamikaze positions this morning. The top of the brown shaded S&R zone was our line in the sand, below positive because we were short and above negative.
With the bounce off of the bottom rail this morning I now have to respect the fact that we maybe forming a sideways trading range with the bottom at 360 and the top at 435. If that is the case then the GDM is starting its 3rd reversal point to the upside which won’t be complete until we find where the possible fourth reversal point begins.
Below is a long term monthly chart which is showing us a possible ping pong move between support at 350 and resistance at the previous low around the 442 area. That would tie into the possible horizontal trading range we looked at earlier.
The long term daily chart for SLV shows the brown shaded S&R zone / neckline coming in at 14.70 which has held resistance several times so far.
The long term monthly chart for SLV shows you how important the neckline at 14.70 is. We are now in our third month of breaking out and backtesting the neckline at 14.70.
Next we’ll look at daily chart for Gold which shows all the important moving averages. Today Gold tested the 50 dma with the other 3 just overhead.
The next chart for Gold is a weekly look that shows the downtrend channel that has been in force since the bull market top. The top rail of the parallel downtrend channel was just recently touched about three weeks ago. The 65 week moving average now comes in at 12.07.
If the CRB index is showing us anything the little red triangle that broke out today maybe showing us a halfway pattern to 213 or so as shown by the blue arrows.
The daily chart for the $GNX, which is another commodities etf, shows the same small red triangle as the CRB.
Lets look at one last commodities index the DBC which trades with alot of volume. It to is showing us a small red triangle that I’m viewing as a halfway pattern to the upside right now.
Lets finish up by looking at the US dollar for some clues on what might be happening. This daily chart shows the big impulse move up accompanied by all the small red consolidation patterns. After finally running out of gas earlier this year the US dollar has been chopping out a sideways trading range which looks like a bullish falling wedge at this point in time. As you can see the US dollar has completed 3 reversal points so far with the fourth one in progress.
The long term monthly chart for the US dollar shows you some classic Chartology. Note the massive base that formed over 10 years. Note the string of white candles that formed the impulse move up. With such a big base it stands to reason that the US dollar would be forming a halfway pattern in this general area. It’s just consolidating that massive rise out of that big base.
Depending on how tomorrow goes I have many more charts to show you on the stock markets. I’m going to wait until after the fed announcement tomorrow before I take a position in the stock markets. Tomorrow should be interesting as usual on the fed announcement days. I hope this posts. All the best…Rambus
Tonight we’ll look at the precious metals complex and see how this game of psychological warfare looks from a Chartology perspective. I know many are disappointed by the short covering rally at the end of today’s trading but this is how markets work. They do everything they can to throw you off the trade and just when you think you have it figured out it will change again. The big question is did this short covering rally change the bigger picture? If one just looks at the very short minute charts they will see the end of the day rally as being pretty significant but the further you go out in time the less it affects the appearance of the chart.
Lets start by looking at the combo chart for the HUI and GLD that we’ve been follow for a long time now. Both the HUI and GLD started their 27 months consolidation patterns on the same day back in April of 2013. They both broke below their respective bottom trendlines on the same day on July 16th of this year. That big breakout occurred on very heavy volume with a big breakout gap. The breakout is now almost two months in the making. Remember how you felt when the HUI gapped back above the bottom rail of its big bearish expanding falling wedge? How could this be with such a perfect breakout? Now when you look at the HUI chart on top that move back above the bottom rail doesn’t look so terrible now as the HUI made a new multi year low at one point today.
The GLD chart at the bottom stayed inside of its bearish falling wedge a little longer than the HUI did but this week it broke back below its bottom trendline. You can see it made a small H&S pattern right on the bottom rail. It’s now in the process of backtesting both trendlines which would come in around the 108 area. This combo chart shows nothing is broken yet with these two stocks only short sellers spirits.
Below is a triple combo chart which has the HUI on top, GLD in the middle and SLV on the bottom. This is a comparison chart which shows you how they tend to move together. It’s not a perfect correlation but pretty close. This chart makes it very clear that the HUI has been leading the metals lower as it was the first one to breakout of its smaller H&S #1 neckline. As you can see all three formed a double H&S top. Almost exactly one year ago both GLD and SLV broke below their neckline #2 and have been backtesting it ever since. That’s almost a whole year of chopping sideways going basically nowhere. The main takeaway from this chart is that the big neckline #2 has held resistance for GLD and SLV. As you can see the HUI and SLV are trading at multi year lows for the month of September with GLD not far behind.
What is striking about this triple combo chart is how much weaker the HUI has been vs the metals. I think this chart is giving us a pretty clear picture of which one of these three is going to bottom first. Note how much lower the price action is for the HUI vs GLD & SLV. GLD and SLV are still pretty close to their respective neckline #2 while the HUI is trading way below its neckline #2 in both time and price. So from a long term monthly perspective there is nothing remotely bullish about these three stocks as they’re basically trading at four year lows.
The next chart is a monthly look at gold which shows its bull market created and expanding rising wedge. It has a classic symmetrical H&S top as shown by the neckline symmetry line which shows the height for the left and right shoulders. Another interesting thing about that massive H&S top is how the left shoulder and head formed inside of the expanding rising wedge while the right shoulder formed as the backtest to the underside of the bottom rail of the bearish expanding rising wedge. The brown shaded area shows the possible two price objectives. The massive H&S top measures down to the 750 area while the 2008 crash low comes in at the 680 area. Its been close to two years now since I first posted the possibility for the massive H&S top which I know feels like an eternity for some of you but this is a very big pattern which takes time to setup the impulse move down. It’s impossible to chart every little wiggle a stock makes but the big picture for gold, I laid out a long time ago, is still working and nothing is broken. Just think for a moment of all the gold bugs that still don’t see the big picture that will eventually capitulate their shares at a lower price than today’s.
The long term monthly chart for silver also shows a very symmetrical H&S top in place. The brown shaded S&R zone shows the price objective for the massive H&S top.
Lets look at one last chart for tonight which is a 40 year monthly chart for silver. This chart shows some nice reverse symmetry going all the way back to the 1980 bull market peak at 50. You can also see the H&S top that I showed you on the shorter term monthly chart above on the far right hand side of the chart. I could be wrong but it looks like the price action is just suspended in thin air waiting for gravity to take it down. As always we’ll know in the fullness of time. All the best…Rambus
Sorry goldbugs ,it is not the gold chart .
There are a lot of opinions out there on the US Dollar . Many of them are bearish in the short medium and long term time frames.
So lets see what the Charts are whispering .
With all the volatility this week in markets around the world the US dollar made an interesting move. The long term daily chart below shows the five point rectangle, at the bottom left hand side of the chart, that launched the big breakout and impulse move higher in May of 2014. If you look at reversal point #5 with a question mark on it you’ll see the comment I made at the time which I noted, this could be a false breakout to the downside and we might see a big move in the opposite direction, which was up. Keep in mind the chart was much bigger back then and the false breakout also looked much bigger. As you can see that indeed was a false breakout to the downside which led to the impulse move up we found ourselves in until the US dollar topped out earlier this year and has been building out the next consolidation pattern.
It’s still not completed yet but the consolidation pattern is taking on the formation of a triangle consolidation pattern. Right now I’m looking at the last dip below the bottom rail of the black triangle consolidation pattern as a possible false breakout which if that turns out to be the case then this triangle consolidation should be finishing up and we should expect a big move in the opposite direction of the false breakout, which would be up. Until the top rail is touched tho this possible fourth reversal point is still under construction with no confirmation yet that the triangle has completed its job of giving the US dollar time to consolidate that big impulse move up.
Below is a daily line chart which shows the three smaller consolidation patterns that made up the last impulse move higher to our most recent high. Many times you will see at least three smaller consolation patterns form that make up a strong impulse leg. After you see the third small consolidation pattern form you generally know the end is getting near. The daily line chart shows the US dollar has some overhead resistance to contend with in the near term. If the bull’s are really in charge the US dollar will need to take out all the above overhead resistance, moving averages, small neckline and the top rail of the black triangle.
The monthly candlestick chart for the US dollar shows it massive base it broke out of. Note the string of white candlesticks all in a row which shows us how strong that first impulse leg up was. Now look at the candlesticks since the US dollar topped out earlier this year. You can see there are some white and back candles with the price action going nowhere which tells us the US dollar is still consolidating. Remember a big base leads to a big move which the US dollar has.
I have been watching the 40 year monthly chart for the US dollar , since we opened the doors here at Rambus Chartology ,
This all important chart shows a massive falling wedge with the two big fractal bases, base #1 and base #2. The breakout from big base #1 shows a backtest to the the big base trendline well over a year later but it didn’t alter the inevitable outcome to its bull market top in 2000. Now note the current breakout from big base #2 which was more vertical than big base #1. Instead of getting a backtest to the big base #2 trendline we are getting the backtest to the top rail of the bullish falling wedge which we’ve been following ever since the US dollar broke out above it. The backtest to the top rail of the blue bullish falling wedge has been picture perfect which includes this months bar with a long tail. So far the breakout and backtest is exactly what we wanted to see. Sorry or the late Friday Night Charts. All the best…Rambus
Last night in the Wednesday Report I posted this daily chart for the GDM explaining why the current low was so critical. The current low could be the third reversal point in a bigger consolidation pattern in which we would need one more counter trend rally to get the 4th reversal point. Hopefully we’ll be able to buy back our Kamikaze stocks at a lower price which means a higher price for the GDM. If this bottom doesn’t hold on the GDM we’ll have to buy the Kamikaze stocks at a higher price. Either way we’ll get positioned again when the time is right.
The GDX possible new trading range.
The HUI’s possible trading range with the 50 dma coming at at 128.02 right now.
The daily line chart for the GDXJ shows the bounce and the areas of possible resistance labeled on the right side of the chart. The 19.50 area would be the highs made back in late July. Next would be the double top hump at 20.75 and then the brown shaded support and resistance zone.
This weekly chart for the GDXJ is our main focus. We’ll have to see how the GDXJ lets us get repositioned again for the downside.
Tonight we’re going to look at the precious metals complex and get focused again as this is the area we need to concentrate our efforts right now IMHO. All the volatility in the stock markets has many taking their eyes off the ball of what may turn out to be the trade of a lifetime for some of you. I’m just as guilty as the next person trying to play the stock markets looking for that big trade that is so elusive right now. The stock markets are like a veg o matic chopping up both the bulls and the bears alike.
I have made a couple of small trades trying to catch one of the swings but the volatility is very hard to deal with. Back in 2000 after the markets topped I began to play the short side as bear markets can be very profitably if you can catch them just right. What I learned back then was you had to be dead on the money with your entry points because the volatility would knock you out before the move you were looking for actually took place. It looks easy in hindsight when you view the long term charts of bear markets but trading them in real time is a whole different ballgame.
I see the same thing happening right now. The volatility is eating investors alive. Just when you think you’re on the right side of the trade we get 500 to a 1000 point reversal. Believe me it doesn’t take to many whipsaws before you become totally confused on what to do. We made some good profits on the initial thrust down which is why I sold out on Monday to lock in our gains. As I stated earlier I’ve made a couple of trades but nothing big because I know what is likely to happen. The markets have a way of taking back all your profits and then some before you finally throw in the towel. And the thing is you’ll be proven right over time but for most investor they’ll keep trying until until they go broke. It’s a game of psychological warfare.
Until this latest stock market move we’ve been really focused on the PM complex and that is where I’m going to concentrate my efforts, for the most part, over the next week or two. Yes there will be some big money to be made in the stock markets but there will also be some big money to be made in the precious metals complex which is giving us a better read on the charts than the stock markets right now. As I have shown you this week the PM complex is beginning to finally break down out of some of those huge 2 1/2 year consolidation patterns unlike the stock markets where the trading action is in the middle of no mans land right now as the big breakout has already occurred.
Before we look at the daily chart for gold I would like to show you the daily chart for GDM which has the last pattern which was a combo triangle / H&S consolidation pattern that began to form at the November low from last year. The reason I’m showing you this chart first is so you can see the price objectives of these two patterns was met and then the relief rally started with a small double bottom. As you can see the relief rally went almost back up to the 455 area which was the November low from last year and was a place to look for some resistance to show up. The price action came close but fell just shy before heading back down to the bottom where GDM closed today.
This is a critically important low right here. Either the GDM will break down right here and now or we could see another reversal back up which would then give us a consolidation pattern. If this new trading area is going to be a bigger consolidation pattern then we have completed two reversal points so far with the third one beginning at our current low. In other words we need one more counter trend rally to complete a consolidation pattern. Keep the combo triangle / H&S consolidation patterns in your mind when we look at the daily chart for gold.
Now lets look at a daily chart for gold which shows the same two formation the triangle and H&S consolidation patterns which began to form at the November low last year. Unlike the GDM which reached its price objectives gold didn’t even come close to reaching its. As you can see gold had the breakout move and the counter trend rally but the counter trend rally was much stronger than GDM’s. The red circle shows where I was looking for the counter trend rally to end which has two necklines and the bottom rail of the black triangle. As you can see gold went slightly higher finally finding resistance at the top rail of the black triangle where it has finally started to roll over. On the GDM chart above the price action is trading right at the very bottom of its last low but gold is still trading well above its previous low which is showing the miners are much weaker than gold which is what we want to see right now. This combo chart pattern for gold has two price objectives down toward the 1000 area. Where will the PM stock indexes be if gold reaches the 1000 area?
This next chart for gold is a daily line chart which shows the massive 2 1/2 year bearish falling wedge with the blue triangle / H&S consolidation pattern that formed out toward the apex. This daily line chart shows the counter trend rally stopped dead in its tracks at the neckline and the apex of the blue triangle. At this point I’m calling this counter trend rally just a strong backtest to the bottom rail of the 2 1/2 consolidation pattern until something says differently.
Now lets take a look at a daily line chart for silver as I believe it’s showing us the way lower for the precious metals complex. After breaking out of its blue triangle consolidation pattern about a year ago silver has been chopping out a pretty large H&S consolidation pattern. Today marked a brand new low for its bear market that began in April of 2011. It’ hard to imagine anyone holding on for the better part of four years and then seeing silver hitting a new low today. It has to be very frustrating psychologically and financially.
The weekly candlestick chart for silver shows how its bear market has unfolded since it put in an unbalanced double top to ended its bull market. Note the string of black candlesticks, on the right side bar, that tells us the last move down was an impulse move. If the month of August ends up with a black candle then this will be the first one in silvers brand new impulse move down in which we should see a sting of black candlestick into the low.
This next weekly chart shows how silver is reversing symmetry back down from its big rally off of the 2008 crash low. Strictly from a Chartology perspective it’s hard to find anything bullish on this chart.
The very long term monthly chart for silver shows its double H&S top and the recent breakdown this week of neckline #2. There really isn’t much in the way of support until neckline #1 is reached. I know it’s hard to believe but that’s what the chart is telling us.
Next I would like to show you a couple of long term charts for the $XAU that shows where we may look for a price objective for this next impulse move lower. This first chart shows you the entire history of the XAU which is showing us a massive bearish rising wedge formation. I would like to focus your attention to the bottom rail of the massive rising wedge which shows us one blue triangle consolidation pattern above the bottom rail and one below. I have talked about and shown you many cases of setups like this. You’ve heard me say if you see a consolidation pattern above an important trendline, or below and important trendline, or one right on an important trendline or one above and one below and important trendline, that is usually a very good setup. Here we see one above and one below that very important 15 year bottom trendline. The XAU is now just several points away from making brand new all time lows. Pretty amazing when you think about it. Also note the big reversal patterns that have played such a key role during the formation of this nearly 35 year monthly chart. Big reversal patterns big moves. I got a price objective by measuring the width of the huge bearish rising wedge which shows a price down to the 23.63 area.
Below is a slightly different version of the long term monthly chart for the XAU in which I started the first reversal point at the beginning of the bull market in 2000. Starting the price objective measurement from their we get a parallel rising channel again separated by the two blue triangle consolidation patterns. Again I took the measurement from the width of the rising channel and added it to the breakout point which gives us a price objective down to the 25.00 area.
Next I’m going to show you the price objective for the GDX based on the big bearish falling wedge. On the weekly chart below there are two different price objectives based on the impulse and breakout to breakout methods. Using these to techniques we get a price objective between 7.40 and 7.90. I will use these price objective for our DUST trade.
Next we’ll look at a weekly chart for the GDXJ which shows its entire history complete with its massive H&S top and a slightly different bearish falling wedge. The GDXJ’s bearish falling wedge is made up of six reversal points and has a price objective down to the 6.50 to the 7.50 area.
As it’s getting late I need to get this posted. Keep in mind these price objectives will get us into the ballpark and give us a place to look for an important low. Nothing is 100% guaranteed in the markets but I like this setup we’ve been following for well over a year and probably longer. This could very well be the capitulation phase that drives the last of the die hard gold bugs nuts. This is why I said in my opening comments that I feel much more comfortable playing this potentially last impulse move down in the PM complex vs trying to catch a move in the stock markets right now. To each his own. All the best…Rambus
Below is the combo chart we’ve been following very closely which shows the HUI and GLD with their respective big consolidation patterns. As you can see they both gapped below the bottom rail of their two plus years consolidation patterns only to have a small selloff. It looked like the initial backtest was going to hold resistance but that wasn’t the case. After the initial backtest they both sold off for a few days only to gap back up and over the bottom black trendline. I have to admit that was very disappointing to me as we’ve been watching this chart for a very long time and everything worked out just like I had hoped it would. We got the big breakout gap on huge volume which is what I was looking for. I’m glad to see the HUI is now trading back below the bottom trendline and GLD is getting closer to breaking back below its bottom rail which will help confirm this latest price action has been just a strong backtest.
The bottom trendlines were a little tricky to put on as the consolidation patterns are so big and the lows and highs are not exactly touching the trendlines. When I see a breakout and backtest I always will update the trendlines, in this case the bottom trendline, which helps shows where the trendline should actually go. If you follow the price action of the bottom rail of each chart pattern you can see how clean the breakout and backtest are now that we have more information to work with. I believe the bottom trendline for the HUI and GLD are properly place. Keep in mind these are very big consolidation patterns that are just breaking out.
Before we look at some weekend charts I just want to second Sir Fullgoldcrown’s Friday night post at the forum. We created Rambus Chartology so we could have a community of like minded investors who want to learn as well as share what they have experienced in their own investment world. We are all equals when it comes to the investment world which can humble even the most experienced traders on the planet. That’s the nature of the game we’re playing. Sharing ideas in which everyone can benefit from is the corner stone of Rambus Chartology. I know we have a lot of lurkers at the forum and if you have any good ideas you would like to share with the rest of the members please feel free to post what you have without fear of ridicule or embarrassment. As Sir Fully likes to say, “It’s all for one and one for all.”
Last week was a week that doesn’t come around very often in the stock markets. After chopping sideways for all of 2015 it now looks like we’re finally getting an intermediate term move down as some important support zones have given way. Until this past week it was still uncertain whether this horizontal trading range was going to be a consolidation pattern or a reversal pattern. Thursday and Friday’s price action confirms for me that we have a 5 point bearish flat bottom expanding triangle reversal pattern in play now. The bottom blue rail of the expanding flat bottom triangle, which gave way on Thursday at 17,100, finally broke critical support. That bottom trendline will now become resistance on any backtest. The next big question will be whether we’ll see a backtest to 17,100 before we go lower? I’ll try to answer that question a little later.
Next lets look at a four year weekly chart for the INDU which shows the smaller red 5 point bearish expanding flat bottom triangle as part of a much bigger blue expanding rising wedge. As you can see the DOW closed right on the bottom rail last Friday which is showing us it’s hot. A break of the bottom blue rail of the expanding rising wedge at 16,460 will give us an even bigger topping pattern.
This next very long term weekly chart for the INDU goes all the way back to the 2007 H&S top which reversed the bull market at that time. That strong decline ended with an inverse H&S bottom which was the exact same height as the 2007 H&S top and led to our 6 1/2 year bull market rally. On this weekly chart I’m showing the bottom rail of the expanding rising wedge as a black dashed support and resistance line. That line is now the most important line on that chart. It will be interesting to see how the price action interacts with it.
This last chart for the INDU is a 30 year monthly chart which shows how the blue expanding rising wedge fits into the big picture at the top of the chart. Keep in mind this pattern won’t be complete until the bottom rail is broken to the downside. That will be the confirmation we’ll need to see that says this stage of the bull market is now over.
Now I would like to show you a few charts that may shed some light on whether we’re going to see some follow through to the downside or if we’ll get a backtest to the 17,100 area before the INDU moves lower. Below is a daily chart for the $RUT which is now showing a double H&S top, not a very pretty one but the pieces of the puzzle are there. Notice the blue bearish falling wedge that formed right on neckline #2. As I’ve stated countless times in the past when we see a smaller consolidation pattern form right on top, below, above and below or right on an important trendline, it’s usually a pretty good indication that the pattern is valid and the breakout will occur. Also I have shown you many times in the past when we see a small consolidation pattern slope in the same direction of the trend, in this case down, we usually see a pretty strong move. This looks like the case with the $RUT.
The long term daily chart for the RUT shows the damage that has occurred when the price action broke below the one year top black rail of the expanding flat top triangle. As you can see it held support on three separate occasions but now with the H&S top and the red bearish falling wedge in place significant damage has been done to the original flat top triangle. The red bearish falling wedge is strongly suggesting that we’ll see lower price dead ahead before we get a counter trend rally.
The daily chart for the $SOX shows it broke down from a bearish falling flag and still has a little ways to go yet before it reaches its price objective shown at the bottom of the chart.
The monthly chart for the SOX shows why the 545 area may offer some decent support in the short term or even the long term. We just have to see what happens when the SOX gets there.
The daily chart for the SPX shows it has broken down from a blue 5 point bearish falling flag at the end of its almost nine month parallel 5 point bearish rising flag formation. We can now call it a bearish rising flag formation because the price action has broken below the bottom rail confirming the reversal pattern for us. The failure of the price action to reach the top rail, which would have been reversal point #6, now tells us the bulls were weak. It’s hindsight now but it still helps confirm the bearish price action from last week. Clues, it’s all about getting clues.
If this decline takes off to the downside the monthly chart for the SPX shows the previous highs made back in 2000 and 2007 should offer some strong support at 1550 or so.
I’ve been showing you this daily chart for the $NYA for awhile now which finally gapped below the neckline this past week after testing it on four separate occasions.
The daily chart for the EEM, emerging markets, broke below the bottom rail of its own bearish falling wedge a week before the US markets.
The weekly chart for the EEM shows it’s now just breaking out of a blue 5 point triangle reversal pattern. The only question is will we see a backtest to the bottom rail?
The daily chart for the RUSL, 3 X long the Russian stock market etf, broke below the bottom rail of a blue bearish falling wedge just three days ago which suggest there is more to go on the downside.
Lets look at one last bearish falling flag which has formed just below the bottom rail of a much bigger black bearish expanding flat bottom triangle consolidation pattern on the $XES. This area has been leading the energy sector lower.
The weekly chart for the $XES shows the bearish expanding flat bottom triangle which I’m looking at as a halfway pattern to the downside that is separating the first leg down out of the bearish rising wedge and our current impulse move down out of the expanding flat bottom triangle.
There are never any guarantees when it comes to the markets but I’m seeing several small bearish falling wedges and flags that usually lets us know that we’re in a strong move. Time will tell.
There is another sector in the markets that maybe showing confirmation of a strong move lower. The Transportation Average was one of the strongest sectors when the markets bottomed in 2009. The daily chart below shows it completed a H&S top last week when it broke below the neckline on Friday. The head is a 5 point bearish falling wedge with a blue bullish expanding falling wedge as the left shoulder and our most recent blue bearish expanding rising wedge as the right shoulder. A backtest would come in around the 8015 area.
The weekly chart for the Transportation Average shows you just how strong its bull market was by the formation of the two bullish rising wedge which is just the opposite of what I just showed you on the charts above with the smaller bearish falling wedges and flags. You can see the price action is just now breaking below the neckline.
The monthly chart for the Transportation Average shows the reason I had been so bullish on this sector for such a long time. This monthly chart below shows you one of the most beautiful H&S consolidation patterns I’ve ever seen. I’ve seen some pretty good ones but this one is right up there with the best of them.
The long term quarterly chart for the Transportation Average goes back about 100 years showing the really big patterns that have formed through the years. You can see the H&S consolidation pattern at the top of the chart. If this index ever declines down to the neckline it would probably be a very good clue that the correction or bear market or whatever it is we’re facing maybe over and a new bull market may begin.
Lets turn our attention to the US dollar as a lot of folks are becoming bearish which maybe the case in the very short term. I first showed you this long term monthly chart when the price action broke above the top rail of the massive bullish falling wedge. So far all the US dollar is doing is taking a well deserved rest after breaking through the top rail. As you can see it has had one backtest to the top rail so far and it might have another one where support should come in between 92 and 93.50 or so. Nothing is broken on this chart which shows a very bullish picture for the US dollar.
Below is a monthly combo chart for the US dollar and gold which shows the US dollar reversing symmetry back up as shown by the blue arrows and gold possibly running into resistance at the 1180 area. Once this consolidation period ends for the US dollar I expect it to rally up to the next blue arrow which comes in around the 108.60 area and then a time out to consolidate its gains. Remember a big base equals a big move which the US dollar has.
Lets take a look at some of the other most important currencies of the world and see what their long term charts look like because the big picture tells the truth. The $XAD, Australian Dollar, shows it still has a ways to go yet before it reaches in massive H&S tops price objective at a minimum.
The weekly chart for the $CAD, Canadian Dollar, shows a double H&S top and has recently broken out of a small H&S consolidation pattern.
The monthly chart for the $XBP, British Pound, shows it has been trading sideways since it crashed in 2008.
There are two separate chart patterns that we can look at in regards to the long term, $XEU, Euro. The first chart is the massive downtrend channel that began to form when the $XEU topped out in 2008. We’ve been watching this one for a very long time, well before it broke out from the blue bearish rising wedge. It did find support at the bottom rail of the downtrend channel and has gotten a bounce. Is it just a dead cat bounce or something more?
This second long term monthly chart for the $XEU is my preferred look which is showing a double H&S top. After putting in neckline #2 the euro has been in rally mode and it’s reversing back up to the brown shaded support and resistance zone which comes in at the 116.60 area which would be the high for the lower right shoulder for the neckline #2 H&S top. If the double H&S top plays out it will have a price objective down to the low made back in 2000 – 2001.
The 25 year chart for the $XJY, Japanese Yen, shows it has completed a double H&S top and has broken below the apex of its ten year triangle reversal pattern that launched the rally to its ultimate top in 2011 that shows a small H&S top that reversed the bull market.
From a short term perspective it looks like the Stock markets still have a ways to go down before we see a short covering rally. The many bearish falling wedges and flags tells us this is a strong move down right now. Be prepared tho for some high volatility as the bulls and the bears fight it for control of the trend. I promise I’ll have more on the precious metals complex this week but this move in the stock markets supersedes everything else right now. Big breakout moves don’t happen very often and when they do its nice to play the impulse leg until something changes. Again we should have a very interesting week ahead. All the best…Rambus
Copper is an important commodity when it comes to the health of the world economies and how it does often reflects how strong or weak the economy is. Its been awhile since we took an indepth look at Dr. Copper to see how healthy it is so tonight we’ll look at a few charts starting with a daily look.
The daily chart for Copper is showing it has completed a double headed, double H&S top, which is having a somewhat ugly breakout and backtest of the lower neckline #2. The smaller H&S #1 was picture perfect complete with a small blue expanding falling wedge for the left shoulder and a blue bearish rising wedge as the right shoulder. H&S #2 was very symmetrical as shown by the neckline symmetry line which shows the height for the left and right shoulders. Outside of the messy breakout and backtest, which happens sometimes, this chart is still very bearish looking.
To really get a feeling for what is taking place with Copper we need to look at the longer term charts that are far less likely to morph into something else. Once a multi year pattern is finished building out the odds are very high that it’ll complete its measured move at a minimum and often times the move will go much further. With really big tops, like most of the commodities and the precious metals complex have built out since they peaked out in 2011, are prime examples of what I mean. These multi year tops have led to a four year bear market in most cases.
Copper’s bear market started in early 2011 with just a small H&S top on the weekly chart which ended up being the first reversal point in a multi year seven point blue triangle reversal pattern. Note the breakout and backtest to the bottom blue rail confirming the bear market top was in place. After the initial move down Copper had a bigger backtest to the bottom rail of the blue triangle reversal pattern again confirming the blue triangle as a reversal pattern to the downside. Note the big backtest has taken on the formation of a H&S consolidation pattern which is the same H&S consolidation pattern I just showed you on the daily chart above. It is also very similar to the one I’ve been showing you on the SLV chart. What is also very interesting here is that neckline #2 on the daily chart above is just a very small part of a massive H&S neckline that goes all the way back to the lows made back in 2010 which is creating an even bigger reversal pattern. One last note on the weekly chart below. Notice how strong and near vertical the rally was after the 2008 crash low. This sets up a very good possibility that we may see a similar move down only in reverse, reverse symmetry, as show by the red arrows. There really isn’t much in the way of support until the 2008 crash low is hit around the 1.25 area.
The monthly chart really takes out the noise and gives you a nice clear picture of the two massive topping patterns, the seven point triangle reversal pattern and now the even bigger H&S top. Keep in mind I was one of the strongest bulls during the bull market years which started with a large double bottom reversal pattern. I have shown you many times in the past when you see a bullish rising wedge form in an uptrend you know that uptrend is very strong. Normally a consolidation pattern will form a sideways pattern or slope down against the uptrend,such as a bull flag but when you see a pattern slope in the same direction of the trend its a very powerful signal. As you can see Copper formed two bullish rising wedges during its bull market run that ended with a bearish rising wedge reversal pattern. The top was a reversal pattern because the price action broke below the bottom rail unlike the bullish rising wedges where the price action broke above the top rails.
The last chart for Copper is a quarterly chart which shows the entire history going all the way back to 1972. Copper built out a massive 25 year triangle base that finally launched its bull market of a lifetime. The way to measure a pattern like this is to measure the first two reversal points in the triangle. You then add that distance to the breakout point to get your price objective. As you can see that massive triangle based called for a price objective up to the 3.81 area as shown by the black arrow at the top of the chart. The top of the massive 25 year triangle ended up offering support during the 2008 crash that reversed symmetry down as shown by the blue arrows. The crash was so hard that the price action actually ate into some of the support that the top rail had. There is a good chance that our current impulse move down that is just now breaking down from the massive H&S top may take the price action even lower than the 2008 crash low as that part of support is now gone. At any rate Copper is at a very interesting point right now on the daily chart all the way out to the long term quarterly chart.
I know you’re probably thinking that the price objective for copper is just a fluke and that it’s impossible for Chartology to show such a thing especially on such a long term chart. I would like to show you another very important commodity which is oil. This quarterly chart goes all the way back to 1982 which shows the huge trading range oil was in until it finally broke out in 2004 which launched its bull market of a lifetime. Oil created a massive double bottom as its launch pad. As I showed you on the quarterly chart for Copper I measured the double bottom base and added that measurement to the breakout point and got a price objective up to 146.15 which was about .85 cents shy of 147 its all time high. Just like Copper oil to found support at the top of the old highs during the 2008 crash.
As you are well aware of there are no absolutes when it comes to the markets but Chartology at least gives us a road map we can follow that lets us know if we’re in a bull or bear market which is the most important thing to understand when trading the markets. The bull market in commodities ended in 2011 and the bear market began which is still ongoing to this day. All the best…Rambus