In part two of this Weekend Report I want to take an indepth look at the US dollar as many of the important currencies of the world all seem to be making important moves right now. If that is true then the US dollar is also in the process of making an important move in the opposite direction.

Below is a long term monthly chart for the US dollar that shows black and white candlesticks. In a strong impulse move down you will see a string of back candles all in a row and in a strong impulse move up you will see a string of white candles all in a row. If the US dollar doesn’t crash and burn during this last week of trading for November, it will have completed it sixth month in a row of white candles sticks. This is telling us the breakout move from the massive ten year base is underway and is looking healthy. Remember big bases equals a big move and a small base equals a small move. It’s all relative.

The next long term chart for the US dollar is a monthly look going all the way back to 1984 which shows its all time high around 160 or so. As the US dollar declined from its all time highs it began to form a huge base which I labeled as, Big Base #1. When the dollar broke out of that big base #1 it led to a move to the 120 area in 2000 which started the bull market in the precious metals complex and the stock markets started their cyclical bear markets.  The move above the big base #1 S&R line, support and resistance line, lasted about three years. The US dollar built out a beautiful blue bullish rising wedge that formed at the halfway point to the 2000 top. The ride up wasn’t an easy one as you can see from all the chopping action during the formation of the blue rising wedge and this is a monthly chart. The big base #1 had two backtest to the S&R line before the impulse move really got going up to the 120 top. We have a well defined line in the sand now. As long as the US dollar trades above big base #2 S&R line it will remain in bullish mode.

Lets look at one more monthly chart that is a combo chart that has the US dollar on top and gold on the bottom. This chart shows a huge rounding bottom formation that began at the 2001 high. The red arrows shows the first positive for the US dollar vs gold. In 2008 the dollar bottomed and rallied while gold was building out its biggest consolidation pattern for the bull market up to that time. The divergence came in 2011 when gold made its all time high at 1920. One would have thought the dollar would have collapsed during that nearly parabolic run higher in gold but in fact the dollar made a higher low vs the 2008 low. That was a major divergence that told me the US dollar was finished with its bear market and gold was probably finished with its bull market which so far has been the case. As you can see on the gold chart it made a multi year low for the  month of November while the dollar made a new multi year high for November which is as it should be.

Lets now zoom in to the current price action looking at the weekly chart. The dollar made a blue five point rectangle reversal pattern that kicked off the breakout move above the S&R line on big base #2. That move gained momentum as it reversed symmetry up through the same area it came down through in 2013. The initial impulse move up was so strong it broke above the brown shaded support and resistance zone before finally getting a chance for a backtest which was dead on the money. Since the backtest at 84.50 the dollar has been rallying very strongly. So far there is nothing not to like about this move.

The daily chart for the US dollar shows all the small chart patterns that have formed since this impulse move began off the 5th reversal point on the rectangle reversal pattern. When the dollar had that false breakout of the bottom S&R zone, at the 5th reversal point, I added a note at the time that said, if this is indeed a false breakout we could look for a big move in the opposite direction. I wonder if anyone remembers that time. Back then the bars were much bigger compared to how they look now. As the dollar rises higher all the bars will look smaller and smaller. Note the small red rectangle at the top of the chart. Is this going to be just another consolidation pattern that breaks out to the upside or is it going to reverse the impulse move up that began at the 5th reversal point on the rectangle? At any rate the move from the 5th reversal point is what a strong impulse move looks like.

Below is another combo chart that has the US dollar on top and gold on the bottom. If you look to the right side of the chart you can see some inverse price action taking place. Note the dollar made the blue bull flag while gold made a blue bearish rising wedge. Now both the dollar and gold are locked into their current little red trading ranges that has yet to be decided which way the breakout will occur. I get the feeling that most are looking for the dollar to correct and gold to rally strongly higher. As always time will tell the story.

Below is the same combo chart but this one goes back further in time and shows the blue 18 month triangle on gold. I don’t have to tell you how critical this area is for gold and the US dollar for that matter.

Now I want to get on to the main theme of this US dollar post which is looking at the shorter term daily charts. As I showed you in part #1 of the Weekend Report, many of the important currencies of the world were forming potential bearish falling wedges on their daily charts. If that’s the case then the US dollar should be forming a similar pattern only in the opposite direction. Lets start with the daily chart for the US dollar that Ive been showing you for several  weeks or so that shows two small consolidation patterns forming one on top of the other. The lower pattern, the blue falling bull flag, is your topical bull flag that is sloping against the uptrend.  As you can see it failed to deliver on the price objective, up to the 91 area, before we seen another consolidation pattern forming the possible blue rectangle. This is now setting up the possibility that the US dollar is building out a bullish rising wedge pattern that will slope up in the direction of the uptrend.

Now lets put on the upper and lower trendlines connecting these two small chart patterns and see what we get. You can defiantly see a rising wedge taking shape. Keep in mind the rising wedge won’t be complete until the price action breaks above the top rail so it’s still a work in progress. If the rising wedge does breakout to the upside we’ll have a very big clue that this impulse move up is only halfway through and we can expect a similar move that led up to the first reversal point in the rising wedge. Note the two smaller red consolidation patterns that are slopping up into the uptrend.

There is an old adage on Wall Street that says if you see the US dollar and the stock market rising together that is bullish for the stock market because capital from overseas is finding its way to the US markets. Since the October low both the US dollar and the SPX have been rising together. Coincidence?

A perfect example of this happening was back in the mid 1990’s when the US stock markets were in the parabolic phases of their bull markets that actually started in 1995. The dollar and the SPX both topped out fairly close to each other in 2000. This is the point that set the stage for gold’s bull market to begin.

There is one more thing I would like to show you on what I think is happening with the US dollar right now. I don’t think anyone has picked up on this potential development yet. When a trend changes from from down to up there is usually a lot of chopping action at the bottom followed by the initial rally off of that bottom. During that initial rally phase a trend channel can form that defines the new uptrend. On the dollar chart below you can see a clear trend channel that has been forming since the bottom in April of 2011. As of the close on Friday the price action close right at the top of the channel. This is the point I want to try and tie everything together and show how the potential bullish rising wedge is so important to the big picture right now. Where it’s forming is critical which is just below, what I’m going to call the mid line of the new uptrend channel. Many times when a new trend is reversing from down to up, which is the case for the US dollar right now, the initial move up is huge which doubles the lower channel. As you can see on the chart below the dollar is sitting right at the mid line. If I’m correct we should see the bullish rising wedge breakout to the upside taking out the mid line of the brand new uptrend channel for the US dollar. This initial move up will be fast and furious equal to the first leg up off of the April low. The blue rectangles are what I call measuring sticks that measure each half of the new uptrend channel. The black arrows shows the last impulse move down into the ultimate bottom in April of 2011. I think we are going to reverse symmetry that move down into the 2011 low with our current rally phase capturing half of that move already.

Below is a 15 year chart for the US dollar that shows the possible brand new uptrend channel. If the bullish rising wedge plays out it will give the dollar the energy to take out the mid line and rally all the way up to the top rail of the new uptrend channel unimpeded pretty much.

Lets look at one last chart where I overlaid gold on top of the US dollar chart. I try to show this chart at least once a month or so because it has been spot on since I began posting several years ago. About six months or so ago I put a thin black dashed line on the gold chart and the dollar chart with the two blue arrows. When I first posted this chart, with the blue arrows, the dollar was trading below the thin dashed line and gold was trading above its thin dashed line. Now you can see how the dollar has broken out above its thin dashed line, had a backtest and is now set to run freely to the upside for awhile. On the gold chart you can see it’s still testing the breakout point which isn’t giving us any indication of the impulse move down yet. I moved the purple circle from the crossover area that happened in 2006 to the right side of the chart. If I’m right on the direction of the US dollar and gold then I think there is a good chance that we’ll see these two cross over again in due time.

So there you have it. The next couple of weeks are going to be very telling on which way all the falling wedges I showed you are going to break. Time always tells the story in hindsight but we can’t use hindsight in trading the markets. So until something changes this is how I see the big picture unfolding over the short to long term for the US dollar. How this affects other areas of the markets will remain to be seen yet. Normally a strong dollar is bad for commodities and the precious metals complex.  Will this time be any different. Stay tuned to find out. All the best…Rambus

There seems to be a lot of confusion out there as to whether the stock markets are bullish or bearish. Is the Dow Jones in a topping pattern as so many analysis are suggesting? I’ve seen some charts that are calling the big trading range , on the Dow Jones going all the way back to the 2000 bull market top, THE JAWS OF DEATH. Man it doesn’t get anymore dire than that. As usual I have a different take on the JAWS OF DEATH, which I would like to share with you  tonight .

Before we look at the first chart for the Dow Jones I need you to clear your mind of everything related to the stock markets in any shape or form. That means no Elliot Wave counts, Time Cycles, Gann Lines , volume studies, no indicators of any kind. Clear your mind of every article you’ve ever read on the stock markets, bullish or bearish. And last of all, NO CHARTOLOGY. I want you to look at just the pure price action without any bias whatsoever. From that point we can then start to see what is really happening to the Dow Jones and related markets .

This first chart is a long term monthly look at the Dow going back to 1997 with no annotations or indicators of any kind, just pure price action. When you look at this chart for the Dow I want you to look at the very last bar on the top right hand side of  the chart. As you can see the Dow is making new, ALL TIME HIGHS, for the month of November. Folks this is not what a top or bear market looks like. This is as bullish a chart you will find anywhere. Regardless of all the reasons why the Dow should be topping or is going into a bear market simply don’t add up . Again look at the last bar on the top right hand side of the chart.

Now that you can see what I’m seeing lets put some Chartology on this chart and see what it looks like. If you prefer you can put on your own trading discipline and see what you come up with. One of the basic principals of charting is what the the definition of an uptrend or down trend is. An uptrend consists of higher lows and higher highs while a downtrend makes lower lows and lower highs. This is a simple concept to understand. On this monthly chart below I’ve added all the chart patterns, as I’ve seen them form through the years.

Lets start at the 2009 crash low that ended on a massive capitulation spike in volume. Who could have ever guessed that five years later the Dow would be making record highs in 2014. I remember the 2009 low very well, the world as we knew it was coming to an end. That has stuck with investors all these years and makes them fearful every time the Dow has a decent rally. In reality, the real world, nothing could be further from the truth over the last five years. The old saying, the stock markets like to climb a wall of worry, pertains perfectly in this case.

Getting back to what a basic uptrend is,  you can see the Dow has fulfilled this requirement to a Tee. Higher highs and higher lows all the way up. Start at the 2009 crash low and follow the price action all the way up to our most recent high. I have said many times that gold’s bull market produced some of the best chart patterns I’ve ever seen in a bull market but the Dow is quickly catching up in that department. Once again notice the last bar on the top right hand side of the chart.

The next chart shows you what most chartists are calling the JAWS OF DEATH. From a Chartology perspective this is classic price action. Any trendline you put on a chart is either a support or resistance line. When the price is trading above a trendline it will act as support when touched from the top side and when the price action is trading below a trendline it will act as resistance. Eventually one of the trendlines will fail and that’s when you get your breakout.

If you look at a triangle consolidation pattern the top rail is resistance and the bottom rail is support. The price action trades between the two rails until either the bulls or the bears win out. In a bull market the bulls usually win the battle and in bear markets the bears usually win out. Looking at the chart below you can see it took six months of chopping action below the top rail of the Jaws of Life consolidation pattern before the Dow was able to overcome that strong resistance rail, as shown by the BO (Break Out) annotation. The Dow then spent about a year trading above that, what had been a resistance rail, to now a support rail. This is a perfect example of what happens when, in this case, the bulls win the battle, resistance turns into support. Note the two backtests, BT, that touched the top rail of the Jaws of Life from the topside.

You may recall last month when the markets were having a tough time of it and everyone was talking bear market. Note where the October low hit. Dead on the top rail of the Jaws of Life.   …Let that sink in for a moment….

Dead On !

A rapid waterfall 10% move to precisely the breakout point . Mr. Market was just checking back from above .At Rambus Chartology we were hoping and waiting for a chance to get on board . But we had to be nimble. Mr. Market did not hang around for a millisecond, in the grand scheme of things . A small head and shoulders pattern on the minute charts was the only signal he gave and fortunately we pounced on it in our General Market Leveraged ETF Trading Portfolio .

This tells us that is one hot rail to be respected. It’s very simple. Above that top rail is bullish and below is bearish. Until that top rail of the Jaws of Life pattern is broken to the downside, one has to be bullish on the longer term time frame, as this massive 14 year consolidation pattern is just breaking out. Well its been breaking out for a year now but it looks like all the work is done and the next big impulse move up is ahead of us. Again notice the last bar on the top right hand side of the chart.

A 75 YEAR BULL MARKET ?  ARE YOU SERIOUS ?

Yes Virginia I am .

Next lets put our Jaws of Life in perspective by looking at a 75 year chart for the Dow Jones. I know some of our older members will remember the 1970’s period when it looked like the world was coming to an end with inflation and rising interest rates going through the roof. That period on the chart carved out a massive H&S consolation pattern complete with a breakout and backtest before the bull market of a lifetime began. You can see our Jaws of Life consolidation pattern that is just breaking out at the top of the chart. Are we at the equivalent in time to the 1982 period for the Dow Jones? Few believed back in 1982 that a bull market was just getting started. It really wasn’t until the mid 90’s that everyone finally figured it out which led to the parabolic blow off. Followed by our just completed 14 year Jaws of Life consolidation .

Lets look at the Dow’s Little brother , the SPX. As you can see the SPX has already broken out of its massive flat top triangle , almost two years ago already!  If you focus in on the breakout area you will see there was one quick backtest shortly after the breakout and the SPX hasn’t looked back since.

Lets look at the 30 year chart for the SPX that shows the beautiful flat top triangle consolidation pattern with four complete reversal points. If you compare our current price action, since the 2009 crash low to the bull market rally back in the 80’s and 90’s, separated buy the red bullish rising wedge, you can see the price action just seems to keep rising relentlessly with only small corrections along the way, leaving many retail investors staring from the sidelines in awe !

Looking at the 75 year chart for the SPX you can see how our current flat top triangle fits into the big picture. As in any time frame an uptrend is a series of higher highs and higher lows. For the most part we can call this a massive 75 year uptrend.

Lets look at one last chart which will be for the RUSSEL 2000 small cap stock index. It to has broken out above its top rail of a 14 year expanding flat bottom triangle and is still in the process of the backtesting the top rail from above.

As these charts above show we’re at an interesting juncture right now in regards to the stock markets. If one has the discipline and courage to buy the strongest stocks or etfs and hold them for several years or longer they will be well rewarded for their efforts in the future in my opinion. I can tell you it’s never easy to hold on during a bull market as every little correction will seem like the next bear market is beginning. There were some outrages profits made during that last secular bull market in the 80’s and 90’s for those that bought the right stocks, especially in the tech sector, and held on for the ride of a life time. No one knows how long our current five year bull market will go on but by the looks of those really big consolidation pattens, that I showed you above, it’s not going to be a flash in the pan type of move. The bigger the consolidation pattern the bigger the move that follows.

I want to leave you with one last long term chart for the BTK (Biotec Index) that has been the leader in this bull market and has a similar big blue consolidation pattern to the ones I just showed you above. I expect the Dow Jones and the other US stock markets will have a similar look when they really get going. Will you be watching or Participating ?

All the best…Rambus

PS: Tomorrow I will show you some charts on some of the Kamikaze Stocks  that you haven’t seen yet. These are fresh out of the oven…

Hello :

For new members and trial members who don’t know I am Gary (aka Fullgoldcrown)

Resume :

Former Gold Permabull ..then after having my crown handed to me by Mr Gold Market

Converted  Rambus Student ( Dave calls me his first and most difficult student)

Rambus Chartology Editor

and

Town Crier / Class Clown .

I would like to take this opportunity to review Rambus Chartology and explain what our site is all about .:

Rambus (Dave Tablish from Northern Arkansas) has been a Market Technical Analyst since long before it became fashionable and easy with the advent of computers .

He started out when he came across the original work of Edwards and Magee in “Technical Analysis of Stock Trends” originally published in 1948 and started applying it with  pencil and ruler  protractor and graph paper over 30 years ago .

Sixty-three years. Sixty-three years and Technical Analysis of Stock Trends still towers over the discipline of technical analysis like a mighty redwood. Originally published in 1948 and now in its Tenth Edition, this book remains the original and most important work on this topic. The book contains more than dry chart patterns, it passes down accumulated experience and wisdom from Dow to Schabacker, to Edwards, and to Magee, and has been modernized by W.H.C. Bassetti.

Bassetti, a client, friend, and student of John Magee, one of the original authors, has converted the material on the craft of manual charting with TEKNIPLAT chart paper to modern computer software methods. In actuality, none of Magee’s concepts have proven invalid and some of his work predated modern concepts such as beta and volatility. In addition, Magee described a trend-following procedure that is so simple and so elegant that Bassetti has adapted it to enable the general investor to use it .

……………………………………..

Rambus learned the only way , from the school of hard knocks ,from trial and error , and more error and losses. But his fascination with the incredible symmetry of chart patterns and his never quit attitude convinced him to stick with it .Technical Analysis became his passion . Over the years he refined his skills and added many of his own observations from his real time charting and trading. Many of these insights can be found in the section on the sidebar of Rambus Chartology called ‘Timeless Tutorials”

Dave finally hit the jackpot in the late 1990s teck mania blowoff when he attached himself to the stock RMBS and traded it all the way to the incredible top. Then spotting a tiny head and shoulders top he exited and left that market to build his dreams .

Hence in about 2006 when Dave started posting his original charts at Goldtent  ( a site where rabid goldbugs like myself inhabited) he took on the moniker “Rambus”

After a short hiatus from the Markets in 2000 (Rambus has always told me that when you make a good score in the markets its best to take much of your winnings out and use them for other purposes lest you give them all back) , Dave returned to his charting and identified what appeared to be a 5 year bottoming pattern in the Gold Market

In about 2002 he started to study and learn everything he could about this horribly beaten down and forgotten market . He familiarized himself with the Metals and the Miners both individually and via the Mining Indices . he was immediately  very impressed that the PM markets held some of the most pure and beautiful symmetrical patterns and he quickly became hooked .

He traded the PMs from the long side in quiet obscurity for several years before he found Goldtent and started to contribute posts. We were in awe of his work .

Rambus charts predicted more and more upside all through 2006-7 and into 2008. Nothing but Bullishness as far as the eye could see. Consolidation Patters always broke out to the upside . he was a hero to us goldbugs . Until that fateful post one fine day in mid 2008. he called his post “What If ? ”

I attempted to save all the goldtent posts from that era but many are now dead links.However here is the post I put together in December 2011 called “Deja Vu” which contains some the charts from the 2008 era .Wow. Notice the WTIC call too .

http://rambus1.com/?p=1829

Rambus located this chart which was posted on New Years Eve 2008 which chronicles his calls from that incredible era in the PM markets .

Well: That was then and this is Now . And here we are again.

Here are some more recent  charts in  which Rambus Projected  the present PM carnage as long as 2 years ago.

This chart produced Feb 15 2013 , shows how the HUI top was actually predicted by the price objective contained in the 6 year head and Shoulders bottoming pattern from 1997 to 2003 . Incredible Chartology  .

BUT how did Chartology do in forecasting this present Bear Market ? Well for one thing look at that chart above and see the impending Head and Shoulders TOP !

Wouldn’t you have loved to have seen that Top back the in Feb 2013 ? What would you have done differently ?

Here is the Rambus Comment from the post of this work

“The Chartology of the entire chart is one of beauty and symmetry which some will see and others won’t. They say beauty is in the eye of the beholder. What do you see?”

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Actually Rambus Produced a Chart called “A Diamond in the Rough” on New Years Eve 2012 which preceded the above chart and was the first warning of impending doom .

Diabolically  this breakout was followed by a huge bull trap rally back to retest the diamond and that formed the right shoulder of the Huge head and Shoulder pattern which proved to be the Top

Fast Forward February 22 2013

“Lets look at one more example that you won’t find anywhere else except here at Rambus Chartology. You can see two reversal patterns, the 11 point Diamond that is actually the head portion of the much bigger H&S top that few believe is for real. The other pattern is the massive H&S top. Its good that few believe this pattern is authentic because everyone can’t exit at the same time. The lower it goes the more people will begin to understand what is actually happening but it will be too late to take action and they will most likely ride the whole thing down or sell into any counter trend rally that will occur thus putting a ceiling above the price action. I hope these examples help you understand what I mean when I talk about odd and even numbered chart patterns.”

All the best

Rambus

Chart 3: Nervous Breakdown !

Here is a Call on Silver (via SLV) that I couldn’t believe at the time .”SLV BLUE DIAMOND”

Followed soon after by “SLV RED DIAMOND”

See that PO ?  Of the Red Diamond  ?  Made 1 year ago …14.50 !!… Which is exactly where SLV has bottomed to date . Yikes !

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OK : The real point of this post is to Explain this Rambus Chartology Website .

On a day to day basis we all of course focus on the daily and minute charts as that is where the rubber meets the road. However we feel that Rambus best value is in identifying major trends and major trend reversals .As you all know identifying trends and profiting from them in real time are two different animals .This is what Rambus attempts to do in his daily realtime market commentaries.

Rambus Chartology is First and Foremost a teaching site. The greatest value of this site is learning Chartology ( a blend of Chart pattern recognition with Market Psychology). The aforementioned “Timeless Tutorials” as well as “The Wizard of Rambus” are the places to go for this.

We realize that not everyone is inclined to learn Technical Analysis and that many come here to see how Rambus is trading the various markets in the desire to trade with him.

For you ,as you know Rambus is not a Certified Financial Planner and he trades his own portfolios (see the obligatory disclaimer)

He has  4  Virtual Portfolios on this website (Rambus also trades his own personal portfolio with  the same trades)

The Most widely followed Portfolio is the Kamikazi Portfolio.

Rambus recommends you put a maximum of 5% of your risk capital in these trades. To say they are volatile is an understatement.Recently a 200% profit in 3 weeks has vaporized.

http://rambus1.com/?p=14865

His other Portfolios are The Junior and Model Portfolios which were originally meant to hold PM Miners in Bull Mode but which now have various other trades.

AND

The new (from May 2014) General Market Leveraged Portfolio which trades 3X ETFs on selected market sectors.

http://rambus1.com/?page_id=23371

In Summary Rambus would like each an every one of his members to learn and be able to utilize the principles of this incredible Market Forecasting Discipline .

In closing here is a response to a member who asked probably the most important question of all .

Why do charts work  ?

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“Hi its Fullgoldcrown here

In case Rambus misses this question I will answer it as I know he would .

……………………………….

Simply because Human Nature is predictable .  Market Participants are all motivated to act by the basic emotions of Fear and Greed.  Charts are the sum total of the opinions of Market Participants. Rambus favorite expression of this is “Its All in the Charts”. What he means is …we can never really Know the fundamentals and how they will play out .We will never really know the extent of Manipulations .We will never really Know Sentiment…or Seasonal Effects or anything in real time. What we think we know about all these things is just our speculation

What’s that brilliant quote again ..? “Its not what we don’t know that gets us in to trouble It’s what we think we know that isn’t so”

The real drivers of the markets are in sum total only knowable by reading the charts . We can all see the history of the price action by viewing a chart .

Where Rambus is Invaluable is his ability to read the language of the markets through its Price Action .

OK Now

One Of My Personal Favorites where in March 2013 Rambus Posted

“Dollar Bears Prepare to Hibernate”

(be sure to read the last 2 charts )

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

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Update : Nov 28 “Energy Deflation Here and Now”

This post highlights the Evolution of this Hugely important Deflationary event

http://rambus1.com/?p=29640

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Years of Study and Experience , a Gift for Pattern recognition and a touch of Intuition

I doubt that we will ever see Rambus’ equal .

But of course I am Biased

🙂

Fully

Yesterday we took a second position in SCO which is a 2 X short oil etf. Lets take a more indepth  look at oil which is showing it’s finally breaking down from a massive topping pattern. We’ll start with the short term daily chart that shows the breakout and backtest to the bottom rail of the little blue bearish  falling wedge. I’m using it as a halfway pattern to get a measurement based on the blue rectangle that traded just above the blue falling wedge. The blue arrows shows the impulse method of measurement along with the breakout method that shows the price objectives down at the bottom of the chart as shown by the brown box. This is just a very short term price objective.

Below is a weekly chart that shows the bigger picture which is a 5 point rectangle or if you want to be really picky, a 5 point triangle reversal pattern. Both the top and bottom rails are pretty horizontal but they do have a very slight slope to them. Also this has to be a 5 point pattern because it has formed off of the 2009 low. Remember an odd number of reversal points creates a reversal pattern. A double top or bottom have 3 reversal points. A H&S has at the minimum of 5 reversal points. A triangle or rectangle needs at least 5 reversal points. An even number of reversal points creates a continuation consolidation pattern. So with that in mind lets look at the rectangle/triangle and see how it turned out.

You can see the the consolidation pattern has 5 reversal points that shows it to be a reversal pattern to the downside. Next I want to focus your attention to our current price action as shown by the green circle. I originally had the bottom rail in a horizontal position. It’s very important when drawing a trendline to look for certain things. If you look real close inside the green circle you can see a small pop and drop pattern that we’re experiencing on gold’s breakout right now. This weekly chart for oil shows the first weekly bar hit the trendline and then got a small bounce for two weeks. On the fourth week you can see oil broke below the bottom black rail in a breakout move where we took our initial position in the 2 X short oil etf SCO. Notice the very last bar inside the green circle which is this weeks trading action. As you can see it made one last rally attempt that was stopped dead in its tracks at the bottom rail at about 80 or so.

Once you suspect a stock is breaking out always tweak your trendline which  will usually show you up close and personal the breakout and backtesting process.  Most of the time you would be surprised on how cleanly a trendline can cut through the price action telling you exactly where the breakout is taking place. The chart below shows you this very clearly.

Since this is a reversal pattern the only way to measure for a price objective is to take the width of the triangle/rectangle and add it to the breakout point. This is another reason you want to know exactly where the breakout occurs. The blue arrows shows you the width of the reversal pattern, added to the breakout, gives you a price objective down to the 40.29 area. One last note on the chart below that shows the first reversal point began in, you guessed it, 2011. Oil is following the same path as most commodities and the precious metals complex.

The next chart shows you the parabolic run oil had that began with the inverse H&S bottom back in 2007. No one knew that a parabolic move was going to unfold over the next year or so. All I knew at the time was that oil put in that inverse H&S bottom reversing the downtrend. You can see the red rising bull flag that slopped up into the uptrend that always tells us the move is strong. The parabolic move up finished with that massive H&S top that had a price objective all the way down to the old all time highs for oil at 35. For those that would like to study what a parabolic move looks and feels line can isolate the price action between 2006 to 2010 in linear scale. Patterns like this  are what chartists live for.

This next chart for oil shows the price action going back to 1995. Note the backtest to the bottom rail of the uptrend channel that occurred in 2011 which created the head of that massive H&S topping pattern. The bigness of these long term patterns tells you deflation is going to be around or sometime to come.

This next chart for oil shows my thinking back on July 4th 2008 when oil was going parabolic. It still hadn’t ended its parabolic run yet but I was on the lookout for a small H&S top or double top on the 2 hour charts looking for any kind of reversal pattern. I knew once the parabolic move up was over there would be a big decline but I had no idea at the time that oil would fall as far and fast as it did. It wasn’t until I recognize the bigger H&S top that I could come up with a downside price objective which ironically was at all the previous highs oil made in history around the 35 area, before oil broke that 35 boundary and started its parabolic rise.

OK one last chart that shows the total history of oil going back to 1982. Notice the brown shade support and resistance zone at the 35 area that had kept oil in check until it broke out in 2004.  Oil finally broke out above the brown shaded S&R zone in 2004 then backtested it in early 2005 which eventually led to the parabolic run to 147. Note how the parabolic crash found support right where you would have thought, right on top of the brown shaded S&R zone. What had been resistance for all those years turned out to be support during oil’s parabolic crash. Pretty amazing. All the best…Rambus

Tonight I want to explore the relationship between the US dollar, the Japaneses Yen and gold. Most investors know that a rising US dollar is usually a bad sign for commodities and the precious metals complex. When the US dollar is falling commodities and the precious metals complex usually do pretty well. When the US dollar topped out in 2000 that’s when gold and commodities started their bull markets that lasted until 2011. Since that time the US dollar has been slowly trending higher while most commodities and the precious metals complex have been moving lower. This long term monthly chart for the US dollar shows you the high in 2000 which marked the beginning of gold’s bull market. At the bottom left hand side of the chart, in big base #2, point #4 marks the high for gold’s bull market. Since that low at point #4 you can see how the US dollar has been slowly rising since 2011 which was the peak for gold and most commodities. One last note on the chart below. The US dollar is now in its third month of a breakout move from big base #2 which is a fractal of big base #1. If you’ve been wondering why the US dollar has been so strong lately it’s because it’s in breakout mode. This is what a breakout looks and feels like.

Below is a beautiful long term monthly chart for the CCI ( Continuous Commodity ) Index that that shows its bull market that started with the massive three year double bottom. The Chartology on this chart is truly amazing as it shows you what a true bull market looks like. When you see consolidation patterns that slope up in the same direction as the major trend, in this case a bull market, that is the market talking to you. It’s the market saying, I want to go higher and in a big way. Normally a corrective pattern, such as a bull flag or wedge will slope against the main trend which is the way most chartists learn from the books they study. Sometimes everything about charting isn’t in the books but is learned from many years of drawing lines on a chart in every conceivable market condition. Note the top in 2001 which coincides with the top in the US dollar on the chart above. I showed you on the US dollar chart above it’s in its 3rd month of breaking out of big base #2. The CCI chart below shows it too is in its 3rd month of breaking out from its big blue triangle consolidation pattern. Coincidence?

Lets now look at a long term monthly chart for gold that shows its bull market that started out with a three year double bottom reversal pattern just like the CCI index. You can see several bullish rising wedges that were telling the story of gold’s bull market move. Again, like the CCI index, gold also topped out in 2011 and has been in a bear market ever since. Unlike the US dollar and the CCI index, gold is only in its second month of a breakout move to the downside. Most folks can’t or won’t acknowledge that massive H&S topping pattern that extends all the way back to the left shoulder, which is the red bullish rising wedge which formed in 2010. The big neckline is taken from the 2008 crash low H&S consolidation pattern where I extended the neckline all the way to the right side of the chart more than a year ago. The top of the right shoulder is taken from moving the neckline up to the top of the left shoulder that often times gives you the height for the right shoulder. As you can see the neckline symmetry rail nailed the height for the right shoulder. After a very long wait the breakout in now coming to fruition.

This next chart is a long term weekly look at the Japaneses Yen that shows a  massive double H&S top pattern with a small H&S top that is actually just the head part of the much bigger six year H&S top. We’ve been watching this chart with great interest for several years now watching the blue bearish falling wedge mature as the right shoulder. The green circle shows you the breakout and backtesting process to the big neckline, that we watched play out in real time. The big patterns always take longer than you think to play out but it was well worth it, seeing the full breakout and backtest completing and now the impulse move lower. All the work is finished now except to watch the impulse move lower.

Now on to the smoking gun. We’ve been watching the US dollar to the Yen ratio chart that has given us guidance as to the direction for gold. When the ratio is rising gold is generally falling and visa versa. It’s not absolutely perfect but close enough that you don’t want to bet against it. Below is a daily line chart that shows the USD:XJY which is going nearly vertical. This means the US dollar is outperforming the YEN in a big way.

Below is a long term monthly look that goes all the way back to the beginning of gold’s bull market that started in 2001. As you can see the ratio fell for most of gold’s bull market except for the occasional consolidation period. Note where this ratio bottomed out, does 2011 ring a bell? From that low the ratio has been steadily rising and gold has been heading in a southerly direction.

In analyzing the markets one needs to become a private investigator and try to get all the clues you can find to make a case before it goes to court or in the markets case, to buy or sell. This next chart is a combo chart that has the USD:XJY ratio chart on top and gold on the bottom. At first glance it doesn’t look like anything special but that is not the case. When we compare the ratio chart to gold we find some interesting things. The two red arrows shows where the ratio chart bottomed out and gold topped out. At the time you wouldn’t have known that this was the end of gold’s bull market but maybe a correction of some kind might develop.

This is where it gets really interesting folks. Note the massive inverse H&S bottom that the ratio chart built out over two years while gold was consolidating it’s gains from the near parabolic run it had into the 2011 high. Note that the massive inverse H&S bottom that broke out in November of 2012 while gold was still in its rectangle consolidation pattern. There was about a 5 month lag time before gold finally broke out of its massive rectangle consolidation pattern. Even though gold was moving lower it still hadn’t broken out of its consolidation pattern. The ratio chart on top was telling us to expect gold to breakdown a full five months before it actually did.

Now using the same principal lets look at our current setup in both the ratio chart and gold. As you can see the ratio chart on top broke out of its blue triangle back in August of this year while gold was still in its own blue triangle consolidation pattern. The ratio chart was giving us a big heads up to expect gold to eventually breakout to the downside out of its blue triangle. It’s only November but you can see on this weekly line chart that gold has indeed broken down and has shown a small backtest to the bottom blue rail. You can see gold started falling once the blue triangle brokekout on the ratio chart. It wasn’t until just about two weeks ago that gold actually broke out of its blue consolidation pattern.

Lets look at one last combo chart for the ratio and gold that is a long term monthly look. Notice how the ratio fell during the bull market years as gold rallied. What’s interesting here is that gold was leading the ratio by about five months or so. When gold broke out of its blue bullish expanding falling wedge the ratio chart on top was still working on building out its blue bear flag. Now lets look at the center of the chart that shows the USD:XJY ratio chart building out a massive inverse H&S bottoming pattern. If you knew then what we know now you would have been selling out all your gold and gold stocks when you seen the inverse H&S bottom breaking up and through the neckline. Again on this monthly chart the ratio broke out in October of 2012 while gold didn’t actually breakout from its massive rectangle consolidation pattern until that infamous day in April of 2013. You can see gold did start to drop when the ratio broke out above the neckline but you had about 5 or 6 more months to get ready for the real breakout that was coming in April. Now lets look at our current situation. As you can see the ratio broke out in August of this year telling us that gold was going to break down form its blue triangle. It was only a matter of time. The ratio chart is calling for a breakout of gold’s consolidation pattern come January of 2015. As subscribers of Rambus Chartology already know the breakout is already underway in gold. The ratio chart on top gave us an early heads up on what to expect going forward with gold.

By putting all the pieces of the puzzle together we have a working model that will tell us how much time we have before gold makes a big move down. If you’re not prepared for the next decline in gold I wish you all the luck in the world as this next decline is set up to be just as painful if not more so than the April of 2013 crash that caught many of the gold investors off guard. All the best…
Rambus

CLICK TO ENLARGE

In Round numbers

$100,000 Gain on a $300,000  3 Week Trade  =33%

and yes Virginia the Trade was up over $300,000 at its peak = 100%

When all is said and done and the DUST settles

THIS WAS A DREAM TRADE WITH A NIGHTMARE FINISH

AND YET $100,00 GAIN

Presently the Kamikazi PF is up 305% since August 1 2012

from $100,000 to $405,000

Target $1,000,000 .

Stay tuned .

For those new members who likely arrived after this October 2nd Weekend Report

This is a Plethora of Monthly PM Miner Charts that Rambus Posted in preparation for what has transpired the last couple of days in the PM Markets . I think If you study these charts and then compare some of them to todays charts it would be a very constructive exercise .

.This is a Teaching Site first and foremost .We love nothing better than to hear stories from members who have embraced Chartology and improved their trading success as a result .

For those serious students we recommend reviewing the many posts at the Timeless Tutorial section of the right sidebar. Scroll Down .

Fullgoldcrown (town crier)

And Now Professor Rambus … Weekend Report..October 2  entitled

PRECIOUS METALS STOCKS…TURNING TO DUST

Last night I promised you I would post a bunch of monthly charts for the precious metals stocks that will show their monthly closing price and percentage loss for September. I think you will be surprised at some of the percentage losses that some of the big caps had as the decline has been kind of stealthy.

We took our first round of buys for the Kamikaze Portfolio on September 4th four days into September. When you finish looking at all these monthly charts I’m going to show you, go to the Kamikaze Portfolio Tracker on the sidebar, and see difference one month can make in a portfolio. I can only imagine the pain some of the staunch gold bugs are starting to feel because of their belief that gold can only go up and if it goes down it’s manipulation.

These chart will also show you why I have the confidence to be fully invested in the Kamikaze Portfolio at this time. If one only looks at the PM stock indexes and not at the individual stocks that makeup the indexes you’re missing a very important part of the processes in determining which direction the big trend is. As I showed you in last nights report the big trend is down in the precious metals complex regardless all the fundamental reasons why it should be up.

The charts you are about to see will show you the truth of what is really happening in the Precious metals complex based on Chartology and nothing more. Just look up to top right hand corner of each chart to see what they did for the month of September. These charts are pretty self explanatory so I will just post the charts without any commentary unless I see something that might be interesting.

Now the 3 X short the precious metals complex stocks.

The grand prize winner for the month of September. All the best…Rambus

All the best

Rambus

Below is the daily chart for the yen we’ve been following with great interest regarding the movements in the precious metals complex. I want to focus in on the price action within the green circle. After breaking down from the massive H&S neckline the yen found about 3 days of support on the bottom rail of the black bearish falling wedge before it fell to the October low. From the October low the yen started its counter trend rally that would backtest either the bottom rail of the bearish falling wedge or the much bigger and stronger neckline of the massive H&S top. As it turned out the backtest to place at the neckline and then reversed back down just as you would expect. Note how the price action gapped below the bottom rail of the black falling wedge and has been backtesting it for the last three days or so. It now looks like the backtest is completing and the real move down maybe just getting started. Confirmation will be when we see the yen take out the October lows.

The yen’s massive H&S top.

When I overlay gold on top of the yen you can see why the yen is so important to our short precious metals positions.

The HUI overlaid on top of the yen.

In this Weekend Report I want to show you what I think is the most important chart on the planet right now. I know many of you won’t agree with this statement because there are a lot of important charts out there that are talking to us right now. This just my opinion based on the most recent price action that this chart exhibited on the recent plunge in the month of October. The chart I’m referring to this the long term monthly chart for the Dow Jones Industrial Average.

Before we get to the present charts I would like to show you a Weekend Report from January 2013 . The signs that a new Bull market in US Stocks was beginning were there , almost 2 years ago . Even I am surprised how this has evolved exactly as described .

http://rambus1.com/?p=9469

Before we look at the Dow Jones I would like to give you just a simple quick explanation of how Chartology works. Every trendline you put on a chart  either acts as support or resistance. For example during a rally phase the bulls are in control and move price higher. At some point the bulls run out of gas and need to consolidate their gains before the stock can make an other advance. The recent high is where you start the trendline which is resistance. Next the reaction takes the stock down far enough where the bears run out of gas and the bull take over again and begin to move the stock back up. This is the beginning of the support line. The next move up can stall out just above, right on or even below the first reversal point high which gives you a the high to place your top trendline which is acting as resistance now. The same goes for the next reaction to the downside where the stock will find support just above, right on or just below the previous low. This is how a consolidation pattern begins to form. The upper and lower trendlines shows you the fight between the bulls and the bears which in a bull market the bulls will when the battle at least 2/3 to 3/4 of the time.

Once the battle is resolved in the bulls favor the top rail, for whatever chart pattern developed, will then reverse its role from what had been resistance to now support. The reason this happens in bull markets is because the bulls are the dominant force in play, Just the opposite in bear markets. Those that bought their stock before or during the consolidation process are still making a profit so there is no reason to sell when the new consolidation pattern breaks out to the upside. A lot of times you will see a backtest to the top rail, which had been resistance turned into support, which gives you confirmation the top rail is hot and to be respected. The bears are weak at that point and can’t drive the price down any lower so the dominate uptrend resumes again. This is just a very short and simple explanation of how support and resistance works which is the basis for Chartology.

The basic principal is, resistance turns into support when it’s broken to the upside and visa versa to the downside, I would like to show you the most important chart on the planet right now IMHO. This very long term monthly chart for the Dow Jones has gotten a lot of play lately as a very bearish pattern which technically is an expanding triangle or as some call it The Jaws of Death.

This next statement will be hard for most folks to understand but I believe the Dow Jones, along with many other stock market indexes and individual stock, have been consolidating in one giant consolation pattern, that got their first reversal point all the way back at the bull market high in 2000. The second reversal point came at the 2002 low followed by reversal point #3 that formed a higher high against the 2000 bull market peak. Then came the crash low in 2009 that looked like the end of the world as we knew. How could the stock market ever recover from such a beating? That important low has scared most investors for life and they will never be able to look at the stock market in a positive light again. That’s what crashes do to your psyche.

Below is a monthly chart, in linear scale, that shows the expanding triangle or as some refer to it as the Jaws of Death. I’ve put a green circle around the area I want to discuss in detail so you can see the principal I showed you earlier in this post on how a trendline can reversal its role, in this case, from resistance to now support. First notice the price action, which was six month of trading, just below the top rail of the expanding triangle. The bulls tried as hard as they could but couldn’t move the price action above that all important top resistance rail that goes all the way back to the 2000 high. Then on the seventh month the bulls were able to crack that strong resistance rail to the upside ever so slightly, but it was beginning to give way. For almost one year now the top rail of the expanding triangle has held SUPPORT with one strong backtest four months after the breakout but quickly reversed direction to close back above the top rail of the expanding triangle. This is where the rubber meets the road as they say. Notice the very last bar on the right hand side of the chart that shows the inter month decline that has everyone worked up about  the new bear market that is now beginning and will lead to the next stock market crash. My take on the October decline is that it was nothing more than the backtest to the top rail of the expanding triangle. This whole process of breaking out from the expanding triangle and the backtesting process, from the topside, has taken roughly a year and a half to complete at this time. If we see the Dow Jones make a new all time high that will be the confirmation I’ll be looking for that the secular bull market is still in play and indeed is just getting started, regardless of all the reasons the stock market has to go down. The reason I call this chart the most important chart in the world right now is because of it’s implications for the rest of the US markets.

Below is a quarterly chart for the Dow Jones that shows the expanding triangle with the breakout and backtest in place.

The long term linear scale chart for the SPX shows it has been much stronger than the Dow Jones as it wasted little time in its breakout and backtesting process of its expanding flat top triangle consolidation pattern.

Using the 2000 starting point for all these big consolidation patterns the RUT has broken out of an expanding flat bottom triangle pattern. You can see the last bar on the right hand side of the chart that shows our current month of October as having a strong backtest to the top rail. What is encouraging about this chart from a bullish perspective is the price action is now trading back above the top rail of the expanding flat bottom triangle. Another positive development would be if the RUT can close above the previous months closing price which it is doing right now with one more week of trading left for this month. Again any move to new all time highs would be confirmation that the breakout and backtesting process if finished and we can get on with the rally that lies ahead.

Next I would like to show you some very large consolidation patterns similar to the ones I’ve shown you on the charts above that have already broken out and have been in their new bull market for several years in some instances. Lets start with the strongest sector in the markets which is the BTK  (Biotech Sector). You can see its nine year blue triangle consolidation pattern that started to form in 2000 and broke out in 2009 and is hitting new all time highs at this moment. Note the breakout and backtest of the top blue rail of the triangle consolidation pattern before the rally to new highs began. This is exactly the same process I showed you on the long term monthly charts above.

Next is a long term chart for the COMPQ that started to from its blue triangle in 2000 and broke out in late 2009. When you look at the short term charts this last decline in October looks like a disaster but when you look at the monthly chart you can see a new all time high isn’t that far above our most recent price action. As this is a monthly chart I would like to see the COMPQ close the month on the higher end of its last bar which would leave a long tail.

This next chart shows the NDX 100 which represents the 100 biggest tech stocks that shows some beautiful Chartology. There was the beautiful multi year blue triangle consolidation pattern which formed a H&S bottom toward the apex. There are two important break outs and backtests on this chart. The first one is when the price action broke out above the blue rail of the triangle consolidation. As you can see the backtest created the right shoulder of the H&S bottom which had a breakout and a backtest to the neckline before price took off to form the red bullish rising wedge. Note the parabolic rise in the mid to late 1990’s bull market that ended in 2000 after building out a beautiful red bullish rising flag halfway pattern to show where to look for the top, blue arrows.

DIS (Disney) shows you another fine example of a big triangle consolidation pattern that broke out in 2010 with two backtests to the top rail and hasn’t looked back since.

Below is a different and shorter term look for CAT that shows its been building out a 6 point blue triangle for close to 3 1/2 years now. Note where the last bar on this chart found support this month.

MSFT broke out of its massive blue bullish falling wedge after 10 years or so of consolidating the rise that began in the late 1980’s to the 2000 top. This chart shows the bullish breakout that has one red consolidation pattern below the top rail of the blue falling wedge and one red consolidation that formed on top of the falling wedge which I have shown many times signals a bullish setup as you can see.

Lets look at one last huge blue triangle consolidation pattern that YHOO broke out of last year after spending nearly 13 years working off the excesses from the bubble phase of the bull market that topped out in 2000. As you can see it just broke out of the red bullish expanding falling wedge and did the backtest this month which is the reason I bought this stock for the Model Portfolio.

Next I would like to show you two sectors that need to be monitored very closely as they look like they’re going to breakout to the upside. The first sector is the RLX, retail sector that has been forming an almost one year rectangle consolidation pattern that is getting close to breaking out to the upside. First the daily chart gives you a close up view of the rectangle consolidation pattern that had a false breakout recently. It’s not uncommon for the last move out of a rectangle to have a false breakout with one last move down that can find support toward the center of the rectangle. We’ll see confirmation when the RLX makes new all time highs above the recent high.

The weekly chart really puts the possible rectangle in perspective. From a Chartology perspective it looks like the blue rectangle consolidation pattern is going to be just another brick in the wall that will lead this sector to new all time highs once all the work is done with the breakout and backtesting process. There are etfs for this index that can be played. Also for those that just like to buy individual stocks you can do a little homework in this sector and find which stocks have the best setup from a Chartology perspective.

Below is a 3 X long etf for the retail sector that is showing a nice triangle consolidation pattern. The volume is very light on this eft which may grow over time like our Kamikaze stocks have.

The last chart for tonight shows the RLV, health care sector, getting real close to making new all times highs. Again this is an area that one needs to investigate if they’re more interested in stocks instead of playing the etfs.

I have been watching this 3 X long etf for this sector which just broke out above the top rail of a bullish expand falling wedge on Friday.

The bottom line is the stock markets may not have the crash that many are looking for at this time. That’s not to say we can’t correct some of the recent move from the October low to the high made on Friday. The markets will confirm for us the bull is back once we see the Dow Jones break to new all time highs. With all these new etfs out there now I prefer to trade them for the most part vs individual stocks. There were so many times in the past when I would get the direction right in the markets only to have some of the individual stocks failing to follow along. Picking a stock now days is like adding another degree of difficulty where you have to be right on the trend then you have to be right on your stock selections. To each his own .

All the best…Rambus

Editors Note:

Rambus has recently added a General Market Leveraged Portfolio where he trades the 3X ETFs on selected market sectors .

www.rambus1.com