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”
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”
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
I would like to start this Weekend Report by looking at the HUI:SPX ratio chart I posted late Friday night that shows a time objective out to October of this year. If both the time and price elements play out according to this ratio chart then the HUI should be close to a major bottom making a round trip from bull market to bear market and back to a bull market again against the SPX. There doesn’t have to be a V bottom as good bottoms take time to build out. 
Next I would like to show you a slightly different way to use these rectangles to show a price and time objectives. These rectangles measures each impulse leg with a halfway pattern in the middle. Sometimes they can work out extremely well but the main point to take away from these charts is it gives you a place to start looking for the move to end. Below is a weekly chart for the COMPQ that showed you where to begin looking for a top during the tech bubble in 2000. This was an extremely bullish setup as the halfway pattern was a bullish rising flag. The red rectangles measures each leg of the final blow phase in that bull market. 
Below is a monthly chart for the INDU which shows a similar setup to the chart above but this time it was the rally phase off of the 2003 crash low. As you can see the INDU formed a blue bullish rising wedge as its halfway pattern that gave me a place to look for a top of some kind to start forming in 2007 as shown by the red rectangles that are exactly the same size. As you know that top ended up being the top that led to the 2008 – 2009 crash low. 
The next chart that shows how these rectangles can measure time and price is the weekly chart for silver that shows the parabolic move to its bull market high in April of 2011. Here you can see how the 2 blue rectangles measured each half of the impulse move up separated by the red bullish rising flag. Again it gave me a place to start looking a for some kind of top to begin forming. I also used the BO to BO method which came in just a tad higher at 47.65 or so. Time wise it showed April as the month for the high. 
Now I would like to come full circle and put this technique into practice by looking at a long term weekly chart for gold in log scale. If you recall the HUI:SPX ratio chart showed a bottom in October of this year. The time and price rectangles on the COMPQ and INDU showed each half of their impulse move up was separated by a bullish rising flag and wedge, respectively, which told us the move was very strong. Gold has yet to break down out of its possible bearish falling wedge but until gold can trade back above the 1305 area a bearish falling wedge is what I”m labeling this chart pattern with the last reversal point being at 1305. The black rectangles measures each half of the impulse move down as shown by the blue arrows. The lower black rectangle shows us a price objective down to the 850 area that should occur sometime in October of this year. If the bearish falling wedge breaks out close to where I have it labeled the BO to BO method would also give us a price target down to the 850 area. Just to give you an idea of where I think we’re at look at the top blue arrow at 1800 and count down about 5 weeks or so. There is still a lot of work gold has to do to reach it price objective but if the 1305 is the last reversal point in the falling wedge then we are in about as close to the high as you can get. It’s now all about watching the price action to make sure nothing important has changed. 
Lets now take a weekly look at silver again this time going back to 2007 which shows a H&S consolidation pattern similar to the one gold formed back then which launched its final parabolic run. On the left hand side of the chart you can see the H&S bottom with the right shoulder being the blue bullish rising wedge. The H&S called for a price objective up to the 45.34 area which coincides pretty close to the red rectangles price and time objectives with the red bullish rising flag forming at the halfway point. You may have noticed that once these time and price rectangle patterns complete there is usually a big trend reversal that takes place. This is a very important clue to know in advance as we should be able take advantage of the situation as we see the price entering into the price objective. Silver has been leading to the downside as it broke out of its blue triangle halfway pattern last September and had a backtest move that ended about 5 weeks ago. It will be interesting to see how this one plays out as it is so far ahead of gold and the PM stocks. 
Now lets focus in on the GDXJ and some of the different chart patterns I’ve been showing starting with this 2 hour chart that shows the double H&S top and the brown shaded area I showed as a possible bull trap between the neckline symmetry rail and just above NL1. This possible H&S top is starting to become pretty unbalanced so the price action needs to break below NL2 and get the show on the road. 
Below is another 2 hour chart pattern that shows the 5 point blue bearish expanding rising wedge. 
Below is a daily chart I posted a week or so ago that shows how similar the two tops are as shown by the red circles. These patterns don’t have to play out exactly but you can see what happened to the higher topping pattern after it broke below the horizontal support line. About 2 weeks later there was a backtest to the underside which would have scared off most folks invested in JDST. The GDXJ is currently sitting on the black dashed S&R line which it needs to break to the downside so we can move on to the next leg lower. Also you can see I’ve labeled the rally off of the November low as an expanding triangle which is different from the big cap PM stock indexes as they show a clear double bottom. This tells me the GDXJ has been weaker than the big caps and will probably make a lower low first. We shall see. 
The next daily chart for GDXJ shows our two double H&S tops and the blue expanding triangle. If the blue expanding triangle plays out as a halfway pattern to the downside then GDXJ should see some type of bottom in May of this year around the 14.70 area where it could start to build out another small consolidation pattern. Again there is a lot of work to be done by GDXJ to get this next impulse move going but the pieces of the puzzle are starting to come together. First we need to see the lower neckline broken to the downside. For longer term subscribers you may recall buying a bunch of JDST just before the neckline gave way on the higher H&S top. We did get whipsawed on the backtest but we got right back in again and rode that impulse move down. 
This last chart for the GDXJ is a weekly look where I took the liberties to change the lower consolidation pattern that started to form in 2013. I have shown you many times in the past how a chart pattern can have what I call a false symmetry breakout of the top and bottom rails. Here you can see the two red circles, one on top and the other below, which if you erase them you would get a very symmetrical 6 point rectangle consolidation pattern. As you can see the rally off of the November low has fallen just shy of reaching the bottom rail, of what I’m labeling as a 6 point rectangle consolidation pattern for now, as the backtest. If the rectangle plays out as a halfway pattern to the downside you can see the brown shaded area at the bottom of the chart that has two price objectives using the impulse method, blue arrows, and the breakout to breakout method. Interesting times. 
Next I would like to show you some of the different stock markets as many are breaking out to new all time highs. The first one is a daily chart of the COMPQ that shows the blue rectangle consolidation pattern that broke to the upside seven days ago with a breakout gap and no backtest so far. You can see I have two price objectives at the top of the chart. The blue one is how I would measure the blue rectangle has a halfway pattern as shown by the blue arrows. The lower black price objective is its all time highs made back in 2000. Normally when you see such an important high like this a stock will initially find resistance at the old high. Even in a strong market there will be a lot of sellers at that point. This should be a good guide to take some profits off the table. Hopefully we may see a small consolidation pattern form just below the all time high at 5132 before the COMPQ breaks out to new all time highs. 
Below is a monthly chart for the COMPQ that shows you where the old all time high at 5132 comes into play. Even though I think the COMPQ is going to rally much higher we just have to overcome the old high and get it behind us. Actually most of the other stock market indexes are all ready breaking out to new all time highs. 
The NDX 100 shows an interesting price objective up to the 4808 area which is the old all time high for this index of the 100 biggest tech stocks. 
Below is the monthly chart for the NDX 100 which shows where the old high comes into play at 4816. 
The daily chart for the RUT 2000 shows it breaking out above the top rail of the massive blue expanding triangle. I just tweaked the top rail a bit. Note the spike high just before the top rail was touched 2 weeks ago and sold off. That’s is typical on the initial hit. After the backtest to the top rail of the blue rectangle it then rallied up and through the top rail of the expanding triangle. Note the last bar on this chart which I’m now labeling as the backtest to the top rail of the blue expanding triangle. Until the weakness last Friday morning I had the top rail just a bit higher but seeing the low on Friday shows me where to the backtest actually occurred. We shall see if this is the correct position now for the top rail on any further backtesting. 
The weekly chart shows you just how important this year long expanding triangle is to the bigger picture. This is what a bull market looks like. 
The daily chart for the SOX index shows it breaking out of an expanding bull flag. A backtest would come at the top rail around the 690 area. 
The monthly chart for the SOX shows its now trading at new multi year high going all the way back to the early 2000’s. I think this is going to be a sector that is going to play catchup with the other tech indexes. 
This should bring everyone up to speed on the PM complex and the US Stock Markets. There are a lot of positive things happening right now if you’re long the stock markets and short the PM complex. Nothing goes straight up or down. It’s usually two steps forward and one step backward until you get where you’re going. A longer term time horizon is best suited for most investors even though the short term swings can catch us off guard sometimes. For those members who are working on the mechanical trading system keep up the good work. Perseverance will pay off in the end. As Sir Fully likes to say, all for one and one for all, for all the knights and ladies of the roundtable. All the best…Rambus
There seems to be something happening in the commodities complex over the last 2 weeks or so. I’m starting to see many small inverse H&S bottoms forming in some of the different commodities. Below is a daily chart for the CRB index that doesn’t show today’s price action on it until the end of the day. As you can see the right shoulder is just about finished building out and with the strong showing in most commodities there is a good chance the neckline maybe tested today.
Yesterday I showed you this weekly chart for the XLB, basic materials index, that shows a big triangle that is breaking out.
Below is a daily chart for GNX which shows it’s making a series of higher highs and higher lows for the first time in a long while.
The next chart for the GNX is a long term daily look that shows the big multi year triangle that led to our most recent low once the bottom rail was broken to the downside. Remember that little blue bearish falling flag we looked at when it was building out? At this point I’m viewing this potential counter trend rally in commodities as a bear market rally. After a waterfall decline like this a 38% retrace would be healthy to keep the bear market alive in commodities
Below is a daily chart for oil we’ve been following that shows a possible inverse H&S bottom without today’s price action on this chart. If oil holds its gains from today the neckline should be coming into play.
This daily chart for DWTI which is a 3 X short oil etf shows a very large H&S top which is testing the neckline today.
The daily chart for SLX which is a steel etf looks like it broke out of an inverse H&S bottom today. I’m going to look at some of the basic materials stocks in more depth in the Weekend Report. This area of the markets may need a breather before heading lower.
So far this week the PM complex has come under some selling pressure and is testing some very important support and resistance lines. Is this the start of the long awaited impulse move down to new lows for this sector? Lets look at some charts and see where we are in the short to longer term perspective.
The first chart tonight is a daily look at gold that shows a triangle reversal pattern that formed at the last high. This is not a textbook example of a triangle reversal pattern but when you look at the price action it makes sense. Note the big long bar that was made four days ago when gold broke below the bottom rail and the increase in volume. When I see a big long bar or a gap of an important trendline I always take notice as one or both of these events can take place during a breakout. On the very short term the 5 ema crossed below the 8 ema just before the breakout. This chart also shows the PSAR has been on a sell signal for several weeks now.
This longer term daily chart for gold shows several chart patterns we’ve been following for clues to help guide us through this correction within the bear market. The first pattern is the blue bearish expanding rising wedge which so far is THE consolidation pattern for this counter trend rally off of the November low. Gold still has to break below the bottom rail to confirm this pattern. The second formation we’ve been following is the possible inverse H&S bottom which maybe negated today. We still need a few more days to see if the neckline can hold support or not. Also today gold closed below the 50 dma for the first time in awhile.
Lets look at gold from a slightly different perspective by looking a a daily line chart. There are several important clues to watch for. The line chart shows the price action is much closer to the bottom rail of the blue expanding rising wedge which will most likely show the breakout before the bar chart. Next notice how the apex worked as resistance on this last rally up to the 1300 area. I’ve shown you many instances where the apex of a triangle can be strong support or resistance depending on which way the price action is moving. All the energy from the top and bottom trendlines is focused out into the apex so it becomes very important to watch the price action for either an end around the apex move or to see if it work as support or resistance. The last bit of information on this chart shows how the brown shaded support and resistance zone, between 1240 and 1250, has reversed its role several times. Gold is now trading between support, bottom blue rail of the expanding rising wedge and overhead resistance at the brown shaded S&R zone.
This next chart for gold we’ve been following shows the four most important daily moving averages of which today’s price action finally closed below the 50 dma. It’s not earth shattering but it’s nice to see gold trading below all the moving averages again.
This next chart for gold shows the big 19 month trading range that has taken on the shape of a falling wedge. Last week I showed you how I tweaked the top rail to touch the last reversal point at 1305 which is now my line in the sand. You can see how the 1240 area has been reversing its role from support to resistance several times in the last eight months or so. Gold still has a lot of work to do yet to complete this consolidation pattern but it’s working in the right direction. With 19 months under its belt, time wise, this pattern could very well be mature. A break of the bottom blue rail will confirm the completion of this big consolidation pattern.
Last week I showed you this updated weekly gold chart that shows the parallel downtrend channel with our 19 month falling wedge consolidation pattern. Note the first impulse move down out of the blue rectangle labeled with the blue arrows with a number one. That first impulse move down started at 1800 and declined all the way down to 1150 or so. Until something changes I’m viewing our most recent high at 1305 as the start of the second impulse move down that has the price objectives down at the bottom of the chart. If you study that first impulse move down you will see it had a sharp decline followed buy about six weeks of sideways price action. You need to mentally prepare yourself for this type of price action once we have confirmation that we are in the second impulse move down that very well may mark the end this bear market.
This next chart is a combo chart with gold on top and silver on the bottom. The thin red dashed vertical lines shows how a top comes in when the RSI gets up between 70 and 80 since the bear market began in 2011. It’s easy to see how much weaker silver has been compared to gold as silver broke down below its bottom rail last September and has just completed a backtest.
Lets look at one last chart for gold that shows a possible more bullish outcome than the weekly chart above. This monthly chart shows the three seven month time cycles that have governed gold since the bull market began in 2001. The red circle shows how gold backtested the bottom blue rail of the expanding rising wedge in January of this year. So far the month of February shows gold declining from that backtest last month which tells us that bottom rail is still hot. The more bullish outcome would be if gold only corrects back down to the bottom rail of the blue expanding falling wedge. Time wise gold is going to have to start a near vertical move down if the March time frame is still in play which would bring gold down to the 890 area or the bottom rail of the blue expanding falling wedge.
Now lets look at the HUI as a proxy for the rest of the PM stock indexes. Below is a 2 hour chart that shows we finally got a little conformation that the possible 5 point triangle we’ve been following has finally broken below the bottom rail this week accompanied by a small gap.
The daily chart shows the 5 point blue triangle reversal pattern that broke below the bottom rail on Tuesday of this week with a little follow through today. It’s still possible we get a backtest to the underside of the bottom rail at 195 or so.
All four horsemen have crossed strongly to the downside now.
Below is a daily line chart that shows the 3 point double bottom that led to the most recent rally phase off of the November low. Note the little multi top that formed over the last several weeks that is actually the triangle on the bar chart. This is just a different perspective.
In the past I’ve shown you how gold, silver and the PM stock indexes can top out and bottom out fairly close together. They also tend to make similar chart patterns. On the second chart of this post I showed you how gold has been building out a potential bearish expanding rising wedge. We maybe seeing the same pattern forming on the HUI as shown by the chart below. The pieces of the puzzle are stating to come together. These types of patterns are extremely difficult to spot in real time but if you can spot one early enough they can be very rewarding. I think gold is giving us a big clue.
I still view this next chart as the most important chart for the PM stock indexes. Below is a weekly look at the HUI’s downtrend channel we’ve been following since the price objective of the double bottom was hit at 212 which also coincides with the top rail of the downtrend channel. Note how similar our current setup is to the one that occurred back in late 2012 and 2013. Back in 2012 the HUI built out a small double bottom which is almost exactly the same size as our current double bottom. The important area of support back in 2013 was the neckline of the massive H&S top. Our current major support line would be the 2008 low where the HUI built its double bottom off of. We could very well be at the same point as the blue arrow at the top of the chart, as in, you are here.
I would like to quickly update a few charts from this weekends report. The first chart is the daily look at the CRB index that is still building out a possible inverse H&S bottom. Until the price action can break above the neckline it’s just a potential inverse H&s bottom.
The daily oil chart shows it’s still working on a potential right shoulder.
The GASO chart shows it to is still working on a potential right shoulder.
SCO is a 3 X short oil etf that is testing the neckline symmetry rail. Again the neckline has to be broken to the downside to complete this possible H&S top. All the best…Rambus
Tonight I would like to look at the precious metals complex and see how things are moving along. Consolidating would be an understatement. The PM complex has been in a very large consolidation pattern going all the way back to the June 2012 low where the HUI, GLD and SLV all bottomed together. From that low all three have been chopping in a falling type pattern making lower lows and lower highs. The combo chart below shows the three distinct but slightly different 18 month consolidation patterns starting at the June of 2013 low. The top chart shows the HUI that has yet to put in a 6th reversal point in it’s big consolidation pattern. It doesn’t have to have a 6th reversal point as it already has enough but if it does the top rail would come in around the 240 area. If you look at the last four weekly bars you can see the closing price for each week are very close to each other meaning there has been very little headway being made either up or down aggravating the bulls and bears alike. Also the 18 month consolidation pattern is expanding unlike GLD which is falling and contracting and SLV which has a triangle. The GLD chart in the middle shows the price action touching the top rail completing the last reversal point number six and falling away. SLV on the bottom chart has been clearly the weakest of the three as it broke out of its triangle in September of last year. Three weeks ago SLV paid a visit to the bottom rail of its triangle as a backtest and is falling away. So we have the HUI in no mans land right now with GLD finding resistance at the top rail of its falling wedge and SLV finding resistance at the bottom rail of its triangle consolidation pattern during the backtest three weeks ago. This combo chart gives you a good overview of where we’re at and where we’ve been. 
Now I would like to do an in depth report on the HUI starting with the 2 hour chart, in linear scale, and focus on what we have in place at the moment. The first chart pattern is the double bottom that started to form in November of last year with the second bottom coming in late December. I’ve measured the double bottom price objective using the black arrows. Just measure the distance of the first two black arrows and add that distance to the breakout point on the double bottom which gives us a price target to 212 which the HUI has achieved. Since the first reversal point the HUI has been chopping out the blue triangle. At this point we still don’t know if it’s going to be a consolidation pattern to the upside or a 5 point reversal triangle to the downside. If the HUI breaks out to the upside then I would have to view the blue triangle as a consolidation pattern which would be a halfway pattern. To get the price objective we would measure the distance from the breakout from the double bottom trendline to the first reversal point in the blue triangle. We then take that distance and add it to the breakout of the blue triangle which would give us a price objective up to the 238 area or the top of the falling expanding wedge I showed you on the combo chart above. If that is what the markets want to give us then we’ll take it but first we have to see the breakout of the blue triangle. 
The four horsemen are still all crossed to the downside. 
If the HUI is going to get to the 240 area then it has some overhead resistance it’s going to have to deal with first. Below is a weekly chart for the HUI that shows some fanlines made off the 2008 crash low. The HUI is currently testing fanline #4 with the bottom rail of the blue triangle just overhead at 220. The red circles shows where the backtests took place in the past which is common with fanlines. 
Now I would like to show you some fanlines that began at the 2000 bear market low. Fanline #1 showed up when the 2008 H&S top broke down. Fanline #2 came into play when the massive H&S top gave way in 2011. Fanline #3 gave way last September when the blue triangle broke down. A backtest to the underside of fanline #3 would come in around the 220 area, green circles. 
Below is another weekly chart for the HUI that shows a downtrend channel that the HUI is currently testing from below. 
Below is a slightly different look at the downtrend channel that I originally showed you about 4 or 5 months or so ago. It’s what they call a double downtrend channel where you have an outside trendline, dashed, on both sides of the main downtrend channel. As you can see the HUI is now in its third week of testing the outer black dashed trendline from below. The higher pink shaded area shows the first impulse move down in time and price. I’ve added the lower pink shaded area, which is exactly the same size as the higher one, that may show us where to look for the ultimate low in November of this year. 
Now I would like to show you some long term charts so you can see where the HUI has been and where it may go in the future. This next chart for the HUI shows its entire history going all the way back to 1995. Note the huge bottom that formed in the late 1990’s that gave the HUI the energy to have a 10 year bull market. You can see the smaller blue triangle consolidation patterns that formed during the bull market years. Next you can see the beautiful and symmetrical H&S top that reversed the 10 year bull market that has led to our most recent low. Note how much different the chart looks when you compare the left side bull market years to the right side bear market years. 
Below is a monthly candlestick chart that shows you when you’re in an impulse move either up or down. When you see a string of white candle, all in a row, you know your in an impulse move up and when you see a string of black candle you know your in an impulse move down. When you see a mixture of black and white candle you know your probably in a consolidation zone as the present picture shows. 
Lets look at one last long term monthly chart for the HUI that shows the bull market took on the shape of a rising wedge. Note the breakout in April of 2013 that took out the neckline of the massive H&S top and also took out the bottom rail of the rising wedge in one big long bar. That’s been almost two years ago already. There is little doubt that we’re in a bear market it’s just that these consolidation and backtesting phases can be long drawn out affairs. As you can see during the bull market years the same thing happened going up. A bull market is much easier to trade because one can hold on to your stocks if you didn’t catch the exact low, which nobody does, and wait for the next leg up to get you back in the game. So we wait for further clues to help guide us in this never ending quest to slay the PM Dragon . All the best…Rambus 
Five days ago silver broke out of an inverse H&S bottom that has temporarily reversed the downtrend. I measured the more conservative price objective using the higher low instead of the Swiss spike low which comes in around the 19.80 area on the log chart. It will be interesting to see if the Swiss spike low will be the ultimate low for the bear market or just a short to intermediate low. Sometimes big trends can end with one last shake out of the weak hands similar to the Swiss spike low.
Below is a two year chart for silver that shows its big triangle consolidation pattern that did a little morphing before it finally broke down in September of last year as shown by the red circles. Since the breakout silver has built out an inverse H&S bottom and is now in rally mode. As you can see on the chart below silver is approaching two very important trendlines from the big blue triangle consolidation pattern. The price objective of that inverse H&S bottom comes in around the 19.50 area which is slightly above the apex. One thing we need to keep in mind is that the inverse H&S bottom is a reversal pattern that can reverse a downtrend. It’s way too early yet to think about a reversal of the bear market but if silver can ever trade above the apex of the blue triangle that would be the first step in the right direction.
This long term weekly chart for silver shows it bouncing off of the next lower support line at 14.65 with the Swiss spike low. Now it’s entering into the brown shaded support and resistance zone which is just over head. Bottom line is silver has to have more buyers than sellers to overcome which looks like strong resistance overhead.
This next long term weekly chart for silver shows the parabolic rally phase into the April 2011 top which ended the bull market. From the bull market top silver has been trading in a parallel down trend channel for almost four years now which is a pretty lengthy move in one direction. Again it’s up to the bulls to reverse this downtrend channel in a similar fashion to the way they did back in 2008 crash low. You can see the price objective to the 50 area in 2011 using two different patterns. The inverse H&S bottom had a price target up to 45.75 and the red expanding triangle halfway pattern had a price objective up to 50. Impulse moves like that are mush easier to trade than these big 18 month consolidation patterns.
This last chart for silver is a 40 year look that shows its bull market top in 1980 and the decline that followed and the long drawn out sideways trading range that went on for many years. There is actually some very nice symmetry on the left and right side of the chart as shown by the big necklines. We’ve been following a potential very large H&S top where the price action broke below the neckline about six months ago. It’s now attempting to backtest the neckline to the 19.60 area which will be critical resistance. At least you have some perspective of where silver was in the past and how it relates to the present which is important to know.
In the Weekend Report we’ll take a good hard look at some of the Kamikaze stocks to try and gain some insight on what is taking place right now with these volatile stocks. All the best…Rambus
