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

Tonight I would like to show you a few Oil charts as its been fairly volatile lately. There are several big patterns in play that have been forming for many years. This first chart is a long term weekly look that shows several potential patterns forming. On this chart below I’m showing the bottom rail as a five year support and resistance line. Notice how many times that bottom rail has been hit over the last 5 years. Three weeks ago Oil broke below that bottom S&R line and has been in the process of backtesting from below. So far it has held resistance. I can also make a case for a big 7 point triangle reversal pattern as shown by the numbers.

This next chart is similar to the one above but goes back further in time that shows Oil’s parabolic run, the crash and the potential massive unbalanced H&S top. This chart is a good example of what can happen after a stock goes parabolic.

Below is another long term look at Oil that goes back over 20 years that shows another possible pattern that has been forming since 2011 the blue rectangle. I’ve taken the liberty to draw in the horizontal top and bottom rails that really shows where support and resistance lies. Sometimes on big patterns like this I’ll give the area of support and resistance a little more  leeway because of the distance between the reversal points. Here again you can see the parabolic rally and the parabolic decline that found support at the previous all time highs at 35. The 35 area reversed its role from what had been resistance for the history of oil to support during the crash.

This last chart for Oil shows the entire history for this most important commodity. I’ll let the chart speak for itself.

There is one more important chart I would like to show you tonight that is the GASO, gasoline chart. Like so many of the other commodities 2011 marked an important high. GASO has been chopping out a horizontal trading range and is now trading back at the bottom area of the blue rectangle.

It would be hard to imagine gasoline trading down to the 1.80 area if the blue rectangle breaks down. The same goes for the Oil  that would have a price objective down around the 78 area. With the US dollar showing some important strength and breaking out of a multi year base maybe these price objective are realistic. Until something alters these long term charts I have to put myself in the deflation camp and see how things play out over the next several years. Time always tells the story. All the best…Rambus

Tonight is a good time to look at some long term charts for the US Dollar and the Japanese Yen. I’ve been waiting for this day for more than a year now when I first created this long term US dollar chart. Some of our long term members will recall this monthly fractal chart that I labeled as having a Big Base #1 and Big Base #2 which are fractals as shown by the numbers on each base. At the time I thought we were ready to breakout above the almost 14 year S&R rail but as you can see the US dollar needed one more small move lower to finish off the big base #2. The breakout doesn’t look very impressive on this bar chart but it is happening.

I have shown you many times that a line chart can often times gives you a quicker signal than a bar chart. Below is a monthly line chart that shows Big base #2 with the breakout in progress. Keep in mind this is a monthly line chart so the breakout won’t be complete unless the US Dollar can close the month of September above the big S&R line. It’s a good start to the month.

This last long term chart is a combo chart that has the US dollar on top and gold on the bottom. The main point of this chart was to show you the positive divergence the US dollar had vs gold. The red single arrow in 2008 shows how the US dollar was bottoming and gold was in its 2008 crash mode. Note how gold rallied all the way up to it’s bull market high in September of 2011 while the US dollar actually put in a small higher low vs the 2008 low. That’s pretty incredible when you think about it. Gold rallied from roughly 700 to 1920 while the US dollar actually made a higher low during that same time period, double red arrows. It’s easy to lose track of these big monthly charts as it takes a long time for them to come to fruition sometimes but the big picture is most critical to grasp.

Below is a daily chart for the yen that I showed you a week or two ago and how it broke out of the second blue triangle that is making up the bigger black falling wedge.  After the breakout I thought we might get a backtest to the underside of the blue triangle but it’s beginning to look like that might not be the case now. Please note the brown shaded gap area that appeared this week. I think that gap is going to play a big role in the long term move for the yen which I’ll show you in a minute.

Below is a long term weekly chart that shows the two triangles that are making up the bigger bearish falling wedge which is the right shoulder of the massive H&S topping pattern. Note the last bar on the right hand side of the chart which shows the price action is now trading below the neckline.

I’m going to show you the exact same chart only this time I’m going to leave the neckline off so you can see more easily the brown shaded breakout gap that is telling us that neckline is hot and that the breakout process is now in progress, green circle. These kind of days don’t come around very often but when we see the US dollar up close to a point and the yen breaking below a multi year H&S neckline, one has to take notice. The implications of today’s price action, in these two important currencies, will have a perfound affect on many markets going forward. Throw the euro in the mix, which looks worse than the yen, and that tells us something big is brewing that we’ll see happening over the coming months. It will be interesting to say the least.

PS: Note the reverse symmetry gap on the left side of the chart. It still blows me away when I see things like this.

In this Weekend Report I’d like to look at some of the Precious metals stock indexes as there was a fairly strong reversal off of the previous lows made over the last two months. It was one of those inflection points where the PM  stock indexes could have gone either way. It just so happened that they all had a decent bounce off the lows with the last two days being up. We’ll examine some of the PM stock indexes in a minute but I would first like to show you the BPGDM as it’s still on a buy signal that was generated three weeks ago.

The reading of 46.67 is the highest point the BPGDM has reached in about year so there is some underlying strength. The BPGDM is above the 5 dma and the 5 dma is above the 8 dma so the buy signal is in place. Also the price action is still finding support at the neckline of the potential one plus year inverse H&S bottom.

Lets look at the GDM which shows the price action this week hitting the bottom of the 2 month trading range and getting a nice little bounce. Reversal point #4 was the inflection point where GDM could have gone either way. Right now it’s finding some resistance at the neckline of the small H&S top that formed at the top of the trading range. Friday GDM close back above the 50 dma. We’re back to the same old question, is this 2 month trading range going to be consolidation pattern to the upside or will it end up being a reversal pattern to the downside. Since we don’t know I’m going to play the trading range until the true trend emerges. Sometimes these types of trading ranges can go on for a long time with several more reversal points taking place.

Below is a daily line chart that shows a potential expanding triangle forming with last weeks low breaking below the previous low as a possible 4th reversal point. Again this can be a consolidation pattern or a reversal pattern once we get some confirmation one way or the other. The expanding triangle won’t be complete until the top rail is hit at potential reversal point #5.

The weekly chart for GDM shows our potential inverse H&S bottom with the two month red trading range forming right on the neckline. The neckline held support again this week at 709 which is now a very important area to watch. I’ve added two price objectives if either the inverse H&S bottom or the red trading range plays out. Just keeping an open mind.

This next short term daily chart for GDM shows Sir Matrix’s four horsemen’s indicators that show the faster TSI and MACD crossing over with the longer term TSI and MACD  getting close but not quite there yet.

This long term monthly chart for GDM show how we could see the potential inverse H&S bottom play out to the upside that would take the price action back up to the old neckline around the 1070 area. If that were to occur the bulls would say the bull market is back while the bears would view this as a counter trend rally in a bear market which would be the camp I would be in. As you know anything is possible. I think most PM investors are either really bearish or really bullish leaving little room for compromise. If GDM breaks out of the 2 month trading range to the upside then I think this scenario would come into play. On the other hand if the PM complex stalls out right here and the GDM breaks below the bottom of the 2 month trading range, taking out the neckline at the same time, then the bearish scenario would come into play. Right now all we really have to work with is the 2 month trading range which we’ll trade until we get some confirmation of an impulse move either up or down.

Next I would like to show you some weekly charts for some of the PM stock indexes that shows the potential inverse H&S bottoms we’ve been following for a long time waiting for some type of resolution. Lets start with just a simple weekly chart for GDM that shows its potential inverse H&S bottom. As you can see it has had a breakout and eight weeks of backtesting from the topside of the neckline.

The HUI has been one of the weaker PM stock indexes as it still hasn’t really broken above its neckline confirming a breakout. You can see the price action bunching up just below the neckline.

The XAU still hasn’t broken out yet either but it has tried several times to do so.

The GDX has broken out of its inverse H&S bottom in similar fashion to GDM and has been in backtest mode for 8 weeks now.

The GDXJ shows it too has broken out of its inverse H&S bottom and is still in the backtest mode.

The GDLX, global gold explores etf, shows it has a potential double inverse H&S bottom but has failed to hold above it’s neckline so far.

SIL shows what I call a 2 1/2 point double bottom with its 8 week consolidation pattern forming a red flag right on the S&R line.

You may have become aware that the PM stocks have been acting stronger than gold lately. The HUI:GOLD ratio chart shows you why as it has formed an inverse H&S bottom. Keep in mind both can fall together but if gold falls faster than the HUI the ratio will still show a rising price trend so it can be a little deceiving at times.

The weekly chart for silver shows its been walking down the black dashed S&R line that has been holding support since it was broken to the upside earlier this summer, reversing its role from resistance to now support. The million dollar question is will it continue to hold support?

Silver’s inflection point. This is the point where silver has to start showing some strength in here or it could be bad news for this precious metal.  The situation can still be saved if it can start to rally immediately.

The daily chart for gold shows you the triangle we’ve been following in which I said to watch the potential 5th reversal point for a short term bounce and then the break of the bottom trendline. The other scenario was that if gold showed more strength, down at the inflection point at reversal point #5, it was possible to see gold rally back up to the top rail. So far we’ve gotten the initial bounce now we have to see how strong gold really is if it can keep on rallying.

With the US dollar showing strength in here it will probably produce a headwind for the PM complex.

The Japaneses Yen is quite oversold right now and could see a backtest to the underside of the blue triangle it broke out of several weeks ago. This could give gold a little boost for awhile if that were to happen.

On this last chart for tonight I’ve overlaid gold on top of the yen. As you can see the correlation is pretty close. This past week tho the correlation wasn’t as good as it has been. As I said it’s not perfect but they generally run together.

I have spent a lot of hours this weekend going over many PM stocks from the juniors to the large caps. If, and this is a big if, if we see some strength this week in the precious metals stocks I will start posting some entry points for a short term trade.  At this moment we are in the middle of the 8 week trading range so this is how we’ll trade the PM complex until we see confirmation of a move one way or the other.. We’ll sell at the top and buy the bottom.  The stock markets are still in rally mode but with the SPX and the Dow trading at their all time highs we may see a little hesitation before going higher. It should be an interesting week as the summer doldrums should now be over. All the best…Rambus

In this Weekend Report there are so many charts I want to show you it’s hard to know where to start. It seems like we have entered a critical inflection point in both the stock markets and the precious metals complex. These inflection points can last for awhile before they show their hand but it’s important to know one exists so we can take advantage of the situation. I’m fully aware that the stock markets are entering the most dangerous time of the year as they move into September. As I mentioned to you before, The Only Rule in the Stock Markets are There are no Rules, so anything can happen at anytime. It just goes with the game we choose to play. With that said lets start by looking at several long term charts for the SPX.

Below is a weekly chart for the SPX that goes all the way back to the 2009 bottom and the uptrend that has developed. It seems like most chartists are looking at the price action from the 2009 bottom as a bearish rising wedge formation which I can see also. I have a different take on the 2009 uptrend tho which I believe is going to double at a minimum. I’ve used this technique in the past in real strong markets either going up or coming down. The original uptrend channel consists of the bottom solid black trendline and the center black dashed trendline. Just follow the price action from the 2009 low to where the SPX broke out above the center dashed trendline in October of last year. That center dashed trendline has done a beautiful job of reversing its role from what had been resistance until it was broken to the upside in October of last year. Outside of the one weekly spike below the center dashed rail, that immediately reversed back up, the center rail has held support just as you would expect from a Chartology perspective.

As you can see the SPX is trading at its all time highs right now. It’s possible that we could see a small consolidations pattern form right here with the current high last week being the 3rd reversal point if the SPX decides it needs a little more time to build up the energy to really keep this new impulse leg up going. On the other hand there is nothing to say it can’t just keep going up from here. Notice the two black rectangles that are exactly the same height. In situations like this many times the original lower uptrend channel, in a strong bull market, can double in size, as the upper black rectangle shows. As you can see there are no touches on the upper solid black trendline yet but if the SPX is in a true impulse move up we’ll see that top rail hit at some point. Right now the center dashed trendline is our line in the sand, above is bullish and below is bearish. Depending on when the price action reaches the top rail of the uptrend channel, a rough estimate would be around the 2300 area.

The long term monthly chart shows the big multi year flat top triangle that broke out back in March of 2013 with one tiny backtest right after the breakout. Note the impulse moves up during the bull market years in the 1990’s. In strong bull markets these moves can become imbedded just like some of the indicators. Notice how the RSI formed back in the 1990’s bull market that stayed overbought for most of the bull market. It wasn’t until the very end that a negative divergence showed up which was a strong warning to take profits. As you can see the current RSI is overbought but not even close to the 1990’s.

Let me show you a couple of examples of how the doubling of a channel  has worked in the past. First lets look at the HUI that crashed in 2008 after being in a strong bull market for 8 years. I used the top rail of the uptrend channel as my guide as it had four touches on it. Keep in mind we are only looking at the uptrend channel that started in 2001 to the 2008 H&S top. The center dashed trendline was the bottom of the channel at that time. The H&S top in 2008 suggested we were in for the first real good correction since the bull market started. I had no idea of the magnitude of the correction at that time only that we were seeing the first reversal pattern forming in eight years. Once the price action broke below the center dashed trendline I knew the correction was going to be bigger than what I had originally  thought. At that point I used the measuring stick, taken off the original upper channel and added it the center dashed trendline to see where a possible bottom may come in using this technique. As you can see it was calling for a low around the 160 area which ended up being just a few points higher than the actual low. Like the SPX chart above, when I put that lower trendline on the chart, it had no touches, it just hung out there on its own until it was finally touched at 160. Notice how the new bottom rail held support during the formation of the right shoulder of the big H&S top formation for 8 months before it finally gave way when the massive H&S top completed.

Lets look at one more example of a doubling of an uptrend channel. After finally putting in a bottom in 2008 gold started its move to its all time high at 1920. Notice how most of the uptrend formed in the lower half off the 2008 crash low. When gold broke above the now center dashed trendline, of the original uptrend channel, it was time to add the measuring stick that would show a doubling of the upturned channel. Note how the final blow off phase to golds bull market accelerated after the original top rail, now the dashed trendline, gave way. That was it for gold.

Before we leave this weekly chart for gold notice our current triangle that is working on its fourth reversal point. A touch of the bottom rail will confirm the pattern is a triangle. Note since the all time high made at 1920 in September of 2011 gold has produce lower lows and lower highs all the way down. The last little high gold made last month has so far failed to reach to top rail of the blue triangle. This could be a warning sign that gold is running out of gas.

Next lets look at some different currencies to see if this rally in the US dollar is going to be just a flash in the pan or is there something bigger brewing. Its has been awhile since I showed you some of these different currencies but the general trend down is still in play. The CAD built out a massive H&S top that is very similar to the one the HUI built out. As you can see it built its first bear flag as the backtest to the neckline. It has now just finished up breaking out of another bear flag to the downside.

The XAD topped out with the blue 5 point triangle reversal pattern. Since the five point blue triangle reversal pattern, that reversed the uptrend, XAD maybe finishing up a right shoulder of a massive H&s top. I’ve overlaid gold on top of the XAD so you can see how they tend to move together.

The last time I showed you this chart for the XBP was probably 6 months or longer ago in which I was showing you how the original 6 point dashed triangle was morphing into a bigger triangle. I have not touched this chart since the last time I posted it. The 6 point blue dashed triangle looked like the real deal at the time as the price action broke below the bottom rail, with several backtest to the underside. It threw us a curve ball which I was able to pick up on by the way these types of triangles morph into bigger triangles.  Whenever I see a nice tight triangle like the blue dashed triangle, it’s rare that they don’t play out in the expected move, in this case down. This is where I have shown you in the past how a morphing triangle develops by showing you the morphing process using the red circles. The red circles are exactly the same size that measures the false breakout of the bottom rail which we will see a similar false breakout of the top rail. It’s just a symmetry thing. The markets love symmetry. As you can see I was looking for the top to come in at reversal point #4 at 173. The actual high came in at 171.92 or just about a point lower than what I was looking for. I will now go ahead and tweak the top rail to the most recent high that still shows a triangle consolidation pattern, just as we thought before the morphing process, but now it just a bit bigger. Note the ping pong action in the apex of the blue dashed triangle. This happens a lot during the morphing process.

Lets take a look at the XSF that has been building out a rising channel for 2 years now that has the potential 4th reversal point in place. The pattern won’t be complete until the bottom blue rail is broken to the downside. Note the failed H&S top that looked so promising when it was developing.

Lets now look at the two currencies that will affect the US dollar the most, the EURO and the Japaneses Yen. Lets start with the euro that broke out of two bearish rising wedges, one inside the bigger rising wedge and the big rising wedge, each accompanied by a breakout gap. Keep in mind when these big patterns are complete is when you get your impulse moves which it looks like the euro is now in. Note the little pause just before the euro broke below that bottom black rail. This is what I like to see.

The weekly chart shows the two year bearish rising wedges that broke out six weeks or so ago. For those that like to play with Chartology you will not find a better chart that shows measured moves and symmetry. The directions are on the chart if you want to play with the uptrend that formed in 2006 to 2008 and the downtrend that formed during the decline that occurred in 2010. The distance between each consolidation going up and coming down were all exactly the same height. The red horizontal dashed lines shows the center of the price action. In 2007 the euro built out a bullish rising flag on the way up. During its decline in 2010 the euro built out a bearish falling flag in the exact same location. Anyway it’s a good study in measured moves and symmetry.

The very long term chart for the euro shows the blue downtrend channel that began forming in 2008. The euro is now in month number 2 since it broke out of the red bearish rising wedge as shown on the weekly chart above. There are two possible areas of support that could come into play down the road. The bottom rail of the blue downtrend channel and the neckline extension rail taken off the massive inverse H&S bottom made at the turn of the century.

Now I would like to expand on the Japaneses Yen chart I showed you Friday night. Below is the same chart I posted Friday night that shows it just broke out of a bearish falling wedge which was the second pattern that has formed inside the much bigger falling wedge that started to build out in May of 2013. The first pattern to form inside the big black falling wedge was the blue triangle that did a little morphing as shown by the red circles. On this chart you can see I have the big black falling wedge labeled as a bearish falling wedge. You are probably wondering why, which I will show you in a bit.

The long term weekly chart shows a large H&S top that formed back in 2011 and 2012. Note the impulse move once the H&S neckline was broken to the downside. The decline stopped right where our black bearish falling wedge started to form back in May of 2013 right after the precious metals stocks collapsed in April. What I think is happening, and have said so before when I posted this chart, is that the Yen is forming a massive H&S top. The blue bearish falling wedge is the right shoulder that matches the blue bullish falling wedge that formed the left shoulder. Note the very last bar on the chart that shows the yen closed right on the potential neckline last week.

You maybe asking yourself, whats the big deal if the Yen is putting in a large H&S top? On the chart below I’ve overlaid gold on top of the yen so you can see what it looks like and why the potential H&S top is very important to the big picture. It’s not a perfect correlation but it’s pretty close.

Lets take it one step further and see how the yen correlates with the HUI, the precious metals stocks. The HUI is in red and the Yen is in black on the chart below. Again not a perfect correlation but pretty close. I wouldn’t want to bet against it unless it was for a very short term scalp. Note the price action for both stocks once the right shoulders were completed back in late 2012 and the first half of 2013.

Below is a chart that I’ve shown you many times in the past where I overlaid gold on top of the US dollar. Since gold topped out in 2011 it has been trending down while the US dollar has been trending up.

This next chart is a multi combo chart that shows how gold is trading vs many of the important currencies out there. If we ever see gold trading above all those black dashed support and resistance lines I will have to reconsider the bearish case for the PM complex but until that happens the trend seems to be down. Notice how the black support and resistance lines have been backtested from below telling us that those lines are hot.

Below is gold’s triangle we’ve been following. I showed you the bottom rail support would come in around the 1270 area. Last weeks low was 1274. So far this is a text book test of the bottom rail. Initially I like to see an important trendline hit and have a small bounce telling us the trendline is still hot. After just a small bounce we need to see the next decline take out the bottom rail with preferably a nice long bar on increasing volume. If you’re a bull you want to see the bottom trendline hold and a 5th reversal point form that will take the price action up to the top rail. A break of the top rail would then strongly suggest the triangle is a 5 point triangle reversal pattern to the upside.

This last chart for tonight shows the entire history for the HUI. I have shown you the big black bearish rising wedge but not the blue triangle because I didn’t know what type of pattern would form below the massive H&S top and the bearish rising wedge. This blue triangle has the same reversal points as gold.  Notice on the gold chart above the price action is bouncing off of the bottom trendline on its triangle while the HUI is bouncing off its top rail of its potential triangle. Previously the precious metals stocks led the way down. If the triangle ends up being a consolidation pattern to the downside it looks like gold is going to lead the way lower with the PM stocks following behind. I believe we are as close as we’ve been, since this one year plus correction started, to actually follow through on the next impulse move down, which will take the PM complex to new lows for this bear market. Silver is sitting on a potential massive H&S top neckline also. It’s impossible to pin point the exact moment this next impulse leg down will begin but we have enough Chartology to strongly suggest the next major move for the precious metals complex will be down and not up. Keep a close eye on the bottom rail of gold’s triangle for the first big clue that the PM complex is headed lower. All the best…Rambus