Lets start by looking at the daily chart for WTIC I posted earlier this week that showed a potential inverse H&S bottom with a double bottom head. The brown shaded areas shows the left and right shoulders. WTIC has closed two days in a row above the neckline. So far so good.

The weekly chart shows the double bottom with the fib retracements. The double bottom has a price objective up to the 68.50 area which is pretty close to the 38% retracement of the parabolic decline. When you have a straight line decline like oil had one would expect to see some reverse symmetry back up once a bottom is in place. The red arrows the reverse symmetry taking place right now to the upside. As this is a weekly chart it will be interesting to see what next weeks bar will look like as the weekly bar coming down was pretty long in this general area.

When we first opened our doors at Rambus Chartology I used to show this weekly chart for GASO on Friday nights. As you can see the big trading range ended up being a 5 point rectangle reversal pattern to the downside. Note the last little bump of the bottom rail just before the bottom fell out at 2.50. That last little touch of the bottom rail looked like another reversal to the upside but the bulls ran out of gas. The bears wasted little time in gaining control of the new move down. The rally in 2011 was pretty steep so when the price action broke down it was a good place to look for reverse symmetry. I originally was looking for initial support to come in around the 1.80 area which was the 2010 low but the bears had other plans and took GASO another magnitude lower before finally bottoming out at 1.23. GASO has made a V bottom and has already captured the fib 38% retrace at 1.95.

The GNX commodities index looks a lot like the daily chart for WTIC which is showing a double bottom head of a bigger inverse H&S bottom. WTIC’s neckline was horizontal while the GNX’s necklines slopes down a little bit. The price action has now closed 3 days in a row above the neckline. A backtest would come in around the 436 area.

Lets look at one last chart for tonight which is the weekly look at Natural Gas which had a pretty good week to the upside. Originally I was showing the current consolidation area as a blue triangle. This weeks price action negated the blue triangle which maybe morphing into a falling wedge formation. As you can see Natural Gas closed right on the potential top rail. Any further strength will negate the blue falling wedge and it will be back to the drawing board. The reason why I think this could be a bearish falling wedge is because it’s forming between the neckline of the massive H&S top and the H&S top’s price objective that goes all the way down to 1.93 or so. Next weeks price action will be very interesting to say the least. All the best…Rambus

Today I would like to focus in on the bigger picture by looking at some long term charts for the precious metal complex. I know most enjoy the action by looking at the minute charts but they’re more likely to morph into something different as time goes on. On the other hand looking at the long term charts changes come much more slowly and they’re less likely to morph into something else. A short term bottom on a minute chart vs a long term bottom on a monthly chart have two completely different meanings. If you see a big bottom on the monthly chart you know that the move will last more than just a few weeks or even a few months. It took a lot of smart investors with deep pockets to build out a bottoming formation that aren’t going to bail out of their potions easily. Minute charts have their place in trying to fine tune and entry or exit point. They can also be used when a bigger pattern is building out with smaller individual chart patterns that end up creating the much bigger finished product. I also have a lot of ratio charts to show you that compare gold to the stock markets and some commodities. These charts  will give us a feel for how gold is actually doing vs some other areas of the markets. As you know commodities fell very hard last year and have been basically consolidating since the first of the year. Gold on the other hand has been chopping out a sideways trading range going nowhere fast. The first chart I would like to show you is a weekly look at gold so you can see the downtrend that has been in place since gold topped out in 2011. When you look at this chart you’re seeing a classic downtrend where a stock is making lower highs and lower lows. To become even remotely bullish I would have to see gold takeout the top rail of the downtrend channel and then the top blue rail of the falling wedge. There is also the very important 65 week moving average that has done a pretty good job of holding resistance. This next very long term chart for gold shows all the chart patterns that it formed during its bull market years. This chart gives you a good idea on how a stock moves. As you can a stock it’s either building out a topping, bottoming or consolidation pattern. Once one of those patterns are completed you get an impulse move, rinse and repeat. It’s how any stock or market moves. Identifying a top, bottom or consolidation pattern is the hard part. Once you have that figured out the impulse move is easier compared to all the chopping around before the impulse move actually begins. Now lets look at some very long term monthly charts for gold. This first chart I’ve been showing for a very long time which shows gold’s bull markets as an expanding rising channel. Note the area, at the top of the chart, where gold broke below the bottom rail of the expanding rising wedge then backtested it from below which built out the right shoulder of the massive H&S top. If you recall the big neckline is taken from the 2008 H&S consolidation pattern’s neckline which I extended to the right side of this chart. Note how the heavy black neckline also is the same angle as the 2008 left and right shoulders and it also shows us the height for the shoulders on the massive H&S top, labeled NL symmetry rail. Before we move on to another monthly chart I would like to show you the beautiful symmetry of the 2008 H&S consolidation pattern as I charted it during big correction. It’s very easy see the symmetry as shown by the colored lines and arrows. This has to be the most symmetrical H&S pattern I’ve ever seen. The neckline is the heavy black dashed line which gave all the lower symmetry lines their angle. Note the two black arrows that sit on either side of the head, on the neckline. The best way to see the symmetry is to follow the  price action down on the left side of the chart to the green arrow and symmetry line. Before you go to the next arrow follow the price action down on the right side starting at the black arrow and following that side down to the green arrow. Then the rally up to the grey arrows and then back down to the purple arrows that shows the bottoms for the left and right shoulders. Where the pink arrow is on the right side of the chart is the only place where the price action failed to match the left side perfectly. As you can see it didn’t affect the actual breakout and backtest which was dead on the money.  You can see how the big black neckline and the top brown symmetry line helped form the H&S consolidation pattern that began in 2010 with the head forming on the big black neckline and the bottom of the left and right shoulders forming on the brown symmetry line. One last note. I have shown you in the past how a rising or falling wedge can be part of a H&S pattern. The blue falling wedge shows you a perfect example of this. The left shoulder and head were formed inside the blue falling wedge and the right shoulder was formed after the breakout. This big H&S consolidation pattern is what launched the finally parabolic rally that ended this portion of gold’s bull market. The next chart for gold I’m using a monthly line chart which shows us gold made three big consolidation patterns that were all rising wedges or flags. I explained on the chart on how I measured for the the blue 6 point bullish rising wedges price objective. You can use that same principal and measure the red bullish rising wedge as a halfway pattern from the breakout of the bottom blue bullish rising wedge. Note the price action on the left side of the chart which is a bull market compared to the price action on the right side of the chart which is showing us a bear market. It’s been awhile since I showed you this monthly chart for gold that uses the 10 month ema for support and resistance. On the way up it held support like a rock until the 2008 crash. On the way down it also has done a good job of holding resistance. This chart also shows the brown shade support and resistance zones that were taken from the bull market side of the chart. I have to admit that I didn’t think it would take almost two years for the blue falling wedge to mature. What I think is happening now is that the almost two year blue falling wedge is going to be a halfway pattern down to the bear market low. I can see, once gold breaks out from the blue falling wedge, that we’ll see a drop down to the brown shaded S&R zone at the 1034 area and then a backtest move to the underside of the blue falling wedge and then the capitulation phase begins in earnest. It’s how I’m conceptualizing it at this point in time. This last long term look at gold goes all the way back to the 1980 high and shows the bear market that ensued that lasted until to the double bottom was put in place in 2000. You can see how the left side of the chart played a key role in how the bull market found support and resistance. Note the neckline at 725 which held resistance on the initial hit in 2007, declined a little bit and then broke through in grand fashion but ran out of gas with the onset of the 2008 crash. Gold found support right where you would expect to find it, right on the neckline taken from the first reaction high off of the 1980 bull market. What is interesting is the H&S top, you see at the top of the chart, has a price objective down to the 725 area which would be a logical place for a bottom of some kind to form. The next chart is a long term daily look that shows the most important  moving averages for gold. As of today gold is trading below all four moving averages. Lets now look at a couple of long term charts for silver that shows the big picture. This first chart is a weekly look that shows silver  built out a H&S consolidation pattern during the 2008 crash which led to its parabolic run to fifty. The brown shaded area at the top of the chart shows two price objective based on two different methods. The little red expanding triangle halfway pattern was the key to finding those price objectives. This chart shows you how much weaker silver has been vs gold as it broke down below it last consolidation pattern, the blue triangle last year. Gold still hasn’t broken below it huge consolidation pattern but it looks like it’s getting close. As you can see silver has been in a nice defined downtrend channel during its bear market. It still remains to be seen yet but it looks like silver is building a small H&S consolidation pattern similar to the one we looked at on some of the PM stock indexes. It’s has been awhile since I showed you this long term monthly chart for silver that shows a very large H&S top that it has already broken down from. The brown shaded S&R zone is where I would expect silver to find support during the next impulse move down. Note the neckline symmetry rail that showed the height for the right shoulder that is just a parallel neckline moved up to the top of the left shoulder. It won’t take much of a move down for silver to reach brand new lows going back to 2009 or so. Now I would like to show you some ratio charts. The first ratio chart I compare gold to copper that looks like the ratio maybe topping out. The reason I say that is because the price objective of the blue falling wedge is right up there at the top of the big trading range. You can see how quickly this ratio has turned down meaning copper is outperforming gold at this moment. I have to say I find this next ratio chart  which compares gold to oil quite interesting  . Last year when oil was in a parabolic decline this ratio spiked up in a parabolic rally even though gold didn’t really do that much. It was the decline in oil itself that cause this spike in the ratio chart. If there was ever a place to look for some reverse symmetry this chart is showing the setup is there. Right now this ratio is finding some initial support at the previous highs made back in 2012. If this ratio breaks below the brown shaded S&R zone there will be little in the way to hold back the decline once it gets started. The neckline from the H&S bottom would be the first area to offer some support. This next chart I compare gold to the CRB index which is holding up the best so far. I put a S&R line just below what could be a top as shown by the negative divergence on the RSI indicator at the very top of the chart. A top won’t be confirmed tho until the S&R line is broken to the downside. It’s just a possibility right now. Next I would like to compare gold to silver which shows this ratio rising which means gold is outperforming silver. What is interesting about this ratio chart is it’s getting up to the top of the 17 year trading range. It has taken four years to go from the bottom, when silver made its parabolic move to 50, to the top of the trading range around the 81 area. This next very long term ratio chart I’m going to compare the INDU to gold so you can see how this ratio works in bull and bear markets. When this ratio is rising the INDU is outperform gold. Note the parabolic move this ratio had in the 1990’s when the bull market was in full force in the INDU. Then the reversal of fortunes, in 2000, which the INDU topped and gold bottomed. This ratio bottomed in 2011 at 5.50. I know many goldbugs were looking for the ratio to go down to 1 : 1 like in 1980 but they got left holding the bag waiting for the 1 : 1 ratio to come into play. This ratio chart shows the INDU outperforming gold since the middle of 2011. Now I would like to show you a few combo charts. This first one shows gold in many of the most important currencies of the world. What’s interesting but not unexpected is gold in US dollars is the weakest of the currencies. As you can see it’s trading well be low its neckline. All the other currencies have had a good bounce off of their necklines but they look like they could be building out at least a short term top since the first of the year. This next combo chart I compare gold to the COMPQ which are the tech stocks. As you can see it’s making a multi year low this month. Gold:NDX 100: Now lets see how the HUI is performing against the SPX. Some of you may remember this long term monthly chart when I first showed the price action breaking down below the bottom rail of the blue massive 5 point bearish expanding rising wedge. It still remains to be seen yet if the time and price rectangles will play out with a low sometime around October of this year. This ratio is going to have to get into gear as there are only about six months left for the ratio to achieve its goal. This next combo chart I’ve been  posting every other week or so as it shows how the HUI on top, GLD in the middle and SLV on the bottom are following each other in a similar fashion, not exactly but pretty close. On the far right hand side of the chart you can see all three are building out potential H&S consolidation patterns. None have broken their neckline yet but it looks like silver will be the first one to do so as it’s sitting very close to its neckline compared to the other two. This last combo chart we’ll look at is a line chart that has gold on top and silver on the bottom. On the left side of the chart you can see that silver topped out in April of 2011 while gold didn’t top out until September of that same year. Here you can see how they tend to top and move together even though silver is leading gold lower, red dashed vertical lines. The million dollar question is are these two building out a H&S consolidation pattern ?

And there you have it  . Long Term Charts  trump everything . Keep them in mind every day .

All the best…Rambus

Inflection Point:

An inflection point on a chart is an area where the price action can break either up or down. It’s an area of confusion that makes investors go nuts. You know a strong move is coming but you aren’t sure what direction the move will go. I believe this is where the precious metals complex is right now. One can make a clear bullish or bearish case for the direction of the PM markets showing just a few chart patterns. In this Weekend Report I want to look at the PM complex without any bias in mind just using the charts with no  fundamental reasons why the PM complex has to go either up or down.

Having an unbiased opinion in any market is hard . We are bombarded each and everyday by countless scenario’s that can play out. We may think we’re unbiased but the truth is it’s virtually impossible to have an unbiased opinion unless you live on a different planet. Just watching the news or talking to your neighbor can give you the impression that everything is just fine and dandy or the world as we know it is coming to an end. We tend to look for articles that match what we think is going to happen as the herd can’t be wrong. In a strong bull or bear market the herd can be right during an impulse move when everyone is on the right side validating your views. Then you get the correction or consolidation phase that then makes you question your original thesis .

Impulse moves are much easier to trade than a consolidation, topping or bottoming phase of any stock or stock market move. A stock can trade sideways building out a consolidation pattern, topping pattern or bottoming pattern roughly 75% of the time while only trading in the sweet spot or impulse move 25% of the time. This is one reason why it’s so hard to hold on to profits that were made during the impulse move.

Lets start by looking at a 60 minute chart for the GDM that we’ve been following that shows a possible bullish blue triangle consolidation pattern that has broken out to the upside after completing four reversal points. The red 5 point triangle was a reversal pattern which was built at the March low that reversed the downtrend that had been in place since the first of the year. When just looking at this 60 minute chart it looks like a bullish setup is taking place. What’s not to like about this chart below. As long as the apex of the blue triangle can hold support the bulls will have their way. If it fails then the bears will be taking charge of the inflection point.

Below is another look at the price action since the March low that shows a possible blue bearish rising wedge developing that is still incomplete. The rising wedge won’t be complete until the bottom rail is touched completing the fourth reversal point. Keep in mind we are trying to look into the future in an unbiased way. All options are open for debate. Some of you may remember the brown shaded support and resistance zone that has been playing its role since the November low in the PM complex. One reason why I think it’s possible that the rising wedge may be in play is because of the two red circles that show the failure of the price action to reach the top and bottom rails by an equal amount. This is just speculation at this point as a strong rally above the brown shaded S&R zone and the top rail of the possible blue rising wedge can blown this scenario out of the water in a heartbeat. The main thing is to be aware of the possible bearish rising wedge and follow the price action which will give us clues to follow. Confirming the 4th reversal point is always the hardest thing to do because there is no confirmation until the actual breakout occurs.

Some of you may begin to see a bigger chart pattern forming when you look at the chart above. If you’re seeing a possible H&S pattern forming your hunch maybe right. On the daily chart below the possible H&S consolidation pattern is starting to look the part. The first thing you need to see happen, to even think about a H&S pattern, is the decline from the head. Normally the left shoulder high should hold support on the initial decline. If a H&S pattern is developing then you’ll see support fail at the left shoulder high and the decline will end up going much lower ending somewhere around the previous low. From that low you’ll see a counter trend rally that builds out the right shoulder. On the daily chart below there is a smaller H&S to I’ve labeled #1. The  potential right shoulder high formed after touching the horizontal line from the much bigger left shoulder high at 560. Sometimes the angle of the neckline added to the left shoulder high may give you the high for the right shoulder which I call the neckline symmetry line. Here a horizontal line maybe showing us the high for the right shoulder at 560 or so. The 50 dma is also showing up at the possible right shoulder high of the bigger H&S #2. Again, a strong rally from this point would blow the double H&S pattern out of the water. The indicators are still showing a bullish setup taking place, the inflection point.

Next I would like to show you a 19 month daily chart for GDM which shows the big black triangle consolidation that led to the last impulse move down that lasted just about ten weeks or so before bottoming at the November low. You can now see the potential H&S consolidation pattern is made up of three individual chart patterns. The left shoulder is a falling wedge, the head is a five point triangle reversal pattern and the right shoulder is our bearish rising wedge that we discussed on the two hour chart above. The reason I’m calling this a potential H&S consolidation pattern is because it’s forming below the triangle consolidation pattern within the downtrend. Also note the black dashed horizontal support and resistance line that comes in at, you guessed it 560, that goes all the way back to the bottom made in December of 2013. The blue rising wedge will give us the clues we need as to the next important move the GDM will make. If GDM can rally up strongly above the 560 area the bulls will be in charge. On the other hand if we see the bottom rail broken to the downside then the bears will be in charge. Either way we’ll know something fairly soon as the rising wedge is contracting. It’s possible we may see a fifth and sixth reversal point within the blue rising wedge before it shows its hand. The bottom line is it has to show us sooner or later of its intentions. One last point on the chart below. IF, the H&S consolidation pattern plays out and the GDM breaks down through the neckline the minimum price objective would be around the 362 area.

The four horsemen and the PSAR are strongly suggesting to be long the GDM as all the indicators are bullish.

This next chart shows the GDM trading up to the top BB which coincides with the 50% retracement of the latest decline, red arrows.

Looking at the four year weekly chart for the GDM there is still that 22 month bearish expanding falling wedge that is still in play.

Lets look at one last chart for the GDM which is a long term monthly look that shows almost all of the history for this PM stock index. First you can see the inverse H&S bottom that formed back in 2000 that launched the 10 year bull market. That bull market formed three beautiful blue triangle consolidation patterns where the impulse moves lasted roughly 4 to 6 months once the breakout took place. An interesting side note is that the 2000 inverse H&S bottom and the massive 2011 H&S top are almost exactly the same height. When the massive H&S top broke down below the neckline the first place it found real support was at the bottom of the blue triangle that formed back in 2005. From that low GDM built out the blue triangle and broke down to the 2008 crash low at 445 or so. There is another price objective we can use based on the breakout from the massive H&S top to the first reversal point in the blue triangle. Using the breakout to breakout method we get a price objective down to the 320 area which is about 30 points lower than the bottom of the 2003 triangle at 350. If you recall the H&S consolidation pattern on the daily chart that we looked at earlier had price objective down to the 362 area. If this bear market is to continue then whenever this next impulse move begins in earnest , we should expect a move down to the brown shaded area between 320 and 360 where we may see another consolidation pattern start to develop or a bottom of some kind start building out. If a potential bottom is in the cards I could see the bottom of the blue triangle being the left shoulder. The head would be where ever this next decline ends. Then a rally back up above the bottom of the blue triangle towards the top rail or apex. Then one last decline back down to the bottom of the blue triangle area which would then be the bottom for the right shoulder. Again this is only speculation at this time but most important bottoms take time to build out and most are of the inverse H&S or double bottom formation. You can see this on the chart below.

Next I would like to show you a combo chart that has the HUI on top, GLD in the middle and SLV on the bottom. This combo chart shows you how all three tend to trade together breaking out and bottoming at the same time as shown by the vertical dashed lines. I would like to focus your attention to the right side of the chart that shows the price action since the November low of last year. You can see that all three are potentially building out H&S consolidation patterns. The necklines are all sloped differently but I’ve put on a horizontal dashed line taken off of the left shoulder which may show the high for the right shoulder. I did the same thing on the GDM H&S consolidation pattern if you recall. You can see the HUI is right at its horizontal left shoulder line. So far GLD, in the middle has failed to reach its right shoulder high while SLV touched its horizontal left shoulder high and has begun to decline and is the weakest of the three. At this point in time the price action since the November low of last year has been nothing but a H&S consolidation pattern if indeed it plays out. Again we have something concrete to watch for clues, for the next directional move the PM complex.

This last chart for the Weekend Report is a long term weekly look at the GDX. This log scale chart shows the massive symmetrical H&S top. What do I mean by symmetrical? The two brown shaded squares that measure time and price, are exactly the same size. As you can see the left and right shoulders are exactly the same height. Now we can measure the price objective of that massive H&S top measuring down from the top of the head to the neckline which is 40.9%. We then take that distance and add it to the breakout of the neckline that gives us a price objective down to 22.60 which is where we got the initial bounce, black arrow. As I’ve mentioned many times in the past hindsight is always 20/20. I originally measured the impulse move down from the breakout of the big H&S top neckline to the first reversal point in the blue triangle. That measurement gave me a lower price objective than what we got. Going back over this chart in hindsight I can now see how our all important November low was achieved. Sometimes the width of a rectangle or triangle will be all the impulse move you’ll get. The width of the blue triangle is 28.8%. When I add that distance to the breakout point of the blue triangle I get a price objective down to the November low at 16.30, blue arrow. Now lets take it one step further. IF, the H&S consolidation pattern plays out the price objective for the GDX should be around the 12.85 area. I measured the potential H&S consolidation pattern on the GDM chart earlier that gave us a price objective down to the 362 area.

The bottom line is we have something concrete to watch for using the clues the chart gives us to find what direction the next move may go. If the PM complex breaks up then we’ll have a different animal on our hands. If the price action begins to decline, first breaking below the bottom rail of the blue rising wedge I showed you earlier, then we can follow the price action I’ve laid out in this Weekend Report until something changes. This is as unbiased a report as I can put together based on the Chartology that is present .As it is not possible  to see the future, all we can do is look at what has worked in the past and try to extrapolate it into the future. This inflection point has caused many good chartists  and traders a lot of angst and many have simply given up . The reward will go to those who manage to be onboard the right  train when  it finally leaves the station .

All the best…Rambus

In this Weekend Report I would like to show you some charts on the US stock markets along with some overseas markets as things are starting to heat up. It’s beginning to look like a world wide event taking place. Some of the European stock markets are breaking out of huge bases along with some Asian countries. Even in the US several of our stock market sectors are just a stones throw away from breaking out to new highs. I think it’s a good thing to see a lot of the worlds stock markets in bullish mode.

First lets take a look at several US stock markets and then we’ll move on and look at some overseas markets to get a feel for this bull move that is getting underway. As you will see some stock markets are stronger than others and that is where we’ll focus some of our attention.

The 2 hour chart for the Dow Jones Industrials  (INDU) starts at the all important October low from last year. As you can see the INDU had a nice impulse move up off of that bottom and began a sideways trading range starting in the first part of December. So far this sideways trading range has lasted roughly four and half months and is carving out an expanding flat bottom triangle. This pattern has completed the minimum number of reversal points, four, if this is going to be a consolidation pattern. The bearish case shows the last high in the expanding flat bottom triangle, marked with a 5?, as the 5th reversal point won’t be complete until the bottom rail is hit. So if you’re a bear the first thing you need to see happen is for the bottom rail of the small blue falling wedge to give way. Even then the bottom rail of the 4 1/2 month flat bottom triangle would have to give way to really see a bearish situation in the INDU. If you’re bullish on the INDU then the first thing we need to see happen is for the top rail of the blue falling wedge to give way and then a rally up to the top rail of the bigger expanding flat bottom triangle. A breakout through the top black rail of the flat bottom triangle would then complete this 4 1/2 month consolidation pattern and usher in the next impulse move higher.

The 2 hour expanding flat bottom triangle I just showed you on the chart above is part of an even bigger consolidation pattern that goes back to the beginning of 2014 which makes this consolidation phase 15 1/2 months long. If the INDU breaks out above the top rail of the much bigger expanding rising wedge we would have an intermediate term move on our hands to follow.

This last chart for the INDU is a monthly look that puts everything in perspective. The breakout of the massive 13 year black expanding triangle actually occurred in September of 2013. Because the expanding black triangle is so massive it has taken this long to complete the breaking out and backtest phases. Note the October low of last year that found support exactly where it should have on the top rail of the black expanding triangle. It’s hard to see anything bearish on this chart for the longer term.

The RUSSEL 2000 (small caps) is leading the charge higher for the US stock markets. After breaking out of its one year black expanding triangle it had a strong backtest that formed a small bear trap just below the top rail, red circle. It’s still uncertain if we’ll see the breakout to new all times highs now, which is just above the previous high made in March of this year, or will we get one more backtest to the top black rail which would then give us a small consolidation pattern sitting on top of the expanding triangle which would be very bullish setup.

The weekly chart for the RUT shows a nice clean blue expanding triangle consolidation pattern which broke out less than four months ago. Note the last intermediate term uptrend that began when the RUT broke out of the big blue triangle consolidation pattern at the end of 2012. It was a choppy intermediate term move but support was always found at the previous high once it was broken to the upside as shown by the black dashed horizontal lines.

Again lets put everything in perspective by looking at the long term monthly chart for the RUT 2000. Here you can see the massive 13 year bullish expanding rising wedge consolidation pattern with the blue expanding triangle forming on the top rail. Note the two other blue consolidation patterns and the impulse moves that followed after the breakout occurred. We are at the equivalent area of the 2nd bar on those other two impulse moves after the breakout. If there was ever a time to buy and hold this would be it for probably at least the next year. I know it’s going to be hard to ride this next impulse move but one could take 3/4’s of their capital and use it for the long term and trade the remaining 1/4 just so you have some action. The intermediate term move is where the big money is made vs the consolidation phases as you can clearly see on the chart below.

Below is a weekly chart for the Nasdaq 100 ( NDX) that I showed you several weeks ago that has the black dashed horizontal lines that shows resistance turning into support once the price action broke to new highs. I said to watch the 4300 area as a good place to see support come in which is the previous top.

Before we leave the US stock markets lets take a quick look at the Transportation Index which is showing a pretty tight triangle consolidation pattern. On Monday of last week there was a small break of the bottom rail which was quickly reversed to the upside and completed the 5th reversal point. In order to keep this chart bullish we need to see the price action rally back up to the top rail to complete the 6th reversal point putting this triangle back into consolidation mode.

The weekly chart shows the blue triangle as a possible consolidation pattern forming as another brick in the wall within its bull market.

The monthly chart for the TRAN shows the little red triangle forming at the top of its most recent impulse move. After a big move like that it’s healthy for a stock to build out some type of consolidation pattern.

This last chart for the TRAN is a 100 year quarterly chart that puts that beautiful H&S consolidation pattern in perspective on the chart above. It still amazes me when I look at a chart like this after 100 years of history investors are still building out consolidation patterns just like the did 100 years ago. Even with all the new technologies investors are still creating the same chart patterns. Chartology will remain the same 100 years from now IMHO.

Lets look at a couple of European stock markets and see how they are doing. The weekly chart for the FTSE shows it breaking out from a two year red rectangle consolidation pattern which had a strong backtest similar to the RUT chart I showed you earlier. It closed the week at a brand new all time high on Friday.

The red rectangle on the weekly chart above looks big by most standards but when you see it on the long term monthly chart it’s just a very small part of a massive 15 year black rectangle. The breakout and backtesting phase is now underway. There is nothing bearish about this chart at all from a Chartology perspective.

Lets now look at the DAX which is further along in its next impulse move higher than the FTSE. Again notice the massive blue 13 year triangle consolidation pattern. Confirmation of this huge triangle was when the top rail was backtested during the October low of last year. I know these charts are showing a different view from the bearish perspective that the stock markets are getting ready to crash and burn. These chart are showing the polar opposite taking place. Keep in mind these chart patterns are built by millions of investors from around the world. Regardless of what you may read their views are expressed in these charts which is the bottom line.

When you compare the Asian stock markets to the US or European stock markets they have been lagging pretty bad. When you look at the charts above they are very close to breaking out to new all time highs. When you look at the Asian stock markets they’re trading well below their all time highs. I think there is a good chance that Asian markets may play catch up to the US and European stock markets. Below is a long term monthly chart for the NIKK which is well into its next impulse move higher. As you can see it’s breaking above the previous high made back in 2007. This is an extremely bullish looking chart.

This next Asian Stock market we’ll look at is the Hong Kong  (HSI)  which had a rather ugly breakout and backtest but this last weeks price action confirms the next impulse move is underway. It’s pretty rare to see a breakout gap on a weekly or monthly chart but the HSI produce one this past week breaking out of the red triangle consolidation pattern that sits on the apex of the much bigger blue triangle consolidation pattern. Again not very pretty but it is what it is.

Lets look at one more Asian stock market the Shanghai Stock Exchange ( SSEC ) which is where the fireworks are taking place right now. The old all time high was made back in 2007 around the 6000 area followed by a lengthy correction. The SSEC is still about 2000 points lower than the all time high so it may have some catching up to do. Again this is a very bullish looking chart.

The ACWI, World Stock Markets Index, broke out of a bullish rising wedge last week.

The last index we’ll look at is the EEM, Emerging Markets, that has been plugging along going nowhere fast. Its built out a four year blue triangle that did a little morphing with a false breakout of the top and bottom rails, solid trendlines. The blue dashed trendlines shows the newer version of the morphing triangle.

Some of the Chinese stocks are breaking out of some nice chart patterns. SIMO  broke out of a bullish rising wedge last week.

Below is a weekly chart for CHL that is showing a potential bullish rising wedge with the top rail being tested last week.

BIDU is starting to look interesting again after a 4 1/2 month correction. It tested the top rail of the 7 point red triangle and the top blue rail of the expanding falling wedge. As you can see it’s at a real interesting junction right here. If it can clear both of those trendlines it will be back in the bullish camp.

The weekly chart for CHIM shows it breaking out of a 5 point bullish falling wedge reversal pattern with a big breakout gap two weeks ago. Last week it had some nice follow through.

The weekly chart for the 3X India Long etf ( INDL) shows it testing the neckline of a one year inverse H&S base.

Back in the USA , Telsa Motors (TSLA) has been working on a one year plus consolidation pattern and is trading at the bottom of its trading range. This looks like a pretty good low risk setup using the bottom rail as your line in the sand.

The daily chart shows TSLA breaking out of an eight month downtrend channel after bouncing off the brown shaded support and resistance zone many times.

I have many more stocks that are coming to life that I’ll be posting this week.

I would like to finish tonites  report  taking a look at two importsnt precious metals stocks : ABX and HL as requested by Sir Classact. The monthly chart for ABX shows it bouncing around at its all time lows. If it can break above the 13.20 area that would be the first bullish sign for this stock in quite awhile.

The monthly chart for HL shows it’s trading in the blue expanding falling wedge which is located just below the neckline of a fairly large H&S top. I expect this pattern to break down but if HL breaks up and out of the blue expanding falling wedge and above the neckline I would have to respect the power of that move.

It sure looks to me like the world stock markets are breaking out together for the most part. It will be interesting to see if we get any weakness after last week big run up in the Asian markets. This is where you want to buy the dips and ride the intermediate term trend. Trying to trade in and out of these intermediate term trends can be costly as the markets usually make it hard to get back in at a lower price than what you sold at. There are a lot of stocks setting up with some good chart patterns that will be great intermediate term buys. Get right and sit tight. All the best…Rambus

In this Weekend Report I would like to show you some charts for Natural gas, oil and the GDXJ. First thou lets take a quick look at the US dollar and the Euro which have started to consolidate their most recent near straight line moves. The monthly chart for the US dollar shows the impulse move out of the big base with a string of nine white candles all in a row. That’s pretty impressive. When looking at the last white candle you can see a possible long wick forming which could be bearish. There are still two more trading days left for this month so things can change but it sure looks like the US dollar is looking for a place to rest for awhile.

This daily chart for the US dollar we’ve been following since last October when it started the strong impulse move up with the blue bullish rising wedge giving us a heads up that the move would be a strong one. It seems like just a few days ago the US dollar broke out of that little blue 6 point consolidation pattern but it has already been a month. After reaching its price objective at 100.20 it has started to consolidate. Right now there is very little information to work off of but the dollar could be at the early stages of a possible consolidation zone. You can see the dollar may have put in reversal points #1 and #2 which may set up a horizontal trading range that could last for sometime to come which would be healthy. Right now it’s time to watch the US dollar for more clues that will eventually give us something to work off of.

Now lets look at a monthly chart for the $XEU that shows the entire history going back 25 years. The first eight years of the 2000’s was a  very good time for the euro but that all changed when it formed a small double top in 2008. The decline has been a series sharp advances followed by bigger declines creating a downtrend channel. The last monthly bar on the right hand side of the chart shows the euro broke below the bottom rail of the downtrend channel in what looks like a final capitulation thrust. As you can see it’s now trading back inside the downtrend channel. Like the monthly chart for the US dollar it certainly looks like the euro is ready to build out some type of consolidation pattern. How big and how long it takes remains to be seen yet.

If the US dollar and the euro are at the beginning stages of correcting their big moves how might that affect some of the commodities that have taken it on the chin recently. Lets start by looking at the CRB index that is in the process of bottoming or consolidating it’s big move down. The daily chart shows the CRB index has been trading sideways since early February of this year forming a possible unbalanced double bottom. In February it looked like the CRB index was making a rectangle consolidation pattern but the price action couldn’t break above the top rail and formed the 5th reversal point which created a rectangle reversal pattern instead. After making a slightly lower low in March it started another counter trend rally but failed on Thursday to trade back above the bottom rail of the blue 5 point rectangle reversal pattern. So far the initial hit and decline is to be expected. Now though if the potential unbalanced double bottom is in play we should see the price action trade back above the bottom rail of the blue rectangle that will tell us the bulls are back in charge at least for awhile.

Below is a weekly chart that shows the three major impulse moves the CRB has made over the last 5 1/2 years or so. The blue arrows measures the big impulse move up in 2009 to 2011 with the red bull flag as its halfway pattern. The red arrows shows the impulse move down in 2012 with the red bear flag showing the halfway area of that impulse move down. The black arrows shows the last impulse move down that started at the top in 2011 with the big blue triangle as its halfway pattern. So far the CRB exceeded the price objective by about 20 points or so trading all the way down to 206 area. There is still no definitive way to tell yet if we are going to see some type of bottoming formation or a consolidation pattern. So far we still have lower lows and lower highs in place which by definition is a downtrend.

The monthly chart for the CRB index shows it has reached the price objective of its big H&S top pattern down at 205. The brown shaded support zone shows you a good place to look for some type of reversal pattern such as a double bottom or inverse H&S bottom. It’s really looking like how the US dollar goes so goes the CRB index. As they say we’ll know in the fullness of time.

Lets look at another commodities index the GNX which is building out a possible unbalanced double bottom with a higher right bottom. It’s still too early to tell yet if the trading range since the first of the year is going to be a consolidation pattern or a reversal pattern. More time will equal more clues.

Lets look at copper to see if we can find any clues that can help us understand the short to intermediate term movement in commonalities. Copper built out a massive 7 point triangle reversal pattern which broke to the downside late last year. This week it backtested the bottom rail leaving a long tail behind on the weekly bar. This chart isn’t very encouraging if your a commodities bull, at least for copper. I’ve added the reverse symmetry annotations because of the strong rally off of the 2008 crash low. How copper went up maybe how it comes back down.

The monthly chart for copper shows its bull market years when it built out two bullish rising wedges after creating a three year double bottom between 1999 and 2002. You can see the last bar on the right hand side of the chart that shows the backtest taking place on the monthly look. Bottom line is copper isn’t really showing us much in the way a bullish bias for the commodities complex in general unless it can take out the top rail of the triangle.

Lets now take a look at oil which looks alot like the CRB index in that it has a somewhat ugly looking trading range building out at the bottom of its big impulse move down. Originally it looked like oil was building a very small double bottom as shown by the two black arrows on the left side, initial low. Oil then rallied above the double bottom hump only to form a 5 point rectangle reversal pattern. That reversal back down maybe forming the second bottom of a bigger double bottom. You can see last Friday’s price action closed back on the bottom rail of the 5 point blue rectangle reversal pattern. Needless to say this is a critically important test right here for oil. If oil can hold support right here that gives the possible double bottom scenario more credence. To actually complete the double bottom oil would have to take out the top rail of the 5 point rectangle which then would reverse its role to support on any backtest and we would call it the double bottom hump.

Below is a simple weekly chart for oil that shows how the possible double bottom is developing. Again it’s still too early to call a double bottom as this trading range could end up being a consolidation pattern to the downside. It looks promising but that’s all we can say about it right now.

This long term daily chart shows you what happens when a long term support and resistance line gives way. All that pent up energy is released in a short period of time and you get a waterfall decline. The red circle shows the trading range that started to build out from the first of the year. Double bottom or consolidation zone? Note oil’s parabolic rise and collapse on the left side of the chart. That big H&S top nailed the price objective down at the 33 area which was the top of the old trading range that went back many years.

This last chart for oil shows its entire history going all the way back to 1983. This quarterly chart shows you the long term resistance zone that held oil in check until it finally broke out in 2004 which eventually led to the parabolic blow off to 147. You can see how the brown shaded support and resistance zone reversed its role to support during the 2008 crash. There is still some room for oil to move lower before it hits the S&R zone. Does oil rally first and then declines to the S&R zone or does it form a consolidation pattern that breaks down to reach or exceed the brown shaded S&R zone first?

Moving on to Natural gas lets start by looking at the $NATGAS  which is the spot price chart. It had been trading in a nice tight parallel down trend channel but then had a false breakout of the top rail which I had to respect and sold the positions I had. It was the last thing I wanted to do but I had no choice. As you can see NATGAS turned right around and traded back inside the original downtrend channel. All is not lost yet as we maybe seeing a backtest to the black dashed S&R line which would come in around the 2.75 area. I think that would represent a good low risk entry point.

The reason I like Natural gas so well on the short side is because of the big two year H&S top pattern. This weekly chart shows a lot of chopping action since it broke out with a nice big breakout gap from the H&S neckline which makes it difficult to hold on to unless you have a longer term mindset. I’m still keeping a close eye on Natural gas from the short side waiting for a good entry point.

Below is a 2 hour chart that shows DGAZ’s new trading range since the first of the year. You can see that false breakout through the bottom rail that forced me to sell out. So far it looks like a bear trap.

The next chart for DGAZ shows the new trading range with the PSAR on a buy signal for the last 5 days. PSAR works very good during strong impulse moves but in sideways chopping ranges you can get a lot of whipsaws.

The four horsemen have now all had a positive cross to the upside.

The weekly chart shows its big blue 5 point expanding flat bottom triangle reversal pattern. You can see the nice breakout gap and then the first backtest which I thought would probably be enough. Was I ever wrong. DGAZ has been backtesting that top rail for 16 weeks now which is still holding support. It just goes to show you you never know how long and how many times a stock can have backtests before it’s finally finished and the impulse move you were looking for finally takes off.

Lets finish up this Weekend Report by taking an in depth look at the GDXJ that I know a lot of folks are interested in. This first chart is a daily look that I first showed you several months ago that have a similar topping pattern as shown by the red circles. The black dashed horizontal line on the higher top shows the breakout from the top with a backtest several weeks later before the impulse move down began in earnest. The lower red circle shows you a very similar setup as it looks like it had a backtest this past week to the black dashed horizontal line. Next we need to see the brown shaded S&R zone give way to get the next impulse move going. The upper red circle shows some chopping action when it came time for GDXJ to break below the brown shaded S&R zone. Once it was finished it wasted little time in falling to the lower S&R zone. Note how the 20 ema has worked as resistance during the topping patterns. Last week GDXJ broke back above the 20 ema but closed Friday just below it.

This next chart is just about the same as the one above but I put the blue rectangle as a consolidation pattern on this one. The blue rectangle is a little objective as I could slope the bottom rail to the downside giving us a flat top expanding triangle. For the time being I’m going to leave the blue trendlines in a horizontal position.

Lets step back in time a little further so you can see how our current trading range, rectangle or flat top expanding triangle, fits into the bigger picture. First notice the blue bearish rising wedge at the top of the chart and the impulse move down once the bottom rail was broken. November of last year marked the beginning of our current consolidation zone which has completed the mandatory minimum of four reversal points so we can call this latest trading range a consolidation pattern. Whether it’s a rectangle or flat top triangle makes very little difference as it’s the essence of the consolidation zone that is most important to grasp. Another important point to note on this next chart is the rally back up to the middle of the blue rectangle that closed that gap. What is also important to note is the latest rally also stopped at about the halfway point within the rectangle. I have shown you many instances in the past where the last move in a rectangle will fail at the halfway point telling us, in this case, the bulls have run out of gas. Just the opposite can happen when you see a breakout to the top side. The last decline will only make it to the middle of the rectangle before the rally begins. Now we need to see some follow through to the downside to really get the impulse move going.

This next daily chart for the GDXJ I decided to add a top and bottom trendline that is forming a short term downtrend channel. If the blue rectangle turns out to be the real deal it should mark the halfway point in the decline that started at the top red circle as shown by the blue arrows. You can see last Thursday GDXJ tested that top black trendline before falling on Friday. The black arrows are the exact same length which measures time and price. Sometimes these types of move, that have a halfway pattern in the middle, will have the upper and lower half looking very similar. We should know something this next week.

Below is a long term look at GDXJ that shows almost its entire history. Sometimes in strong moves down there can be multiple channels that are built with each one being just about the same width. As you can see the black rectangles are the exact same size that shows the two upper channels being equal in size. Note the bottom black trendline that has no touches on it. If the GDXJ is going to end its bear market there is a good chance that the bottom rail may get hit as the last leg finishes up. Keep in mind this is only a possibility at this time. If we see the lower dashed trend line give way then we’ll have this chart on our radar screens to watch and see what happens. This is the same principal I showed you in regards to the upper channel on the US dollar chart a while back.

This last chart for GDXJ shows its entire history with its massive H&S top. You can now see the blue bearish rising wedge and our possible rectangle consolidation pattern and how they fit into the very big picture. Just under three weeks ago GDXJ hit a fresh new all time low before getting our current bounce. When I look at this long term chart it still looks to me like the GDXJ still has some unfinished work to do on the downside. All the best…Rambus

Most would agree that the US Dollar is the most important Chart on the Planet

Newer members may not be aware of Rambus track record with the Dollar .

The Friday Nite Chart post from yesterday is a continuation of this analysis

Here is a post from exactly 2 years ago predicting a huge move to come in

the Dollar Index .

“Dollar Bears Prepare to Hibernate”

http://rambus1.com/?p=11237

Snip:

Rambus Epiphany Chart , March 10 2013

That was then and this is NOW

When you look at these different currencies you will see some massive topping patterns that reversed their bull markets. You will also see they still have a long ways to go to the downside before this bear market is over. If that is the case then the US dollar has a long ways to go in its bull market.

And as most market participants will agree there is no more important chart on the Planet than the US Dollar Chart

We have been closely following this chart since the inception of Rambus Chartology

Here is a Post from exactly 2 years ago , March 10 2013 called

“Dollar Bears Prepare to Hibernate”

http://rambus1.com/?p=11237

That was then

and this is Now :

Lets start with the CAD which broke down from a blue triangle consolidation pattern on Tuesday of this week.

A long term daily chart that puts the little triangle in perspective which looks like it’s just starting another impulse move down.

The long term weekly chart for CAD shows the massive H&S top and the little red triangle that broke out this week.

The NZD daily chart.

The weekly chart for NZD shows its bull market top was a 5 point triangle reversal pattern. Eight weeks ago it broke out of a little red bearish falling flag with a backtest two weeks ago.

The daily chart for the XBP shows it has been trading in an expanding downtrend channel since late last summer.

The weekly chart shows it breaking out of a multi year bearish rising wedge with the breakout and backtest completed two weeks ago.

The long term monthly chart shows the entire history for the XBP and the breakout that is occurring this month out of the bearish rising wedge.

Lets now take a look at everyone’s favorite currency the XEU that actually has been one of the easiest currencies to call as the daily chart below shows. Nice clean patterns with nice clean breakouts.

This weekly chart shows the price action since it broke out of the black bearish rising wedge.

This first monthly chart shows the XEU cracking the bottom rail of the downtrend channel.

This next very long term monthly chart for the XEU shows a massive H&S top in place with the right shoulder being the bearish rising wedge we looked at on the daily chart. You can see the XEU made an attempt last month at a backtest to the brown shaded S&R zone. This is the type of chart that can show reverse symmetry. The rally back in the early 2000’s was pretty vertical which means there is a very good possibility that we’ll see something similar coming back down. This is an extremely bearish looking chart IMHO.

Now lets look at a daily chart for the XJY that shows the beautiful black bearish falling wedge that was made up of two different consolidation patterns. Note the breakout of the smaller blue triangle consolidation pattern about 2 weeks ago.

The weekly chart shows the bearish falling wedge as a halfway pattern to the downside. I’ve measured it from 4 different perspectives which shows the 74 area maybe a good target to shoot for. Again you can see the little red triangle that I just showed you on the daily chart above and how it fits into the bigger picture.

The last weekly chart for the XJY shows you the massive H&S top and the blue bearish falling wedge as the right shoulder. Some of you may remember when the neckline was breaking down and I put the green circle around the BO area to show you the breakout gap and backtest. There is also a green circle on the left side of the chart which I labeled as a reverse symmetry gap, one on the way up and one on the way down at almost at the exact same price.

The last currency we’ll look at is a weekly chart for XSF that shows it made a big blue bear flag that broke to the downside and formed the little red bearish falling wedge. That little red falling wedge was showing up on just about every currency I watch. I don’t have to tell you what that huge spike was that was made on January 5th of this year. Note how the top rail of the blue bear flag stopped that spike high and now the price action has reversed symmetry back down and has just broken back below the long term support and resistance line.

This last chart for the XSF I overlaid gold on top so you can see the correlation that sometimes is pretty good and at other times not so good. Since the spike high in the XSF the correlation has been pretty close. It’s never perfect but it does give you a feel for how they track each other.

This last chart I’ve been showing for a very long time that has gold overlaid on top of the US dollar. Generally they have a pretty close inverse correlation but not always. The purple circle on the right side of the chart is where I thought the two would meet similar to the crossover in 2006, purple circle. As you can see gold has been holding up pretty well vs how strong the US dollar has been.  This just goes to show you there are no absolutes when it comes to the markets. All the best…Rambus

In this Weekend Report I would like to show you some charts for the PM complex in which we finally got some answers to some pressing questions that needed to be answered. The break below the brown shaded support and resistance zone – double bottom hump on the PM stock indexes, now gives us confirmation that the support zone is now negated and the bears are back in charge. The bulls failed miserably last Friday to defend that most important area and are now in retreat. They may put up a small temporary skirmish over the next several days but that’s all they’ll be able to do. Our job now will be to short into any strength.

Lets start by looking at a 2 hour chart for GDM that shows the big brown shaded S&R zone between 550 and 560 which was gapped over last Friday telling us the bulls were very weak. If you start at the left side of the chart you can follow the price action and see how the S&R zone has reversed its role several times going back to October of last year. There is another brown shaded S&R zone that I built after the second low was put in, back in December of last year, that runs between 510 and 515 or so. Again you can see how it has reversed its role several times. Notice how the price action will rally up to the underside of the S&R zone, have a small sell off and the next rally takes out that overhead resistance which then reverses its role and becomes support on the next decline. Friday’s price action tested the top of the lower S&R zone at 515. The lower S&R zone between 510 and 515 maybe a place to look for a small counter trend rally in which to add to our short positions. If the bulls are strongly in retreat there is a possibility that we may see another gap of the lower brown shaded S&R zone. Chances are we may see some weakness on the open tomorrow and then get a corrective bounce but that’s all it will be. This is the start of a possible impulse move down not the end.

Next is a daily candlestick chart that shows us why we could see a small bounce at the 520 area. There was a small double bottom that formed in December and that double bottom hump comes in at 520 so initially we could see a small bounce. It remains to be seen, if we do get a bounce, how high it may go. The 560 area would be the maximum I would expect the bulls to rally GDM.

Below is a 2 hour chart for the HUI that shows all the chart patterns since the double bottom was formed starting at the November low. Now with the benefit of hindsight we can see how the double bottom trendline slices right through the trading range with the double bottom forming below the double bottom trendline and the H&S top forming above the double bottom trendline. It will be interesting to see if the double bottom trendline holds resistance now at the 172 area.

Now I would like to show you a chart pattern for the HUI which I have shown before but didn’t go into any great detail. With Friday’s big move down the pattern now jumps out at you like a sore thumb. Originally I first recognized this pattern on the daily line chart for gold which was the bearish expanding rising wedge that started to form at the all important November low. The rally was a little stronger than I thought at the time as gold traded above the brown shaded S&R zone which was showing strength. Theoretically the brown shaded S&R zone should have stopped the counter trend rally dead in its tracks. Gold managed to rally all the way up to 1305 which ended being the apex of the blue triangle. From that important high it has been all downhill for gold. You can see the small breakout and backtest of the bottom blue rail of the expanding rising wedge which was very hard to see on a bar chart at the time. First let me show you the daily line chart so you can clearly see the defined bearish expanding rising wedge then I’ll show you the exact same chart, leaving the trendlines and annotations in place, so you can see the subtly difference. As I have mentioned many times in the past a line chart can sometimes give you an earlier heads up on a breakout vs a bar chart. The daily line chart for gold.

Now the very same chart with nothing changed except for being a line chart it’s now a bar chart. You can see by looking at the bar chart the breakout and backtest are clearly defined even though there were some spikes through the top and bottom trendlines of the expanding rising wedge. Friday’s big move down is now starting the next impulse move lower as the breakout and backtesting processes of the bearish expanding rising wedge is now complete. Most folks don’t like to look at line charts but I find them very useful in certain circumstances.

Now I would like to show you a combo chart that has the HUI on top and GLD on the bottom. I’ve shown you this chart many times in the past as it shows the beginning of the almost two year trading range for both the HUI and GLD. I have also shown you many charts in the past that shows how the PM complex tends to move together forming similar chart patterns and breaking out and backtesting their respective trendlines at roughly the same time. It doesn’t always workout perfectly but if gold is breaking out then there is a good chance that the HUI and silver are close to breaking out also. The big two year chart patterns for the HUI on top and GLD on the bottom are very similar but slightly different. Both chart patterns have down slopping trendlines with the HUI forming a bearish expanding falling wedge while GLD has formed a bearish falling wedge. Now to the meat and potatoes of this post. As I showed you on the daily chart above gold formed a blue bearish expanding rising wedge. As you can see on the chart below the HUI also has formed a blue bearish expanding rising wedge of its own. The only difference is GLD has broken out of its bearish expanding rising wedge pattern with a breakout gap while the HUI is still trading inside of its pattern. At this point it looks like GLD is leading the way lower but the HUI isn’t very far behind. So the next big test for the HUI and the other PM stock indexes will be when they break the bottom rails of their respective bearish expanding rising wedges.

Now that you can see that the HUI and GLD have bearish expanding rising wedges in place lets take a look at SLV and see if there are any similarities. Below is a weekly combo chart that has ZSL on top, which is a 2 X short silver etf, and SLV on the bottom. SLV has been leading the HUI and gold lower as it broke out of its big trading range last September. As you can see  the ZSL and SLV both closed on their important trendline last Friday. Those expanding rising wedges are not small patterns which should lead to a pretty big move once they break their respective trendlines.

Below is the weekly chart for gold that I’ve been trying to post once a week or so that shows its downtrend channel with the last high coming in at 1305. I know for some of you it may feel like we’ve missed the boat on this move down but in all actuality this move down is just beginning as it’s only been about 5 weeks since the top at 1305 was last touched. So far this move down is stronger than the last impulse move down that started at the1800 area back in the fall of 2012. If this impulse move is anything like the last one, that started at 1800, we still have a good eight months to go yet. This impulse move will not be straight down by any stretch of the imagination as that would be too easy. Just look at the first one that started at 1800 and see how volatile it was at times. At any rate we did get some big clues last Friday that will help us understand where we’re at and where we might be headed. Now the game plan will be to add to our shorts in the Kamikaze Portfolio on any strength we see. All the best…Rambus

Every now and then I’ll do a post on “What If ” something is changing or not following along with what the original Chartology was suggesting. I have to keep an unbiased opinion and follow what the charts are saying. Sometimes it’s easier said than done. I know many of you were surprise when I exited the Kamikaze Stock last Friday. Believe me it’s not what I wanted to do but the short term charts are suggesting there maybe be a little more upside price movement left in the PM stock indexes.

Lets start with the daily chart for GDX which I showed you last week that has the 5 point triangle reversal pattern. I pointed out the the GDX was bouncing between the double bottom hump at 20.20 and the bottom rail of the 5 point triangle. This went on for eight days or so with no conviction either way. I said this is where we’ll see how strong the bulls are. As long as the price action stayed below the bottom rail of the 5 point triangle the bears were in control. It doesn’t look like a big deal on this daily chart below but you can see the GDX closed above the bottom rail of the blue triangle telling me the bulls may have more strength than I gave them credit for.

Now lets look at the 2 hour chart for GDX which shows the dominant pattern in place an unbalanced double bottom with the right bottom being a little higher that the left. The double bottom hump comes in at 20.20 which should be strong support at least on the initial hit. When the 5 point triangle broke down the double bottom hump, at 20.20, was the next area of support to keep a close eye on. There are several ways an important S&R line can be taken out. First, in a strong move the S&R line can be gapped. The second way can be the drop and pop, where the price action comes down and tests the S&R line and gets a bounce. The bounce quickly fails and then you get your drop down and through the S&R line. The third way is to see a big long daily bar that slices right through the S&R line and closes well below it. This 2 hour chart shows the double bottom trendline held support at the 20.20 area and the HUI bounced up inside the blue triangle as shown by the horizontal dashed rail. Finding support at the double bottom trendline at 20.20 now gives us possible new pattern to watch which would be a bull flag with the recent touch at 20.20 being the possible 4th reversal point. The initial bounce at 20.20 was to be expected but the rally above the bottom rail of the 5 point triangle showed the bulls were stronger than the bears on Friday. For me this meant going to a neutral position until we get some more information to work with.

This next daily chart for the GDX shows you my concern from last Friday’s price action. Always keep in mind no matter how bullish or bearish I may be on a stock I’m always looking at the bull and bear scenarios. This daily chart in now starting to have a bullish bias to it based on last Friday’s price action. Here you can see how the double bottom hump held support at 20.20 last week which was bullish. GDX closing above the bottom dashed rail of the 5 point triangle was bullish. Now we have to see how the GDX interacts with the old top rail of the triangle which may now be the top rail of a 6 point bull flag which I will label as a halfway pattern to the upside if it can breakout  through the top rail. If the potential bull flag works out then we should see a price objective up to the 27.56 area. If you look over to the left hand side of the chart you’ll see the last topping pattern which was H&S top that reversed that uptrend. In big trading ranges like this it’s normal to see a reversal pattern form at the top and bottom. This is another reason why I think this double bottom is so important to the trading range as it’s reversing the downtrend from the H&S top. So from a Chartology perspective things are starting to make sense.

The next daily chart for GDX shows how I’m going to measure the price objective if the blue bull flag plays out as a halfway pattern. The two black rectangles measures time and price so if the bull flag plays out we should see a top begin to form at the 27.50 area towards the third week of March.

If this potential short term bullish scenario plays out up to the 27.50 area that is going to change things from the longer term perspective. Below is a weekly chart for GDX which shows two important developments if this new short term scenario plays out. First you can see the previous two highs were made at 27.50 which held resistance. Next I’ve added a brand new downtrend channel based off of the top of the head on that massive H&S top and the top of the right shoulder. I then pulled that top trendline down to the bottom of the channel and it matches up pretty close to the three previous lows. The center dashed line also has some pretty clean touches.

Lets now look at the daily chart for GDM that we’ve been following for a very long time now that shows the wide brown shaded support and resistance zone. Note how the wide brown shaded S&R zone held support and resistance as the price action bounced between the top and bottom rails before finally breaking out. The rally out of the right side bottom of the double bottom reversal pattern broke above the S&R zone only to fall back into it but then found support at the most recent low at 560 with the 50 dma helping with support.

The next daily chart shows the 765 area as the price objective of the potential bull flag.

The weekly chart for GDM shows where the 765 price objective comes in at the 2 other previous highs. Again, I took the top rail based on the head and right shoulder of the H&S top to get the bottom and center trendlines.

Next I would like to give you a play by play for the 2 hour chart for the HUI we’ve been following since the formation of the double bottom. You may recall the brown shade area where I was looking for initial support between 175 and 180. That brown support zone was taken from the double bottom trendline that slopes down and the double bottom hump which is horizontal. You can see when the HUI broke above the double bottom trendline there were three backtests before the price action rallied up to the first reversal point on the blue 5 point triangle at 212.50. The 212.50 area was also the price objective of the right bottom on the double bottom as shown by the black arrows. From the 212.50 high the HUI started building out the blue triangle pattern. I had no idea which way it was going to breakout. Three fourths of the time a consolidation pattern will breakout in the direction of the move leading into the pattern. But that wasn’t the case. As you can see the HUI gapped below the bottom rail of the blue triangle it signaled the triangle was a 5 point reversal pattern to the downside. There were two backtest to the underside of the bottom rail before the HUI gapped down that looked like the impulse was beginning. It was very short lived as the price action started to trade sideways creating the little red rectangle. Again one would have expected the little red rectangle to breakdown as that was the direction of the move leading into the pattern. Note Friday’s price action that closed above the top rail of the red rectangle. That is the point I decided to go to cash in the Kamikaze Portfolio until I see what happens next. There are two areas I”m keeping a close eye on. The first is the Apex of the blue triangle that comes in around the 196 area. The second short term area I’m watching is the top of the little red rectagnle at 188.60 or so. In order for me to get bearish again the HUI would have to close below the double bottom trendline at 175.

Below is another 2 hour chart that shows the potential bull flag that is forming on top of the double bottom hump with the 4th reversal point at 180. If the potential bull flag plays out the HUI may reach the 255 area.

Lets take a quick look at GDXJ which is showing a possible blue falling wedge that is forming inside a bigger rising wedge.

The daily chart for GDXJ shows the potential blue falling wedge forming inside the much bigger expanding triangle that began to form at the November low. Will the backtest hold?

There is one more chart I would like to show you before we wrap up this Weekend Report which is the HUI:GLD ratio chart. This chart has a similar setup to the PM stock indexes as it’s showing a double bottom with a blue triangle forming on top of the double bottom hump. This ratio chart may give us the first real clue as it touched the top rail of its blue triangle last Friday and sold off a bit. That was the initial hit. Now we’ll see if there is any follow through to the upside this week.

I think  this week we’ll have some important answers to the short term trading direction for the PM stock indexes. A rally right here would embolden the bulls and scare the bears. That’s what the markets are good at. Just give me a trend for several weeks and I’ll be a happy camper. If this is the start of the next small impulse move up the next three weeks should be pretty interesting. All the best…Rambus