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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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

I hope everyone is enjoying the volatility because that is the name of the game we are playing. There is no such thing as a safe investing environment. As with nature you always have two opposing forces, the ying and the yang, the good and the bad, the democrats and republicans and the bulls and the bears. This creates tension between the two sides which leads to movement in one direction or the other. Nature demands change because without it everything would become stagnant and die. Just when you think you have the markets figured out something will change and leave you wondering why this is happening when that should be happening. I’ve stated several times in the past, “the only rule in the market is there are no rules.” This means markets are always changing and what may have worked before may not work this time. So we are always trying to hit a moving target with our Chartology, Elliot Wave or time cycles, whichever method you use, to gain an edge. This is just the nature of the beast pure and simple. If it was easy there would be no markets to trade because everyone would be right and nobody would be wrong. Like I said you have to have the ying and the yang, the good and the bad, the democrats and republicans and the bulls and the bears.

Tonight I want to show you some weekly line charts for some of the big cap precious metals stocks but before we do I would like to update you on a couple charts first. Below is a daily bar chart for gold that shows the double H&S top with the lower neckline coming in right at 1300. Even though there was a small false breakout the pattern still remains intact. We’re close but just not quite there yet.

(Editor’s Note : This Post was made Wednesday Night….. As You probably Know…as of Friday…we are Now “There” )

This next chart is what I call my bull and bear chart. The bulls are looking at this chart and are seeing an inverse H&S bottom that is going to lead to a brand new bull market. The bears look this same chart and see a bearish H&S top. One side is going to be right and the other side is going to be wrong. We’ve placed our bets and now we wait for confirmation.

This next chart is a combo chart that I’ve been showing that shows gold breaking down from its small red bear flag five weeks ago already and the HUI has been in breakout mode for the last two weeks. Let me repeat this again. Gold has broken down out of its bear flag five weeks ago and the HUI two weeks ago. Folks we are and have been in an impulse leg lower. What you are experiencing right now is just normal market movement, nothing more or nothing less. In the case of the bear, the markets go down more than they go up but there is always the steady chopping action that frustrates both the bulls and the bears alike. It’s the trend of lower lows and lower highs that you have to observe, over time, to see who is in control. Note the heavy purple dashed line that shows the bull market tops in gold and the HUI. Look at the price action on the left side of the purple dashed line and you see higher highs and higher lows all the way up. Now look to the right side of the purple dashed line and you see just the opposite, lower highs and lower lows which is a downtrend. This is basic Chartology 101.

The two hour line chart for the GDM shows the breakout and backtest, that we observed in real time, when it happened. I don’t know how to make it any planer that the precious metals stocks have been in an impulse move lower since the breakout from the bottom blue rail of the bearish expanding rising wedge. There is nothing weird or strange about this downtrend. It actually looks pretty normal. Two steps down and one step up, backing and filling which is creating lower lows and lower highs. This is a downtrend you are experiencing.

This next long term daily chart for the HUI puts our bearish expanding rising wedge into perspective within the confines of the downtrend channel that started one year ago already. As you can see its been a steady grind lower until the blue bearish expanding rising wedge developed. The market need a timeout and this is the consolidation pattern it chose to form. Note the breakout and backtest when the HUI broke through the bottom blue rail of the expanding rising wedge. It just doesn’t get any pretty than this. As long as the price action stays below the bottom blue rail of the bearish expanding rising wedge we have to play the odds that the move lower will continue.

Earlier in this post I showed you my bull and bear chart and said I believe the bears were going to win the battle. These weekly line charts shows why I still remain bearish and why the bulls will have to start proving their theory before the precious metals stocks go much lower. As sir Plunger so aptly put it, the point of recognition is close at hand for the third phase of this bear market. I believe when the bulls can no longer make a case for their inverse H&S bottom they will start to capitulate and run for the hills. That has yet to happen but it’s getting closer by the day.

The first weekly line chart I would like to show you is the XAU that is just a simple chart that says alot. Sometimes you don’t need alot of lines on a chart to make your point. You can see the two H&S top patterns that most missed that stand out like a sore thumb now that they can be seen in hindsight. I believe the point of recognition for the bulls will be when the previous low is broken to the downside.

ABX is currently trading below the 2008 bottom.

AEM is currently trading at multi year lows on the weekly line chart.

ASA is showing some nice reverse symmetry down but is still trading several points above its 2008 low.

AU has been trading below its 2008 low for sometime now. Note the breakout and backtest to the 2008 trendline.

BVN is just a point or so away from its 2008 low.

CDE shows a beautiful H&S top that just completed the backtest and now has plenty of room to run to the downside.

GFI is trading at multi year lows and is approaching the 2008 bottom.

GG still has a lot of room to move lower.

Randgold just completed a backtest to its double top trendline and has a lot of room to move lower now.

HMY is trading way below the 2008 bottom is now approaching new all time lows.

One last chart and then I need to get this posted. NEM is now trading at multi year lows. There are still two days left of trading for this week but if NEM closes below the previous low that will not be a good omen if your a bull.

All these charts above shows you why I’m still bearish on the PM sector and until something changes these charts for the better it is what it is regardless of what the fundamentals may say. There are going to be good days and bad days coming up. The volatility will probability increase as we move lower with the bottom pickers looking for a bottom and the lonely bulls selling at all cost to save whatever capital they can. Stay calm and strong. All the best…Rambus

In this Weekend Report I want to continue looking at the precious metals stock indexes and the consolidation patterns that have been building out since the June low. The reason I’m spending so much time looking at this possible consolidation area is so you can get a feel, in real time, how breakouts and backtest work. There is no better way to learn how the markets work than to watch how things unfold moment by moment. Its easy to say after the fact, yes I should have done this or that, but real time doesn’t give you the luxury of 20/20 hindsight.

I’m going to start with the 2 hour, 6 month line charts that I showed you a couple of weeks ago before the flash rally. They looked like they were on the verge of breaking down at the time. I think the flash rally just delayed the inevitable. It may not feel like it but a lot of work has been going behind the scene with the breakout and backtesting that takes time to complete. As you will see everything up to this point is still working out as planned except for the flash rally. Keep in mind when I posted these chart we were still trading inside the bearish expanding rising wedges.

Lets start with the strongest of the precious metals stock indexes the HUI that now shows the breakout and a half hearted backtest so far. You can also see the H&S consolidation pattern that is part of the bearish expanding rising wedge consolidation pattern that shows up on the other PM stock indexes as well.

The XAU shows it a little further along in it’s move lower.

The GDX shows a nice breakout and backtest.

GDM is a proxy of our DUST trade which is trading lower which is good for DUST.

The GDXJ, small caps, shows the same setup as the other PM indexes.

The GLDX small cap gold mining stock index is the furthest along in its impulse leg lower. Note, that one backtest after the breakout. That is something we have to keep an eye on with the big cap PM stock indexes. You never know for sure from what level a backtest could spring up from so this chart is a heads up just in case the big cap PM stock indexes have something up their sleeve. This chart also paints a bigger bear case as the little guys are leading the way down. You want to see just the opposite happen in a bull move.

The 2 hour line chart for gold shows a H&S pattern that broke down and is now in a strong backtest. We need to see the price action break back below the neckline again to confirm the H&S pattern.

SLV is showing a small unbalanced H&S consolidation pattern that has broken down below the neckline with 2 backtests. It has also broken down from the much bigger support and resistance rail and is backtesting it from below. Above the S&R rail is positive and below is negative.

Next lets look at the internal structure of the blue bearish expanding rising wedge as seen on the 60 minute chart for the HUI. It wasn’t until the small double top was in place that the expanding rising wedge could even be seen as a possibility. Once I recognized the double top I was then able to draw in the top blue rail which so far has turned out to be the major resistance point for the HUI. As you can see there is a smaller H&S pattern with the double top as the head and the red bearish falling wedge as the right shoulder. Note the big breakout gap that took out the neckline and the bottom rail of the red falling wedge. That’s what you like to see happen in a situation like that. There is also a much bigger H&S pattern in play at this time with the left shoulder forming back in July. The last point of interest is the red bearish falling wedge that is forming basically right on the bottom blue rail of the expanding rising wedge and the H&S neckline. Note the beakout gap and the backtest last week to the underside of the neckline and the bottom blue rail that ended up being the 4th reversal point in the red falling wedge.

As you can see the GDM chart has a similar look to the rest of the PM stock indexes as they all look pretty much the same.

The GDXJ shows a double H&S top that is showing the way lower for the bigger caps.

Lets put our blue bearish expanding rising wedge into perspective which shows it as the last consolidation pattern in a string of consolidation patterns that have made up this downtrend that started at the right shoulder high made last year around this time. You can see a breakout gap accompanied by the backtest last week which shows the work that was being done to get ready for the next impulse leg lower. Everything is in place. Now we just need to see some follow through to the downside to really get the ball rolling. Also note that our bearish expanding rising wedge is by far the biggest chart pattern of this downtrend. This tells me it could very well be a halfway pattern. We’ll just have to follow the price action and see where it leads us.

This next chart starts putting all the pieces of the puzzle together up to this point in time. The top and bottom rails of the expanding downtrend channel each have three touches which makes this viable pattern. Normally in a downtrend you will have a hard move down followed by a sideways consolidation pattern that can chop sideways until it hits the upper trendline. It can do this several times before the downtrend is finished. The blue numbers shows this happening on the chart below. Point #1 started the downtrend with points #2 and #3 being the sideways consolidation pattern trading between the bottom and top rails. Now fast forward down to reversal point #4 which is the beginning of our blue bearish expanding falling wedge that has now trade between the bottom and top rails. I don’t know if the price action will trade back down to the bottom trendline but it’s setup to do so. If it did the decline would probably look similar to the decline between reversal points #3 and #4. Again we will just have to watch the price action for clues along the way.

Using the linear scale chart we get a more parallel down trend channel.

I would like to go back in time and show many of our newer subscribers what we were looking at back in the beginning of 2012. The first thing you will notice is the black dashed down sloping trendline that I labeled as a support and resistance rail. The red arrows shows how it acted as resistance and the green arrows shows how it acted as support. That was a very important trendline at the time which let us know where we stood as far a being in the bull or bear camp. You can see the H&S top that has all the green arrows underneath it as it was acting as support. That was a very nice looking H&S top that I thought was going to be our major top at the time. As you can see the price action broke below the neckline that said all systems go for a move lower. The backtest started off of the solid black uptrend rail that took the HUI back up to the neckline, red arrow. So far everything was working out beautifully. I drew in the solid black uptrend rail connecting the 2008 low and the low we just made. When the HUI started to move lower after backtesting the neckline from below I really thought the price action would break through the solid black uptrend rail with no problem as the H&S top was in place. As you can see when the HUI declined back down to the black rail it didn’t give way and the HUI started to rally creating the double bottom. This was a very trickery situation as we had the H&S top in place and a double bottom that had just held. We were short at the time and I had to decide very quickly if that was the correct position to be in as the double bottom held and the HUI was rallying strongly up. Long story short we exited our short position and went long. Once above the neckline, red arrow, it felt like the bull market was taking off again and the place to be was to the long side. This is why following the price action is so important. The rally stalled out at the blue arrow, which we now see as the right shoulder of a bigger H&S topping pattern. I held my ground on the backtest from the top side just as you would have expected to happen as the support and resistance rail suggested should now hold as support, green arrows. The moment of truth came when the HUI broke below the black dashed support and resistance rail with a strong move. I said at the time this wasn’t supposed to happen if the bullish case was in place. We exited our short position with a small loss to break even. At that point we backtested the black support and resistance rail from below and is when we took our initial position in DUST on December 2nd I believe. I used the red circle to show how we were interacting with the neckline, which is part of the support and resistance rail and the solid black uptrend rail. The Chartology worked its magic within the red circle as you can see. The price action backtested the neckline and then when the uptrend rail was broken to the downside it backtested it as well. This was as clear a signal as you could get that the false breakout above the neckline or the support and resistance rail was nothing more than a bull trap that caught many bulls by surprise including me. I was lucky enough to have Chartology on my side so by following the price action we were able to get out of our precious metals stocks and ride the whole bear market impulse leg down using DUST, DSLV and DGLD.

Now you can see our blue bearish expanding rising wedge that nobody is seeing except members of Rambus Chartology. There is a very good possibility that this pattern is showing us the halfway point of the major decline that started at the top of the right shoulder on the bigger H&S top that I’ll show you in a minute.

The chart below shows the small H&S top on the chart above but also shows the much bigger H&S top that formed when the rally stalled out above the smaller H&S neckline that I’ve labeled as a bull trap.

Below is a daily log scale line chart that shows the double H&S top in place with our blue bearish expanding rising wedge as a possible halfway pattern. Keep in mind the linear scale chart gives a lower price target for the big H&S top.

I need to warp this up as it’s getting late. So far nothing is broken and the price action is moving along as expected. There are times when the markets whipsaw you before you know what hit you. By following the price action we can generally stay on the right side of the bigger move. The markets are always trying to shake you off before your price objectives are hit, it’s just the nature of the beast.  We’ll see if we get any follow through to the downside this week that will leave our bearish expanding rising wedge in the DUST. All the best…Rambus

I just want to show you why we are much more leveraged to DUST or short the precious metals stocks vs just being short gold and silver. Below is a combo chart with the HUI to gold ratio on top and gold on the bottom. This is really a pretty incredible chart when you see how badly the precious metals stocks have preformed to gold. The ratio chart also has some pretty nice symmetry going on. I’ve been looking for the .13 area for a long time that will match the start of the bull market low made back in 2001.

The next chart for the HUI to GLD ratio shows how it has broken below the 2008 crash low and has been consolidating just below that important bottom since July of this year.

This next chart compares the HUI to silver that shows how badly the precious metals stocks did when silver was making its all time highs back in April of 2011. Notice the almost vertical drop the ratio made into the April 2011 bottom. That shows you how badly the PM stocks did as silver was going parabolic. I remember thinking to myself, something isn’t right with this picture, at the time. Note the big H&S consolidation pattern that formed in the middle of the chart that broke down last fall. In July of this year the ratio broke down again this time breaking below the red bear flag.

I want to show you one more ratio chart that compares gold to the XAU that tells an incredible story. First note the spike high that was made during the 2008 crash where the ratio went to a new all time high. Everyone said that was a fluke and it was truly an aberration that will never happen again. The ratio fell for the next year or so and then began the long risie back up again. Note the 5 point blue triangle that reversed the downtrend. As you can see two more consolidation patterns formed on the way up that kept suggesting that the precious metals stocks were still underperforming  the metal. Then the ratio hit another all time high this summer that looked like it would be the ultimate high for the bear market for the precious metals stocks vs gold. Note the little island reversal that formed just under the black dashed trendline just below the all time high. I thought at the time that the ratio was finally breaking down and it was time for the precious metals stocks to start outperforming gold again. That’s when we took a stab at the precious metals stocks that lasted all of a week or two before we had to exit at breakeven. As I mentioned several times and to Sir Fully this week, ” the only rule in the markets is are there are no rules.” This means stocks can get overbought or oversold beyond anything reasonable and for an extended amount of time. I can guarantee you that if you said, at the beginning of the bull market for the precious metals stocks that they would under perform gold to this extent, they would have put you in a mental institution.

As long as these ratio chart continue to fall we will be more leveraged to the precious metals stocks using DUST as our main tool. It’s possible that when THE BOTTOM finally comes in the precious metals stocks will lead the way higher as they did back in 2001. Right now they are still under performing the metals.

In this Weekend Report I would like to look at the Chartology of the precious metals complex as this is either a consolation phase or as some think a bottoming formation is building out that will lead to the next bull market. In order to grasp what is really going on we need to look at all the possibilities and try to gain some perspective on which course of action the precious metals complex is likely to move in the short to intermediate time frame up or down.

The first chart I would like to show you is what I call my bull or bear chart. Many chartists are looking at the inverse H&S bottom that actually started to form back in April of this year, left shoulder. The head was formed during the late June low followed by the ten week rally to the September high around the 1435 area. As you can see there are two black necklines labeled #1 and #2 that shows a possible double inverse H&S bottom. In order to keep the symmetry alive gold would need to decline down toward the 1250 area where it could then form the second right shoulder. To confirm an inverse H&S bottom is in place gold would have to takeout the bigger neckline #2  around the 1400. This would be the bullish case for gold. The bearish argument for gold is that it is forming a H&S consolidation pattern as shown by the blue annotations. The flash rally that took everyone by surprise made the right shoulder high which quickly reversed direction. So at this point we have two inconclusive patterns to work with.

As I will show you in the following charts I believe the blue H&S consolidation pattern will be the correct pattern to follow. If gold rallied up through the bigger neckline #2 then I will have to reassess the situation. The 60 minute chart for GLD shows all the chart patterns that have developed since the late June low. The first chart pattern to note is the black bearish rising wedge that had built a smaller red bullish expanding falling wedge as a halfway pattern which created the left shoulder. The breakout from the red expanding falling wedge led to the high for this move which is the head portions of the double H&S top. Note the small H&S top that reversed that 10 week rally labeled neckline #1. Once the smaller neckline #1 was broken to the downside that led to the bottom of the bigger H&S neckline #2 where we got the flash rally that formed the right shoulder. Note the neckline symmetry rail that was made off of the smaller neckline #1 that gave us a good place to possibly look for a bounce for a bigger H&S top which turned out to be the case with the placement of neckline #2. A neckline symmetry rail is just a parallel trendline made off the original neckline. It doesn’t work all the time but it does give you a rough place to look for a second neckline which happens quite a bit.

Let look at a daily chart for gold that puts the 60 minute H&S consolidation pattern into perspective. As you can see the price action is trading right in the middle of both necklines in no man’s land.

This next chart shows the big 20 month rectangle that gold broke out from back in April of this year. That was a major nail in the coffin for the bull case as gold should have never broken that critical bottom rail of the 20 month rectangle. That confirmed the bear market for me.

Lets look at one more chart for gold that shows a very long term monthly view going back 20 years. This chart makes it painfully clear if you’re bullish on gold that there is a lot of work to do to repair all the damage that has been done since the unbalance double top was put in. First note the 10 month ema that held support for most of gold’s bull market years and was rising. Since the unbalanced double top was put in note how it’s now acting as resistance on any rally and is falling. The brown shade support and resistance zones I have added that shows the previous tops that were made on the way up should now act as initial support on the way down. If gold takes out the 3rd brown shaded support and resistance zone there will be little in the way of support until it trades down to the 4th support and resistance zone around the 1000 area. I often write about reverse symmetry which means how a stock goes up, especially in a strong move, will reverse that move in similar fashion on the way down. As you can see that is exactly what gold is doing.

Lets now focus our attention to silver by looking at the 60 minute chart that shows it too has a small H&S top  in place with a possible bigger H&S pattern developing right now. There have been two backtests to the smaller neckline around the 22.25 area. Note the flash rally that took the price up to the smaller neckline and has created the right shoulder of the bigger H&S pattern. As you can see the bigger H&S pattern is strongly slanted but the neckline symmetry rail suggested that the right shoulder high would come in around the smaller H&S neckline. The price action has been crawling along the bottom neckline for a week or so which if it’s broken to the downside the bigger H&S pattern would have a price objective down to the previous low at 17.82.

The daily look at silver shows how the flash rally ran into resistance at the neckline.

The weekly chart for silver shows its big 20 month rectangle that broke down in April of this year right at the same time gold broke below its own bottom rail. The blue arrows shows why the bottom blue rail of the rectangle is such a critical resistance zone. It’s a 38% retrace of the last reversal point in the big rectangle at reversal point #6. The brown shaded area shows how silver came close to actually backtesting the bottom rail of the 20 month rectangle. Again that bottom rail is critical resistance so if silver can ever overcome that blue rail that would be a big deal for the bulls but until they can over come that all important trendline defensive action is the best policy.

This next chart for silver shows a possible consolidation area that maybe forming at this time. It’s too early to tell yet buy it makes sense from a Chartology perspective. As you can see silver had a big decline starting at the 6th reversal point in the blue rectangle at the 35.50 area all the way down to the 17.80 June low. That was a very big decline and now it needs time to consolidate that move  regardless if silver is still going to move lower.  Right now silver is trading right in the center of a possible consolidation pattern as shown by the thin red dashed center rail.

Lets look at a weekly chart for SLV that shows a slightly different consolidation  pattern vs the 20 month rectangle. Here you can see a blue bearish falling wedge that has four reversal points with a big breakout gap and a completed backtest to the bottom blue rail. Again, you can see how SLV can trade sideways for many months before a definitive breakout would occur. These types of trading ranges can offer up some good profit potential if one can identify them early enough.

I would like to finish up this Weekend Report by looking at some of the precious metals stock indexes that are showing two different patterns at the moment. LIke I showed you on the short term charts for gold and silver they both have formed H&S consolidation patterns. The first pattern I would like to show you on the HUI is its own possible H&S consolidation pattern. Here you can see the flash rally formed the right shoulder and the HUI is now testing the possible neckline. Just think of the neckline for the HUI as positive above and below negative. Of the four precious metals stock indexes I follow the HUI is showing the most strength as the other ones have already broken down.

The 2 hour line chart shows the other chart pattern the PM stock indexes are all making is a bearish expanding rising wedge with the H&S pattern as part of the bigger pattern. As you can see the bottom rail is very hot as its been tested many times. We will know soon enough who is in control the bulls or the bears by what happens around this very important trendline.

As I stated early the HUI has been the strongest PM index as it’s still trading above the bottom rail. Lets look at a few more PM indexes that are showing weakness and are trading below that all important rail. First lets look at the GDX that shows it already breaking below the bottom rail complete with a backtest. The bottom blue rail is now your line in the sand.

The 2 hour line chart for the XAU shows a breakout and backtest.

Even though there wasn’t a lot of movement this week in the precious metals stock indexes there was some very important changes being made namely the breakout and backtest of the bottom blue rails of the bearish expanding rising wedges. So far this is how we want to see the breakout occur. The important thing to keep in mind is that we don’t want to see the price action trading back above the bottom blue rail if one is short. If one is bullish that is what one wants to see. The main thing is we have a line in the sand in which to operate.

The GDXJ is showing a double H&S top in place with the all important backtest taking place right now.

The long term daily chart for GDM shows how this potential topping area started out as a small double top which is the head portion of the H&S consolidation pattern. The brown shaded area shows why the double top head formed where it did as it was previous resistance.

I want to leave you with one last long term chart for the HUI that shows the massive H&S top we’ve been following and our current blue expanding rising wedge pattern in linear scale. We have two price objectives as shown on the chart below. The first one is the price objective of the big H&S topping pattern that measures down to the 106 area as measured by the blue arrows. The second price target is based on our bearish expanding rising wedge as being a halfway pattern. This price target is measured from the breakout of the big H&S top to the first reversal point in the blue bearish rising wedge. Add that measurement to the breakout of the blue expanding rising wedge to get your price objective down to the 65 area, red arrows.

I know it seems impossible at this time for such a low price objective but when I look under the hood of the precious metals stock indexes there is still a lot of room to move lower for many of the big cap stocks. Until something changes this scenario this is what the charts are telling me. Having capital when the PM complex is finally finished going down is going to be key in taking advantage of the bargains that will be there for the taking. That’s the bottom line. This week I’ll update some of the big cap precious metals stocks again as that’s where the real story lies.  All the best…Rambus

Today’s price action gave us a very important clue that a major shift is brewing in regards to the precious metals complex and most likely commodities as well. These kinds of days don’t come around very often but when you see such a massive move during the day time trading hours you need to pay attention. I know today’s price action may be very frustrating for some of you but It’s all part of the game we choose to play. It’s days like today that separate the winners from the losers. This is the point where many will throw up their hands and say ” I quit this is just to hard.” But in all honesty this is the point where you can grow as an investor because you have survived one of the best shots the markets can throw at you. Now it’s all about analyzing what happened today and moving forward.

Today we got the biggest clue we could ask for. The almighty dollar finally gave us the answer we’ve been waiting for. As you know I’ve been bullish on the dollar for quite sometime waiting for it to show its hand. Today was the day. Early on in its development I showed the potential for a Diamond pattern that I believed would breakout to the upside. Today we got the breakout but it was to the downside. I always talk about the number of reversal points a pattern makes because it can tell us if it’s going to be a consolidation pattern or a reversal pattern. An even number of reversal points equals a consolidation pattern that will breakout in the direction of the move leading into the consolidation pattern. An odd number of reversal points tells us the congestion area is going to be a reversal pattern. As you can see on the chart below the Diamond has 11 reversal points making it a reversal pattern to the downside. Also note the big long daily bar today. This is what a breakout looks like. Today’s breakout move in the US dollar is a  pivotal event that is going to change things at least for the intermediate term. After all these months of waiting for the dollar to finally show its hand today was the day. It’s now possible we could see a backtest to the underside of the blue diamond around the 80.80 area before it moves down in earnest.

The breakout in the dollar gives us perspective of where we are in the scheme of things which is important to know. This next chart is a combo chart that has the US dollar on top and gold on the bottom. If you recall our diamond pattern originally started out a an expanding triangle, reversal points one through nine. The gold chart shows it backtesting the bottom rail of the rising wedge pattern which so far is holding resistance. If gold can manage to close above that bottom rail that would be another very big clue that gold has some legs and could rally further. The bottom blue rail of the 20 month rectangle, at 1530, is by far the strongest resistance point that gold will have to overcome to really start a new major leg higher.

The blue diamond on the longer term look with the 50 and 200 dma crossovers. So far the 50 dma hasn’t crossed below the 200 dma yet but it’s now getting close.

This next long term combo chart for the US dollar and gold shows the dollar breaking below the rounding bottom that has been in place for many years. This is a big deal.  Again you can see how the 1530 area shows up as resistance for gold.

Let me show you one more chart for the US dollar that I don’t believe I’ve shown you before. As this rising wedge formed below the previous top it only needed an even number of reversal points to be a consolidation pattern. As you can see it clearly broke below the bottom rail today signaling the rising wedge is a bearish rising wedge. The price objective of a rising wedge, when it has broken to the downside, is where the rising wedge first started to form. In this case the low around the 73 area would be the price objective.

Below is a daily gold chart that looked very negative up until 1 pm today. Now I would have to rate it as neutral until it can trade above the neckline and the bottom rail of the rising wedge.

Lets take a look at gold that shows the rally today stopped right at our overhead resistance at the 1360 area. A move back inside the rising flag would be constructive.

About a month ago we tried our hand at going long the precious metals sector for the third time in the last year or so. We loaded up on a bunch of precious metals stocks and the long 3 X gold and silver eft’s. Below is the original chart I posted at the time that showed how a possible inverse H&S may form based on the Chartology of the chart. I have not touched this chart since I posted it in the, “Another Brick in the Wall post”.

http://rambus1.com/?p=15900

Today’s price action bounce off of the 1300 area which was critical for this potential scenario to play out. It looked like earlier this morning that gold was cracking the bottom neckline symmetry rail. By 1:15 it was obvious that the 1300 held as support. As you can see gold is now trading right into overhead resistance backtesting the bottom rail of the uptrend channel. I need to tweak the neckline down just a tad as gold failed to reach my price objective up to the 1455 area. I will also have to tweak the neckline symmetry rail just a tad as it runs parallel to the neckline.

Below is a weekly chart that shows the potential inverse H&S bottom that still has alot of work to do yet before we can say it’s complete. Today’s bounce at 1300 goes along way in the development of the possible H&S bottom.

Based on the long term look at where support and resistance resides I built this chart that shows how gold could move higher. This would be a perfect scenario chart where gold would hit overhead resistance, fall back to support, rally back up to the next resistance rail, backing filling all the way up. Gold has a lot of work to do but if the June low is THE LOW this is how I would expect it to move. Once gold can trade above the top blue rail of the bullish expanding falling wedge that is when gold will be in the clear and can run to new highs. Right now gold is trading right in the middle of the possible bullish expanding falling wedge consolidation pattern.

Tomorrow we’ll look at the precious metals stocks and indexes. Today’s price action came right at the last critical moment to preserve some of the inverse H&S bases that had been forming since April in some cases. They aren’t some of the prettiest bases I’ve ever seen but they could fit the bill with just a little more work to the upside. Keep in mind that the precious metals complex is still consolidating or bottoming and today’s price action is very miniscule when one looks at the longer term monthly chart. Bases take time to build and I would like nothing better than for the precious metals stocks to be forming long lasting bottoms in here. We just have to follow the price action and see where it leads us. We should know more in the next few days if some of these bases are really going to mature and some sort of bottom is in place if even for the intermediate term. Stay strong…Rambus