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

CURRENCY WORLD :

Lets start off the Wednesday Report by looking at several currencies that broke out today. As you know the Eruo has been one of the weakest currencies out there. Today’s breakout of a bear flag confirms there is more downside to come. This first chart is a daily look which shows the Euro formed a H&S top in the first half of this year and broke down sharply in late July. The Euro has been chopping out the blue bear flag for most of October which broke down today with a breakout gap.

Below is a weekly chart I’ve been following very closely that shows the bear flag, on the daily chart above, was the backtest to the bottom rail of the bearish expanding rising wedge. This chart shows the second leg down is just getting started.

This long term monthly chart shows the break down from the bearish rising wedge and the impulse move that has been taking place since the breakout. The euro has been locked in the downtrend channel since topping out in 2008 with no end in sight.

In this last Euro chart I’ve overlaid gold on top of the euro so you can see how the two can trade together at times. Sometimes they move in lockstep and other times in the opposite direction. Since August of this year the two have been moving together fairly closely.

A quick update on the Yen shows the backtest last week to the area of the breakout gap from the massive H&S top, green circle. So far this is prefect Chartology. Now we need to see it break back below the bottom blue rail of the falling wedge to really get the move going to the downside as all the work will be completed in regards to the breakout and backtesting.

On the chart below I’ve overlaid gold on top of the yen so you can see the correlation between the two that has been pretty strong since the middle of July of this year.

The daily chart for the US dollar shows it has formed a blue flag that is getting ready to breakout. Note the little red rectangle that formed just below the brown shaded support and resistance zone. That little red rectangle gave the US dollar the extra strength to finally breakout above the S&R zone. Now notice how our blue flag has been forming right on top of the brown shaded S&R zone. Again, this is perfect Chartology where resistance turns into support once it’s broken.

This long term weekly chart puts our brown shaded support zone in perspective. The bottom of our latest move up started with the blue 5 point rectangle reversal pattern to the upside. After reversing symmetry up the US dollar ran into the old highs where it just plowed right on through to the topside of the brown shaded S&R zone. The backtest was the blue flag I showed you on the daily chart above.

The last chart for the US dollar is a chart I’ve been showing for years where I’ve overlaid gold on top of the US dollar. I would like to focus your attention to the right hand side of the chart that shows a thin black dashed line, one on gold and the other on the US dollar, blue arrows. What the blue arrows show is how gold has been acting a little frisky recently while the US dollar has been chopping out its blue flag as shown on the daily chart. The US dollar has broken above its resistance line while gold is still finding support on its support line. Once the US dollar starts to rally I believe gold will finally break below its support line which is  actually a descending triangle. You can clearly see the trend has been down for gold and up for the US dollar since 2011.

KAMIKAZI TRADE

As you know I bought back most of the shares I sold several weeks ago on JDST today. The first chart is a 2 hour look GDXJ that shows the downtrend channel that has been in place since July of this year. Outside of the big rally several weeks ago the GDXJ has made lower highs and lower lows the whole way down. There were the three fanlines that helped in identifying the downtrend. Just below fanline #3 GDXJ formed a blue rectangle that had a false breakout to the upside but quickly turned right around to trade lower negating the false breakout. Next you can see the blue triangle that formed just below the bottom rail of the downtrend channel which gave us one consolidation pattern above and one below which I’ve pointed out many time is a bearish setup. As you can see the bottom rail of the downtrend channel has held resistance since it was broken to the downside in September. Today the bottom blue triangle broke out signaling a resumption of the impulse move lower. Confirmation will be when GDXJ puts in a new lower low.

Below is a close up look, on the 30 minute chart I showed you this morning, of the morphing blue triangle. This is the reason I bought JDST in the fashion I did today.

Below is another 2 hour chart shows that shows you the downtrend channel from a different perspective. As you can see there has been one consolidation pattern followed by another since the breakout below the brown shaded support and resistance zone.

Below is a daily look for GDXJ that shows the most important chart pattern for this stock which is the blue bearish rising wedge. As you can see it hugged the bottom blue rail for about a week before gravity finally took hold and the decline began in earnest.

As the rising wedge is the most import chart pattern for the GDXJ I have to put it in perspective by looking at the weekly chart. Folks, it just doesn’t get any prettier. One can complicate things to make it much harder than what it is. Keep it as simple as possible.

US STOCK WORLD

As you know we’ve taken on some big positions in the different areas of the markets recently. We are now entering the toughest time when you take your initial positions. No stock or market goes straight up or down but more like two steps forward, in a bull market, and one step back. After moving 2 steps forward we are now taking our one step back if this is just a correction in an on going bull market. There is no way to know 100% for sure if we’re in still in a bull market or have entered into the dreaded bear market that everyone is claiming.

Lets start with a 2 hour chart for the Dow that shows the inverse H&S bottom that broke out and now is in the process of doing the backtest which would come in around the 16,395 area. You can see a similar inverse H&S bottom that formed at the August low that had a strong backtest but still worked out OK.

While we’re on the Dow I would like to show you the down to up volume chart that I’ve shown you recently. As you can see we’ve had 2 days where the down to up volume exceeded 8.5 which can be a good indication of some capitulation by the bulls. The capitulation volume doesn’t have to come at the exact bottom as you can see from previous capitulation bottoms.

Below is a 2 hour chart for the NDX that shows its inverse H&S bottom. The main concern I have here is the big gap that was made on the way up.

The NDX four horsemen are still positive.

The 2 hour chart for the RUT shows it’s now backtesting the neckline. You can see the August inverse H&S bottom had a strong backtest before it began its rally. So far nothing is broken yet. Tomorrow maybe a different story though.

The 4 horsemen are still positive.

As it is getting late there is one more chart I would like to show you which is the NYSI Summation Index. Normally when the Summation Index gets down to the brown shaded area a bottom is usually pretty close at hand. The exception being is when the markets are in crash mode like the 2009 decline. Many times you will see a double bottom where the SPX will make a lower low while the Summation Index will make a higher low, which is a positive divergence. Our current correction has been the strongest one since the 2011 low. What I’m looking for is for the Summation Index to turn up first, which it has, and then for the MACD to crossover to the upside, which it has. The only question is, will we see a double bottom as seen in 2009, 2010 and 2011? Stay tuned as things are starting to get really interesting.

All the best…Rambus

For you members that do not visit the forum regularly

Let me Introduce one of our Members and frequent Poster at the Chartology Forum

http://forum.rambus1.com/

Parabolic Chuck ( best know for finding parabolas in a hay stack)

Just announced he achieved a milestone and a goal he set for himself :

…………………………………………………………..

100% gain since May 22, 2013

That was the day I started following chartology, learning chartology, and taking Sir Rambus’ advice.

Been a heck of a roller coaster! Hope it’s all uphill from here!

I figure if I can average just 50% per year I’ll be set for life in about 10 years…

Thank you Sir Rambus and everyone else here!! This is the best site on the planet… Keep up the good work chaps

………………………………………………………………

We are Proud that this Student exceeded the Professor

http://forum.rambus1.com/?p=70951

…………………

Thanks for sharing your milestone with us Chuck

Continued success

Rambus Audept and Fully (Town Crier )

I’m going to divide this Weekend Report up into two parts, the stock markets and the precious metals complex. Both of these markets are on the move right now so we need examine them for clues to see if this is just a short term trading strategy or something more long lasting. Lets start with some US stock markets that had a rough week with many indexes breaking below their 200 dma.

I was first able to build out this rising wedge on the Dow Jones when it put in the August low that formed a small inverse H&S bottom at reversal point #4. It then rallied back up to the top trendline of the rising wedge at 17,300 where it found resistance. As you can see, Friday’s move, closed below the bottom rail and the 200 dma. This is negative price action. We now have a clear line in the sand that is the bottom rail of the rising wedge. A backtest would come in around the 16,725 area which will represent critical resistance.

The next chart is a longer term daily chart for the Dow that shows the consolidation patterns since the 2012 low.

The long term weekly chart for the Dow shows the 2007 H&S top and the 2009 inverse H&S bottom that launched the 5 1/2 year bull market that maybe culminating with our blue 5 point rising wedge. It’s still too early to say yet if this is the end of the bull market but it does look like we are in for a decent correction. One of the first big clues will be if the Dow takes out the August low which would then start a series of lower lows. We would then have to see a counter trend rally that makes a lower high to really setup a downtrend.

This long term monthly chart shows how I’ve been following the Dow since the bear market bottom in 2009. If you start at the bear market bottom in 2009 you can see the Dow has formed higher highs and higher lows virtually all the way up including this months bar. This is why it’s important to see if the Dow can take out the August low which would then setup the first lower low.

Another very long term monthly chart for the Dow shows the giant blue expanding triangle that started to form at the 2000 bull market peak. Note how the last high on this chart the Dow tried several times to break above the top rail of the expanding triangle only to fail. You can see the last bar on this chart kinda stands out all by itself below the blue top rail of the expanding triangle and the bottom rail of the rising wedge. Note how it took five months and the backtest to the underside of the black bearish rising wedge, that formed the right shoulder in 2007, for the Dow to actually start its impulse move lower. It shows you you can be right on buying the breakout from the rising wedge but it would have been hell holding on during the 5 month backtesting process that formed the right shoulder.

Lets take a look at a few charts for the SPX to see how this index is doing. Back in the spring of this year the SPX built out a H&S consolidation pattern which reached its price objective at the black arrow. As I have shown you on the long term charts for gold and silver you can extend the neckline out into the future and it’s surprisingly how well it still works. Here I did the same thing which helped me locate the August low and we got our rally. During our current decline the neckline extension rail was tested strongly last week but finally gave way on Friday. I had to respect that the neckline extension rail was still valid until it was broken to the downside. Now it should act as resistance on any backtest which would be around the 1925 area.

The monthly chart for the SPX shows a flat top triangle that was broken to the upside in 2013. It has been trapped inside the rising wedge since the bull market started in 2009. If the price action breaks below the bottom rail of the rising wedge the first real area of support would be the top rail of the flat top expanding triangle at 1550 or so.

The 30 year monthly chart with the 10 month moving average.

The SPX quarterly chart going back to 1940.

This last monthly chart for the SPX shows you what I’m look at for a longer term sell signal. It’s very close but not quite there just yet. I did get a whipsaw in 2011 but that is the only false sell signal since 1994. The only other 2 sell signals came at the 2000 and 2007 tops so buy and sell signals don’t come around very often. First lets look at the indicators at the bottom of the chart. The first thing we need to see is the blue Histogram below zero which we now have. Second we need to see the MACD crossover to the downside which is almost there. Third we need to see the Slow Stoch crossover to the downside which it has. And the last piece of the puzzle is we need to see the pink 6 month ema crossover the 12 month simple moving average which is getting close. So basically we are waiting on the moving averages to crossover to get a long term sell signal.

Now I would like to look at the Russell 2000 which has been the weakest sector in the US stock markets. This first daily chart shows the brown shades support and resistance zones we’ve been tracking for some time now. There really is some nice symmetry as shown by the two H’s at the top of the chart and the two big S’s that are the same height on the left and right side of the two big H’s. The bottom brown shaded support zone was decisively broken on Friday’s big move down and now should act as resistance on any backtest.

This next daily chart for the RUT shows a 9 point Diamond reversal pattern. Sir Fullgoldcrown, who has been following my work longer than anyone else on the planet, came up with this Diamond reversal pattern that is beautiful in its symmetry. If we are truly entering a new secular bear market, which remains to be seen yet, I would expect the RUT to reverse symmetry down in similar fashion as to how it went up.

The long term monthly chart for the RUT shows some interesting things. First there is the huge black rising expanding wedge that has held support and resistance since the bottom rail was touched way back in 1996. As you can see the bottom rail has had four touches and the top rail is currently working on its third reversal point. What is interesting is that each major top is forming seven years apart with the first one in 2000 the second one in 2007 and our current one in 2014. This long term monthly chart shows the first real support area would be at the top of the blue triangle around 865 or so.

Lets now turn our attention to some foreign markets and see how their charts are looking . The weekly chart for the CAC broke below its neckline last week competing an unbalanced H&S top.

France

The weekly chart for the DAX shows a similar unbalanced H&S top on the weekly look.

Germany

The long term monthly look at the DAX has a more bullish look to it as the H&S pattern, on the weekly chart above, is building out above the top rail of a blue triangle. Key support will be the top rail of the big blue triangle.

The weekly chart for the FTSE broke below the red five point triangle reversal pattern two weeks ago on the weekly chart. You will see why the red trendline, that makes up the top rail of the red triangle, is horizontal when I show you the monthly chart.

U.K.

This monthly chart shows you why the top rail of the red triangle is horizontal. It just couldn’t bust through the bigger and badder top rail of the 15 year rectangle.

Next we will look at some other Countries through their ETFs.

The weekly chart for ATG has broken down out of a bearish rising wedge.

Greece

EWA broke out of a 7 point bearish rising wedge last week.

Australia

EWC built out a small double top on the weekly chart.

Canada

EWI broke out of a H&S top last week.

Italy

EWJ is testing the bottom rail of the 5 point blue triangle reversal pattern.

Japan

The RSK broke below the blue triangle consolidation pattern then had some wild moves around the breakout point which formed a H&S pattern.

Russia

The EUFN, European Financial Sector, broke out of a H&S top last week.

The EUR, European Top 100 index, broke out of a bearish rising wedge last week.

These charts should give you a good feel for what is taking place in the world right now. I think the deflationary pressures are taking hold and it’s going to be hard for most economies of the world to escape its wrath. I’ll have part 2 on the precious metals complex tomorrow. All the best…Rambus

Oil has been in the process of breaking out and backtest the neckline of a 5 year H&S top. Today marked the lowest price since the breakout.

The long term monthly chart for oil shows some nice Chartology.

There was an important breakout this week in the GASO  chart we’ve been following for years. I’ll let you decide what the implications are for this sector  going forward. Have a great weekend…Rambus