In this Weekend Report I would like to take a fresh look at the precious metals complex again as things are still evolving in this area. I want to look at the GDX as our proxy for the rest of the PM stock indexes as it trades with the most volume and probably gives us a better feel for where the big caps are headed. As you know we’ve looked at several different possibilities for our recent consolidation zone that are still valid as consolidation patterns. At the end of some if these more complex trading ranges one can end up with a lot of trendlines that can make things a little confusing at times. With that said lets strip away all the noise and see what is actually there from a Chartology perspective.

The first daily chart for the GDX shows our first consolidation pattern that formed the bearish expanding rising wedge. As you can see it still stands out as a consolidation pattern with the breakout and completed backtest. The backtest came in exactly where it was supposed to. This consolidation pattern is still valid as nothing has been violated.

The second consolidation pattern we’ve been following is the H&S consolidation pattern that is still in play. It to had a nice backtest to the neckline and the 50 dma that stopped right where it should have. There is nothing broken on this chart either.

And the possible third consolidation pattern is our 6 point Diamond that encompasses both the bearish expanding rising wedge and the H&S consolidation pattern. This Diamond is very symmetrical in that the top and bottom rails are almost parallel as are the two side rails. You can see last Friday’s price almost got down to the bottom rail before it moved higher at the end of the day. It looks like the 25.50 area is going to be critical resistance as that’s where the 50 dma and the top rail of the diamond come into play.

We won’t know until the Diamond breaks out but from my perspective the Diamond is going to be our consolidation when all is said and done. As I have shown you many times in the past, bigger consolidation patterns are usually made up of smaller patterns and this Diamond pattern fits the bill.

If the Diamond turns out to be our consolidation pattern then it will most likely be a halfway pattern that forms in the middle of two impulse moves. One leading into the Diamond and the second one when the price action leaves the Diamond. What this also suggests is that when this next impulse leg down is finished that will mark THE bottom. A very important bottom. It doesn’t mean the big cap precious metals stocks will start screaming to the moon it just tells us the low is in. The most likely scenario is that some type of reversal pattern will form that no one knows how long it will take to complete. All we will know as that an important low will probably be established.

On the weekly chart below I show two different price objectives for the low. The first price objective is the measurement from the big massive H&S top that has nothing to do with the Diamond. I measure H&S patterns a little differently than what the books say is correct. I will measure from the top of the head to the right shoulder armpit. I then take that measurement and add it to where the price action breaks through the neckline to get my price objective, blue arrows on chart below. It basically measures each impulse leg.  In this case the neckline is horizontal so you would get the same measurement either way from the traditional method.

Now lets measure the red Diamond as a halfway pattern. As the big H&S top is the previous pattern I will measure from the breakout from the neckline to the first reversal point in a consolidation pattern, in this case reversal point #1 of the red Diamond. I then take that measurement and add it to the breakout point for the red Diamond to get our price objective. I call this the breakout to breakout method. There is another method I use which I call the impulse method but it’s not applicable to this situation. As you can see both price objectives, from two different measurements, are very close to each other, around 11 on the GDX. First though the red Diamond has to breakdown to get the ball rolling. Keep in mind if the Diamond turns out to be our consolidation pattern then we will experience an impulse move that is totally different than what we’ve been experiencing since April of this year. This is what you live for as a trader. Impulse moves are actually much easier because you have a trend established whereas in a consolidation pattern there is no trend to follow.

Next I would like to look at the SLV that is showing a similar Diamond to the GDX. As you can see it broke below the neckline last Friday and is now attempting to backtest it from below. There is a slight divergence with the spot price for silver as it’s still trading above the bottom rail of its Diamond. For the time being I’m gong to follow the SLV and see if the breakout holds. Notice how our Diamond has formed right below the big breakout gap from the 20 month rectangle. This is a perfect place for a consolidation pattern to form.

The weekly chart shows how our current red 6 point Diamond may play out as a halfway pattern to the downside. Note the position of the 4 point bullish rising flag that formed back in 2010 that led to SLV’s bull market top. The move leaving that bullish rising flag was almost identical to the move leading into the rising flag in time and price. This isn’t an exact science but it does give us a place to look for some kind of top or consolidation pattern to form. Also note that when the price objective for that red bullish rising flag was reached it also marked the end of the bull market in April of 2011. I think we could be setting up a similar situation if this next impulse leg down plays out as expected.

Now lets move on to gold and look at its Diamond consolidation pattern in more detail. Note at each top within the Diamond, even numbered reversal points, a small reversal pattern formed. You can see our current setup is very similar to reversal point #4.  From a purely Chartology perspective I could see a bounce off of the bottom blue rail of the Diamond that would cause a backtest to the neckline at 1300. Note the 150 dma that is working as overhead resistance now.

The weekly look at gold shows its diamond forming on the 2008 inverse H&S bottom neckline. It also looks like there is some reverse symmetry down, red Diamond,  that is matching the red bullish rising wedge on the left side of the chart going up.

There is a comparison chart I use that shows how the HUI and gold tend to form similar chart patterns. Note the two red patterns on the right side of the chart.

Lets take a quick look at the US dollar and see how the apex of the Diamond formation is functioning. So far it’s acting perfectly. You can see the initial hit and small decline which we were expecting. Then the big breakout move above the apex and then a backtest from the topside last Friday.

The US dollar waited till the last moment to save the bottom rail of the big base #2 that is so critical to the overall big picture. When it cracked that bottom rail for a week or so it put everything on hold. Now that the US dollar is trading back above that rail I can breathe a little bit easier now. Let me just say that if the US dollar finally takes out that multi year S&R rail that is going to be a big deal. I’ll leave it at that for now.

Lets now take a look at the euro that shows a classic throw over, above the top rail of its bearish rising wedge. As I have shown you before when you get these false breakouts and the price action immediately turns around and trades back inside the pattern it should actually embolden you to get in sync with the new trend as you know that was the last gasp of life to that trend.

What a difference a week or two can make to a chart. This daily chart for the euro now shows a possible 6 point bearish expanding rising wedge consolidation pattern. Does that name sound similar to you? It still has some work to do but with the way the US dollar is acting this consolidation pattern is very possible.

If the US dollar is putting in a big bottom then the euro should be doing just the opposite building out a large topping pattern. I tweaked the top blue rail just a tad when I seen that nice long bar, made from the previous week, where the price action closed toward the bottom of the bar. That top blue rail is now your line in the sand above is positive and below is negative. Right now it’s negative for the euro.

So we have a clear picture of what is transpiring in the precious metals complex right now. We still need conformation of the continuing downtrend once the bottom rails of the Diamonds all finally break down. I have been jumping the gun a bit by taking on some position before the breakouts but sometimes you have to be bold to make a good trade. Right or wrong I’m comfortable with our portfolios right now. I might not be by the end of the week but for the time being the charts are showing more bearish setups than bullish. We just need to confirm the continuing downtrend to get really excited about this 7 month consolidation zone being over and done with.  All the best…Rambus

Tonight I want to look at what I think has been an ongoing consolidation phase since April of this year. I mentioned numerous times, when we broke down form that massive H&S top on the HUI, that what we were experiencing was a rare move that doesn’t happen all that often in a trader’s career. To be able to catch the beginning of that huge impulse leg down and hold on through several smaller consolidation patterns took a lot of guts, but I knew the reward would be worth it in the end. The end came in August of this year when the HUI crossed above the 50 dma that had kept us in the trade the whole way down.

What you are experiencing now is the total opposite of an impulse move. The HUI has been correcting that huge move down, chopping in a 70 point trading  range from 210 to 280 with no visible trend. This is the job of a consolidation pattern, to work off the oversold readings to get ready for the next move lower. Sometimes this chopping action will carve out a reversal pattern and a new trend will emerge. Normally, 3/4th of the time, the trend will continue in the same direction leading into the congestion area when it leaves. The odds favor a continued move down once our consolidation pattern has finally finished its dirty work. So tonight lets look at some charts, for the precious metals complex, to see what is developing.

The first area I would like to look at is gold. During the bull market years the 150 dma gave the very best signal that a bottom was in, bar none. You could have thrown out every technical indicator, time cycles, Elliot Waves and yes even Chartology and you would have nailed every important bottom. The only time the 150 dma didn’t work was during the 2008 crash. Below is a daily chart starting from the 2008 crash low to the present. I have been watch this moving average with great interest wondering if it would do the same thing when gold turned down. We are now starting to get the answer. As you can see on the chart below gold is testing the 150 dma from below for the second time. Until it fails I will have to consider the 150 dma as our most important indicator for a top. I know it sounds too simple but sometimes simple is best.

This next chart for gold shows the 150 dma with one completed blue triangle that formed back in April and June of this year with a possible much bigger triangle that is still under construction. So far the 150 dma is holding resistance, top rail of the bigger blue triangle. There is another important feature on this daily chart that is talking to me. Normally, when you get a breakout from a consolidation pattern, think small blue triangle, the next consolidation pattern will form below the bottom of the consolidation pattern. Here you can see the possible bigger blue triangle is not doing this. It’s correcting in the same general area as the smaller blue triangle. This strongly suggests to me that both triangles are part of a bigger consolidation pattern that is still developing.

Before you look at the next chart see if you can figure out what type of consolidation pattern might be forming on gold?

Next lets look at a chart for silver. If gold is building out a 6 pt diamond consolidation pattern the odds favor that silver will have a similar looking pattern. I often wonder about that big long bar that was made back in May of this year and if it would have any relevance down the road. As you can see it fits the diamond consolidation pattern perfectly.

The next chart I would like to show you is a daily chart for SLV that shows the Diamond pattern forming just below an important support and resistance zone. Many times you will see something like this that forms just above, right on or just below and important S&R zone. In this case SLV is forming its diamond just below this important area.

If you were a subscriber back in 2012 I brought this 8 point blue diamond consolidation pattern to your attention:

(Editors Note:

This is a certified unchanged chart from January 3 2013…please Note the Price Objective on the Chart !!)

(Editor’s Note 2 : Here is the Story behind this chart Posted at the forum tonite

http://forum.rambus1.com/?p=32884

If you recall the breakout was one of those slow motion breakouts that took almost 8 weeks to do the backtest. This chart gave me the courage to stand my ground when the going got tough. As you can see once the backtest was finished the impulse leg down began that took  SLV below 18 before it bottomed.

Now lets put both of our Diamonds together on the weekly chart and see what the big picture looks like. If this diamond consolidation pattern plays out like I expect it will then it will be a halfway pattern to the downside. Note the red bullish rising flag that formed as a halfway pattern back in the parabolic blow off phase. I wish I would have had our website up and going back then as that red bullish rising flag measured out beautifully. That was then. Now we have a very similar setup with our current red 6 point diamond consolidation pattern that may play out as a halfway pattern to the downside. The move leading out our smaller red 6 point diamond should look similar to the move leading into our smaller 6 point diamond from the breakout of the bigger 8 point blue diamond. The setup is there. We just have to wait for confirmation and a break of the bottom red rail to get the ball rolling to the downside after a possible backtest.

This next chart is a comparison chart that shows you how the HUI, gold and silver tend to run together. One can be stronger than the others at times but as a rule you can see they generally move together which is important to know. So if gold and silver are showing a certain consolidation or topping pattern then the HUI is most likely forming a similar pattern. The annotations on the chart below shows them to be forming a H&S top pattern. I’m really just using the annotations to show you the similarities between the three patterns so don’t pay attention to the S’s, H’s and the NL’s. Think of the NL’s as  support and resistance rails, above is support and below in resistance.

Several weeks ago I showed you what I thought were diamond consolidation patterns that were forming on the precious metals stock indexes. At the time I was showing what looked like a 5 point diamond reversal pattern to the upside. On the chart below is an updated look at the HUI that shows the original 5 point diamond on the left side of the down slopping blue dashed line. As you can see that line was broken to the upside which in turn may now be showing us a 6 point diamond consolidation pattern instead of a reversal pattern. Remember the golden rule, an odd number of reversal points equals a reversal pattern and an even number of reversal points equals a consolidation pattern. Keep in mind this possible diamond pattern is still developing which could go on for several more weeks yet.

This next chart shows the XAU’s diamond pattern that is still labeled as a 5 point reversal pattern. The 6th reversal point is still in progress.

Below is the original chart for GDXJ that I’ve not tweaked yet. Note the breakout gap above the top right, down slopping rail that looked like a real breakout at the time. As you can see the price action has now drifted almost all the way back down to the bottom of the diamond.

Another important piece of the puzzle is the US dollar. Lets look at what the dollar has done this week since the Weekend Report. If you recall I was expecting some resistance at the apex of the Diamond around the 81 area. So far this is what we are getting. Even if the price action is going to break above the apex I would still expect an initial hit, a small move down and then another hit. So far the US dollar is behaving the way it should. The real question will be if it can actually break above the apex, because if it does that will be a monster clue that the dollar is getting stronger.

This is the way I see things right now in regards to the precious metals complex. We’re kinda of in no mans land right now waiting for confirmation from the many diamonds I’ve shown you. Keep in mind there are many individual precious metals stocks showing this same diamond pattern that started to form back in April of this year. There was no way to know back in April what kind of consolidation pattern might form. As you can see these consolidation patterns can go through many changes before the final pattern reveals itself. That’s what makes these areas so hard to trade. If you don’t catch the exact bottom and then sell at the top they can whipsaw you around before you know what hit you as we have seen. It’s getting late and I need to get this posted. Keep an open mind. If these possible Diamond patterns  play out we will then have another important impulse leg to trade that will make up for all the chopping action we’ve been in since April. All the best…Rambus

There were some interesting developments this week that I would like to focus on in the Weekend Report. The most important thing to happen was the rebound in the US dollar that was very impressive. Is the bottom in or is this just a short covering rally that will peter out when it’s finished? Oil continues to fall at a rapid rate which could be signaling another deflationary event maybe on the horizon. There are still a lot of crosscurrents out there but if we can get a good read on the US dollar and Oil that should help us understand what is likely to take place over the intermediate term.

I have a ton of US dollar charts I would like to show you so lets look at some of them and what they’re showing. First, lets start with the eleven point Diamond that broke down in September of this year and had several backtests to the underside of the bottom rail before it moved lower. The US dollar had a strong counter trend rally this week which is now trading right back up to the backtest area at the apex of the Diamond. This is a critical area where the confluence of the support and resistance rails are focused like a laser beam at one point, the apex. If the US dollar can trade above this critically important area that would be one for the dollar bulls.

This next chart shows when the US dollar put in its top at reversal point #9 gold was putting in a nice bottom that led to a 250 dollar rally that shows the inverse relationship is still working. As you can see last weeks rally in the US dollar put gold on the defensive.

This next chart is a longer term look that shows the Diamond and our rally from  last week as a backtest so far. The red and green circles shows where the 50 dma and the 200 dma have crossed over giving buy and sell signals. As you can see the dollar is still on a bearish crossover at the moment.

Next lets look at the old original expanding triangle which led to the Diamond pattern. As you can see the bottom rail is still HOT after all this time as this is where the dollar is getting its bounce. This recent low at reversal point #10 completed the ninth reversal point which is telling us it’s a reversal pattern to the downside. In order to get the 10th reversal point completed the dollar would have to rally all the way up to the top rail to compete the 10th reversal point putting the expanding triangle back into a consolidation pattern to the upside if it breaks through the top rail. Expanding triangles like this tells you the volatility is getting to extreme levels as each swing is getting bigger and bigger suggesting the dollar is getting out of control. Right now the dollar is testing the brown shaded support and resistance zone from below which is its first real obstacle to moving higher.

I have to give this next chart to the bulls as they have managed to trade above the support and resistance rail that I have to label as a false breakout for the time being. If the dollar bulls can get the price action above the brown shaded support and resistance zone, directly overhead, that would be another positive development for the bulls.

The reason the dollar chart above is so important, especially with the support and resistance rail, is because of what the implications are if the S&R rail can hold support. I’ve shown you this next chart many times in the past that shows the big picture for the dollar. Notice the thin black dashed line on the far right side of the chart that is the support and resistance line from the chart above. If this critically important line holds it will put the bigger picture of a strong US dollar back into play. The dollar would need to take out the thicker S&R rail to really create a strong move to the upside. So far the thick down sloping S&R rail has held resistance on several attempts by the dollar to breakout.

This next long term monthly chart shows the US dollar breaking below a 2 plus year uptrend, black dashed line, that has formed within the completed downtrend channel at reversal point #5. Is this just a backtest move to the thin dashed line or something bigger?

Lets look at weekly chart for the US dollar that shows a bearish rising wedge that has broken down. A complete backtest would come in around the 82 area.

Lets look at one last chart for the US dollar that shows the very long term look that shows a potential very large H&S top pattern. I really don’t expect this chart to play out but in a worst case scenario, if inflation was ever to go hyper, then this chart would probably play out and gold would go to the moon. You can see why our latest support and resistance rail, that had the false breakout to the downside and has reverse back up above that important rail, is so critical to the big picture. We are at junction city USA.

So far what the US dollar charts are showing us is that it’s time for the bulls to step up to the plate and break through all the overhead resistance rails to turn the dollar back up into an uptrend. The ball is in their court right now.

Now lets look at the most important commodity on the planet which of course is Oil. We shorted oil when it broke down from the support and resistance rail as that showed me a creditable top was in place. So far the price action is moving down in reverse symmetry to how it went up this past summer on the daily line chart.

Lets look at the same top using a bar chart that shows us Oil created a red  bearish falling wedge that is approaching a short term price objective down to the 92.71 area. This would be a good place if one wanted to take some profits.

Before we move on I want to show you how the false breakout, that I attributed to the Syrian crises, looked like the real thing at the time as the price action broke above the 2 1/2 year top rail of the blue triangle. Everybody and their brother saw that breakout but when I looked at it from a different perspective I seen something totally different. First the blue triangle with the false breakout.

Below is the weekly chart I showed you where I used horizontal trendlines for the top and bottom of the big trading range. Doing this gave me a much clearer picture of what was really taking place. Many times horizontal support and resistance zones gives one a clearer picture even though the tops and bottoms are not specific points but more of a zone, thus the brown shaded support and resistance zones I often show. As you can see Oil is now working on a possible 5th reversal point in a rectangle which would put this rectangle into a reversal pattern if the price action eventually breaks through the bottom brown shaded support and resistance zone.

This is what the rectangle would look like on a very long term chart of oil. If this rectangle turns out to be a 5 point reversal pattern and breaks out to the downside I think the deflationary scenario I’ve been looking for would come to fruition.

I want to show you one more long term look at oil, that I’ve been showing for a long time now, that has yet to materialize but with the recent weakness its starting to get interesting again. This chart shows a massive H&S top pattern that has teased me several times in the past when it would approach the neckline. Note how many times this neckline has been tested over the last 5 years or so. I look at this very long neckline as the line in the sand between deflation or inflation. If the neckline can hold then the inflation scenario will have merit and the inflationists will have a shot at being correct. On the other hand if the neckline gives way to the downside then the deflationary hole will open up like a black hole that will suck in everything that isn’t nailed down.

The GASO chart shows it’s approaching the bottom rail of a 5 point rectangle.

Lets turn attention to the old CRB commodities index that shows us, after trading sideways since July of 2012, it’s now starting to show some weakness as it’s getting close to making a new lower low.

The GNX commodities index.

JJA agricultural index.

You can use your imagination on what this next chart tells you about the battle between inflation or deflation.

The battle still rages on between the inflation camp and the deflation camp. This has been going on ever since the bull market started for the precious metals complex. If we’re going to see deflation come to the forefront then the US dollar bulls will need to step up to the plate and rally the dollar above some of those close by resistance rails just overhead. Buy the looks of most of the charts above deflation still seems to be in the big picture going forward. How long it takes to really get the ball rolling is anyone’s guess but we seem to inching closer to the inevitable tipping point. How the precious metals complex does is still unclear yet as that sector is still in a trading range which could breakout either topside or through the bottom. I suspect the PM sector will initially fall in the first round of deflation but then turnaround before everything else like it did in 2008. The US dollar will be our biggest clue going forward so that’s where I’ll be keeping a close eye. All the best…Rambus

Below is a weekly look at the HUI that shows a possible rectangle forming. As you can see we are getting a bounce off of reversal point #3 that could be the start of the move up to the top of the trading range. The price action could also come back down to test the bottom rail one more time to form a small double bottom at reversal point #3 before it rallies up. Note the thin blue dashed rail that runs through the center of the rectangle. Most rectangles have these halfway lines in them that divide the upper and lower half’s. You can see the low that formed in April starts the center dashed rail. Our current rally has stalled out at the center rail. This is just more confirmation that we are still trading in a congestion zone either be it a consolidation pattern or a bottom pattern. The plan will be to trade the bottom of the rectangle and sell the top until prove otherwise.

Many times, just before a big move is to occur, you will get a false breakout that can whipsaw you before you know what hit you. It gets everyone moving one way and then out of know where the price reverses direction leaving everyone shaking their heads and afraid to make a move. As you were just whipsawed your thinking is, I’m going to wait until I see a better setup. Does this sound familiar to you. The problem is the real trend is just starting and you are sitting on the sidelines waiting for a new entry point that gets higher and higher. Whipsaws are just part of the game we play and can be painful if not understood. One year ago we got a good whipsaw on the HUI when it broke back above the smaller H&S top, neckline #1, that looked like a real move to the upside when it happened. I got sucked into that one just like everyone else at the time because there was a nice double bottom that had formed that created the right side of the much bigger H&S top, neckline #2. The brown shaded area, just above the smaller neckline #1, turned out to be a bull trap just as the big downtrend was beginning. It trapped many bulls that held on far longer than they should have. You talk about a head fake. Luckily I was able to reverse our long position when the smaller neckline #1 was broken to the downside, breaking even for the trade. That’s when we got short and rode the new downtrend all the way down into the August time frame when the HUI finally crossed above the 50 dma. You can see a couple of small backtests to neckline #1, last two red arrows on the right side of the chart, that gave us all the clues we needed to be short the precious metals stocks. Now look down to the bottom right hand side of the chart that shows the exact same brown shaded area that I’m calling a bear trap. Again, we were short when the blue bearish expanding rising wedge was broken to the downside. When the price action couldn’t move lower than the June bottom a red flag came up for me. As you know I abruptly reversed course again on October 18th and went long. I know many of you were thinking what is he doing? How could he be a bear one day and a bull the next? After being whipped sawed as many times as I have been you begin to understand what is happening and you actually become more embolden once you figured it out. That is why I wasted little time going from being short to being long. If I’m correct on this one we’ll have bought very close to the actual bottom which is looking more like a double bottom now. We still need to trade above 280 or so to confirm the new uptrend but we have excellent positioning right now with our NUGT 3 X long the precious metals stocks etf.

The next chart is a comparison chart that shows the HUI on top gold in the middle and silver on the bottom. If you recall I was looking at the many H&S consolidation patterns that were forming on the precious metals stocks and the PM stock indexes. As you will see the HUI and gold have now broken back above their respective necklines negating their H&S consolidation patterns. Silver is still trading below it’s neckline but it’s steeper than the HUI and golds. The blue shaded area shows the bear trap that many don’t believe is happening. There is an important clue but a very subtle one on the HUI. Follow the price action when the neckline was broken to the downside, which is the bear trap. Notice how the HUI gapped above the neckline and then the very next day backtested it from above. As you can see gold had a similar breakout and backtest form the top side of it’s neckline. This explains why I reversed course when I did. So far it has worked out beautifully.

Next I would like to show you a 60 minute chart that shows more detail of the reversal, off our current low, that has taken place on the HUI. There is a really big clue that stands out like a sore thumb. Note the big breakout gap that occurred at the bottom rail of the blue expanding rising wedge – neckline and the top black rail of the bullish falling wedge, on the far right hand side of the chart. That big gap is one way to get over resistance. Also note the backtest to the blue rail that told me that rail was hot even though it had failed to hold resistance on our current rally. Whenever you see a gap that trades above an important support or resistance rail listen very carefully to what the market is telling you. Its talking to you but you have to understand the language and with enough time and experience you will be able to interpret what she is saying.

There was another very important clue that caught my attention this past week. The chart below shows the downtrend channel, that began with the bull trap I showed you on the first chart above, that is the top of the right shoulder of the big H&S top pattern. This chart shows you all the small consolidation patterns that we watched form in our long ride down from the red arrow, red vertical line, to where the HUI gapped above the 50 dma in August. That is where we exited our short positions on DUST, DGLD and DSLV. The green arrow, green vertical dashed line, shows where we have gone long starting on October 18th. I think this would qualify as selling or shorting the top and buying the bottom, at least up to this point in time.  I would like to focus your attention on the red circle that shows how the HUI interacted with the confluences of resistance rails. You have to look real close, inside the red circle, that shows a big gap right where the green arrow is pointing up. That gap took out the big one plus year top rail of the downtrend channel, the bottom blue rail of the expanding rising wedge, the black dashed support and resistance rail and the 50 dma all at one time. That was a very important development IMHO.

Next I would like to look at some inverse etf’s for gold, precious metals stocks and silver. I’m actually getting a pretty clear reading on these short 3 X etf’s that are painting a very positive picture for the precious metals complex. Remember they are inverse etf’s that shows if DGLD is building a H&S top then gold is showing a H&S bottom. The first chart we’ll look at is DGLD 3 X short gold that has a very nice looking H&S top in place. As you can see it’s made up of three different chart patterns. The price action broke below the blue bearish rising wedge, about 8 days ago, with a quick backtest that told me to expect a move down to the neckline at the very least. This is good for our UGLD trade which is 3 X long gold.

Below is a line chart for the DGLD short gold etf that shows a nice symmetrical H&S top that is trading below the 50 dma.

Next lets look at DSLV which is a 3 X short silver etf that is showing a very bearish picture for that etf but a very positive picture for your USLV 3 X long silver etf. DSLV is hanging on by a fingernail to the black dashed uptrend rail. Note it has already broken out from the blue bearish rising wedge halfway pattern. These types of patterns generally form about halfway through the impulse leg down. By the looks of this chart the next 4 to 6 weeks should be very bad if you are short silver but very good if you’re long silver.

Below is a close up view of DSLV’s bearish rising wedge complete with a breakout gap and backtest last Friday. This is the reason silver was weaker last Friday compared to gold and the HUI as it was in backtest mode, not quite ready to start its impulse leg.

Now lets look at everybody’s favorite 3 X short etf, DUST. The 60 minute chart shows the blue bearish rising wedge that we were watching very close that had a false breakout to the upside if you recall. It is now part of a much bigger chart pattern the bearish rising flag. Notice the big break away gap from the blue bearish rising wedge. If you recall that is where we exited our DUST position at the time. I said when you see a big gap like that, don’t ask questions, just get out of your position as quickly as possible because there is a good possibility that a big move is about to begin. That is another clue as to why I made such an abrupt turn around from being short the PM complex to going long. Gotta listen to the clues. As you can see DUST has already broken out of the bear flag and did a backtest last Friday.

This next chart of DUST puts our bear flag into perspective as a halfway pattern within a bigger downtrend channel. The red numbers shows the nice clean reversal points in the blue bear flag.

The daily chart for DUST shows a rather ugly H&S top formation with a strong backtest. As you can see the price action from the last two days has traded below the bottom blue rail of the blue bearish rising wedge so we are actually 2 days into the breakout.

This last chart shows how I’m measuring the blue bear flag as a halfway pattern. Each rectangle measures time and price. Notice how the price objective is all the way down to the October low from last year that should come in around the 11.35 area around the 12th of December. This chart is a template for us to watch to see how things progress. As long as nothing gets broken and the price action continues to fall we’ll just bid our time waiting for the price objective down to the 11.35 area to be hit. There are no guarantees that this will unfold exactly how I have it laid out but this is the best scenario I see from a Chartology perspective.

Keep in mind these three etf’s are short the precious metals complex. The reason I’m showing you these short etf’s is because they have a clearer picture and are easier to see their tops which would be bottoms on our long precious metals stocks, NUGT, UGLD and USLV. By the looks of these chart above we are on the cusp of something interesting that is about to happen in the precious metals sector. Stay tuned for further developments. All the best…Rambus

Rambus Has completed his all important Weekend Report early

He is busy with his Grandson’s Third Grade Football Playoffs today

He has asked me to post it

But I decided to keep it to myself this week

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OK OK….Stop with the Brick Throwing Please

Posting will be This evening about 7 to 8 PM Eastern North America Time

Here is a Hint :

Me and My DUST

http://youtu.be/2SlwV7mtsmw

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Meanwhile Please gather at the Forum to share your ideas and Vote the new Poll

For those with Forumophobia ..or those who like to vote twice…we have the same Poll Here at the main Site

Vote Vote Vote

(Scroll Down half way to the Poll on the Sidebar)

In this Weekend Report I would like to show you some charts as to why I have made an abrupt short term move out of our short positions in the precious metals complex. I know some of you think I have lost my mind but I can assure you that isn’t the case. Regardless if I’m bullish or bearish I’m always looking at both sides of the market looking for clues for either direction. This week we got a major clue when the US dollar finally finished its third backtest to the bottom rail of the 11 point diamond top. It’s possible that gold and US dollar can trade in the same direction for awhile but I don’t think that will be the case longer term. So lets look at some charts for the US dollar first as that’s where the biggest clues lie.

A diamond is generally consider a bearish topping pattern but from my experience they can go either way. I’ve shown you some beautiful diamond consolidation patterns that worked out very well. It’s the same with the rising and falling wedges. Whichever way they breakout will be the direction of the next move. It just so happens that our 11 point diamond pattern on the US dollar has broken down and out of the pattern. If the reversal point at #10 held and the price action rallied back up and through the top rail it would have been a consolidation pattern but that is not the case. After a month or so of backtesting the bottom rail of the diamond pattern it now looks like the move down on Thursday maybe starting the impulse leg lower.

The reason the 11 point diamond on the US dollar chart is so negative for me is because one formed on the HUI as the head portion of the massive H&S top. When you spot one it pays to heed its warning either as a topping pattern or a consolidation pattern.

Below is a combo chart that has the US dollar on top and gold on the bottom. Up until the dollar broke below the diamond top five weeks ago I was bullish on the dollar and bearish on gold which proved to be the case since gold topped out in 2011. I don’t know about you but when I look at the red diamond and see nothing but air below it it doesn’t make me feel very bullish. Sir Chuck here is a strongly slanted H&S top on gold, that you won’t see anywhere else but at Rambus Chartology, that reached its price objective at the June low as the US dollar was putting its high on the diamond. As you can see over the last two months or so the inverse correlation hasn’t been that strong but I think if the dollar continues to fall we will see gold move higher.

Lets look at one more chart for the US dollar that shows a 6 point bearish rising wedge. The bottom of the bearish rising wedge would be the price objective which would come in around the 73 area. How long it takes the dollar to reach that first real support zone should tell us how long gold will have to be in rally mode.

A weak US dollar usually means a stronger commodities market in general. The chart below shows the GNX trading in a falling wedge pattern for just under three years now. As you can see the price action is now being squeezed into the apex of the bottom black uptrend rail and the top rail of the blue falling wedge. If the GNX breaks out through the top blue rail I would have to consider this big falling wedge as a halfway pattern to the upside. As you can see this commodities index can really move in both directions. It would also be telling us that commodities in general maybe a good place to park some capital.

There is an area I like to follow when we see a weaker US dollar and that is the Basic Materials sector. As you can see the IYM, basic materials etf, has just broken out of a 6 point bullish rising wedge and completed the backtest a week ago. It’s hard to believe but this etf is within striking distance of its all time highs.

Lets looks at several stocks that are in the basic materials sector. AA has been building out a very tight falling wedge that is right on the verge of breaking out through the top rail. It had many chances to break below the bottom rail over the last two years but it never happened.

DD – DuPONT has broken out of a very pretty symmetrical triangle consolidation pattern and is now in an impulse move higher. It’s also trading at new all time highs.

Dow Chemical has broken out of a diamond consolidation pattern and is running to the upside trading very close to new all time highs.

Dow Chemical weekly diamond.

IP – International Paper is trading back above the top rail of the blue triangle that led to the 2008 crash low. It formed the red bullish rising flag just below the top  blue rail and is now trading close to new all time highs.

Lets look at one more stock in the basic materials sector that is just now breaking out of a 5 point bullish falling wedge. X – US Steel is trading way below its all time highs but it looks like a bullish setup to me as it has broken out of a 5 point bullish falling wedge. There is a lot of room to the upside on this one.

Next I would like to look at several of the very largest miners that have been morphing from what was looking like a H&S top pattern that is failing as the price action is now eroding the neckline to the upside. These H&S patterns were formed about the same time the HUI’s big H&S top formed but unlike the HUI that crashed down to the 200 area these big miners kept hanging around their necklines. I kept wait for them to follow the HUI lower but they refused. Now with the weaker US dollar they’re beginning to show some life.

The first big miner I would like to show you is RIO that actually had a double H&S top with a clean breakout to the downside and backtest. Over the last eight weeks or so the price action has been trading just above the neckline and now looks like it maybe forming a smaller inverse H&S bottom right on the big neckline. It’s still possible it could trade back below the neckline but I have to give the benefit of a doubt to the smaller inverse H&S bottom until prove otherwise.

Below is the monthly chart for RIO that showed the unbalanced H&S top which now looks like a false breakout.

Below is the same monthly chart for RIO but this time I’ve changed the trendlines to the new pattern that is emerging. It still hasn’t broken out of the top rail yet but if it does I would have to consider this triangle to be a halfway pattern. Note how the brown shaded support and resistance area held support during the 2008 crash.

BHP weekly chart shows the exact same setup to RIO with the false breakout from the neckline and now is trading on top of the neckline.

Lets look at one more big miner FCX that is actually breaking through the top rail of its now morphing H&S – triangle pattern. I’ve left the original annotation on this weekly chart that shows how the H&S looked in conjunction with the blue triangle. Note the small double bottom that formed on the right side of the chart that has led to the breakout of the top blue rail.

Lets look at one more stock that I know most of you are interested in, DUST. Earlier last week we were looking at a morphing rising wedge that looked like it was breaking out to the topside on the 30 minute chart. Right after the breakout it declined and found support at the apex of the original rising wedge, blue dashed trendlines. From there it made one last attempt to breakout and move higher but as you can see it lost momentum and closed at the bottom rail. Nothing was broken at that time and it looked like it had just formed a small double bottom on the bottom rail. The next morning there was a big to the downside that forced us to exit our positions. What is left behind looks like a 5 point bearish rising wedge. When there is a big break like that it doesn’t pay to be cute and out guess what the stock may do. That big gap is talking to us even if DUST recovers, discipline says to get out of harms way and don’t ask questions.

DUST 60 minute look.

Below is a daily chart for DUST that shows what I think is happening right now. There is a possible unbalanced H&S top with a fat neckline, brown shaded area. There is a bigger rising wedge that is making a strong backtest to the neckline. I have to admit it’s not the prettiest H&S top I’ve ever seen but it could fit the bill. Just like the HUI, that doesn’t have a clear picture yet, is leaving some room for further interpretation. Right now DUST is trading between the 50 dma and the 150 dma.  As you know we took a small starter position in NUGT based on the breakout from the smaller, rising wedge, blue dashed rails. The bigger rising wedge still hasn’t broken out to the downside yet. if it does we can add more to our NUGT position. If DUST can rally back above the bottom dashed blue rail of the smaller rising wedge we would then have to exit our NUGT position.

If one can get the direction of the US dollar right that goes along way towards making the right decision in which area to invest. Up until just recently the US dollar was in that chopping sideways diamond that didn’t show itself as a top or consolidation pattern. With the breakout and now three backtests to the bottom rail of the blue diamond, the evidence now becomes undeniable until something changes for the positive for the dollar. The first thing the dollar would have to do to show it’s becoming positive would be for it to trade above the apex of the blue diamond. That would get my attention. The burden of proof now lies with the dollar bulls to turn things around. I really believe that we are at the very beginnings of a major shift back into commodities again as the charts above are showing. It’s still very early in the transition phase but the commodities have basically been consolidating for close to three years now. With a long term consolidation pattern you get a long term move in the same direction leading into the consolidation pattern. The US dollar is key going forward and if it stays in its downtrend commodities should benefit. It’s still very early yet so we have plenty of time to put together our portfolios. All the best…Rambus

New Pricing takes effect at Midnight Sunday Oct 20

as per this Post

http://rambus1.com/?page_id=10112

Present Monthly and Yearly Members are All Grandfathered at the Present rates as long as you continue to subscribe

Note :

If a Monthly Member wishes to go to Yearly…the paypal buttons will reset at midnight to $399 a year

so if you wish to do so at $299 you have until Midnight Cindarella

🙂

Team Chartology would like to thank each and every member who has found your way to our website and have honoured us

with your support these past 2 years . We are truly humbled by this experience .

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Some of you have been with us from the very beginning in November 2011 .

Most of you early Subscribers are from Goldtent , (the best Damn Goldbug Site On the net) where Rambus first posted his charts back in 2007- 2008

Who We Are and How We Happened

http://rambus1.com/?p=12205

2008 Rambus Deja Vu Post

http://rambus1.com/?p=1829

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Many more of you found us via Precious Metals Information sites such as

Gold-Eagle
Safehaven
Market Oracle
Investing.com
Kitco and
Safehaven

We thank the Owners and Editors of these sites for posting Rambus Public Posts

Example :

Gold-Eagle Rambus Posts

http://www.gold-eagle.com/authors/rambus

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We are also overwhelmed by the notes of appreciation we have received these past 2 years…some of which can bee seen here

Testamonial Testamania

http://rambus1.com/?p=11625

and

Some Stunning Research into Rambus Chartology from a Member

http://rambus1.com/?p=14543

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The Point of this Post is Not to brag or gloat about Rambus’s Successes( Rambus Hates when I do that) because as we all know

In this business we are only as good as our last trade .

The Point of this Post is to Recap where we have come from and where we are going

HUI a Diamond in the Rough (Posted January 2 2012 !) …just 2 months after we opened

http://rambus1.com/?p=1874

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Rambus has 2 Portfolios

Both Started August 1 2012

1… Model Portfolio which was originally intended to contain 20 or so PM Stocks

Rambus has been Bullish for very short periods and has carefully built this portfolio 3 times

only to abandon them shortly after when things did not line up

this portfolio has recently held other General Market Stocks and occasionally shorts as well

Presently it is Up a mere 38% since inception and presently it is all in cash..but if I know Rambus

Not For long

2…the Kamikazi Portfolio which is for Agressive Traders and houses 3 X Precious metals Bull and Bear ETFs

as well as occasional other 3X ETFs in other sectors…This Portfolio is presently Fully Invested

and is presently up 358% from Inception…Yes Rambus has turned $100,000 into $458,000 in 14 months

PORTFOLIO TRACKER

http://rambus1.com/?page_id=6926

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Now to the Point :

We have Decided to raise the Price of Subscription from $29.99 a month to $39.99 a month

and from $299 a year to $399 a year

Starting on our Second Anniversary Next Sunday October 20th

BUT

All Present Members are Grandfathered at the Present Rate

You will continue as Rambus Members for as long as we are here for $29.99 a month or $299 a year

until you chose to unsubscribe

Now…Present monthly Members who have been considering yearly can do so this week (until Next Sunday)

at the present $299 Yearly price

After that date there will only be 2 Subscription price options available via paypal

$39.99 and $399

So if you chose to go yearly after the 20th it will be at $399

For those who pay by cheque or monthly invoice

we will still honor you present price but if you chose to go with recurring monthly or yearly payments

please do so this week at the present price

Here is the Sign up Link

http://rambus1.com/?page_id=10112

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Again We wish to thank each and every one of you for Subscribing and Look Forward to more Exciting and interesting and Profit Filled years

Fullgoldcrown ……(for Audept, Mrs Rambus and Rambus)

PS : Questions and Comments can be sent to the Contact link on the top right of the Home Page