Tonight I would like to update you on some of the US stock markets we looked at this morning. For the most part the support and resistance lines held pretty well today considering all the volatility. Starting with the INDU the S&R line held resistance today but the 200 dma is still holding support so we have a standoff taking place. So far all the volatility has been held in check below the support and resistance line which is telling us it’s an important trendline. The best way to look at the S&R line is to think of it as support when the price action is trading above it and resistance when the price action is trading below it. It’s a well defined line in the sand.

The longer term daily chat for the INDU is showing the price action dropping below the S&R line which should now reverse its role from what had been support to now resistance. For the last three years or so the INDU has completed one consolidating pattern on top the the next , creating an uptrend , which is a bull market.

After breaking below the S&R line two weeks ago it is still holding resistance. It won’t take long before we know what next direction this index wants to go.

The ACWI is an all word stock market that broken down from a possible double H&S top and is now in the process of backtesting the upper H&S #1 neckline from below which could very well be the right shoulder of a double H&S top.

The compq has been trading in an 8 month rising channel formation touching the bottom rail this past week.

The long term daily chart for the NDX100 shows it breaking down from the blue 5 point triangle reversal pattern this week.

The NYA has broken down from a 5 month H&S top that has broken the neckline and is now it backtesting process.

The RUT has been building out a 7 month rising channel formation with a breakout and backtest taking place right now.

I am watching the ACWI For clues the Stock Markets are making an important top .

It seems like next week is going to be an important time to see how all these backtests that have going on now for several weeks play out. Have a great weekend…Rambus

This week has been very volatile in the US stock markets as you well know. The volatility started two weeks ago when the Dow dropped 350 points on a Monday I believe. That decline broke an important support and resistance line that had held support since March. This volatility has taken place just below that important support and resistance line which so far is holding as the backtest. The indicators are still bearish for the most part.

Below is another daily chart for the Dow which is showing the 200 dma. I also added a short term price objective if this important support and resistance line holds as the backtest. From top to bottom it would give the Dow about a 7% correction at a minimum. The December and February lows would actually be the next area of support around the 17,050 area.

The long term daily chart for the Dow shows how the breakout and backtest looks along with the 200 dma.

The daily chart for the SPX shows the big breakout day from two weeks ago and the backtest that has been taking place.

The daily chart for the COMPQ shows a similar setup to the Dow and SPX and is strongly backtesting its support and resistance line today as well.

Tonight I would like to update you on some precious metals charts we’ve been following very closely to shed some light on where we’re at and where we maybe heading. When investing in the markets we need to have a game plan to follow so that we know when the game changes we have to change. As long as the game plan is working you stick with it until you’ve reached your price objectives or the trend changes.

Believe me it’s not at all easy to follow a game plan. There are things that happen to a stock or market on a daily basis, that we have no control over, that can affect our thinking. Without a game plan to follow we are at the mercy of every little wiggle a stock makes. One has to have a certain amount of confidence in whatever trading system they use to be able to ride out the wiggles that can whipsaw you to death if you act on every move a stock makes.

Getting the initial position to stick is one of the hardest things to do because it’s impossible to buy the absolute bottom. A stock or market will move two steps forward and one step back in an uptrend. It’s that one step back that tends to get you if you didn’t buy the actual low. So usually, at the beginning of a trade, many times you’ll find yourself with a small loss to deal with. If you got the trend right it will generally fix itself and your small loss will finally turn into the gain you’re originally looking for.

Lets now look at some precious metals stocks to see if our original game plan is still working. Below is a chart for the $BPGDM that shows the GDX on top and the BPGDM on the bottom. The last time I showed you this combo chart the GDX still hadn’t broken the neckline yet and the BPGDM chart on the bottom was stuck at 23.33 I believe. As you can see the GDX has broken below its neckline and the BPGDM has moved lower and is now trading at 16.67 which means that only 16.67% of gold mining stocks, on a point and figure chart, are on a buy signal. Note the alinement that now shows the BPGDM is leading the way lower with the faster 5 dma next and the 8 dma last. This is the setup you want to see in a downtrend.

The next chart is a long term daily look at the CDNX index which was just starting to break below the bottom rail of the blue triangle consolidation pattern the last time we looked at it. As you can see it’s now starting to pick up some steam to the downside confirming the small caps are in trouble.

This next chart is a daily look at the GDM which shows the combo triangle / H&S consolidation pattern that started to form at the November low from last year. It’s easy to see in hindsight now how all the pieces of the puzzle fit together. Note the breakout from the triangle, black solid trendline, eight days ago was quickly followed by the breakout below the neckline three days later. This past Monday was the backtest day that tested the neckline. This chart shows you the game play we’ve been following since May which is still working according to the Chartology. If for some unexpected reason the price action starts trading above the neckline and the bottom rail of the black rectangle then the game plan will have changed and I will have to adapt to what the chart is saying at that time. So far so good.

The indicator chart shows all the inductors are bearish at this time.

Some of you may remember this daily chart for GDM which is showing the blue morphing rising wedge that caused a little trouble back when it was forming. The red marks shows how it morphed into a slightly larger bearish rising wedge with a false breakout of the top dashed trendline and then an equal false breakout of the bottom dashed trendline that represents the original bearish rising wedge. The solid blue trendlines ended being the pattern I was looking for. Note the breakout through the bottom rail of the blue bearish rising wedge and the backtest that lasted about a week before the price action began to decline in earnest. That little move helped confirm the game plan for me at the time. It looks just like another little wiggle to most folks but for me it was a serious piece of the puzzle.

Below is a long term daily line chart that shows gold on top and silver on the bottom. The black dashed trendline down at the bottom right hand side of the chart finally shows silver cracking that important trendline / NL while gold is still testing its own black dashed trendline. It has taken awhile but this chart is still confirming the game plan. There is still a lot of room for the RSI indicator at the top of the chart to move lower.

Below is a daily chart for gold that shows its most important moving averages which are all above the most recent price action confirming the game plan. If we were to see gold start trading above some of these important moving averages then I would have to start to reconsider the game plan but for now there is nothing broken.

This next chart for gold shows the downtrend channel I’ve been trying to show you once a week so that you can follow the Chartology as it’s developing in real time. The black and red rectangles measures time and price for each impulse move. I’ve been saying that I would like to see the price action testing the bottom rail of the blue bearish falling wedge by the middle of July. The reason for that is because that is when gold broke below the bottom rail of it big six point blue rectangle back in 2013 and the red rectangle measured that impulse move down. The red rectangle at the bottom right hand side of the chart is the exact same size that shows where we may look for a low in time and price. It’s not mandatory that gold hits the bottom rail of the blue falling wedge in the middle of July but time wise it would be some nice symmetry if it did.

I’ve been showing you this long term monthly chart for gold shortly after it broke down from the bearish expanding rising wedge almost two years ago. Longer term members may remember when I added the neckline extension rail that is taken from the 2008 H&S consolidation pattern and extended it out in time to the right hand side of the chart. The symmetry was just too pretty to ignore as shown by the neckline symmetry rails. They’re all the exact same angle which shows the bottoms of the left and right shoulders of the 2008 H&S consolidation pattern, which is also the same angle for the neckline, which also shows the highs for the left and right shoulders of the massive H&S top and its neckline. The breaking and backtesting process has been going on for close to a year now but this is a massive H&S top that is in play as big patterns take a lot time to develop. Now it’s getting time for gold to break to new lows since its bear market began in September of 2011. That will confirm the game plan.

I don’t show Platinum very often but it’s part of the game plan. Below is a long term monthly chart that shows its multi year blue rectangle. It then formed the smaller red rectangle and is now making new yearly lows.

Platinum weekly chart.

This next chart is a daily line chart for silver that shows it breaking below its neckline. If you look really close you can see a tiny little backtest to the neckline. It’s possible we see another backtest to the neckline but the fact that it has broken below the neckline tells us we’re on the right track.

As with gold silver to has a massive H&S top in place. It too has some very nice symmetry as show by the neckline symmetry rail which shows the height for the left and right shoulders. My game plan is to shoot for the brown shaded support and resistance zone. If silver makes it that low I’ll be satisfied.

I have many more charts I could show you but I would like to end this Wednesday report by looking at the GDXJ. Below is the two hour chart we’ve been following that shows the blue bearish rising wedge with a H&S top.

Below is a long term daily chart which shows the previous consolidation pattern, the bearish rising wedge at the top of the chart. The H&S top I showed you on the two hour chart above is the fourth reversal point in the new bearish falling wedge at reversal point #4. Note the impulse move down from the blue bearish rising wedge at the top of the chart that also had a H&S top at its fourth reversal point. Our current blue bearish falling wedge would give us a price objective down toward the 12 area as shown by the blue arrows.

This long term monthly chart shows how our current blue bearish falling wedge fits into the bigger picture.

When you look at all the individual precious metals stocks I’ve been posting that are breaking out from their seven month consolidation patterns along with these charts above the game plan is still clearly in affect. It’s possible it could change at anytime but until that time comes I have to go with the game plan that has been working. All the best…Rambus

After creating a unbalanced double H&S top DBC gapped the neckline today with a huge breakout gap.

The GDXJ is at an important inflection point right here and now. As you can see it’s sitting right on the neckline of a small H&S top that has formed at the fourth reversal point on the potential bearish falling wedge. A break of the neckline will almost assure a move down to the bottom blue rail of the falling wedge at a minimum.

The long term weekly chart shows the two blue consolidation patterns with the lower one being the possible bearish falling wedge we looked at on the chart above. Note the 4th reversal point in the top pattern, the bearish rising wedge, and the decline that followed. The fourth reversal point in the lower bearish falling wedge may very well be the beginning of the next impulse move down similar to the fourth reversal point in the bearish rising wedge. If that is true this move down is just getting started. The blue arrows measures the price objective down to the 12.69 area which would cut the GDXJ in half from the current level.

The daily chart for the GDX shows it has now broken below the bottom rail of the black triangle using the bar chart. Notice it formed a small H&S top at its fourth reversal point similar to what the GDXJ is doing right now. When you compare this daily chart for the GDX to the GDXJ chart above the GDX big caps are leading the way lower. Maybe the small caps will play catch up as they are lower on a percentage basis today.

Since the all important low that the precious metals complex made last November SLV has built out a H&S consolidation pattern. It’s not the prettiest one I’ve ever seen but all the pieces are there. SLV looks like it’s completing the second right shoulder by breaking down from a small H&S top today. As you can see there are two left shoulders and two right shoulders with a big fat neckline, brown shaded area, as the lows were not even. Nevertheless that brown shaded S&R zone shows all the lows that were made since the November low and if SLV breaks below the brown shaded S&R zone/neckline it will reverse its role to what had been support  for 7 months to resistance.

Below is the long term monthly chart we’ve been following for several years now. This daily H&S consolidation pattern has formed as the backtest to the bottom rail of the blue triangle and the neckline of a much bigger H&S top. It has taken almost a year now since SLV broke below the bottom rail of the blue triangle to compete the backtesting process. Big patterns take lots of time to completed all the work during the breaking out and backtesting sequence. Step by step the job is getting completed.

There are no words to describe the Carnage  that Precious Metals Stocks have suffered for the last 12 years. There is no consoling those who have invested in this sector , many who have literally lost their life’s savings as they watch this horror unfold in utter disbelief .

The best way to gauge this complete evisceration of Precious Metals Investors is to follow the HUI:GOLD Ratio .

This ratio compares the most widely followed PM Mining Index . the HUI …Numerator

with the Price of Gold …Denominator

This Ratio is widely followed by PM Analysts, many  who have been calling for it to bottom since it entered its bear market in…get this…2003 !

Yes 2003 !

Rambus has documented the fall of this ratio ever since he began this website and has just tonight posted an update showing it has actually  broken out of a small consolidation pattern this past week and is now BELOW where it was at the beginning of the Late Great Gold Bull Market in 2001 .

………………………………..

Excerpt from Rambus Chartology Weekend Report June 21 2015.

“Next I would like to update you on the long term HUI:GOLD ratio chart we’ve been following that shows this ratio has finally broken below major long term support, going all the way back to the 2000 low. I have literally waited several years for this ratio chart to break .13 and it finally has. The little H&S consolidation pattern that formed right on the S&R rail has been the key in looking for this ratio to break to new all time lows”

Please take a moment to let this stunning chart sink in .

Especially if you have been holding PM Stocks with the view that this ratio cannot possibly go any lower  or if you have been bottom fishing in this god forsaken sector .

The price of the Major PM Mining Stocks, as represented by the HUI:GOLD Ratio , is BELOW where it was when gold was trading at $250 , 15 years ago.

And in spite of all the analysts saying this was absolutely impossible , this Incredible Ratio is breaking down yet again to new all time lows .

The Mind Boggles .

Fullgoldcrown (For Rambus Chartology)

This Weekend Report will probably be one of the most important posts I’ve made in quite some time. It will require 3 parts to fully present this scenario .

I’m going to try and lay out a game plan on how this possible last impulse move down may play out in time and price. One thing I can guarantee you is that there will be no bell going off at the bottom when it finally materializes. The volatility will most likely be very extreme with huge swings back and fourth as the last of the bears sell out to the new bulls. How long that process will play out is anyone’s guess. It may take several months or longer until we see some type of reversal pattern form.

Normally after a hard move down the first bounce off of initial support will be the strongest. It’s like dropping a super ball, the first bounce will be the highest with the subsequent bounces losing steam until it finally comes to rest. These bounces will produce some type of reversal pattern that we should be able to recognize which most likely will be a double bottom or inverse H&S bottom.

Today, in part one, I would like to look at the HUI, the precious metals stock index, for clues on how this last impulse move may play out in time and price. I’m saying last impulse move down but there in no way to know 100% for sure if that is true. This next impulse move down is based on what the chart patterns are suggesting today along with some of the individual precious metals stocks. When you add everything up it becomes clear that at a minimum we’ve been in the next impulse move down since the May high at the 185 area. I’m going to use the HUI as a proxy for the rest of the PM stock indexes as it’s leading the way lower.

First I want to look at the short term two hour charts and move out to the longer term charts to try and put everything in perspective and paint a picture of how I think things may play out based on the Chartology at this time. We’ll definitely need to keep an open mind and adapt to changes that the market may throw at us.

When looking at these short term charts the November low from last year was a most important low as many of the individual precious metals stocks and precious metals stock indexes show that low as being the first reversal point in a bigger consolidation pattern. This consolidation phase has gone on now for 7 1/2 months. When the last impulse declined into that November low there was no way to know how or which type of consolidation pattern may build out. All we could do is watch the price action for clues on what may develop. This first 2 hour chart for the HUI shows most of the smaller consolidation patterns that formed since the November low. It’s easy now to look back in hindsight to see how things unfolded but it’s much harder in real time to know 100% for sure what you’re seeing is correct as chart patterns can morph into bigger patterns.

Some of you may remember the 5 point blue triangle reversal pattern that ended up being the head of, at that time, a small H&S top labeled #1. There was a nice reverse symmetry decline into the March low which now is the armpit of a much bigger H&S pattern #2. You can see how laborious the right shoulder was during its formation as the original blue dashed rising wedge morphed into the bigger rising wedge which eventually built out the right shoulder. I showed you how the HUI may do a ping pong move in the apex of the blue dashed rising wedge and also how the apex may hold resistance. Looking back in hindsight that’s is what happened and why we started to get short the Kamikaze Stocks. The first big clue we got is when the price action gapped  below the bottom rail of the blue rising wedge. From there you can see the little red rising bear flag that formed right on top of the neckline. Then the price action gapped below the neckline with one clean backtest so far. I wish I could rule out no more backtests to the 164 area but it’s still possible at this point in time. The main thing is we have a clean line in the sand at the 164 area to keep a close eye on.

This next 2 hour chart for the HUI I’m going to use for illustration purposes and call it a four point triangle consolidation pattern. They’re basically both consolidation patterns with the same outcome.

This next chart is a 2 year daily look at the HUI which shows the combo H&S / triangle pattern we just looked at above with the blue triangle consolidation pattern that led to the last impulse move down once the bottom rail was broken to the downside. Since the November low from last year the HUI has built out this blue triangle/H&S consolidation pattern.

To say the last two years in the PM complex has been tough would be an understatement as traditional chart patterns have morphed into bigger patterns. Longer term members may remember this blue 8 point Diamond consolidation pattern that chopped around for almost a year and a half before it finally broke to the downside in the last impulse move down. Starting at the 5th reversal point you can see the blue triangle, that I showed on the chart above, which finally ended the Diamond. The last impulse move down started at reversal point #8 and ended at the all important November low last year. Hear I have the H&S consolidation pattern in place but it could also be a triangle consolidation pattern that is just now starting to break down. Note how many times the bottom rail or NL has been touched over the last seven months or so. This is an important breaking taking place right here and now.

Before we move on the the longer term charts I would like to show you the first impulse move down we caught back in December of 2012. The big S at the top of the chart represents the top of the right shoulder for the massive H&S top. That right shoulder high was an unconventional 5 point red bearish falling wedge which is a reversal pattern. When the pattern broke down we took our first short position on the backtest to the underside of the red falling wedge as shown by the black arrow. That short trade started out very slowly as shown by another unconventional blue falling flag which took a good three months to build out.

At the time I was using the 50 dma as our sell/stop. You can see how well it worked in holding resistance which the HUI couldn’t break. Finally the blue falling flag broke to the downside with a nice clean backtest to the underside of the bottom rail. The HUI declined sharply until the start of the conventional red bearish rising wedge which took about a month to complete. The black arrow in late July of 2013 shows where the HUI gapped above the 50 dma where we finally exited our Kamikaze position. The reason I’m showing you this trade is to show you that it will not be a cake walk during this next impulse move down. There are going to be some small consolidation patterns that form along the way with some very wide swings in the price action that will scare the pants off of you. They call it short covering rallies. They will only last for a few days but be prepared for them.

This next weekly chart for the HUI is one we’ve been following very closely that shows the double trendline downtrend channel. The outer dashed trendline has held resistance three times now so we know it’s hot. You can see the lower rail of the bottom triangle cracked this week to the downside. This is the point where we could see a backtest to the underside of the lower triangle before the move lower takes off. Note the impulse move down from the upper blue triangle. There was no backtest when that bottom rail was broken. The pink shaded areas measures time and price based on the first big impulse move down as shown by the blue arrows.

When I first built this chart I was using the last reversal point in the upper blue triangle as the starting point for the second impulse move down. At the time the smaller lower blue triangle hadn’t formed yet which may change the price objective as shown by the blue arrows. I’ll show you what I mean in a moment.

As I’ve shown you on the charts above this has been a rather unconventional trading range, for a lack of better words. This next weekly chart for the HUI I’ve never posted before until today. I’ve been looking at this next possibility for some time trying to explain this big trading range which I would view as very complex. I have shown you in the past how two smaller chart patterns can build out a bigger pattern which is not at all uncommon. If we fuse the two blue triangles together we get, what most chartists would call, an unconventional bearish falling wedge.

The weekly chart below shows how the falling wedge fits into the big picture. I’ve made two price objectives based on the impulse method as shown by the blue arrows and the breakout to breakout method. The breakout to breakout method starts with the breakout from the massive H&S top to the first reversal point in the black falling wedge. Take that measurement and add it to the breakout from the black falling wedge to get your price objective. If the black bearish falling wedge plays out then we’ve only completed four weeks of this next impulse move down as shown by the blue arrow at reversal point #4.

Before you write off this possibility I will show you another bearish falling wedge that played out during the 2008 crash.

This next weekly chart for the HUI takes in the H&S top that built out in 2007 and the 2008 crash that ensued when the breakout from the neckline took place. Like our most recent massive multi year H&S top, which is a double H&S top, the 2007/2008 H&S was also a double H&S top. The first leg down the HUI formed a little red bear flag halfway pattern which when it completed marked the first reversal point in the big blue bearish falling wedge.

If you’re an adrenalin junkie, as Sir Parabolic Chuck ,at the Chartology Forum says he is, you would have been in 7th heaven. Note how many points were in the first reversal point within the blue bearish falling wedge in about two weeks time. Then the second reversal point to the downside that was bigger than the first reversal point which again took about two weeks. The 3rd reversal point took less that a week to complete and then the fourth reversal point signaled the blue falling wedge was complete when the price action broke below the bottom blue rail. Note the clean breakout and backtest of the bottom rail of the blue bearish falling wedge. It was perfect Chartology. After the backtest was completed it only took four days for the HUI to reach its ultimate low around the 150 area.

The initial bounce off of the bottom was roughly 75 points from about 150 to 225 in about two weeks time. Just think about that for a minute. All I can say is be careful of what you wish for. The HUI then decline back down to the 160 area in just over a weeks time forming the second low. From the second low the HUI rallied almost 100 points in less than two weeks time where it finally ran out of gas and fell back. At the time I was looking for the double bottom hump to hold support but as you can see the price action traded below that area for about a week before the HUI left, what I’m calling a 2 1/2 point double, bottom for good. The HUI basically doubled in about 2 months time from 150 to 300 before you could blink and eye. Previews of coming attractions?

Below is a monthly chart that shows how the current bearish falling wedge would look as a stand alone pattern.

Next I would like to show you a few long term charts looking for clues on what is happening from a different angle. This monthly chart for the HUI shows three fanlines that start at the bear market low in 2000. Note how fanline #2 splits the two triangles with the blue one on top and the red one below. Perfect Chartology. What is also apparent on this very long term chart that shows the entire history for the HUI is the bull market that started in 2000 built out a massive blue bearish rising wedge. Note the big breakout in April of 2013 that so many were calling manipulation at the time. I viewed that big move down as a breakout from two important trendlines. The first was the breakout from that massive H&S top that few believed was possible at the time. The second breakout broke below the bottom rail of the massive rising wedge pattern. From a Chartology perspective that’s exactly what you want to see when two important trendlines give way.

This next chart is a weekly line chart for the HUI which helped confirm for me when the HUI was breaking out from that massive H&S top in 2013. Note how fan line #1 formed when the HUI broke below the neckline and the dashed uptrend rail which had been in place at the time in 2008, green circle. The exact same thing happened when the massive H&S top broke down in 2013 again at the neckline and fan line #2. You can see the small H&S top that has been forming since fan line #3 gave way late last year. If you changed this chart to a bar chart you would see the head backtested the underside of fan line #2 right on the money.

Next I would like to show you a couple of ratio charts. The first ratio chart compares the HUI to GLD. Here you can see the H&S top that has formed since the November low from last year.

This very long term weekly chart for the HUI:GLD ratio shows the H&S top, on the chart above, is sitting right on a very important support line that goes all the way back to the 2000 bear market low at .13 or so.

This last chart for tonight shows the HUI:SPX ratio that shows the HUI under performing the SPX and has now broken the neckline to the downside.

From a Charology perspective the HUI is not looking very healthy in here. We could see a little backing and filling over the next week or so but nothing of significance. In part 2 (for subscribers) we’ll look at the precious metals themselves and look for more clues on a time and price objective. In part 3 I’ll show you many precious metals stocks that should also give us a big heads up on when to look for a possible important bottom to start building out. I really believe we’ve started this next important impulse move down that may take up to four more months to play out so we still have some time left to get our shopping list together on which precious metals stocks we’ll want to own once this Grueling Bear Market comes to an end. Mercy !

We will be calling on the Good Knights and Ladies at the Chartology Forum Round Table to prepare the list  based on their wide array of knowledge in the Precious Metals Stocks.

All the best…Rambus