Before we get into tonight’s charts I would like to explain what my goal is right now for the precious metals complex. We never know 100% for sure when we have a bottom in place. All we can do is look at the charts and indicators and try to get the odds in our favor on when to make a move. For the short to intermediate term I think we have a decent bottom in place in which we can try to take advantage of a move higher.

The hardest part of getting on board for an intermediate move is in the very beginning stages. First you have to identify a bottom, in the case of the precious metals complex, and then you have to start buying. Think of these impulse moves as two steps forward and one step back. We have just had our two steps forward and today marks the point of a possible one step back. This is normal market behavior. Giving back some of your hard earned gains makes you feel uncomfortable and you get this feeling, in the pit of your stomach, that you must sell. If we are truly in an impulse move higher your mentality should be to buy weakness. When your in a trading range is the time to sell into strength not in an impulse move. These are two completely different techniques. Right now I think we have entered at least an intermediate term move in the precious metals stocks and that is how I’m going to play this move until something tells me different.

My experience has taught me to trade the intermediate term move and hang on for dear life when things start moving both going up and coming down. This is where the big money will be made IMHO. Those that try to trade in and out will get a few good trades off but will eventually get out of sync with the move and find themselves on the sideline when the heart of the move takes place. I know for a fact that this is already happening with some of our subscribers that decided to sit out the move in some of the 3 X long eft’s we’ve been buying for the intermediate term move.

This is the point where one has to decide on which type of trader they want to be. If you want to be a short term trader then you really need to be disciplined and follow your system to the letter. If you chose to be an intermediate term investor then you need to get positioned for the longer haul by buying your favorite precious metals stocks now. You need to have the mindset that there are going to be corrections along the way but you have the confidence in the trend to hang on. It takes a lot of discipline and courage to ride out these inevitable corrections but that is the only way I know to make the big bucks. With that said lets look at some charts and see what they maybe telling us.

Lets start by looking at a daily chart for gold that is showing us a potential inverse H&S bottom that is the second bottom of a possible much bigger double bottom that goes back to the June low. This is exactly where one wants to see one of these reversal patterns form. If you recall gold made that very small double bottom, in December,  that is now the head portion of the bigger inverse H&S bottom. Note the little unbalanced double bottom that was made back in June of last year that started the bottoming process and the small H&S top that was made at the 1430 top which I’m labeling, for the time being, as the double bottom hump. You can see how important the 1430 area is going to be for our intermediate term move. Note the last two bars on the far right hand side of the chart that shows the price action for gold doing a ping pong move between the 150 dma and the neckline. This is a big deal folks. Its showing us two very hot lines right now, one that is resistance and the other support. As I’ve shown you many times in the past when a stock is trading up against an important trendline, that is acting as resistance, you often see a smaller pattern form just below that important line of resistance. A moving average is no different than a trendline as they both can act as support or resistance. What makes me think that gold will break above the 150 moving average is the inverse H&S bottom that is forming just below it. If gold does in fact break above the 150 dma that will be a very big clue that gold has some legs to run higher.

Lets look at the long term monthly chart for gold that shows our possible double bottom that is forming at the bottom of the big blue expanding falling wedge. The first bottom was made in June and the second was made in December. If you ever looked at a chart and said to yourself, ” man I wish I would have bought at that bottom.” Well folks this is how you do it. You never know 100% for sure if the bottom is in place until you can look back in hindsight. A year from now will we look back at this chart and say, yep that was the bottom. Only time will tell. It takes guts, some luck and a whole lot of discipline to buy into any important bottom because the news is always the worst. Risk is always part of the equation also.

Lets now take a look at silver that is slowly grinding its way ever so slowly higher. As you can see it has broken above the top rail of the blue downtrend channel with a clean backtest. It’s again testing the top rail of the red 2 and 1/2 month old rectangle. It’s also trading above the 50 dma. Is it to forming a double bottom just like gold? We’ll know in hindsight.

Lets look at a long term weekly look at silver that shows it finding support at the brown shaded support and resistance zone. As you can see it has held support twice so far which is possibly forming a double bottom. Until silver and gold for that matter, can trade back above the bottom rails of their 22 month old rectangles, the downtrend will remain in tact. For the intermediate term move, I’m looking for the old high that was made back in August of last year, to be our first price objective. At that point we’ll have to reassess the situation and take it from there.

Below is the gold and silver combo chart I’ve shown you several times in the past that shows the trading action since they both topped out in 2011. I want to focus your attention to the two red horizontal trading ranges at the bottom of each chart. As you can see gold has been stronger than silver as it’s testing its mid line while silver still hasn’t broken above its thin black dashed horizontal S&R rail yet. The red horizontal trading ranges clearly shows you what my goal is for this intermediate move which is the top red rail. Again we’ll have to see what happens if we get there.

Below is a daily chart for JNUG that shows our three buy points so far. When we took our third buy on Monday I put an order in to but 1000 shares on the backtest to what I hope will be the neckline of a very large inverse H&S bottom. Notice the smaller inverse H&S bottom that now makes up the head portion of the potential very large inverse H&S bottom. So far this move is going as expected.

This next chart for the JNUG is a “What would you have done chart” that shows the last 7 buy points on our last trade setup. The green rectangles shows where we bought . As you can see there were 7 green rectangles that show the buy points and the one brown rectangle that shows where we sold. There were 6 positive trades below the brown rectangle and one losing trade above the brown rectangle. My question is, what would you have done in this situation? It’s easy to see in hindsight what to do but in real time it’s a much different story. At any rate I just wanted to show you this can be a game of inches sometimes where you can be so close but so yet far away. As you know we have taken on three new positions so far, purple rectangles, to try and get back in sync and if we get a complete backtest to the neckline we’ll have our fourth.

Lets look at one more chart as it’s getting late. The last chart I would like to show you is a weekly look at DUST which is a 3 X short the big cap PM stocks etf. If the blue bearish rising wedge plays out as a halfway pattern to the downside we should see a price objective down to the 12.32 area.

So far nothing is broken for our long positions in the precious metals complex. As long as the support rails do their job we just have to hang on for the ride. Remember two steps forward and one step back. All the best…Rambus

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In this Weekend Report we’re going to look at some short term charts for the precious stock indexes and try to decipher if this congestion zone they’ve been trading in for the last two weeks or so is a consolidation pattern that will allow the price action to rally up to the next area of resistance or is this two week chopping action actually a topping pattern and the precious metals stocks are in for another rough go of it. Man that was a long sentence.  The sooner we can figure out what has been building out over the last several weeks the sooner we can take advantage of the situation.

Many times a line chart can give you a quicker entry point vs a bar chart.  As we’re looking at the short term, two weeks or so, the first set of charts I want to show you is a 30 minute line chart. A line chart can take out a lot of the nose, such as a spike high or low, that can change the looks of a chart pattern quite a bit. It just uses the closing price for whatever time period you are looking at, in this case it will be the 30 minute charts.

As you know in the last hour of trading on Friday I started to build a position in the PM stocks based on what I was seeing on the line charts. I was waiting for a decent break and finally got it toward the end of the day. The breakout is small yet but there was also a backtest to the top rail if you look real close.

Lets start with the XAU that shows us a four point bullish falling wedge with the really small breakout and backtest. Keep in mind the XAU is not the leader right now so this little breakout and backtest is important IMHO. Also when you look at these 30 minute charts notice the area at the bottom of the charts that I’ve labeled as “Nice Base.” If you, recall when the area under the black dashed horizontal rail was being put in, we were seeing small reversal patterns such as a 5 point bullish falling wedges and some rectangles. They will be easier to see on a bar chart. The point is we do have a base in place which has broken out to the topside. The price action has rallied up to form a consolidation pattern and that consolidation pattern has broken out to the upside. So far this is an uptrend. The real confirmation will be when the price action trades above the previous little high in this consolidation pattern.

Keep in mind these 30 minute line charts are giving us a different perspective of what you will see when I show you the two hour bar charts a bit later. The GDM is still trading inside its consolidation pattern but is trading up toward the top. It is actually showing some relative strength to some of the other PM stock indexes.

These next two charts shows a completely different look than the two above. I think Miss Patty caught on to this pattern early on in their development. I’m referring to the Diamond consolidation pattern because these Diamonds have 6 reversal points. As you can see on the GDX chart below the breakout from the Diamond is well into its breakout move. We can’t rule out a backtest but the breakout looks good so far.

Below is the HUI and its Diamond pattern. I left my original annotation on the chart that says, Expanding Triangle. The reason I left it on the chart is because when a Diamond is forming it starts out as an expanding triangle. Also the HUI is the weakest of the PM stock indexes right now, as you can see by how far down it’s from its high.

This next chart for the GDXJ shows you why I think the precious metals stocks are going to breakout to the upside. As I’ve been showing you the little juniors have been stealing the show from the big cap PM stocks. Last Friday was a crucial day as the apex of its triangle held support and the GDXJ took off closing at a new high for his move. That is the confirmation I wanted to see.

This next chart is a 2 hour look at the GLDX which is a junior gold explorers etf. Again you can see how these small caps are leading the way. It wasn’t until the end of the day that we got the breakout from the H&S consolidation pattern but we got the breakout. Notice the volume bars at the bottom of the chart.

I won’t go into much detail on these 2 hour bar charts for the precious metals stock indexes as they are pretty self explanatory. When you look at this next set of charts notice the volume bars that were left at the end of trading last Friday.  GDM.

I left in the original 5 point bullish falling wedge reversal pattern that I know most of you have already forgotten about. It was this little pattern that reversed the downtrend that started at the top of the right shoulder high on that massive H&S top. As you can see it’s now is part of the base.

The GDX cracked its top rail at the close on Friday.

When you compare the GDXJ to the big cap PM stock indexes there is no doubt who is leading the charge. I know a lot of folks don’t like to trade these little guys but they have been very good to me in the past. I know some of you who traded them back in the early days of their bull market know what I mean. They have been so out of favor for so long they are playing catch up right now.

Below is a daily look at the GDXJ that should put a smile on your face. How many remember the red 5 point rectangle reversal pattern? As you can see it’s now the head portion of a nice inverse H&S bottom. Note the breakout of the neckline last Friday on really nice volume. This is what we’ve been waiting for.

Before we move on there is one more small cap index that I showed you a while back that was busting a move higher as it was going vertical, at least on the minute charts. You can see the move up on the right side of the chart that went straight up to the neckline and then pulled back. It’s now making another run toward the neckline. This could be a very large base being built here going all the way back to April of last year.

Lets put that possible H&S bottom into perspective by looking at the weekly chart. Here you can see the multi year blue falling wedge with the possible H&S bottom forming at the very bottom. As I have shown you in the past, many times the left shoulder and head will be inside the falling wedge and the right shoulder will form as the backtest to the top rail. Since this H&S bottom is made up of two heads it looks like the right head and right shoulder are forming as part of the backtest.

Below is another look at our possible H&S bottom. This chart I called my reverse symmetry chart as the price action was reversing symmetry down until our current and possible H&S bottom started to form. Folks this is what you want to see at the end of a long move down, a reversal pattern of some kind. Note the beautiful H&S bottom that formed after the 2008 crash.

If the PM stocks look like they maybe heading higher lets take a close up look at gold and silver to see if we can see any clues that may help the cause. It sure looks like the GLD is building out an inverse H&S bottom with a horizontal neckline. Friday’s price action closed just below the neckline so it’s very close but not quite there yet.

Lets look at one more chart  that shows the SLV still trading inside its 2 month rectangle. What is interesting is that it’s working on the 5th reversal point right now. If the SLV can take out the top rail we will have reversal pattern in place that is reversing the downtrend. It still has some work to do but it’s getting there.

I’ve been going over many of the junior mining companies and have narrowed the list down to about 30 or so. Our computer genius has been out of town this weekend but my plan is to start another portfolio, with $100,000, that will be strictly for the small caps, say under $5 a share. This will be a mostly buy and hold portfolio for up to a year or so. The rally phases in the early part of this bull market generally lasted a year from trough to peak. Even if audept doesn’t get to setting up the new, Junior Precious Metals Stocks Portflolio, I will be posting some buys in the very near term. There are some very good looking stocks out there that are starting to get away from us. With these juniors the leverage goes down very quickly once they start to move.

This should get everyone up to speed on what I’m seeing in the precious metals complex right now. We’ll take it one step at a time. As long as they’re moving in the right direction we’ll go along for the ride.  All the best…Rambus

Before we get into the charts I have seen several questions on what type of trader is Rambus. There are basically three types of traders. The short term, the long term and the intermediate term. I’m an intermediate trader that looks for the impulse move when a consolidation, top or bottom is confirmed. It’s those moves where you can make the most money in the shortest period of time.

The markets are either building out at top, bottom or consolidation pattern at any given time. This is where it’s much harder to make profitable trades because they are in chopping mode with no real trend, just short term moves going nowhere. It’s when these tops, bottoms or consolidation patterns are completed is when you get your impulse move and a trend to follow. Being in an impulse move is much easier psychologically because the chopping action has finally ended. On the other hand, during an impulse move, you will run into small consolidation patterns that form along the way that many think is the end of the move but in most cases it’s just a pause that refreshes.

What frustrates most investors is the waiting game when the markets are building out these tops, bottoms and consolidation patterns. They want action now. These patterns can be traded but you have to be very nimble and quick so most traders get eaten alive. Sometimes it’s easy to see that you are in a clearly defined consolidation pattern for instance and know exactly where the breakout will occur. Then, there are the more complex consolidation patterns that morph many times before it becomes clear what kind of pattern it’s forming. We have been in one such pattern since the June low in regards to the precious metals complex. It has morphed at least three times so far and it still isn’t giving us a clear cut signal that it’s finished.

We have attempted several trades within our current congestion area and have been lucky enough to come out with a small profit. We were setup though for an impulse move that failed to materialize so we had to abort these trades with a small gain. My goal is to be mostly setup for the impulse move before they begin. This means taking some position while still in the congestion zone. Sometimes you win and sometimes you lose but if you can keep your loses to a minimum, during these chopping phases, and can recognize when the real impulse move begins, that is what the intermediate term trader looks for. What we experienced from December of 2012 to August of 2013, shorting the precious metals complex, is a prime example of what I’m trying to accomplish right now. We just haven’t gotten confirmation the congestion area is finished building out which could be a consolidation pattern to the downside or a reversal pattern.

Lets take a close look at GLD from the short term to the long term to see if we can find any clues as to where we are in terms of a top, bottom, or consolidation pattern. It’s very important that you look at all time frames to get a feel of where you are in the big picture especially if your an intermediate term trader. Below is a two hour, two month chart that shows us a six point bearish rising wedge that broke down late last week. If you recall I became somewhat positive on the PM sector when I seen the double bottom that started the building process of the rising wedge. As you can see the double bottom worked out beautifully as the breakout above the double bottom hump was accompanied by an nice gap. Next we got our confirmation when the price action did a double backtest to the double bottom hump. All systems were go at that time. I had no idea of what was to come next only that GLD had put in a nice little double bottom reversal pattern to the upside. When you hear me talk about following the price action that is exactly what I mean. In hindsight now we can see the result of that little double bottom that took the price for GLD from 114 to 122 or so.

Next I would like to put our little blue rising wedge into perspective by looking at a 2 hour line chart for GLD but this time it goes back about nine months or so that shows how it’s just part of a possible bigger pattern. Starting at the June low on the far left hand side of the chart you can see there was another small double bottom that was the start of that blue bearish rising wedge. If you recall we went long back then and caught some of that move in the blue raising wedge. I remember looking for a slightly higher price objective as I was using a parallel channel. When the price action failed to reach the top rail and broke below the bottom rail I knew the trade was over and we exited the trade with a small profit. What we have developing right now is a possible triangle formation. We have completed 3 reversal points with the possible 4th starting last week. The fourth reversal point won’t be completed until it touches the bottom rail plus the last reversal point is always the hardest to spot in real time because you won’t know until you can look back in hindsight and say, ” yup that was the last reversal point.” If the price action breaks above the top black rail of the possible triangle formation that would be a very bullish development and we would have to exit our short positions. As you can see there is a very fine line between being a bull or a bear when you look at the top rail of the black triangle. It is also the lowest risk entry point, which we took, because of that line in the sand.

Lets look at a daily chart for GLD which shows our 2 blue bearish rising wedge, three fanlines and a possible double bottom. The further you go back in time the bigger the picture is you have to work with. The fanlines did a good job of keeping the downtrend in check between the two blue rising wedges. We have to keep an open mind as the June low and the December low were made at the same low on the chart. We can’t leave any stone unturned when it comes to looking for clues that may help us make the right decisions.

This next chart shows why the GLD is stalling up here in this general area. Note the brown shaded support and resistance zone that is working as resistance right now. Again if the GLD can trade above that brown shaded support and resistance zone it will be talking to us. Right now it’s up to the bulls to prove their case.

Next I would like to show you our possible blue triangle again in the short term and then using the same chart going back in time so you can see what I’m referring to when I talk about being in an impulse move where, in this case the impulse move is down, and the smaller consolidation patterns that form along the way in a true impulse move. Keep in mind I built these patterns in real time as the impulse move worked its way lower. The first chart is the short term look.

This next chart is the exact same chart I’ve been using for many years. All the old chart patterns and annotations are still where I left them as the GLD has moved on in time. The first thing I would like you to note is how much smaller the consolidation patterns are vs our current and possible blue triangle consolidation pattern. Those small consolidation patterns formed during the impulse move down. In this case there were about four that were made before GLD hit the bottom and built the first pattern inside our big blue triangle, the red bearish rising wedge. Many times after you have an impulse move a consolidation pattern will form that is much bigger than any of the smaller consolidation patterns that formed during the impulse move as this chart clearly shows. These bigger consolidation pattern will often be a halfway pattern that separates the first impulse move down from the second one which hasn’t happened yet for GLD. If the GLD breaks below the bottom rail that could very well signal the next impulse leg down is underway and and the big blue triangle will most likely show up halfway between the two impulse legs when we look back in hindsight.

This next chart for the GLD goes back over  six years and shows you the really big impulse move up off of the 2008 crash low. Just as I showed you on the short term daily chart above, all the smaller consolidation patterns formed in golds impulse move down, just the opposite happened when gold was moving higher off the 2008 low. Here you can see when each of the consolidation patterns completed, a strong move up occurred. GLD did this all the way up to its all time high where you can see the finial thrust higher was nearly vertical after breaking out from the last little red triangle. Then the chopping action started which eventually turned out to be a topping pattern. No one knew with any certainty if that chopping action was going to be just another consolidation pattern to the upside or a topping pattern which would change the character of the whole bull market. I was lucky enough to get out of Dodge and wait for awhile to see what might happen especially after that near vertical move which I know can be the end of something that was very good. After the small top formed and GLD had its hard break down it then went on to form a 22 month six point beautiful rectangle consolidation pattern to the downside. That confirmed for me that the GLD was truly in a bear market. Now we have a possible triangle formation that could very well be a halfway pattern for the second leg down. The only problem we have right now is the blue triangle hasn’t completed its fourth reversal point yet. Until that happens we have to respect the fact that anything can happen. We can lean toward the bearish camp because of the downtrend GLD has been in. If you look at every short term top that GLD has made since it broke down from the last reversal point inside the black rectangle you will see every top is lower than the previous top. That’s a downtrend period.

Lets take a quick look at the weekly chart for GLD that I’ve shown you several times in the past that shows a possible sideways trading range that maybe in play. I’ve shown you how important that top rail is on our blue triangle and this weekly chart shows you why. The red dashed down slopping line is the top rail of our possible blue triangle. If GLD can breakout above the red down slopping line then there is a good chance that it will make up to the previous high around the 137.50 area. Whatever it decides to do we’ll be ready for it. It just has to show us its true intentions which right now are still suspect.

Believe it or not there is still another triangle I can make a case for that I’ve been following since it broke down about 12 weeks ago. What I’ve been looking for is for GLD to put in a lower closing low on the weekly chart. This week we came pretty close to doing that. I believe when we see that, that will tell us the backtest is finally finished and the next impulse move down will be ready to begin. I’ve put two different price objective on this weekly chart if this red triangle turns out to be the halfway pattern.

This last chart for gold is one we’ve been following for sometime now that shows a possible very large H&S top pattern. So far we have no confirmation as the price action is trading right on the neckline. If gold ever does take out that neckline we’ll be the first to know that a really big drop is forthcoming as that possible H&S top has a price objective down to the 700 area. The symmetry is definitely there with the neckline symmetry rail showing us the high for the left and right shoulders just as it did when gold put in its H&S consolidation pattern back in 2008.

So far we have a lot of nice looking charts but we have no confirmation that the next impulse leg is starting yet. All we can do is take some small bites  from the short side as that’s the main direction of the PM complex right now. It could change tomorrow and if does we’ll change with it.

Before I end this Weekend Report I want to show you just a couple of charts for the SPX, using it as a proxy for the rest of the stock markets, which we may trade based on its current setup. The first chart is a 2 hour chart that shows us a possible unbalanced H&S top in place. The right shoulder is quite a bit smaller than the left but in fast moving markets the right shoulder can be much smaller. You can see the price action really bouncing between the top and bottom blue rails in a frantic attempt by the bulls and the bears to gain control of the situation. If the neckline is broken to the down side the price objective will be down to the 1700 area.

I just want to show you one more chart for the SPX that is a possible 5 point bearish expanding rising wedge. Note the little red rectangle that has been forming just below the bottom blue rail. We also have a double top in place which is a reversal pattern.

Tomorrow I’ll go into more detail on what I’m expecting with the stock markets over the intermediate term time frame based on the SPX. Now its time to get ready for the Super Bowl and relax for a few hours. Enjoy the game.  All the best…Rambus

There is a lot we could discuss in this Weekend Report from the price action in the US stock markets to the world stock markets. As we are almost fully invested in the precious metals complex, and especially the juniors at this time, I think we need to put aside all the outside noise and focus on our PM investments.

I know many of our subscribers follow other market other than the precious metals sector which is good. There are thousands of investment opportunities out there that can be a daunting task trying to figure out where to invest ones hard earned capital. I’m agnostic when it comes to making money in the markets. I don’t care which area to invest in as long as there is some volatility either going up or down. The 1990’s was a good time to invest in the tech stocks for example.

The precious metals complex fits the bill for me over the last 12 years as there is plenty of volatility going up and coming down especially with some of the precious metals stocks. Over the last 12 years there have been four separate occasions when my portfolios have done over 400% and that was mostly on the long side. I was lucky enough to catch the 2008 crash using SMN and DUG because there wasn’t any leveraged short gold miners etf’s like we have today. I was also lucky enough to catch the bulk of this bear market in the precious metals complex when we took our first short position in December of 2012 and exited in the first week of August of 2013. Now here we are sitting at another potential crosswords in the precious metals arena again.

One thing I’ve learned playing this sector and especially the juniors is that if you want to make the big bucks you have to get in early, right or wrong. I have taken several positions that didn’t stick and was stopped out even, or with a slight loss, but if you are early enough and right the doubling affect on the juniors can be astounding. Most of you already know this but let me just give you a theoretical example at what this means. If for instance you buy a junior for .10 cents you double your money when it gets to .20 and if it gets to $1.00 you have a 10 bagger or 10 times your original investment. On the other hand if you waited until the price got to .20 before you bought and it goes to $1.00 you only make half as much money. But the real story is when you get a junior, using the same example, the doubling affect really starts to kick in the higher the stock goes. The compounding affect can be tremendous if you buy the right stock. That’s one reason I like to buy a basket of juniors because you only need one or two to really hit pay dirt.

Lets look at the GDXJ junior gold miners index that is still in the beginning stages of a new uptrend. The early part of a new uptrend can be fragile but as long as nothing is broken you have to give it the benefit of a doubt. So far the new uptrend has been picture perfect. We have the red 5 point rectangle reversal pattern that reversed the downtrend. Note how each trendline, starting with the breakout from the red rectangle, to the first up slopping black dashed S&R rail to the neckline extension rail, all had a clean breakout and a clean backtest. You can see where Friday’s weakness found support, right on the neckline extension rail at 35.10. So far this is the price action working to take out overhead resistance. This type of price action is telling us the bulls are gaining in strength as each backtest is being bought. This is reality right now which is all we have to work with. Can something changes this reality, yes but until it does it is what it is.

This next chart for the GDXJ shows us some more positive price action. As you can see there was a nice clean breakout from the blue bullish falling wedge and there was a backtest 5 days later to the top blue rail. There is another piece of Chartology that is at work right now and that is how the price action is reversing symmetry back up as shown by the two small inverse H&S bottoms. What happened on the way down is now happening in reverse to the upside when you look at the previous small tops on the way down. It would be painful but there could be a backtest to the lower neckline at 33.50 before the price move higher. No guarantee though. Note the positive divergence on the RSI at the top of the chart, blue arrows.

The weekly chart below shows the whole price history for the GDXJ. First, notice how the brown shaded support and resistance zones worked as support and then when they were broken to the downside they reversed their role and acted as resistance. That is Chartology 101. The next thing I would like to show you on this weekly chart is the halfway gap that was formed last spring when prices really started to fall which created the gap. The blue arrows shows how I measured the halfway gap which had a price objective down to the 29.22 area almost exactly the very bottom. I think this is an important clue that that impulse leg down ran out of gas right where it should have. There is also a positive divergence on this weekly chart for the RSI.

Lets take a look at the long term monthly chart that shows the big H&S top that all the precious metals stock indexes had. It had a good breakout but the backtest was a little strong but that didn’t change the overall bearish picture as that’s when the price action really began to tumble. You can see the first low that was made in June of last year and the bounce that occurred. Then the December low fell below the Junes low which was very negative at the time. Many times these false break outs represents the final capitulation and the last bear has finally sold out creating a vacuum of only buyers so you get an important bottom. We still have one more week of trading in January but you can see this month produced the first black volume bar in a long time. One last point on this chart and this goes for the rest of the precious metals stock indexes. At this point in time the only pattern I can put to the price action between June and December of last year is an unbalanced double bottom.  With the price action rallying above the June and December lows that’s the only pattern that fits the bill. This potential double bottom may morph into something else later but we don’t have the luxury of hindsight. Many times after a stocks has a big decline or rally you will see a variation of a double top or bottom. Some are neat and clean while others are unbalanced. We won’t know the answer to that question until the double bottom hump is broken to the upside.

Lets now look at the JNUG that is the trading instrument we are using to trade the juniors for the most part. The first chart is the one I’ve shown you that has all our buy points labeled with the green rectangles. Just follow the price action up from the red arrow on the right side of the bottom pattern. You can see how each buy was made based on the breakout and then the backtest. As you can see we took our last position last Friday which would be the top green rectangle on the backtest to the S&R rail. You can also see the reverse symmetry taking place. How it went down is how it’s coming back up. The backtest was a little strong on Friday but nothing was broken. Also notice that if this backtest can hold right here on the S&R rail and JNUG can then rally up strongly through the top black dashed horizontal rail, that I’ve labeled as a possible neckline #2, then JNUG will be forming a much bigger inverse H&S bottom. This is only a possibility at this point but it’s something I’m watching very closely.

Lets look at one last chart that is a daily line chart for JUNG. This chart shows you a very clear picture of the reverse symmetry that is taking place since the little double bottom was put in back in December of last year which created the head portion of the inverse H&S bottom #1. Note how the lower right shoulder was formed on the backtest to the double bottom hump at 15.80. JNUG then rallied all the way up to the next high at 27.50 which acted as resistance late last week and we are now getting a move lower that could form a right shoulder. That’s the million dollar question right now. If JNUG can find a low somewhere in this general area and then rally backup through neckline #2 that would create a very large inverse H&S bottom which would equate to much higher prices. First things first though. In order for this setup to work JNUG needs to find a bottom very soon right in here. So far nothing is broken that would tell me to abort this potential bullish setup. So we have to go with the odds until something changes.

So this is where we stand in regards to our junior precious metals part of our portfolio. As you well know the markets can change in a heartbeat but we have to go with the odds that is suggesting to stay the course for now until something changes the scenario I’ve laid out for you. All the best…Rambus

PS: Here is a daily chart for DUST which is a 3 X short the gold miners etf that we used during the bear market last year. It looks like it may have just broken down out of a blue bearish rising wedge halfway pattern. If that is the case then this means the precious metals stocks will be in rally mode as DUST is declining. This looks like it’s going to be an interesting week to say the least.

It’s always amazing to me how market sentiment can move from one extreme to the other taking the herd with it. Chartology is the study of charting and investor psychology which when you put to two together can give one an edge on where you are at any given point within a bear or bull market.

Back in the first week December of 2012 the sentiment was very bullish for the precious metals sector especially the precious metals stocks. Gold and silver both had rebounded off of the bottom rails of their six point blue rectangles that had been building out since they both topped out in 2011. It’s easy to forget how bullish sentiment was back then after a year of falling prices in 2013.

The chart below is a weekly combo chart that has gold on top and silver on the bottom. This charts shows gold and silvers near parabolic move up in 2011 with silver topping out first in April and gold topping out in September. Usually gold and silver tend to move together but not this time. The blue shaded area shows the massive divergence between the two. As is typical with parabolic rises the decline is just as fast if not faster than the rise. Even though they both topped out at different times they both began their long drawn out, blue 6 point rectangle consolidation patterns, at reversal point #1. I can still here the cries of manipulation as gold and silver broke down from their parabolic tops. From a Chartology perspective this is exactly what one would have expected to see happen after such a huge move up with no consolidation patterns to stem the decline once it got started. There is a lot of information on this chart so I’ll post it right here and we’ll look at it some more in just a bit.

As the chart above is showing gold and silver built out a beautiful 6 point blue rectangle that were consolidation patterns for the next leg down. The green dashed arrows shows where we took our initial position shorting the precious metals complex which was the first week of December of 2012 when it looked like gold and silver were putting in another top instead of breaking out to the topside. Again the sentiment was extremely bullish at that time as gold and silver were still testing the top of their trading ranges. Going short up there wasn’t as easy as it looks in hind site. Both the gold and silver could still have broken out to the upside as there are never any guarantees in the markets. What really gave me confidence to short up there was the first fanline labeled F1. I knew once the price action broke below it it would act as resistance on any rally attempt.

The red dashed arrows, in the red sideways trading range, is where we covered our shorts. It was actually when the HUI crossed above the 50 dma for the first time since the top was put in. As you can see we didn’t catch the exact top nor did we catch the exact bottom but we did capture the meat and potatoes of that big impulse leg down. Before we move on I would like to draw your attention to the breakout of the 6 point blue rectangles. Again cries went out about the precious metals were being manipulated, but from a Chartology perspective, this is exactly what a breakout looks like. The bulls were exhausted and there were none left to buy when the rectangles broke down so there was a vacuum where prices could easily fall. Once you can understand the psychology of these types of moves you can then begin to understand how markets move.

I would like to take one more look at this chart above which brings us up to our current market action. Now I wold like to focus on the red horizontal trading ranges on both gold and silver. As with the blue rectangles I’ve labeled our current red trading range with red numbers. As you know I’ve been pretty bearish on the whole precious metals complex for well over a year which turned out to be the right call as both gold and silver had some of their biggest declines going back many years. As you can see at reversal point #3, which I’ve labeled with a question mark, because we don’t know 100% for sure if this is actually the bottom, could be the beginning of the next rally phase. The daily chart is showing a double bottom in place and the placement of that double bottom at the June low is giving us a high probability that at least a tradeable low is in place. Note the thin black dashed horizontal line which is holding resistance that is taken off the previous lows made last fall in the red sideways trading range. That previous low is offering initial resistance right now. A break above that horizontal black dashed line will signal a strong move higher possibility to the top of the bigger red trading range.

The reason I’ve spent so much time on the charts above is because they show how extreme investor sentiment can become. From a parabolic euphoria to our bear market doom and gloom and every emotion in between.  Back in December of 2012 very few analysis were calling for a bear market. Most were still talking about how high gold, silver and the precious metals stocks were going to soar.

Now I want to fast forward to the present day. What a difference a 2 1/2 year bear market can do to the sentiment. I’m just as guilty as the next guy that was, or is, looking for even lower prices. It’s hard to fight the herd especially after the drubbing the precious metals sector has taken over the last few years. What I’m seeing now, in regards to sentiment, is that everyone is now looking for lower prices. That is a huge change that often happens at turning points in a market. Right up to New Years Eve I was in the bear camp. When the precious metals sector opened for trading on the first day of 2014, with a big gap up, a warning bell went off for me. I had stated that we were at an inflection point where the precious metal complex could move in either direction for a decent move. For me the big gap up told me to exit all our short positions we had, and take our profits and run.

As we were short going into New Years Eve lets take a look at the HGD.To which is a 2 X short Canadian gold etf. As I stated earlier I thought we were at an inflection point which this chart clearly shows. Note the last bar inside the red rising wedge which closed almost right on the bottom rail, that was New Years Eve. As you can see we had a decent H&S bottom forming and the red rising wedge was forming right on the neckline. This is usually a bullish setup. Note the big gap down out of the red rising wedge that found initial support at the neckline. For me that breakout gap wasn’t supposed to happen if gold was going lower. We exited our short positions on that very same day, asking no question. When your expecting something to happen and the exact opposite happens then there is a conflict of interest and the best course of action is to get out until the dust settles.

Lets now take a closeup look at gold”s possible rectangle trading range that I showed you on the charts above. Our small double bottom, at reversal point #3, is still holding and gold is beginning to slowly advance higher. Gold is now trading above the 50 dma with the all important 150 dma coming in just above. Also note the small double bottom that formed back at the June low that took the price action back up to the top of the trading range. So we now have a bottom in June and one in December. At this point it’s still too early to tell yet if we are going to end up with a big sideways trading range or if the potential double bottom, made from the June and December lows, is going to be a double bottom reversal pattern. All we know right now is that we have  small bottom in place that is worth trading gold to the upside, IMHO.

Next I would like to show you a very long term chart of gold that shows a possible bullish scenario. If the possible double bottom that has formed between June and December of 2013 is actually going to be a reversal pattern to the upside then this next chart shows how the 2 1/2 year consolidation pattern may look like. What I find encouraging is that the neckline extension rail, taken off the 2008 H&S consolidation pattern, has now been tested two times once in June and once December, our double bottom months. There is still a lot of trading to go for January but I would love to see a nice big white candle form right on the neckline extension rail. So far gold is up almost $50 for the month of January.

This next long term chart for gold shows how the tops of previous consolidation patterns work as support when there is a decline within an uptrend. Our current double bottom is showing up at the previous consolidation high. Note the blue bullish expanding falling wedge that formed back in 2008 that was part of the complex consolidation pattern as shown on the chart above.

This next chart I would like to show you on gold’s long term chart that I call, “JUST ANOTHER BRICK IN THE WALL.” This chart has every consolidation pattern that gold has made during its bull market. As you can see our latest consolidation pattern is bigger than any other one before it. The 2008 blue bullish expanded falling wedge comes the closest to matching our current consolidation pattern in time and price. From a symmetry perspective our possible latest blue expanding falling wedge still looks like it fits in with the uptrend. Time will tell of course but I’m just keeping an open mind as to what possibilities may lie ahead for us.

There is another important development that has started to show up that I believe could be the most import  piece of the puzzle. The precious metals stocks have started to outperform gold. Some of you that have been trading this precious metals bull market for many years will remember the parabolic moves gold and silver had in 2011, which we went into detail on in the first charts above. I remember how frustrating it was to be holding the precious metals stocks as the precious metals were going nuts to the upside. I don’t know about you but I can clearly remember how frustrating it was. We were seeing the perfect setup. Gold and silver were rocketing higher but our precious metals stocks could care less. In hind site that was a huge tell that a bear market of some size and duration was upon us. The precious metals stocks were talking to us if we cared to listen.

Now lets fast forward to the present. There is a subtle change taking place right now with the precious metals stocks. Unlike 2011 when gold and silver were making new highs and the precious metals stocks could have cared less I’m now seeing just the opposite happening. As gold and silver are still barley off the floor the precious metals stocks are starting to make some big moves to the upside. What is even more surprising is that the little juniors are out performing everything in the PM sector. You talk about a change of character?

Lets start with the GDX that is showing us a small inverse H&S bottom is now in place. This is a small inverse H&S bottom but keep in mind it is forming at the end of a year plus decline. This is the perfect place to look for a reversal pattern. As you can see it’s trading comfortably above the 50 dma now that has been working as support lately.

Lets now look at the GDXJ that is showing us a beautiful inverse H&S reversal pattern complete with a breakout and backtest. Keep in mind, even though this is a small inverse H&S bottom, it’s a reversal pattern and it could also be part of a bigger reversal pattern with this part being just the head portion of a much larger inverse H&S bottom. Also note the huge volume that has accompanied the breakout.

GDXJ of course is the Junior Miners ETF

Based on this action I have taken 6 Positions in Our Kamikazi Portfolio (from January 8th trough January 14).. in JNUG, the 3X ETF based on the GDXJ
Already in less than 3 weeks these positions are up 44% 48% 42% 24% 22% and 24% !
The leverage in a 3X ETF is astounding If you get in on it before an Impulse move . I Expect much more to come albeit with potentially
wild drawdowns .
For More Information on these Kamikazi Trades please read the sidebar category “Kamikaze Caution”

This next chart is a ratio chart that compares gold to the XAU. After under performing gold for so long it now looks like the the XAU maybe ready to start out performing again. This one chart I’ve been waiting patiently to finally confirm the PM stocks are finally going to take the lead like they did in the early years of the bull market. As you can see the ratio has broken down from the red 5 point bearish rising wedge that is now three weeks into the breakout.

Below is a 30 year chart for the gold to XAU ratio that really puts into perspective how far out of whack this ratio is. Note our little red rising wedge in the top right hand corner of the chart.

This next chart is a ratio chart that compares the juniors to the big cap PM stocks. Since putting in a double bottom in December the little juniors have been kicking the big caps butt. It’s always encouraging when you see the small caps, in the precious metals complex or even the stock markets, outperforming the big caps as it suggest there is some speculative money looking for a place to invest. Note the volume the last few days.

So for me the bottom line is the precious metals stocks are outperforming the metals which has been a rare event over the last year or so. This is the market talking to us right here just like it did in 2011 when just the opposite occurred.  All we can do is follow the price action for more clues as things progress. There is a lot of work to do yet in the precious metals complex, that needs to be repaired, but there has to be a starting point somewhere and now could be that point. At the bare minimum we should have at least a short to intermediate term rally that may or may not be the start of the next major impulse leg up. With Chartology on our side we will be able to see what is unfolding before our very eyes and take advantage of anything the market gives us. All the best…Rambus

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URA is an Uranium etf that maybe signaling something is going on the this sector. It broke out of a 5 point triangle reversal pattern with the small red bull flag that formed right on the top rail. This is usually a bullish setup.

In this Weekend Report I would like to show you some charts for silver which shows a bullish and bearish scenario. As we are at an inflection point we need to monitor both sides of the precious metals complex for clues that may give us the next important direction this group, as a whole, may move. To pick an absolute bottom is next to impossible to do but one can get very close sometimes if a clear and open mind is present.

As you know I’ve been very bearish on the whole precious metals complex for over a year now when we took our first short positions back in the first week of December of 2012. We rode the whole bear impulse move down which just so happens to be one of the biggest annual declines in gold and silver in many years. Now, the whole PM complex has arrived at what could be just a stopping point for more downside action to come or could this possibly be an important bottom of some kind that signals the almost three year bear market in silver may have run its course. No one knows with any certainty the answer to this all important question but lets take a look at the silver charts and see if they can give us some clues in which direction the next important move may take place.

Lets start by looking at a daily chart for silver that we’ve been following for sometime now. As you can see since the beginning of December of 2013 silver has been chopping out a horizontal red trading range at the June 2013 low. This is the inflection point at least on a short to intermediate term perspective and it could also be on the very long term look that I’ll show you later in this Weekend Report. Note the blue downtrend channel and the 50 dma that is running parallel to it. Friday silver tagged the 50 dma. There are three overhead resistance points in which silver needs to overcome before it can move higher. There is the top rail of the red rectangle that will need to have at least 5 reversal points to make it a reversal pattern. Then there is the top blue rail of the downtrend channel and of course the 50 dma. So silver has its work cut out to get on the topside of these now resistance points. Note the June low took on the chart pattern of a red 5 point bullish rising flag before it broke out to the upside. Also the June low and our present low could be a significant double bottom for future reference.

Below is a chart I showed you about 3 weeks or so ago that shows two unbalanced double tops labeled #1 on top and #2 on the bottom of the horizontal black dashed line. Note the little black rectangles just below the down pointing red arrows. Several weeks ago I labeled the lower one as, you are here. I said it still may take several more weeks before it matches the top black rectangle in time before we get a move. As you can see on the lower black rectangle the time factor is just about finished if this rectangle is going to be fractal of the top black rectangle. Up to this point notice how the blue arrows measured from the unbalance double top #1 called the first low in the unbalanced double top #2, blue arrows. Then the green arrows did the exact same thing measuring the second low in the unbalanced double top #2. This is where it gets interesting folks. If you look at the next set of arrows you will see they’re red. If this potential fractal is going to play out then we can expect a hard break down as shown by the red arrows on the unbalanced double top #2 that would take the price action all way down to the 13.10 area. On the other hand if the price action breaks above the black rectangle that would negate this possible fractal that has been near perfect up until Friday.

Lets look at a daily line chart for silver that shows us a different chart pattern than what the bar chart is showing us. Remember a line chart just shows the closing daily price that is connected to the next daily closing price. A line chart can takeout a lot of the noise such as spikes that are made during inter day trading. As the line chart shows silver has created a 7 point blue triangle that still hasn’t broken out but Friday’s price action close right on the top rail. It’s going to be an interesting week to say the least.

Lets look at one more daily chart for silver that shows our blue 6 month trading range. Notice how our most recent low was slightly higher than the June 2013 low. If we connect the two bottoms we get a slightly upsloping pattern. In my mind this 6 month trading range has to be one of three patterns at this point. As it only has completed two reversal points so far this tells me the consolidation pattern isn’t compete yet and we need one more rally up to the top blue rail to put in the 4th reversal point to make this trading range a possible consolidation pattern to the downside. The second possibility is this trading area is creating a H&S consolidation pattern with the smaller red patterns the left and right shoulders and the bottom blue rail would be the neckline. The third possibility would be this is a true double bottom which is a reversal pattern. As you know I always look for some type of reversal pattern such as a H&S, a double top or bottom or a 5 point pattern of some kind such as a rectangle, triangle or falling wedge to reverse the trend. This would be a place to see a possible double bottom.

Now I want to show you a weekly chart for silver that puts a couple of things into perspective. First, why did the decline stop in June of 2013 at the 18 area. On this log scale chart you can see the blue 6 point rectangle was a halfway pattern as measured by the blue arrows. Another intriguing thing about his weekly chart is the neckline extension rail taken off the 2008 inverse H&S bottom that led to the parabolic move to fifty. This is basically the same neckline extension rail that I’ve shown you on the gold chart. So we have two very good reasons why silver stopped where it did in June and December of 2013. As you can see the neckline extension rail has reversed its role from resistance, back in 2008, to now support. All this chart tells is that there is a good reason why silver has found support where it has. That doesn’t rule out the fact that this is still a consolidation pattern in the making and move lower will resume once a 4th reversal point is completed. Note the little red bullish rising flag that showed me where to look for the top in silver back in April of 2011. Is our blue rectangle showing us the bottom for this bear market as it to is a halfway pattern?

Lets look at another weekly chart that puts our bear market into perspective. So far the downtrend off of the April 2011 high has formed a perfect parallel downtrend channel. Just like any other chart pattern I like to see at least four reversal points in an uptrend or downtrend to know that it is valid. As you can see our recent low in June of 2013 is showing us a possible 4th reversal point within the downtrend channel. That’s not to say we can’t have a fifth or sixth reversal point form down the road but we are looking at the current price action for clues. One step at a time.

The very long term look at silver shows a possible parallel uptrend channel forming with just a slight break of the bottom rail which is shown by the dashed lower rail. The RSI at the top of the chart shows us this is the area where the previous two important lows came into play. I’ve labeled our blue downtrend channel as a possible bull flag which is the exact same width as the blue 4 year down sloping wedge that actually started the bull market once the price action broke above the top rail back in 2001.

I want to end this Weekend Report with two more charts. One is very bearish and the other could be very bullish. Lets start with the possible bearish scenario which shows the potential H&s top that I’ve shown you before. So far the price action is bouncing off the potential neckline that I said should be expected on the initial hit. Silver could rally up further building out a right shoulder.

This last, very long term monthly line chart for silver, I’ve written off several times thinking the pattern was failing but each time I write it off it comes back into play. I built this chart many years ago and it has worked out beautiful. So far the only thing wrong is this potential backtest to neckline #2 has been a little strong. You can see how critically important this backtest is to neckline #2 as the price action below that neckline shows a massive 25 year base and we are in the backtest phase of the huge H&S base. As you can see I was looking for the backtest to come in around the 20.50 area. We have traded about 2 points lower than that but this being such a huge pattern, maybe two points won’t mean that much. We’ll just have to see how it plays out. This chart also shows you why the potential double bottom is forming at a critical juncture if this backtest is to be successful.

So here we are looking at a possible very large and important inflection point that may signal the next major move in silver. All we can do is follow the price action and see what it tells us. The very first thing we need to see is silver takeout the 50 dma and the overhead resistance to get the ball rolling in the up direction. It is close but not quite there yet. We just need to keep an open mind for either scenario and trade accordingly. All the best…Rambus

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In Keeping with a Theme here at Rambus Chartology lets look in on the complex game being played on the Chess board that is the Precious Metals Market

Tonight I would like to show you some charts from the bull and bear side of the equation for gold. This is called an inflection point where the precious metals complex can move either way and establish some sort of short to intermediate term move. A lot of these charts you have seen before. Lets start with the bearish charts for gold which there are a lot to look at. Before we do I just want to make it perfectly clear that I’m still in the bear camp but as you will see we could have a short to intermediate rally that fits into this scenario that doesn’t change the big picture.

The gold fanlines. As you can see gold is now trading above fanline #4 and below the heavy black dashed support and resistance rail or neckline. The price action is moving out toward the apex of the two rails with the bottom fanline #4 at 1220 and the heavy black dashed S&R rail which comes in around the 1250 area. There is now just 30 points that separate these two trendlines. We could witness some violent moves within the apex until one side wins out.

Gold 2008 long term fanlines. Below are the big long fanlines taken off the 2008 crash low. As you can see we are backtesting the bottom fanline from below right now.

Gold H&S consolidation pattern. This next chart shows the H&S consolidation pattern that we’ve been following since November before it broke below the neckline. As you can see gold has had one complete backtest so far and is attempting another that will come in around the 1250 area.

Below is the same chart only It’s a line chart that shows a small positive move when the recent price action traded above the little double bottom hump at 1220. Its not that big of deal right here, but getting above the neckline and the 50 dma will be the big deal, but it’s a start.

Gold Diamond. Below is our big blue Diamond that is made up of a small triangle on the left side and the H&S consolidation pattern on the right side of the Diamond. The 150 dma comes in at 1300 today which is a very important moving average.

Lets now look at some potential bullish charts for gold starting with this one year daily chart that shows our current double bottom along with the June double bottom low. As you can see with the June double bottom the horizontal black dashed line held the backtest many times before the price action finally took off to the upside. Today marks the 6th day that the price action has traded above our current double bottom hump at 1215. As you can see the 50 dma is coming in right at the 1250 area.

The longer term daily look at gold shows how important this potential double bottom is for an intermediate term rally back up to the top of the possible trading range at 1425.This would be the 3rd reversal point right here with a 4th somewhere higher. The price action doesn’t have to rally all the way to the 1425 area. Gold could put in a lower high and create a descending triangle consolidation pattern somewhere along the way.

This weekly chart for gold really shows you the possible trading range between 1180 and 1425 or so. As you can see by looking at the 6 point blue rectangle, that was the first consolidation pattern to form during this bear market, it had 6 reversal points. As we know there are no rules to say our current possible trading range can’t have 6 reversal points. Or, if we get a rally back up to the top of the trading range at 1425 and have another decline back to the bottom at 1180 or so, which could then start a 5th reversal point which would then make this trading range a possible 5 point rectangle reversal pattern to the upside, if the price action can takeout the top rail at 1425. That’s just speculation right now but it’s a remote possibility in a bullish scenario.

This next chart for gold is the very long term look at its parabolic rally. I’ve added a possible trading range in red that I showed you on the chart above. This looks like it could be a good place for a consolidation pattern to form as a possible halfway pattern to the downside.

This next chart is a combo chart with gold on top and silver on the bottom. For the most part it looks like the rallies are stronger and faster than the declines within each rectangle. Anyway, you can see how important the bottom red trendlines are as they have been holding support for over 6 months now.

This last chart for gold I haven’t shown you before. It”s a two month time cycle chart that has been working pretty good recently. If this next 2 month time cycle plays our as the previous ones then we should be bottoming right here and rally to the very end of February to the first part of March. Usually when you really count on a time cycle to fulfill its move it doesn’t work but we’ll give it the benefit of a doubt until it fails.

This should get you up to speed on what to expect with gold at this very important inflection point. Do we get a tradeable rally from right here or do we just go ahead and crash and get it over with.

Checkmate ?

Stay tuned as things are really starting to get interesting. All the best…Rambus