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

http://rambus1.com/

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

Free Trial

http://rambus1.com/?page_id=10

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

In this Weekend Report I would like to take an indepth look at gold that is showing a potential small double bottom. There is also a larger double bottom or part of a bigger consolidation pattern that also needs to be looked at. Some of the charts I’ve shown you many times and some are charts that I follow I have never posted before but I still keep a close eye on. As you will see, this area we are in right now, is very critical to the short term and the long term look for gold. Remember we have to keep an open mind and let the charts speak for themselves.

This first chart is a 10 month daily look at gold that shows our current small double bottom that broke above the double bottom hump on Thursday with some follow through on Friday. If you look to the left hand side of the chart you will  see the June low that was also a double bottom of the unbalanced kind. Note how the Double Bottom hump, at the June low, held support many times, when it was backtested from above at 1265. The next thing I would like to show you on the chart below is the positive divergence on our current short term double bottom and also the positive divergence off the June low which is six months in the making. I’ve add what I consider to be the most important moving averages for gold which are the 50, 150 and 300 dma. Going back to the June low you can see how much work gold needed to do before it finally broke above the 50 dma. Once it did it was a straight shot up to the top of the possible trading range where the 150 dma came into play and held resistance. The 150 dma also held resistance at the October high. You can see where the 300 dma will come in IF gold can reach the top of the trading range around the 1425 area. So this chart represents the short term look at gold. Note that we sold most of the Kamikaze Portfolio on the second bar on the far right hand side of the chart because of the possibility of a double bottom forming. Until that point we didn’t know which way the price action would go.

This longer term daily chart for gold shows the possible new trading range between 1180 and 1425. If this is going to be a consolidation pattern then we are at the 3rd reversal point right down here. We would then need one more reversal point #4 to complete a consolidation pattern which could show up at the top of the trading range where the 300 dma will come into play.

December-21-2013-pdf(2)

The next gold chart shows the fanlines that had been working so well until we hit this double bottom area. The move above fanline #4 shouldn’t have happened. That area should have held resistance. The next area of resistance is the heavy black dashed S&R rail that comes in around the 1260 area. This is how gold is talking to us. When it has the energy to start taking out overhead resistance rails it’s showing strength and we have to respect that.

Below is our gold Diamond that we’ve been following for some time now. The apex of the big blue Diamond represents a strong area of resistance which comes in around the 1295 area. A move above the apex will negate the blue Diamond which would put the double bottom, that I showed you on the charts above in play. So the apex is another important area to keep and eye on.

There is another important resistance point which comes in around the neckline of the H&S consolidation pattern that is part of the blue Diamond pattern we looked at earlier. Again a break above the neckline will negate the H&S consolidation pattern.

We’ve talked about inflection points which are areas that can break either way. Gold is at an inflection point right here trading at the June low. At this point we have to give the advantage to the bulls as they have already defended this area once before. If this low can hold, which would be reversal point #3, that could setup a good move higher. You can see a very strong positive divergence on the RSI at the top of the chart.

This next weekly chart for gold puts our possible consolidation pattern into perspective. Note the neckline extension rail that is taken off the 2008 inverse H&S bottom. We’ve been watching how the price action was going to interact with that important trendline. As you can see it has held the June low and now the Decembers low so far. As with any trendline you put on a chart it will act as support when the price action is above and resistance when the price is below. So far the neckline extension is holding support.

I mentioned that I spend almost as much time looking for the bullish scenarios for the markets as I do the bearish scenarios. This chart below is similar to the chart above except I’ve added what could be a bullish expanding falling wedge as a very large consolidation pattern that has formed since the 2011 high. I just want to state right here, I’m still in the bear camp without question. Gold has a ton of work to do to turn this chart positive. At the very least gold is sitting on support right here at reversal point #3 which is really a multi year low going back to 2010. I’ve labeled the reversal points in the falling expand wedge with bold black numbers. As you can see if the June low holds, for whatever reason, that would mark the 4th reversal point within that pattern once it broke the top black rail. Note the 2008 bullish expanding falling wedge that looks similar to our possible current one.

Lets take a very long term look at gold that shows the important chart patterns since the bull market began. This chart shows how our possible current bullish expanding falling wedge would fit into the bull market that began in 2001. Note all the white candles that formed in each impulse leg up during the bull market years when the price action broke out of one of those consolidations patterns. Note all the black candles that have formed during gold’s bear market impulse legs down. You can see the black candles that were made during our last decline that stopped at the neckline. It is way too early yet, as the month of January is just beginning, but if gold is to find a bottom here it would be nice to see a white candle at the end of the month.

This next chart is a very long term look at gold that goes all the way back to the 1980 high. You can see the multi year huge bases that were made to launch gold’s bull market. The chart  above had a bullish perspective, this one has the potential bearish look that we’ve been following for quite awhile now. The million dollar question right now is is gold building out a right shoulder for the H&S top? There is still one more scenario I could throw in throw in here that nobody is looking at. This is one of those WHAT IF moments. What if gold is building out a high level consolidation pattern ranging from the all time high at 1920 and the low at 1180. If you look at the price action in the 90’s you can see there were some very long periods of side ways price action. It’s only a possibility but we have to be aware that this can happen.

Below is a combo chart that has the HUI on top and gold on the bottom. As this chart shows the HUI broke down well ahead of gold. Even today the HUI is trading below its June low while gold has found support there. So who’s leading who?

There was an important development this week in the GLD to XAU ratio. I have shown you this chart many times as it has been building out a rising wedge formation. This week it broke below the bottom rail. This could be a very big deal for the precious metals stocks as they have not been this far out of whack with gold in history. Is it possible a means to something halfway normal could occur with this ratio? If we see this ratio continue to fall we’ll know something is in the wind.

I want to show you one last chart that compares the GDXJ to GDX, the small caps vs the big cap ratio. As you can see this ratio put in a nice H&S top as the big cap precious metals stocks were outperforming the small caps. Just recently this ratio put in a small double bottom and has broken out. If this ratio can trade above the neckline extension rail that would be a really positive event. I know it should be the other way around where the big caps  lead and the small caps play catchup according to the fundamentals but for the last couple of weeks the juniors have been outperforming the big caps.

What these charts above are tell us is that we are at an inflection point in the precious metals complex. Gold is King so if it’s putting in a bottom the rest of the complex will follow. This week should be very telling as everyone will be back from their Christmas break. Playing the long side for awhile will be a nice break as there are so many more options to play with. One can just buy GLD, SLV or the GDX with no price depreciation. And of course we can buy individual precious metals stocks as well. I’ve been working on a shopping list for some of the precious metals stocks that I may recommend soon for at least a short to intermediate term move. You should be working on your own also. Stay strong. All the best…Rambus

Rambus Chartology has been focusing on the Precious Metals for the most part as that is where the most compelling Chartolgy has been .

But tonite I would like to switch gears and visit a different sector which is looking very interesting to say the least

About every two or three months or so I do a post on the Basic Materials sector just too keep an eye one what is happening there. It has been somewhat mixed for the most part but it now seems to be gaining some momentum. As you know I’ve taken a couple of position related to the area recently. I tried the shippers a month or so ago but got stopped out on a hard backtest but I could see the potential starting to build for this undervalued area. The latest bout of strength still hasn’t shown up in the CCI commodities index as it has been flat lining on top of a long term support and resistance rail that goes all the way back to 2007. So far the CCI has corrected 50% of the move off the 2008 low which it has been holding for some time now.

The GNX is still trading inside a big blue triangle that maybe getting close to breaking out. That top blue rail has five touches on it so we know it’s hot.

The Baltic Dry Index was the first real good indicator that the basic materials  stocks were finally bottoming and a potential decent rally was beginning. As you can see it produced a nice five point triangle reversal pattern as its bear market low complete with a backtest.

There are several etf’s out there that track the basic materials sector. One of my favorite ones is the IYM that is now just testing its all time highs going all the way back to the 2008 high. Its built out an almost two year blue triangle that has broken out and had its backtest. As you can see the price action is sitting right on the all time high, black dashed horizontal rail, at the top of the chart. Regardless of what we think of the fundamentals we have to respect the strength in this sector.

Another etf that tracks the basic materials sector is the XLB.

Below is a weekly 3 X bull etf for the basic materials sector, MATL, that closed the week at a new high for this stock. It has very light volume though.

Lets now look at some of the stocks that makeup this sector as some of them are part of the Dow Jones. DD is a big part of the Dow Jones and shows why the Dow is still making new highs. On the monthly chart below you can see a beautiful red triangle that broke out sometime ago and is currently in an impulse leg higher making new all time highs.

The monthly chart for IP shows it’s trading at all time highs.

Dow Chemical is going to close out the month of December at new all time highs.

CNX is still well below its all time high but it looks like it could be forming a flat top expanding triangle.

APD is breaking out to new all time highs.

AA is another stock that has recently broken out of a blue triangle consolidation pattern.

The weekly look for AA shows there is still a lot of room to move higher for this stock. It created an 11 point bullish falling wedge reversal pattern to end its decline.

There are several areas in this sector that have yet to really takeoff and are still undervalued. There’s an old saying that states, how copper trades so does the stock market. This means if copper is strong so should the economy and vise a versa. I think copper finally showed its hand this week after breaking out if a nice eight month inverse H&S base. Its been lagging the Dow Jones for quite sometime but maybe it’s getting ready to play catchup.

The weekly look at copper shows just how weak its been since topping out in 2011. It built a beautiful 6 point blue triangle consolidation pattern but so far has failed to follow through to the downside. Note the small inverse H&S base on the lower right hand side of the chart that is the same inverse H&S base that I showed you on the chart above. This could be a very important development.

As I have shown you many times in the past, a triangle can morph into a bigger triangle, that doesn’t change the direction of the move, but just creates a bigger triangle. The monthly chart below shows how copper is morphing into a bigger triangle. Note the two red circles that shows the failure of the top and bottom rails that is creating the bigger blue triangle consolidation pattern.

Coal is probably the weakest area inside the basic materials sector. It built out a beautiful H&S top with a blue triangle just above the neckline and red bearish rising wedge just below the neckline. This is usually a bearish setup. As you can see KOL, the coal etf, is basically trading in no man’s land at the moment.

Even though the KOL, coal etf, is trading sideways there is a coal stock, ACI that is close to breaking out of a 5 point blue triangle reversal pattern to the upside. This stock looks like a very good bargain in here for the next year or two if it takes out the top blue rail.

The weekly chart for ACI shows why it could be such a great bargain down here. Buy low and sell high applies to this stock. As you can see its been in a three year bear market with one consolidation pattern forming below the next. Now we may see a 5 point triangle reversal pattern forming at the bottom. This is a perfect Chartology chart of a bear market, complete with a topping pattern and hopefully a bottoming pattern with consolidation patterns that make up the bear market.

I believe the hottest area in the basic materials sector right now are the steel companies. First lets look at the SLX which is the steel eft. I have to admit I’ve been watching this rally taking place for sometime now and never pulled the trigger. Its been building out some very nice chart patterns that have shown this etf to be in a bull market. Note the nice inverse H&S bottom followed by the red bull flag that formed just below the neckline and the red bullish falling wedge that formed just above the neckline. As I have shown you in the past, when you get a consolidation pattern that forms just below the neckline and then one that forms right on top of the neckline this is almost always a bullish setup. As you can see the SLX broke out of a 6 point blue triangle last week.

When looking at the daily chart above it looks like we already missed the big move up but when you look at the weekly chart you can see the rally is just really getting started. Just like the copper chart I showed earlier that had a morphing triangle, SLX also has the same morphing triangle as shown by the red circles. These morphing triangles can be very aggravating as they will give you a false buy and sell signal. When the price action doesn’t follow through after the breakout that is when you start to take into consideration that the triangle maybe morphing, It’s still valid only it will be just a bit bigger than previously thought. Most give up on these types of patterns but I find them very useful when its all said and done.

Lets now look at some individual steel stocks that are showing some strong moves taking place. Of all the steel stocks I follow AKS has probably been the strongest. You can see it had a nice inverse H&S bottom that completed with a big breakout gap. It hasn’t hardly stop to rest yet.

The weekly chart for AKS shows there is still a lot of upside potential left in this stock. At some point it will start to form a good consolidation pattern and that’s when it will be time to pounce.

NUE has been one of the strongest steel stocks as shown by the weekly chart. Note the red triangle that formed right on the top rail of the blue triangle. This was a bullish setup.

The last chart I would like to show you is a weekly look at US Steel that put in a five point bullish falling wedge reversal pattern to the upside. As you can see there is a huge potential for this stock.

The basic materials sector is telling us that there is truly a global recovery taking place at the moment. How long this recovery lasts is anybodies guess. The shippers have been confirming this for sometime now and we can’t ignore what the charts are telling us. It’s never just black and white as there are always cross currents running through the markets that can make them difficult to read sometimes. With Chartolgoy on our side we can keep on top of the changes even though the fundamentals might not agree with what the charts are saying. It looks like there are some good bargains in this sector that we can take advantage of if we can keep a clear mind. All the best…Rambus

Below is a combo chart that I’ve shown you several times that has the INDU:GOLD ratio on top and gold on the bottom. So far the parabolic move in the ratio and gold is still playing out. As you can see on the gold chart below gold touched the parabolic arc this week with the ratio chart on top doing the same. This was an important week for this ratio and gold to keep the parabolic moves going in each direction.

ABX tested its parabolic arc this week and then sold off sharply leaving a nice long tail on the weekly bar.

Lets look at a ratio chart the compares gold to the CCI. As you can see on the chart below gold has been under performing a basket of commodities as it’s making a new lower low this month. The massive H&S base measured out almost exactly to the top. Note the red 5 point triangle reversal pattern that called an end to gold out performing commodities in general.

The HUI to gold ratio chart shows the breakout from the red bearish falling wedge still in play as its been in backtest mode since breaking out. May seems to be showing up as a time objective with some of the charts I’m following. For me price is more important than time which goes against some of the trading disciplines out there. So if this ratio hits the price objective first that will take precedence over time.

I’ve shown you this gold : XAU chart several times in the past which shows just how bad the big cap precious metals stocks have been under performing gold. This chart goes back 30 years and never has it been this far out of whack. The problem is that it’s still getting worse as there is a good chance this ratio will make a new all time high by the end of December. It is what it is until it isn’t. Time to hit the hay. All the best…Rambus

Lets get right to the charts tonight as everything seems to be going according to plan so far. Today’s move in gold seemed volatile but when you look at the daily chart, the price action fit right into another little Diamond consolidation pattern, that has formed just below the bigger blue Diamond consolidation pattern. When you look at the very last bar on the chart below you can see the high today came right up to the top rail on the right side of the Diamond and then fell away. Then just towards the end of the day it broke through the bottom rail. So it looks like our small consolidation phase maybe coming to an end. If we get a backtest tomorrow, to the bottom red rail, it would be a good low risk entry point to add another small bite to your existing position.

Lets look at a daily chart that shows the fanlines I’ve been using that shows how gold has been backing and filling coming down from its most recent high. The June low is the starting point for your fanlines as that area was the most important low in this decline. Note, when each fanline is broken to the downside you generally get a backtest to the underside at some point. Normally after the 3rd fanline is broken is when the pattern is complete. In this case I’ve added a fourth fanline which gold closed right on today. Note the heavy black dashed horizontal support and resistance rail that runs through the chart. Above is positive and below is negative. Notice how its reversed its role from support to resistance at the end of November.

If you look really close, at this monthly chart for gold, you can see it’s now trading below the month of November. With just a little more downside action it will be trading below the all important June low which will setup a lower low for this bear market. So far this reverse symmetry chart is working out beautifully.

As you can see on this last chart for gold the possible neckline, of a huge H&S top, is within striking distance. Charts like this is what makes this game so interesting because you can see what the potential is before it happens. And then to watch it unfold in real time is just the frosting on the cake. So far so good.

Silver is also forming a small red Diamond consolidation pattern just below its big blue Diamond. Unlike gold silver didn’t breakout of its little red Diamond pattern today so we have to wait for confirmation before we add a few more shares of DSLV.

Lets now look at a weekly chart for SLV that shows us the two pretty Diamonds that have formed. I know it feels like this backtest has taken a long time but if you look at the bigger blue Diamond the backtest there took about 12 weeks vs about seven weeks with our smaller red triangle. The apex of the Diamond is critical resistance. We don’t want to see that area violated under any circumstance.

Below is a long term monthly chart for silver that shows neckline being tested on this huge potential H&S top. As I have said several times, I really want to see how silver interacts with this all import trendline as it will give us some good clues to go by. So far it has bounced off of the neckline once so it’s telling us it is getting warmer.

Lets now take a look at the HUI with a simple brown shaded support and resistance zone that has worked out beautifully so far. The black arrows shows previous support points that should now turn into resistance since the HUI has broken below the support and resistance zone. Keep in mind everyone that bought above that brown shaded support and resistance zone is underwater and looking for a place to get out even if they can. This should put a ceiling on the price for the HUI.

Below is the HUI Diamond consolidation pattern that we’ve been following for quite awhile now. The breakout is still under the gravitational pull from the blue Diamond but with a little more downside effort the HUI will finally break free and move down to the next area of support.

I haven’t shown you this chart for the HUI yet that has an expanding downtrend channel. I did show you an expanding uptrend channel on the gold monthly chart above that has that big potential H&S top pattern forming. This expanding downtrend on the HUI is just the opposite, it’s getting bigger at the bottom. I’ve been following this chart very closely since the 6th reversal point was hit on the blue Diamond that coincided with the top rail of the expanding downtrend channel. This chart starts at the top right shoulder of the massive H&S top pattern, labeled with the bold S. This is what that decline has looked like since the top at 520. Note the smaller blue bearish falling flag that began the expansion of this downtrend channel. This chart looks very ominous to me. If I was a bull and seen this chart I would be very scared of the consequences if it plays out like I think it will. You can see the breakout from the blue Diamond is well underway with nothing but air below.

Below is a weekly line chart for our blue Diamond that shows the top of the right shoulder that we just looked at on the chart above.

The weekly line chart shows us a bearish falling wedge that I consider to be a halfway pattern. Same consolidation area just a different look.

This last chart I would like to show you tonight is a monthly line chart for the HUI. Keep in mind a line chart just shows the closing price, whether it’s a daily, weekly or monthly look. For me this chart really puts things into perspective. As you can see, on a monthly closing basis, we are now trading down at the 2008 crash low. Pretty incredible when you think about it. I don’t have time to show you tonight but alot of the big cap precious metals stocks still have a long ways to go down yet before their price targets are hit. So can the HUI go lower than the 2008 crash low? Stick around and find out. All the best…Rambus

Tonight I would like to update some of the Diamonds that have been in play for several months now. Chartology is giving us an edge over most of the other technical disciplines out there , in that it has been showing us the way lower to a T. Nobody but Rambus Chartology folks are seeing the precious metals stocks from this angle that got us short, for the first ride down, one year ago during the first impulse leg down. It was in the first week of December of 2012 that we took our first DUST position and added to it from there until the Kamikaze Portfolio was full. Here we are one year later and we have the exact same setup staring us in the face. This time we are one step ahead of the game by being fully invested in the Kamikaze Portfolio before things broke down.

I have described to you how hard it is to get your initial position to stick before you may get stopped out. Just think of an impulse move as two steps forward and one step back. If you wait and buy in the second step, because it feels more comfortable, you will find yourself underwater at some point which makes it difficult to hang on even though you are right taking a position. It’s that step back that gets a lot of investors in trouble. Yesterday, I noticed a couple of red quotes, amongst the sea of green, where we had entered the last of our positions in the Kamikaze Portfolio. This week was the step back. If you had bought back up inside the Diamonds, you felt some pain, but not the kind of pain if you had bought your stock in the last three weeks or so after the breakout. Your emotions will start to kick in and you will question if you’ve made the right decision.

So lets look at some of the Diamond formations and see how they have showed us the way lower, while most investors don’t have a clue to what is actually happening in the precious metals sector. They keep looking at everything but the price action which is the most important aspect to making money in the markets especially in an impulse move, IMHO.

The GDM daily chart shows us its beautiful Diamond consolidation pattern which is now in its fourth week down from the breakout.

The weekly chart for GDM shows the impulse move down that is now in its fourth week. From a Chartology perspective this chart is as clear as day as to what’s happening. It just doesn’t get any prettier.

The monthly chart for GDM really puts the bear market into perspective. You have the massive H&S top that reversed the rally off the 2008 crash low. Note the last 5 bars on this monthly chart. Each one is making a lower low and the price action is now trading below the June low that so many gold investors were trying, with all their might, to call a double bottom. Now that the double bottom is out of the picture I wonder what will be their next reason for a bottom? Compare the price action from the rally off the 2008 crash low where most of the monthly bars made a higher high to our current bear market, that is showing us the exact opposite. Each monthly bar is making a lower low except where there is a consolidation pattern.

Lets look at the weekly linear scale chart for the HUI which shows our Diamond consolidation pattern having made an attempt this week at a backtest. A move below last weeks bar will more than likely tell us the backtest is over and done with as it will setup a new lower low for the move.

This next chart is a monthly linear scale chart that shows the total history for the HUI. The month of December still has alot of trading left but you can see on the chart below that the major bottom uptrend rail has been broken. I’m in awe of how this bear market if unfolding when I look at this chart. Many think we should be playing with the stock market stocks instead of shorting the precious metal stocks. Folks, this chart shows you why we have been shorting the precious metals stocks instead for the most part. You just don’t find moves like this everyday in any of markets and to recognize something on this scale, early enough, can change your world.

Lets take a look at gold from several different perspectives. The first chart I would like to show you is a daily chart with fanlines on it. Normally when a fanline is broken you will get a backtest to the underside, in this case. When the third fanline is broken to the downside is when you the pattern is complete. I have added a fourth fanline that came at the previous low at 1210. The heavy black dashed trendline is actually a neckline that is part of this complex consolidation pattern. Note the last two days of trading where the price action is backtesting the heavy dashed trendline or Neckline. This is a critical test taking place right now on gold.

Below is a daily chart for gold that shows the H&S consolidation pattern in more detail. Keep in mind this H&S consolidation patterns is just part of the bigger and more complex Diamond.

This next daily chart for gold shows the complex blue diamond with the many smaller chart patterns that make up this pattern. You can see the smaller blue dashed triangle that started this Diamond followed by smaller H&S tops at each reversal points within the Diamond. You can see the bigger H&S pattern that we looked at on the chart above. I can also make a case for a symmetrical triangle that would start at the June low. All those lesser chart patterns equals a big Diamond consolidation pattern.

Below is the 6 point Diamond consolidation, as a stand alone consolidation pattern, without all the other smaller patterns.

Lets check on the progress of the potential big H&S top that has yet to breakdown. We are getting some important information tho as it’s bouncing off the potential neckline. I know it cause some pain but it tells us this neckline is hot and if it is broken to the downside it will signal the completion of this possible very large H&S top.

Lets look at one more long term monthly linear chart for gold that shows the parabolic bull market which gold enjoyed for over ten years. If this chart doesn’t make an impression on you, that gold’s bull market is over, there is no other chart I can show you that can change your mind. This is it. A break below the June low will be the frosting on the cake.

As I have stated many times in the past, the big money will be made by those that can control their emotions, and not jump ship every time a wave hits. This is an epic decline taking place in the precious metals stocks that you just don’t see everyday in any market. If one can play this move correctly it can be a game changer in ones life but it’s going to take discipline that most don’t have. All I can do is show you the Chartology and the rest is up to you. All the best…Rambus