I was originally going to do the Weekend Report on the very long term charts for the markets but after last Friday’s trading I decided to mix it up a bit with some shorter term charts. It seems like everyone is either looking for that 10% to 15% correction right here before the stock markets can go higher or many looking for the top that will lead to a bear market. That is possible but I would like to show you some charts that maybe saying this correction is over and the next impulse leg up is now getting underway. You never know 100% for sure if you are right until you can look back in hindsight. With that said lets look at some charts starting with the INDU.

Last week I posted some inverse H&S bottoms that broke out on Friday only to have a strong backtest based on some negative information from the Ukraine. It was a wild day with big price swings. For the most part the necklines held their ground with some having what I call a strong backtest. The two hour chart for the INDU shows you what I mean.

That little inverse H&S bottom, on the 2 hour chart above, doesn’t look like a big deal when you see it in isolation but when you put it in context of the daily chart it takes on a whole new meaning. I can guarantee you no one is looking at the INDU as the chart below shows. That small inverse H&S bottom on the 2 our chart may very well be the 4th reversal point in a much bigger bullish rising wedge consolidation pattern.

I know many of you are thinking another bullish rising wedge, how can that be? As I have shown you many times in the past these type of patterns show up in strong bull markets which the INDU has been in since the 2009 low that no one can deny. When you look at the daily chart below I would like you to compare the indicators from reversal point #2 to our current 4th reversal point as shown by the dashed purple vertical lines. The red circles shows how this pattern has morphed into the bigger bullish rising wedge by failing to reach the top and bottom rails. When you build charts in real time the original bottoms were where the red circles are. Triangles can do the same thing when they morph into a bigger triangle. The originally interpretation of the rising wedge was correct but it just morphed into a bigger rising wedge. Same pattern just bigger. This happens a lot with triangle also. Note how the bottom rail of the rising wedge lies right on top of the 200 dma.

Lets now take a look at the weekly chart for the INDU that goes back to the 2011 bottom that shows this bullish rising wedge isn’t at all unusual. Keep in mind this pattern won’t be complete until the top rail is broken to the upside. The little inverse H&S bottom maybe giving us an early heads up that at least a move up to the top rail maybe in play. It’s possible we get a 5th and 6th reversal points before the pattern is completely matured. We just have to follow the price action. A sell/stop can be place just below the possible 4th reversal point if things don’t work. Note how the RSI 50 has been holding support for the last year or so, red arrows.

Perspective is everything when it comes to the markets. It’s always important to know where you’ve been in order to have an idea of where your at in the big picture. This next weekly chart goes back to the beautiful H&S top that formed back in 2007 which led to the big crash. It was as plain as the nose on your face back then but few grasped the consequences of how important it would be. I knew back then that the INDU was topping out but I didn’t know the markets would crash like they did. I just knew a top was being put in place and the uptrend from the 2002 low was being reversed. Note the beautiful inverses H&S bottom that formed in 2009. An interesting fact about that 2009 inverse H&S bottom is that it’s the same height as the 2007 H&S top. The 2007 H&S top took longer to build out but both H&S patterns ended up being the same height.

I suspect many analysis are looking at our current blue raising wedge as a bearish rising wedge which could be the case but until that bottom rail is significantly broken to the downside I’m sticking with the bullish scenario as I have seen too many of these patterns form in bull markets. Just think of these bullish rising wedges as a running corrections to the upside until proven otherwise. One last note on the chart below. The INDU has pretty much made higher highs and higher lows since the 2009 bottom which is an uptrend, Chartology 101.

Lets look at another chart for the INDU which is a long term monthly look that shows you how a bullish rising wedge, that developed back in the 2002 to 2007 bull run, formed right in the middle of that bull market as a halfway pattern in both time and price. Will history repeat?

This last chart for the INDU I use for looking for bottoms. At the bottom of this chart it shows you two different volume bars. The green volume bars shows you the up volume vs the down volume which I don’t use. The beauty of this chart is the red volume bars that shows you the down volume vs the up volume. I have two dashed lines on the red volume bars. The upper one is at 8.5 and the lower one is at 3.35. If you recall the INDU was down over 300 points several weeks ago which looked like the beginning of a big correction. Note how the down to up red volume bar expanded up to 8.5 which suggested a low maybe forth coming. About 4 days later we got another capitulation bar that made it up to 3.35 giving us another clue an important low maybe at hand. As you can see several days later the low did come in for this down move so far. Keep in mind that little inverse H&S bottom I showed you on the first 2 hour chart above which maybe the the 4th reversal point in the bullish rising wedge on the daily chart. Again, you can see how critically important I’m viewing this potential bottom in here. It makes sense from a Chartology perspective.

Lets take a look at the COMPQ as it has been one of the stronger US markets. As you can see Friday’s price action completed the 4th reversal point in a potential bullish expanding falling wedge. The only question is do we get a breakout right here or do we go back down to form a 5th and 6th reversal points? The MACD and HISTO are now positive with the slow stoch moving up.

I’m going to move right on the the monthly chart for the COMPQ that shows its beautiful bull market. Lets start on the left side of the chart that shows the red bullish rising flag that formed as a halfway pattern that helped me get out of the markets in plenty of time to lock in my profits in a stock called Rambus that was a life changer for me. If you think riding this bull market is difficult it pales in comparison to the move from the low in 1995 to the top in 2000. Unlike this current bull market where everyone is looking for this bull market to crash and burn the move in 1995 to the top in 2000 was just the opposite. A lot analyst were saying we were going to 20,000, 30,000 even higher as we were in a new paradyme. IPO’s were going through the roof on their opening day. It was a time to behold but as always the party must end and end it did.

Next lets look at the big blue 10 year triangle consolidation pattern that I’m viewing as a halfway pattern at present. Notice the H&S bottom that formed the last reversal within the blue triangle. That blue triangle took 10 years to work off the access from the huge bull market. I’ve labeled the old bull market high in 2000, that comes in at 5132, which I think will be the first place we may see a pause that refreshes.

Next I would like to look at a couple of different sectors we took positions in last week. First lets look at the BTK, Biotechnology index which has been by far the strongest sector in the markets. The first chart is a 2 hour chart that shows the little blue triangle that broke out last week with a backtest on Friday.

Now we need to put that little 2 hour triangle in context by looking at a longer term daily chart. As you can see on the chart below our little 2 hour triangle is part of a much bigger daily triangle which both broke out of last week.  A backtest is possible to confirm the breakout.

The BTK has been the strongest performing sector since the 2008 crash. Note the beautiful blue triangle that formed as a consolidation pattern between the 2000 high and the 2008 low on the monthly chart. Compare it to the COMPQ’s blue triangle consolidation pattern. These huge consolidation patterns are the reasons why the stock markets are so strong. After 10 years of consolidation it was time for their big moves to the upside. Note the  beautiful breakout and backtest before it ran up to the next consolidation pattern the red bullish rising wedge. This is what a bull market looks like.

I would like to take a close look at the other sector we bought last week, the SOX. The SOX held its ground last Friday during the big swings back and forth with the neckline holding support. I could make a case that the SOX is making a double inverse H&S bottom with the second neckline still waiting to be broken to the upside.

Below is a weekly chart with just a few annotations that shows its uptrend channel that has been forming since the end of 2012. Again our little inverse H&S bottom of the 2 hour chart above would be at the last reversal point in the uptrend channel.

This last chart shows the SOX big 10 year bullish falling wedge that finally broke out in 2010. Note the little red bull flag that formed just below the top rail of the falling wedge just before the big break out. After the breakout the SOX went on to form the blue triangle consolidation patterns as the backtest. The last bit of resistance was finally over come at the horizontal black dashed line made off the big blue flat top triangle that formed inside the falling wedge. Keeping an open mind, it’s possible we could still see a backtest to the 546 area that should now offer strong support. At any rate this long term chart for the SOXs looks extremely bullish. When you look at this chart below ask your self how would you have handled the rally that started in 1998 at 185 to the top in 2000 at 1350. It looks easy when you look back in hindsight but could you have held on for the ride of a lifetime or would you have taken your profits at the first opportunity looking for a place to get back in that never happened?

There are many individual stocks that back up the big 10 year consolidation patterns that I’ve shown you above. It’s just as hard riding a bull market up as it is shorting and riding a bear market down. I have to admit I’m just as guilty as the next guy trying to call an intermediate term top in these bull markets that seems to be a loosing proposition. In a strong bull market there is always the wall of worry which keeps most investors on edge but if you can look at the big picture it should help in controlling ones emotions. All the best..Rambus

Below is a combo chart that shows the TLT:GLD ratio chart on top and the GLD on the bottom. This chart shows you when the ratio is falling GLD is rising and when the ratio is rising GLD is falling. Notice back in 2008 the ratio was at its high and GLD  was at its low. As you can see the ratio fell during the next three years while gold put in its all time high at 1920 in September of 2011. From that all time high in GLD to the low in the ratio chart, GLD has been falling while the ratio has been rising. Note the massive inverse H&S bottom on the ratio chart that broke out in April of 2013. There was a laborious backtest to the neckline that seemed to go on forever which ended up forming the blue triangle that sits right on top of the neckline. We got the backtest to the top rail of the blue triangle back in early July that held beautifully. Now the ratio chart is getting ready to make a new high for this move off of the September 2011 low. The yellow shaded areas shows minor lows in the ratio chart that corresponds to minor tops in the GLD. As long as the ratio chart keeps rising, which it should after breaking out of the blue triangle and the huge inverse H&S bottom, GLD should fall and most likely break throug of the bottom of its one year plus blue trading range. The Chartology of this chart says GLD is going lower in no uncertain terms. All the best…Rambus

Last week we seen the stock markets go down and the precious metals stock indexes go up for the most part, inverse correlation. Friday the stock markets had a big reversal day with the PM stocks being mostly flat to down. It will be interesting to see how long this inverse correlation holds together.

Lets start with a daily chart for GDM that is showing a falling wedge at the moment that has broken out to the upside with a backtest to the top rail last Friday. The PSAR has been on a buy signal for 3 days now. The MACD and Histogram are still in negative territory while the slow stoch is rising giving us a mixed picture at the present time.

Next I would like to show you the SPX and the decline it had last week which looks like it may have found a bottom of some kind on Friday. Note the red falling wedge that has 5 reversal points which makes it a reversal pattern to the upside. Also there is a possible Wolfe Wave that shows a price objective up to the green trendline which could overshoot a bit. At the top of the chart you can see the blue rectangle I posted just before it broke down that also had a H&S top so that part has played out accordingly. Now the question is what kind of rally will we see going forward. If the green WW doesn’t hold resistance then the bottom of the blue rectangle, at the 1955 area, should be the first real area of resistance.

The weekly chart for GDM shows the neckline has held support for the 5th week in a row now. It did drop down to 708 earlier in the week but recovered to close closer to the high for the week instead of the low. Five weeks of grinding action with no clear cut signal yet.

Lets now look at a daily line chart for GDXJ that shows it’s still in the confines of a falling wedge which has completed 6 reversal points so far with the possible 7th one in progress. And the chop continues.

The weekly chart for GDXJ shows it to has tested its neckline for many weeks now which is still holding support. Above the neckline is bullish and below is bearish. We have a very fine line it the sand in which to place a sell/stop if one is long.

Below is a daily chart of GOLD that shows the potential triangle forming. Note the potential 4th reversal point where the price action broke below the S&R line and then backtested it on Friday and closed toward the low of the day. On a positive note Gold is still trading above the 150 and 300 dma. It looks like the 1270 area is going to be critical support if gold moves down to the bottom rail.

Below is a chart I posted several weeks ago in which I was looking for the neckline symmetry rail to hold support for the bottom of the possible right shoulder. So far the Neckline symmetry rail has held support unlike silver.

Below is a long term daily chart for gold that shows the potential one year inverse H&S bottom. It looks like the 1365 area on the neckline is going to be critical resistance until it gold can break it to the upside. If gold can break that neckline it would suggest a rally up to the 1596 area. First things first, 1365 needs to be taken out before we can get too excited.

Next lets look at silver as it seems to be a big fly in the ointment. As you know silver has been lagging pretty badly in the PM complex. Is it going to be late to the party or is it leading the way lower?  The long term daily line chart shows the one year red triangle that had a false breakout to the downside and then it had one to the upside. As you can see it’s now trading below the apex. When you look at this chart notice all the lower lows and lower highs that have been made since the top in April of 2011. Silver had a chance in July to take out the March high but so far has refused to do so.

Next I would like to bring back a few long term charts for silver that I haven’t shown in awhile that have some bearish implications if they play out. The first chart goes back to 2003 that shows some of the more important chart patterns during its bull market. Some of our longer term members have been looking at this potential H&S top for close to a year now. You can see the neckline symmetry rail called the high for the potential right shoulder last year. That big neckline has held support and has refused to give up yet. If it does break it would be very bearish for silver but until that time comes the price action is still trading above it.

Below is a monthly chart for silver in which I have tweaked the red triangle that is making up the potential right shoulder. By tweaking it I mean I’ve adjusted the top and bottom rails to the symmetry false breakouts of the top and bottom rails. When I first drew in the right shoulder I was looking for more work to be done before the potential right shoulder could be considered finished. As you can see enough time has now passed for this possible right shoulder to be considered complete. Until the neckline is broken to the downside it is what it is.

The last chart for silver is a very long term look that goes all the way back to 1977 that shows how silver reversed symmetry back up in 2000 to the top made in April of 2011. You can see how precariously close silver is getting to that 4 plus years neckline. Again, until that neckline is broken to the downside silver still remains positive but if it ever breaks below it there will be a huge H&S top in place that will be reversing the bull market that began in 2001. Something to keep a close eye on.

There is another chart for the SPX that I would like to show you that had a nice H&S consolidation pattern that reached its price objective up at the 1995 area. I’ve extended the neckline to the right side of the chart that sometimes will come back into play as a backtest. The rally last Friday looked pretty strong so the neckline extension rail may not provide resistance. We’ll just have to see what happens.

Below is a long term chart for the  QQQ’s that also had a H&S consolidation pattern with the head being the low in 2009. It just recently hit its price objective at 94.80. On a positive note the 30 and 88 wma has done an excellent job of holding support since the buy in late 2009. The QQQ’s could have a decent correction without breaking the 30 and 88 wma.

Below is a chart for oil that is also getting very close to an important neckline. This potential neckline goes back 5 years and counting.

This long term monthly chart for oil shows its major uptrend channel that began in 1998 and topped out in late 2007 after its parabolic rise. You can see the crash that ensued once the move completed. The backtest to the underside of the bottom rail of the major uptrend channel created the head portion of the possible 5 year H&S top.

Lets look at one last chart which will be Natural Gas. It too had a nice H&S top but much smaller that broke down six weeks ago. Its in a confirmed downtrend but there are no rules that says it can’t backtest the neckline before it declines is earnest. I would prefer to play this one on the short side unless you’re very quick on the draw.

So there you have it, a mixed bag in the PM complex and the stock markets. Either one could be in the beginning stages of a decent move but we need to see more confirmation of a trend to really get excited. This looks like it could be an interesting week ahead so stay tuned for further developments. All the best…Rambus

In this Weekend Report I would like to show you an in-depth look at two important precious metals stock indexes, the GDM and GDXJ. The reason I want to show you these two PM stock indexes is because they correspond with the 3 X leveraged etf’s, GDM for NUGT and the GDXJ for JUNG that we are currently trading. Last week seemed like the end of the world to a lot of the gold bugs as the PM complex had a decent sell off causing much pain for those holding on the long side. If you’ve been in the markets for any length of time you know there usually no gain without some pain. It just goes with the territory. We’ll look at the very short term to the long term charts, looking for clues that may shed some light on the future direction for the precious metals complex, at least for the short to intermediate term horizons. Lets start with the 2 hour look at GDM that is showing a some what unconventional consolidation pattern, a six point Diamond. Normally when an area of congestion is taking place and there are no obvious consolidation patterns forming I begin to look at the more obscured patterns such as a Diamond or a Roof pattern. When a Diamond is forming there is usually a big decline in the middle of the pattern that generally expands on the left side and contacts on the right side. As you can see on the 2 hour chart below reversal points #1 and #2 are start the expansion. Reversal points #3 and #4 show the longest point in the Diamond with reversal points #5 and #6 contracting like a triangle. The price action actually broke above the top trendline on the right side of the chart late in the day on Friday. You can see the indicators on the right side of the chart are all in bullish configuration in this 2 hour chart. The daily chart puts our little Diamond in perspective in the bigger picture. This chart starts at the December 2013 low and it also shows a higher low made last month in June. This is the start of an uptrend. In order to create an uptrend we’ll need to see GDM take out the March highs creating the first higher high. Right now I’m viewing our Diamond as a halfway pattern that is forming off the June low similar to the little red triangle that formed during the December to March impulse move as measured by the blue arrows. I’ve put two possible price objectives based on the two different measuring techniques I use. Both measurements are very close to each other at 860 for the breakout to breakout method and 865 for the impulse method. One last note on this daily chart for GDM. You may have noticed there was a negative divergence on the RSI when the high was put in on the Diamond several weeks ago. This started the actual correction. Now notice the positive divergence on the RSI. In strong impulse move one likes to see the RSI stay above the 40 area during a correction. So far the RSI has held above 50 which positive. The weekly chart for GDM shows our inverse H&S bottom that has been in backtest mode for three weeks now after breaking  above the neckline. These backtests can sometimes be painful but they are a necessary evil which helps you confirm the breakout. As you can see GDM has been trading above the neckline for three weeks now helping to confirm the breakout is for real. The neckline is now our line in the sand, below is bearish and above is bullish. Now for the monthly chart that shows the entire bull market along with the massive H&S top that has led to our current low. When you look at this long term chart notice how each important top and bottom were accompanied by a H&S pattern. Even the 2008 crash low had an inverse H&S bottom but the bounce was too steep to show up on this monthly chart. If our current inverse H&S bottom plays out it will have a price objective up to the 1017 area which is getting close to the most important resistance point on the chart. The brown shaded area shows the price objective of our inverse H&S bottom and the neckline for that massive H&S top which will act as resistance on the initial hit. If the PM complex is actually embarking on the next leg up to new highs I would expect GDM to form some kind of consolidation pattern just below the big H&S top neckline before the price moves higher. On the other hand the old neckline may be too much resistance to overcome and the GDM retreats back down to the precious low or lower. The bottom line is that this inverse H&S bottom is telling us that GDM should have an intermediate term rally that should take the price back up toward the old neckline. From that point we’ll have to see how it interacts with the neckline and take it from there. Note the positive indicator on the sidebar. Now that we’ve looked at the big cap PM stocks lets take a look at the GDXJ that will show us how the small caps are doing. As you know the small caps have been leading this rally which is a positive as it shows speculative money is finding its way into the more riskier PM stocks. It looks like GDXJ has formed a blue falling wedge which didn’t really show itself until late in the day on Friday. We need to see it breakout above the top rail to really put the falling wedge into the bullish category. You can see an A B C correction within the blue falling wedge that just missed the bottom target by a hair. It’s possible we get another reversal back down to the bottom rail before this pattern is complete. As long as the price action stays within the confines of the falling wedge it should remain bullish. This is the first time I’ve shown you this daily chart for the GDXJ as I was waiting to see if the second backtest would hold support. First, notice the unbalanced H&S bottom that has a much bigger left shoulder than the right. Sometimes this happens in fast moving conditions. Note the nice breakout gap and two quick backtest to the neckline before GDXJ moved higher. What I really like about this setup is how the blue falling wedge has formed on top of the neckline. I’ve shown you many times in the past, when you have a very important trendline, many times you will see a small consolidation pattern form just below, right on top or just above that support and resistance line. As you can see the GDXJ actually put in a slightly higher high before it began to correct. Again, we have an important line in the sand, above the neckline is bullish and below is bearish. The weekly chart for GDXJ shows the slanted inverse H&S bottom that broke out about three weeks ago. Last week we seen another weekly bar backtesting the neckline which to the untrained eye can seem like the end of the world if you don’t have a game play to follow. As I showed you in last weeks, Weekend Report, that another backtest to the neckline was very possible and I gave you specific price targets to watch for. So far the backtesting to the necklines has been textbook. I’ve put a red circle around the breakout and backtest that took place when the massive H&S top neckline finally gave way and the bear market really got underway. What’s so interesting about the current inverse H&S bottom for the GDXJ is it has a price objective up to the neckline of its major H&S top around the 65 area. It’s one step at a time. If this inverse H&S bottom plays out according to the Chartology I’ve laid out for you we should see a the old neckline act as resistance on the initial hit. From that point we’ll have to see what takes place and go from there. The monthly chart for the GDXJ shows the total history for this PM small cap index. You can see all the indicators are positive along with a positive divergence on the RSI indicator at the top of the chart. The GDXJ is really coming into its own as volume continues to grow exponentially. These two very important PM stock indexes gives us a good feel for the precious metals complex as a whole. We have some really good lines in the sand to exit our positions if things don’t work out as expected. There are no absolutes in the markets so we have to go with the odds, and right now from a Chartolgy perspective, the odds are favoring a move higher in the intermediate term. So watch the necklines for major support and take it from there. All the best…Rambus

In this Weekend Report I would like to take an in depth look at gold as there could be some important developments taking place that didn’t show up until this weeks volatile swings. Keep in mind a week ago this particular pattern didn’t exist as there was no evidence in place to even speculate on what what I’m seeing right now. As you know things can change very fast in the markets especially when the volatility increases as we seen this week. One always has to keep an open mind and look at what the markets are giving us to work with.

With that said lets start by looking at daily line chart for gold that shows, after this weeks wild price swings, we maybe seeing a right shoulder being formed. What’s so important about the location of this possible H&S bottom is that it’s forming above the December inverse H&S bottom, which if our current H&S bottom plays out, it will give us a higher low and a higher high creating an uptrend. There is a technique I use, which I’ve shown you before, where I will extend the neckline to the right side of the chart far beyond the actual breakout. There is an old expression that a neckline never dies it just slowly fades away. Many times you will see an old neckline act as support long after you think it’s no longer relative. Here you can see how it has been working so far creating the bottom of the left shoulder, followed by a sharp break to form the head and then the rally back above the neckline extension rail which held support last week. As you can see the possible right shoulder is still in the early stage of development. I would really like to see some more work on the right shoulder but no closing price below the 1290 area. Just think of that neckline extension rail as a support and resistance line, below is bearish and above is bullish. If this possible H&S bottom plays out it will have a price objective up to around the 1450 area which would then give is a higher high vs the high made last August.

Lets look at the same time frame using a bar chart with what I think are the most important moving averages for gold, the 50 dma, the 150 dma and the 300 dma. During last weeks volatility the 50 dma and the 150 dma held their ground while the 300 dma finally held its ground at the low last Friday. So we have three important averages holding support at the bottom of the right shoulder so far. One big down day can change all that but for right now we have to give the benefit of a doubt that they will hold until proven otherwise.

Along with the moving averages gold is also showing a fib 50% retrace that comes in also at the bottom of the right shoulder.

This next chart for gold is a long term daily look that shows our one year plus trading range which is hard to put a name on what type of pattern it will ultimately be. Most have been calling it a triangle which is still inconclusive as we don’t have four completed reversal points in place yet. For a long time everyone was calling it a double bottom which isn’t the case now. If the June low had made it all the way down to the bottom, at the December low, that would have completed the fourth reversal point and we could then call this one year trading range a triangle. We still wouldn’t know if it was a consolidation pattern to the downside or a reversal triangle to the upside until we seen how the price action interacted with the bottom blue rail. If the price action broke through the bottom rail this one year trading range would be a consolidation pattern to the downside. If the price action bounces off the bottom rail and rallied up to breakout above the top blue rail it would then have five reversal points and we could call the triangle a reversal pattern.

This is where it gets interesting. The December inverse H&S bottom and our current H&S bottom are exactly the same size if you measure from the bottom of the head to the right shoulder armpit. If our current H&S plays out the price action will have to break above the top rail of the possible blue triangle. As I showed you earlier the price objective for our current H&S bottom comes in around the 1450 area which is slightly higher than the previous high made back in August of 2013. If that were to occur we would then have a horizontal trading range which would look more like a rectangle than a triangle. The fourth reversal point is always the hardest to locate in real time. It’s easy in hindsight.

I have never shown you this long term daily chart for gold as it’s not as pretty as I would like it to be. I can tell you that chartists are having a hard time trying to put a name on this one year plus trading range for gold as it doesn’t have all the characteristics in place to actually call it something yet.

As you know I’ve been labeling some of the precious metals stock indexes as having an inverse H&S bottom in place. As I showed you on the chart above it’s hard to put a name on this one year trading range so far. Many times the precious metals stock indexes and the precious metals will form very similar chart patterns and generally breakout about the same time. If we use our imagination I can see a double headed inverse H&S bottom that has been forming over the last year or so. There is some nice symmetry taking place where I added the neckline symmetry rail, where you take the neckline and move it down to the bottom of the left shoulder. It then projects to a possible bottom for the right shoulder if things progress that far, which they have. As you can see the June low hit the neckline symmetry rail dead on the money. Right now it looks like the neckline resistance will come in around the 1365 area which gold will have to overcome to enter into the next move higher. One step at a time.

I would like to make one last comment on this daily chart for gold that is showing a big divergence with the RSI and the bottom of the right shoulder. As you can see, the RSI at the top of the chart, bottomed at the December low along with gold. They both rallied up to the March highs where they both started to decline. The RSI declined and took out the December low while gold’s decline was very modest and made a much higher low than the December low, which so far is the bottom of the right shoulder. This is a big divergence to say the least. Time will tell how this plays out but gold will have a head start vs the RSI if it decides it wants to put on a decent rally phase.

Lets look at a few more charts for gold, in no particular order, that shows the longer term look at the bull market and some of the interesting chart patterns and moving averages that have played a key role during gold’s 14 year run. The 150 dma worked magic during gold’s bull run off the 2008 crash low. It also reversed its role to resistance several times during this bear market. Right now gold is trading back above the 150 dma which comes in at 1287 and is slowly starting to rise.

Below is another daily chart that shows the important moving averages and what a true bull run will look like. Once a correction is over and the rally phase gets going these moving averages will start to aline themselves as shown by the rally off of the 2008 crash low to the top in 2011. You can see they also went into alinement during part of this bear phase gold has been in since 2011. What we see happening now is they are starting to squeeze together very tightly while gold is trading above all four moving averages. This is first time this has happened since late 2012.

This next chart for gold is a long term monthly look that shows the 10 month ema and how good of a job it has done during gold’s 14 year run showing both support and resistance. The only time it really failed on the upside is when gold had the 2008 crash and the top in 2011. You can see it has reversed its role to the downside and has held resistance since the second peak, top red arrow. Gold did manage to spike above it for a short time several months back but it couldn’t hold. Then last month gold actually closed above it ever so slightly, and as of today gold is trading about a dollar higher with two weeks to go yet for July.

This next monthly chart for gold shows the bigger chart patterns that have formed during gold’s 14 year run. On the first chart in the post I showed you a small neckline extension rail that is helping to add support to the bottoms of the left and right shoulders. In this very long term monthly chart I’ve extended the neckline, that was part of the complex consolidation pattern, that was made back in 2008. It was made up of three different chart patterns with a H&S bottom being one of them. I drew in the neckline extension well over a year ago wondering how the price action was going to react to it. So far the neckline extension rail has reversed its role and has been acting as support for the last year and a half. I can’t tell you how important that neckline extension rail is because if it gets broken to the downside that’s when we get the flush to new lows. This chart also shows that when gold is in an impulse move up you will see a string of white candles form and just the opposite when gold is in an impulse move down, you will see a string of back candles. When you see a mix of black and white candles you know your in a trading range.

I would like to show you one last long term monthly chart for gold that has all the chart patterns that I’ve followed through the years. I call this chart, JUST ANOTHER BRICK IN THE WALL, because it has to be one of the most beautiful bull markets in recorded history. I’ve said this before and I’ll say it again, they will look back at this gold bull market in the future and study it like we study the 1929 crash. From a Chartology perspective this is as good as it gets when you see one consolidation pattern form on top of the next, each one higher than the last. There are several bullish rising wedges that generally show up in strong bull markets. There was also a bullish expanded falling wedge that was one of the consolidation patterns made in 2008. As you can see the last chart pattern at the top of the chart is now three years in the making and is by far the biggest and longest running trading ranges for this bull market. It to is an expanding falling wedge. Is it going to be just another brick in the wall and lead gold to new all time highs or have we seen the end of gold’s bull market. Stay tuned as we follow the price action to where ever it leads us. All the best…Rambus

PS: We’ll look at silver in depth in the Wednesday Report.

Sometimes there just aren’t enough hours in the day to get everything done one wants to do.

Today I would like to look at Palladium as it has been the leader in the precious metals complex. When Palladium starts an impulse move up it usually wastes little time and rallies very strongly. Below is a weekly chart that shows the latest triangle consolidation with the breakout and the impulse move that has been in progress since the first of the year. Note the two parabolic moves with the first one starting at the 2008 low and ending at the first reversal point on the red 6 point triangle consolidation halfway pattern. After the red triangle finished building out, the second impulse move began that also went parabolic leaving the red triangle as a halfway pattern as measured by the blue arrows. It wouldn’t surprise me if the big blue triangle that Palladium just broke out of at the first of the year doesn’t workout as a halfway pattern starting at the 2008 crash low with the top at 850 being the first impulse move up.

Below is a monthly chart for PALL that puts our blue triangle in perspective within the big picture. The all time high was made way back in 2000 along with the tech bubble and then crashed like just about everything else. PALL is now taking out the previous highs made back in 2010 and 2011 which is showing incredible strength when you compare where gold and silver are relative to their 2011 highs. At some point I expect PALL to start forming a possible halfway pattern after it move a little higher which we will then be able to fine tune a possible price objective. All the best…Rambus

Tonight I would like to take a look at the US dollar as its been showing a little strength lately. Over the last month or two I’ve been showing some commodities indexes that have been very weak which I think has to do with the strengthening US dollar. The move up in the US dollar hasn’t been that big yet but it could be in the beginning stages of a rally phase that could send this index higher. How high is anyone’s guess but any strength will have an impact on the commodities sector and possibly the precious metals complex. It has been awhile since we looked at the US dollar so lets take a look under the hood and see what we can make of the reserve currency.

The first chart I would like to show you is a long term daily chart we were watching very closely back in May of this year. At the time it looked like the US dollar was building out a massive H&S top formation. As you can see the neckline was broken to the downside but quickly reversed direction and rallied back up above the neckline. At the time I said that was probably a very bullish development. When you get a false breakout like that and the price action reverses quickly that is generally a sign of exhaustion. So far that has been the case.

The daily dollar chart is really quite boring for the short term as there aren’t any good chart patterns to be seen at this time. The longer term daily chart does show a big horizontal trading range going all the way back to November of 2013 which corresponds with a similar sideways trading range for gold. It’s not perfect but you can see the inverse movements between the US dollar and Gold. If you look at the last month of trading for both the US dollar and gold, on the combo chart below, it’s very clear that they are moving in the opposite direction.

This next chart for the US dollar I’ve been following for many years that shows a three year cycle low that comes in like clock work. It’s hard to believe that the next three year cycle low comes in on July 22 of this year. Please notice the three year cycle low in 2008 and 2011 which coincides pretty close to important tops in the PM sector and commodities. Are we going to experience the same thing again three years later from the 2011 cycle bottom? Also the US dollar is now trading above its 200 dma.  It’s something I’m keeping a very close eye on.

If we’re going to look at the US dollar we need to take a close look at the XEU as the euro is the biggest component in a basket of stocks for the dollar. Unlike the daily chart for the US dollar, that doesn’t have a decent short term daily pattern in play, the euro does. Today it looks like the euro broke out of a H&S top with a small gap. This could be an important top that has just formed as I’ll show you in a bit as to why.

Below is a very long term chart for the euro that shows two bearish rising wedges, one inside the other. Notice the last bar on this chart. It’s the same small gap that accompanied our little H&S top on the chart above. Now you can see why this is such a big deal. If the euro starts to drop precipitously it will have a positive affect on the US dollar which will have a negative impact on the commodities complex.

This next chart I’ve overlaid the euro on top of gold so you can see the similar correlation. Again it’s not perfect by any means but it does give you a sense that when the euro is strong or weak so is gold. You can do the same thing with the other important currencies and get a similar result. Again something I’m keeping a close eye one.

This last chart is a very long term monthly look that shows you just how precarious the situation is with the euro. I showed you a bearish rising wedge earlier in this post for the euro that just broke the bottom trendline today with a gap. This is the same bearish rising wedge only on the monthly look. You can”t see the gap on this chart but the daily chart does show it’s now breaking the bottom trendline. This could be a very big deal.

Below is a very long term chart in which I’ve overlaid gold on top of the US dollar. This chart clearly shows you the inverse correlation over the long haul. It doesn’t feel like it but the inverse correlation has been pretty good since the commodities complex topped out in 2011 along with the US dollar bottoming about the same time.

Below is the CCI commodities index we’ve been following that has been showing weakness since the first of the year or so.

CCI monthly look.

Lets take a quick look at copper as it’s one of the more important commodities to help give us direction. As you can see it has been building out a massive triangle pattern that started to form way back in 2011 when the commodities complex topped out. As you can see it’s testing the top rail which would be the 7th reversal point if it holds which would make this triangle a reversal pattern to the downside. On the other hand if it breaks out through the top rail that would be very bullish for the different economies of the world.

The US dollar is at a critical juncture right here and now. Based on the XEU, which is just starting to break down, this would imply that the US dollar will show strength in the coming months. The weakness in the commodities complex has already shown up which is suggesting deflation is more pronounced than inflation at this moment. There are areas of strength in the commodities, such as the industrial metals, which have been doing pretty good, but other areas like the agricultural side of the commodities complex is doing very poorly. How will the precious metals complex fair is the million dollar question. Will they buck the trend and move to the beat of their own drummer? Looking back in hindsight we will know the answer to that question. Right now we have to be ever so vigilant looking for clues that may help us understand the answer to that million dollar question. All the best…Rambus

I think today’s price action marks a very important confirmation point in the precious metals stock indexes, at least for the intermediate to longer term outlook. Finally, after a year of chopping around in small up and down moves, we are starting to get some confirmation that this one year trading range is indeed a reversal pattern and not a consolidation pattern. When a big patterns like this ends is when you get the big impulse moves which is where you make the real money.

As you have found out trading ranges can be very frustrating to trade especially when there is no real horizontal support and resistance rails. The inverse H&S bottom was hard to trade because there were many smaller moves within the one year trading range. There were also several patterns that failed to mature which also made it difficult to know if we were forming a consolidation pattern or reversal pattern. It always looks easy in hindsight but when you are living through one of these very large trading ranges it’s a totally different ballgame. Patterns can morph and grow larger than what one might have first anticipated on the front end. The name of the game is to protect ones capital and is one reason why we were in and out trying to catch part of the small moves inside the big one year trading range. Sometimes you win and sometimes you lose but preservation of capital will guarantee that you will be able to play the next impulse move when it finally arrives. We did that.

For those members that were with Rambus Chartology back in December of 2012 know what its like to ride an impulse move. It’s a totally different ball game vs consolidation trading. We did very little trading during that huge impulse move down holding on for dear life every time there was a counter trend rally. It would have been easy to sell out during those short term counter trend moves but we held on and captured the lions share of that big impulse move down. Now after a year of going nowhere it looks like we are on the cusp of another important impulse move, this time higher, which gives us many more options to trade with vs just going short.

If this is truly the beginning of a new impulse move higher the toughest thing you will face is the urge to sell out and take a small profit. I know folks are already looking for the exits because they have decent profit but one of the biggest lesson I’ve learned through the years is not to try and trade an impulse move. You will get your small profit but you will find it nearly impossible to get back in at a lower price than where you exited your initial position. It’s the nature of the impulse move to take as few investors for the ride as possible until you arrive at the end of the move.

The first chart I would like to show is the the Gold:XAU ratio chart that we’ve been following for years now. It still amazes me how far out of whack this ratio got. Just when you thought it couldn’t go any higher it did. Below is a weekly line chart that is finally showing us that the end is at hand and the XAU is now going to outperform gold, probably in a big way, revision back to the means. I’m using a line chart because it often times gives you an earlier confirmation than a bar chart. As you can see this ratio just broke the neckline of a one plus year H&S top that is now reversing the uptrend that has been in place since October of 2009. This is a big deal folks and it shouldn’t be taken lightly. This nearly five year uptrend, where gold has outperformed the XAU, is coming to an end. The precious metals stocks are now the place to be.

Below is a long term weekly chart for the HUI that shows the major uptrend channel beginning back in late 2000. This chart shows you what I mean when I talk about an impulse move. Note all the consolidation patterns that formed in the bull market from late 2000 to the 2008 H&S top. Each impulse move started with the last reversal point in each consolidation pattern. You can clearly see the different characteristics from the price action when the HUI was forming a consolidation pattern vs the price action, impulse move, when the consolidation pattern finished building out. The move between each consolidation pattern is an impulse move. That is where the big money is made. What generally happens is, if you caught part of the impulse move up and had a decent profit, you probably gave most of it back during the next consolidation pattern. Sound familiar.

.I have a lot of work to do tonight so I’m going to end it right here. Today was a very positive day for the precious metals stocks. If we are right then the beginning of the end is at hand. All the best…Rambus

In this Weekend Report I’d like to show you some charts on the different US stock  markets and some of the stronger sectors within the US markets. It seems like no one believes this rally taking place in the US stock markets and many stock markets abroad. The mantra is we have to have a correction because markets can’t keep going up like this , which is true , but the stock markets will let us know when it’s time for a correction. Right now most of the charts are looking positive with no sign of a top in place yet. This could all change next week but right now things are looking much more bullish than bearish.

Lets start with the Dow Jones daily chart that shows us the price action has been chopping around in a 270 point trading range for the better part of June. We still don’t know if this pattern is going to be a rectangle consolidation pattern that will let the price action breakout to the upside or if it will be a double top reversing the uptrend. More time is need to see what the Dow wants to do.

Now lets put our little June trading range in perspective by looking at a daily chart to see how it fits into the bigger picture. What this daily chart shows us is that the Dow has been actually consolidating since the fist of the year. The possible little rectangle has formed as the backtest to the top blue rail of the rising wedge. What we don’t want to see is an end around the apex move as that would change everything in the short to probably intermediate term. So from my perspective a six month correction is enough time for the Dow to have another impulse move higher before it’s time for the next consolidation phase to begin as long as the apex isn’t violated. The trend is your friend.

Now lets look a long term weekly chart that shows our latest consolidation pattern, at the top of the chart, as just another in a string of consolidation patterns that have formed since the low in 2011. As you can see the Dow is in backtest mode right now that needs to hold so the next leg up can begin. As you can see the Dow has been flirting with new highs for the last four weeks now.

This last very long term monthly chart for the Dow shows how I’ve been following the price action for many years how. What is interesting about this chart is the blue bullish rising wedge that formed back in the rally phase from the 2002 low to the 2007 top. It formed exactly in the middle of that nearly five year cyclical bull market in both time and price as shown by the blue arrows and black rectangles. Now fast forward to the 2009 crash low and the rally phase that has ensued since. Some of our long term members may remember this chart when I posted it when the price action broke out of the blue bullish rising wedge. We got about three months of rally before the Dow started to form another rising pattern the little red rising bull flag. If you look at the price action from the 2009 crash low this monthly chart shows a rally that doesn’t want to quit. When I see chart patterns slopping up into an uptrend that tells me we are in a very strong market. Just the opposite in a down market when the consolidation patterns slope to the downside in the same direction of the downtrend. Until something changes this behavior we have to go with the trend, which is up until proven other wise.

Back in May I showed you this morphing six point Diamond consolidation pattern on the SPX which so far has been working beautifully. Note how much stronger the SPX chart is compared to the Dow chart above. While the Dow has been building out a sideways trading range the SPX has been making a series of higher highs and higher lows since it broke out of its consolidation pattern. It’s showing relative strength to the Dow.

This next very long term monthly chart for the SPX I built many years ago. You can read what I wrote when we were still trading inside the massive flat top triangle consolidation pattern. At the time I didn’t know when the SPX would breakout or if it would ever breakout but as you can see it did in fact  breakout and hasn’t looked back since. June produced another new all time high regardless of all the reasons why it shouldn’t.

This last chart for the SPX shows you 74 years worth of trading. The reason I’m showing you this chart is so you can see how big the 13 year blue flat top triangle is relative to anything built in the last 74 years. Big consolidation patterns creates big moves.

Lets take a quick look at the RUT that shows its correction since the first of the year was the blue bullish falling wedge. As you can see it just looks like another consolidation pattern in a long string of consolidation that have developed since the 2009 crash low. I would like to see the RUT take out the previous high to confirm the new move higher.

The NDX has been gaining back its strength since it had its correction this year that took on the form of the blue bullish expanding falling wedge. The NDX made a new multi year high last Friday that shows you strength not weakness. It still has some more work to do to breakout into new all time highs but it is getting there.

Lets look at the long term monthly chart for the QQQ which is the etf for the NDX 100 biggest tech stocks. This chart shows some beautiful Chartology starting with its massive three year inverse H&S bottom with the head portion being the 2009 crash low. Note the bullish setup that occurred at the neckline where there was one consolidation pattern that formed below the neckline and then one that formed on top of the neckline. After breaking out from the blue bullish rising flag the price action as been rising steadily creating a new multi year high last week. From a Chartology perspective it’s hard to find anything bearish with this chart.

Lets now look at several areas of the stock markets that have been doing exceptionally well. The fist sector I would like to show you is the DRG sector which is making new time highs. After breaking out from its massive blue bullish falling wedge it has been a straight shot to the upside. Whenever you see a nice neat consolidation pattern like this many times how a rally looked coming into the consolidation will look very similar when the price action leaves the consolidation pattern. Note how similar the move was leading into the bullish falling wedge and how similar the rally is since DRG broke out.

The BTK has been the strongest and the first sector to breakout and begin its new bull market back in early 2010. While most stock markets and different sectors really crashed in 2009 you can see it is hardly visible on the long term monthly chart. This is why it has been the leader during our current bull market.

I had been watching the XOI build out that beautiful blue symmetrical triangle for literally years. As you can see it kept bouncing within the confines of the blue triangle with each reversal getting smaller and smaller. It was one of those big patterns that was hard to believe when it first broke out because of all the time and reversal points it took to finally complete the consolidation pattern. Now with the beauty of hindsight we can see the price action is starting to accelerate to the upside just as we should expect. As you can see it made a new all time high this month.

This last sector I would like to show you is the SOX which is not close to making new all time highs but it has just recently broken above horizontal resistance at 546. As with all the other sectors I showed, which all had massive consolidation patterns, the SOX also has its own 10 year bullish falling wedge. When you look at this chart it shows a good example of how markets work from a Chartology perspective on any time scale. There is an impulse move followed by a consolidation period followed by another impulse move. Rinse and Repeat until eventually the major move is finished and then what may look like another consolidation will actually be a reversal pattern. Then the same thing happens when the markets goes down.

When I look at these massive consolidation patterns that have broken out, some years ago already, it’s hard for me to see a new secular bear market forming. Many have been claiming this rally off the 2009 crash low was nothing more than just a counter trend rally in the secular bear market. When you have stock markets and different sectors in the stock markets making new all time highs its hard to call it a top or bear market. Tops take time to form and with many stock markets making new all times highs it would still take a long time to build out a  major top. I’m just going to follow the price action and see where it takes me regardless of why the markets are not supposed to go higher.

There are many individual stocks in these strong sectors that one can find using a little Chartology. If you put in a little time and effort you will be surprised what you will come up with. It’s called doing your homework. You know what sectors are strong right now so those are the areas to focus your attention on.

All the best…Rambus