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 :

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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

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We are Proud that this Student exceeded the Professor

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

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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

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

For the last two months, and especially the month of September, I’ve been trying to prep you for the impulse move that we currently find ourselves in right now. You don’t have to wait any longer wondering when it’s going to begin. We’ve been in this impulse move down since the last high was made on August 14th, which is the 4th reversal point in that blue triangle consolidation pattern, we’ve been following so close. I’ve been showing you countless H&S top patterns in all the big cap precious metals stocks a long with smaller consolidation patterns that are breaking out.  I’ve shown you how the Japanese Yen and the eruo that have been collapsing and how closely gold and precious metals stock indexes are following the Yen lower. I don’t know how I can make it any more clearer that the move we’ve been waiting for, for 15 months or so, is already six weeks old.

A stock or stock market can do one of four things. First it can build out a topping pattern, 2nd a bottoming pattern,  3rd a consolidation pattern, all of which are followed by number four, an impulse move. This is how markets move. You can’t have a big bull market if you don’t have a big base and you can’t have a big move down without a big topping pattern. The bigger the pattern the bigger the impulse move that follows the breakout. As a trader, one of the most important things you have to learn is, which one of the four phases you are in.

Lets start by looking the long term monthly chart for the HUI that shows you exactly what I described above about the four different phases a stock or market can be in. Notice the massive inverse H&S base that was made at the end of the last bear market that took roughly five years to build. If we were paying attention to that massive H&S base we knew a new bull market was beginning. Big pattern big move. Note the vertical move once the neckline was broken to the topside. That was the first impulse move. After that impulse move became exhausted the blue triangle consolidation pattern began to form that took well over a year to complete. Again, once the triangle consolidation pattern finished building out it was time for the next impulse move to begin. Again, note the vertical move out of the blue triangle which was the next impulse move up.

This repeated all the way up to the 2008 H&S top that reversed the bull market and led to the big crash. Because it was a crash, in this case the HUI had what they call a V bottom. You normally don’t see moves like that in normal behaving markets.

Now I want to focus your attention to the massive H&S top that took over 3 1/2 years to build and broke down in April of 2013. Again, notice the near vertical move down once the H&S top gave way. Like the impulse moves up in the bull market years the HUI is repeating the same process only this time in a bear market. You can see our blue triangle that has been consolidating that first impulse move down out of the 3 1/2 year H&S top. The big H&S top is telling us to expect a big move down which we are currently in the middle of.

When you study the chart above ask yourself which was the better way to make money during the bull market years. Trying to trade the consolidation patterns, which stand out like a sore thumb now, but not when they’re building out, or to ride the vertical move called an impulse move. I can tell you from experience that you will make a whole lot more money riding an impulse move than you will trying to guess the next reversal point in the consolidation patterns.

This next chart shows you the impulse move down from the top of the right shoulder to the bottom of the blue triangle on the chart above that occurred in 2013. On the monthly chart above the move looks pretty straight down but on the daily chart you can see the little consolidation patterns that formed along the way down. The black arrows shows you where our earliest members rode that impulse move down. We had a simple plan. As long as the 50 dma held resistance we would let the trade run. The trade lasted from the first week in December of 2012 to August of 2013. I can still remember several short covering rallies in which the HUI was up close to 20 point for the day. The ride wasn’t easy, they never are, but if one can hold on during an impulse move you will be rewarded for your efforts. Those that get shaken off will be looking for a place to get back in as it’s very difficult to trade an impulse move no matter how good you think you are. It’s just the nature of the beast.

I haven’t shown you these next three charts that show how I’m perceiving our current bear market that started at the top of the right shoulder on that massive H&S top. This first chart shows you the double trendline downtrend channel that shows our blue triangle I’m viewing as a halfway pattern to the downside. As you can see we are now in our second full week of trading below the bottom rail of the triangle consolidation pattern. The impulse move actually started at the last reversal point in the blue triangle where it touches the black downtrend channel. When you look at this blue triangle think of all the blue triangles that formed during the bull market years and the impulse moves that occurred between each triangle consolidation pattern.

This next weekly chart for the HUI shows the exact same setup that shows the downtrend channel with the blue triangle. This next chart also shows you how our current downtrend channel and blue triangle consolidation pattern fits in with the massive H&S top. Big tops equals big moves down. Note the impulse move that started at the top of the right shoulder that we looked at in more detail on the daily chart above. I envision we are starting a similar impulse move down that will have some twist and turns along the way that will try to shake us off. The ride won’t be easy but if you can hang on you will experience a ride of a lifetime.

As you know personally I favour the maximum leveraged 3X bear ETFs in riding an impulse move . This is definitely not for everyone . The market can easily move against you 20% or more in one day . See Kamikazi Caution on the sidebar .

As I always tell Sir Fullgoldcrown . Find a Vehicle and Position Size you can live with for months and ride it for all its worth . Unfortunately with PM Stocks you are limited to 3X or 2X short etfs .

Only you , know your max pain tolerance

This last chart for the HUI shows the exact same setup as the last two charts above only this time it takes in the bull market years so you can compare our current setup to the bull market triangles. Our current blue triangle is very similar in time and price to some of the blue triangles that formed during the bull market. This is how markets move. For the more experienced trades out there you’re more than welcome to trade the little squiggles but for the average investor, get positioned and stay put until the impulse move runs it’s course. This is how you make the big bucks. Find an impulse move an ride it for all its worth.

I saved a bunch of monthly PM charts last night that I will show you tomorrow as I’m out of time tonight. You will be amazed at some of the percentage losses many of the big cap PM stocks made during the month of September. September was a good month for us in the Kamikaze Portfolio but this is only the very beginning of this impulse move. If you can fasten your seat belt and hold on for dear life, when the going gets tough, you will come out on the other side with a high cash reserve and the experience of actually riding and understanding what an impulse move is and how they work. That experience alone will be worth more than the profits you’ll make as you can take what you’ve learned and use it the next time you see an impulse move beginning. All the best…Rambus

Over the last several weeks I’ve been posting many charts showing massive H&S tops in many sectors of the markets in which I’m trying to paint the big picture for you on what to expect in the longer term time frame. I don’t know how many of you are grasping the big picture and what it means going forward but the big picture should be your main focus unless you’re a day trader. It’s no coincidences that the US dollar is breaking out of a massive  multi year base while the precious metals complex and commodities have been taking a beating. It’s happening right here and now as last weeks price action is confirming for me the next impulse move down has begun.

Lets start this Weekend Report by looking at two more massive H&S tops, one on silver and the other on gold. I’ve been showing these potential H&S tops for the better part of a year now if not longer. At some point, if you’re right on your call, the day will come when you finally see the breakout. It may seem like an eternity sometimes but having patience and not giving up when nothing is broken can give you an early heads up to the next big move.

Silver’s day came this past week on Friday when it was down 73 cents on a nice increase in volume. Big moves like Friday”s don’t come around very often but when they do you have to take notice. Usually when I see a big move like that it generally means there is a breakout and that is exactly what silver is doing. After nearly 15 months or so of building out a morphing triangle the real breakout move came on Friday even tho there was a small breakout and backtest earlier in the week. Below is the daily line chart that shows the morphing triangle, red circles, and the real breakout on Friday. The only question is will we see a backtest before silver moves lower?

Now lets take a look at silver’s massive H&S top on the monthly chart. As you can plainly see the breakout is taking place right now. We still have another seven days of trading left for the month of September before the monthly bar is completed. There is not a lot of support below the neckline until major support shows up at the brown shaded support and resistance zone around the 8.50 area. I wonder how many precious metals investors will hold on for a round trip, back to the beginning of the bull market, that will be asking themselves in the future, why didn’t I sell out a long time ago. I know the same thing happened in 1980 when most thought the bull market wasn’t over until it was too late. You can also throw in the 2000 top in the stock market bubble as well.

Below is a weekly chart for silver that shows some of the Chartology that was made during the bull market years to the present.

Lets now take a look at some gold charts that have actually been showing us the way lower. Gold was the first to breakout from its triangle consolidation pattern several weeks ago while silver and the PM stock indexes were still building out their respective triangles. You can see the all important 150 dma is now starting to roll over after rising slightly since June of this year.

Below is a weekly chart for gold that shows a downtrend channel where the top rail was being tested over the last several months. With the breakout of the red triangle the impulse move is underway that should take gold down to a minimum of the 985 area using the red triangle as a halfway pattern. The all important 65 wma has been doing a good job of holding resistance over the last several years.

Below is gold’s massive H&S top which is strongly testing the neckline right now. The price objective for the H&S top would be down to the 700 area which was the low for the 2008 crash. Note the MACD that is starting to curl back down along with the slow stoch.

As I mentioned at the beginning of this post, I believe last week marked the beginning of the next impulse move down. I want to focus in on the GDM as a proxy for the precious metals stocks indexes. The first chart is a daily candle stick chart that shows the reverse symmetry down and all the back candles I said we would see if we were in a true impulse move lower. So far so good.

Below is a daily line chart that really shows the reverse symmetry taking place right now.

This next daily chart for GDM shows it breaking out from its triangle consolidation pattern late last week. A backtest would come in around the 645 area.

These next few chart will show you just how important this triangle consolidation patten is. The first weekly chart shows the massive H&S top and our current blue triangle consolidation pattern that is finally breaking out to the downside. Note how the oversold condition has been worked off on the RSI at the top of the chart. Also notice how the MACD and the slow stoch have rolled over and are headed down.

I would like to update you on that potential inverse H&S bottom that kept us in limbo for close to 8 weeks. I had to respect the fact that the price action broke above that potential neckline which held support for 8 weeks or so. Once that neckline failed to hold support anymore it was a green light for me that the failed breakout would lead to a big move in the opposite direction which is now occurring. I also said that a lot of gold bugs were looking at the potential neckline as their savior in which a new bull market would be launched and if that neckline failed we would start to see them exiting their longs positions. What everyone wants no one gets.

This last chart for GDM shows you how I think things may play out over the next year or so. First there is some interesting symmetry with the inverse H&S bottom that formed at the beginning of the bull market in 2000. What is interesting is that the H&S top that formed in 2011 is the exact same height as the 2000 inverse H&S bottom. They are both reversal patterns that reversed many years of a trend that had been in place.

I would like to paint a picture of how this bear market may unfold over time. Again reverse symmetry will play a key role. I drew in two thin black dashed horizontal lines, one at 540 which was the bottom of the blue triangle that was made in 2005 which shows where our current blue triangle found a bottom just slightly higher than 540. The lower thin black dashed horizontal line comes in at 350 which is the bottom of the blue triangle that was made in 2002. What is interesting about the 350 area is that’s close to where our current blue triangle has a price objective if it plays out as a halfway pattern to the downside. The brown shade support and resistance shows where we could see this impulse move down find support between 320 and 350.

I drew in another blue triangle that could be the area for one last consolidation pattern to form before the bear market is finished. The blue triangle is only for the sake of showing you where a potential consolidation pattern may form. I have no idea if it will be a triangle, rectangle or a wedge of some type. One last note. During the bull market years the rallies lasted between four to six months once they broke out from their triangle consolidation patterns. If we see a similar time frame for the breakout of our current blue triangle I could see GDM hitting the 320 to 350 area sometime after the first of the year. At that point we could see one more consolidation pattern form before it’s all said and done.

I would like to show you one last chart that I haven’t posted in awhile that is a ratio chart comparing the HUI to the SPX. The first time I posted this chart the ratio was just breaking down from that massive five point bearish expanding rising wedge. The 2011 high matches precisely the top in the precious metals complex and most. The two rectangles are the exact same size that measures time and price. If this ratio continues to play out as expected we could see a low in this ratio by October of 2015. The red triangle looks like it’s getting ready to break to the downside at any time now which would suggest a weak PM complex and a strong stock market on a relative basis.

I really think the evidence is piling up that is strongly suggesting that we are now in the next impulse leg down, not only in the precious metals complex, but commodities as well. It’s no coincidence that the US dollar is strong and is  breaking out to the upside while we’re seeing weakness across the board in most commodities. One plus one is equaling two from a Chartology perspective. This is the time to get positioned and hang on for dear life. Trying to trade in and out of an impulse move will be unforgiving for most investors. As I have said many times before, you will be given every reason in the book to cover your short position, but for those that can stay on for the ride will be richly rewarded for their effort IMHO. All the best…Rambus

We’ve been looking at massive H&S patterns in the last two reports I’ve posted so you can get a feel for the bigger picture which is so important to grasp. It’s always much easier to make money trading within the big trend. For instance if you’ve been trading the precious metals stocks over the last 3 years or so you have had a strong headwind blowing against your trades making it very difficult to make a decent profit and then hold on to those  profits. If you’re a short term trader and can catch the little swings up and down you at least have a chance but that to is very hard to do constantly. Knowing the direction of the big trend can bail an investor out if his timing is off but if you trade against the trend and your timing is off then you will pay dearly as the markets can be unforgiving.

As I promised you in the Weekend Report, tonight we’ll look at some massive H&S tops that are showing up on some of the major currencies from around the world. When looking at some of the charts keep in mind how they will affect the US dollar. These charts will have a direct impact on the long term direction for the US dollar regardless of why the dollar has to crash and burn.

Lets start with the Canadian Dollar that is showing a smaller H&S top on the daily chart.

We’ve been following this long term weekly chart for the Canadian Dollar  since it broke below the massive H&S neckline in the middle of last year. The breakout took its sweet ole time forming a bear flag just below the neckline which was telling us the bearish setup was in place. Since the breakout of that massive H&S top the Canadian Dollar has now formed its second red bear flag that broke out to the downside two months ago and is starting an impulse move lower. You can see the little H&S top that formed at the high of the lower red bear flag that I showed you on the chart above.

The Australian Dollar looks an awful lot like the Canadian dollar on the daily and long term weekly charts. The daily chart shows XAD breaking down out of a H&S top last week.

The long term weekly chart for XAD shows some really nice Chartology. The head portion was made up of the blue five point triangle reversal pattern that finished up with a seven point red rectangle. Remember an odd number of reversal points equals a reversal pattern and an even number of reversal points equals a consolidation pattern. The left shoulder was made up of the blue expanding falling wedge while the right shoulder is being made up of the blue falling flag. The neckline is still unbroken to the downside yet but the price action is closing in on it. As I have mentioned before these big patterns will take a long time to reverse the downtrend that is being put in place.

The long term monthly chart for the euro shows a massive H&S top forming. It’s not one of the prettiest H&S tops I’ve ever seen but all the pieces are in place suggesting that at a minimum the breakout of the blue rising wedge, which is creating the right shoulder, should take the price down to the brown shade support and resistance zone. From that point we’ll have to see what develops.

If you’re a goldbug this next chart for the Japaneses Yen should make you stand up and take notice. There are a thousand fundamental reasons why gold should be going up but the XJY is telling you the truth in which I’ll show you in a minute. I first posted this long term weekly chart for the yen when the much smaller H&S top, that is forming the head portion of the massive H&S top, broke out. Note the almost vertical decline once the energy was released to the downside. The right shoulder is a nice piece of Chartology as it shows the two red triangles that are creating a much bigger blue bearish falling wedge. Today the XJY broke below the bottom rail of the blue bearish falling wedge signaling the impulse move  is just beginning. One last note on reverse symmetry. Note the green circle on the left hand side of the chart. It matches perfectly to the green circle on the right hand side of the chart that shows you the breakout of that massive H&S top neckline. It just doesn’t get an prettier.

Below is a daily chart for the XJY that shows the bearish falling wedge in more detail with today’s breakout.

This next daily chart for the yen I’ve overlaid gold on top so you can see the near perfect correlation of the two. I’ll leave it up to the fundamentalist out there to come up with why this correlation is so strong. From a Chartology perspective I don’t need a reason why only that it is happening and that’s whats most important. Following the price action.

This next chart I’ve overlaid the HUI on top of the XJY that shows a similar correlation that gold has with the yen. Here you can see the massive H&S top that both the yen and the HUI made before they broke down below their respective necklines. The correlation is close enough that I wouldn’t want to bet against it.

While we’re on the Japaneses Yen I would like to show you a ratio chart that compares the US dollar to the Yen. On the chart below is a long term weekly look that shows a massive inverse H&S bottom with a near vertical move once the breakout occurred. After a pause to refresh, blue triangle, this ratio chart is in another near vertical move up showing how much stronger the US dollar is compared to the Yen. So we have gold and the HUI following the yen lower while the US dollar is going strongly in the opposite direction which isn’t a good sign for the commodities or precious metals complex.

All the different currencies have a direct impact on the US dollar so lets see how the US dollar looks vs the different currencies. This first chart is a daily look that shows the beginning of the impulse move up for the the US dollar. As you can see the move started after the US dollar broke out of the five point rectangle reversal patten and hasn’t looked back. There is no question that the US dollar is overbought and is trading back at its most recent highs. In fast moving conditions, like the US dollar finds itself in right now, it can form one small flag type consolidation, one after the other, until it’s time for a bigger correction. You can see the first little red consolidation pattern, the red  bullish rising flag, that formed on the top rail of the five point rectangle. Notice the vertical move out of that pattern that is called a flag pole. Today the US dollar just broke out of a small rectangle which might very well be another halfway pattern to the upside with a vertical move to follow that is similar in nature to the one leading up into the red rectangle.

If many of the currencies I showed you on this post have massive H&S tops in place it stands to reasons that the US dollar should also have a massive H&S base. Below is my epiphany chart when I first discovered the two fractals for the US dollar. As you can see, finally after a year and a half of waiting for big base #2 to breakout, it’s finally happening this month. I have to say it’s very rewarding to finally see something you seen a year and a half ago come to fruition. A lot of investors are wondering why the US dollar is so strong right now. The reason the US dollar is so strong right now is because it’s breaking out of that massive big base #2, it’s a breakout move.

I have believed for a very long time that the US dollar was going to take center stage at some point in time. With all the massive H&S tops in place, on a lot of the most important currencies, this is telling me that things related to a strong US dollar are going to be under pressure for sometime to come. We’re not talking about a few days or weeks or even months but most likely years before those massive distribution patterns play their selves out. It’s just my interpretation of the Chartology that is leading me to this conclusion. The fundamentals will show their hand further down the road but it will be too late to take full advantage of what lies before us right now. The big picture is painted in full color for everyone to see if they choose to look. I like what I see from purely from a Chartology perspective. All the best…Rambus

I believe last week marked an important turning point for the precious metals stocks. After two months of chopping in a tight trading range GDM, which I’m going to us as a proxy for the big cap precious metals stocks, finally broke below the critical brown shaded support and resistance zone. This was a big deal for me as now all those bottoms that had been holding support should now offer important resistance on any backtest.

This first chart for GDM shows the two month trading range that one could call either a double top or if you use your imagination you can see a double headed H&S top with a small left and right shoulder. It really doesn’t matter what you call the trading range above the brown shaded support and resistance zone, it’s the S&R zone that matters the most. That S&R zone is now our line in the sand, above is bullish and below is bearish. If GDM is indeed starting a new impulse move lower we should start to see a bunch of black candles forming one below the next. Note all the white candles that formed during the rally off of the June low which told us the move was strong. One last point on the chart below. I’ve labeled the price action below the brown shades support and resistance zone as having a possible reverse symmetry move down which would look similar to the June rally only in reverse. The main thing to keep an eye right now is to see if we get a backtest to the previous support zone at 710 that should now reverse its role and act as resistance.

This daily bar chart for GDM shows the double top price objective which would come in around the 655 area at a minimum.

As you know I always like to look at a line chart as it can take out a lot of noise that a bar chart can make sometimes. This line chart shows the breakout and a possible backtest to the 710 area to confirm the top is in place.

Next I would like to start painting the bigger picture if our current top is indeed the top we’ve been looking for. Last December GDM finally found support at the 560 area which led to a rally that took the price up to the March high. This created the first reversal point in a possible consolidation pattern or topping pattern. GDM then reserved direction and headed back down to the June low at reversal point #3 which was a higher low than reversal point #1.This completed the second reversal point. At that point reversal point #3 began which took GDM up to our current top completing the third reversal point that is making a lower high than reversal point #1 which is giving us a triangle looking pattern. The fourth reversal point won’t be complete until the price action hits the bottom trendline at 645 or so. It may sound confusing but when you look at the chart below is becomes very obvious. So the next important area to watch, if indeed the top is in place, will be the bottom rail of the possible blue triangle at 645.

The GDM Four Horsemen.

Another reason last weeks price action was so important is because GDM has broken down below the neckline of that potential inverse H&S bottom that has kept us in limbo for the last two months. It’s looking more likely that the inverse H&S bottom maybe negated if we see more weakness coming into the big picture over the next week or two. If GDM was embarking on a new bull run it should be showing more strength instead of weakness in here which it’s not.

On this next weekly chart for GDM I’m showing the potential blue triangle that we looked at earlier in this post. If you look at the RSI indicator at the top of the chart you can see how the 14 month chopping range has relieved the very oversold condition when GDM first started the correction. It now has plenty of room to run to the downside if it breaks below the black dashed rising trendline.

This last chart for GDM is a monthly look that shows the massive H&S top and the decline that ensued. This linear scale chart has a price objective down to the 320 area. Note the three blue triangles that formed during the bull market years and compare our current triangle that is similar in nature that has been forming during the bear market. In an uptrend a consolidation pattern will usually breakout to the upside and in a bear market the consolidation pattern will break out to the downside. The odds favor our current and possible triangle will breakout to the downside.

I would like to throw in this long term chart for the HUI that puts our potential blue triangle in perspective. Note that during the bull market years the HUI constantly made higher high and higher lows. Now compare that uptrend to our current downtrend that has made a series of lower highs and lower lows since the bull market peak in 2011.

Lets now look at a few gold charts and see what’s happening there. This first chart shows the blue triangle that started to form the same time GDM started to form its triangle. The big difference is gold has broken below its bottom rail while GDM is still trading in the middle of its potential triangle. Gold is trading below all the moving averages on this chart with the 150 ma being the most critical.

Below is a long term daily chart for gold that shows all the most important moving averages. As you can see the price of gold is trading below all the moving averages at this time. These moving averages actually work best when there is a strong move either up or down as show by how they aline themselves. When they are all bunched up together it tells you there is a top, bottom or consolidation pattern forming.

This next chart for gold is a weekly look that shows the 65 week moving average acting as resistance since early 2013. This weekly chart also shows you the downtrend channel that has the blue rectangle and the red triangle forming between the top and bottom rails. I’ve added instructions on how I measured for the price objective of the 6 point blue rectangle. If the red triangle plays out to the downside I used the same measuring technique that would give us a price objective down to the 985 area. Note the last bar on the far right hand side of the chart. Is this the beginning of the next impulse move lower or will we get a fake out breakout? I don’t think we’ll have to wait very long for an answer one way or the other.

Lets look at one more long term chart for gold the monthly bar chart. This chart shows the 10 month ema that did an outstanding job during the bull market years for holding support. Even during this bear market it has done a good job of holding resistance. This chart also shows you where I would expect support to come into play if things breakdown for gold, the brown shaded S&R zones. As you can see the 985 to1034 would be the next critical support area for gold.

Lets take a look at the long term silver chart that we’ve been following for close to a year now. The price action hit that potential neckline in June of 2013 and has been finding support ever since. As long as neckline holds the potential H&S top is just that a potential H&S top but if the neckline ever gives way it would be a tough ride down if you were bullish on the white metal. One step at a time.

I think last weeks move to new multi week lows on GDM could very well be a warning shot across the bow for the big cap precious metals stocks. The possible backtest to the 710 area is going to be the most important area to keep track of. That’s our line in the sand, give or take a few points, that will let us know which direction the big cap PM stocks want to go. The first part of the week maybe very choppy with some wild swings as the bulls and the bears fight it out for dominance of a new trend that should start to emerge anytime now. All the best…Rambus