Tonight I would like to show you some charts of what this nearly 10 week counter trend rally looks like compared to this downtrend that has been in place since the highs made one year ago. I want to start with a one year two month chart for the HUI that starts with the right shoulder top, for the massive H&S topping pattern, Big S. This chart may look a little busy but if you start at the top left side corner, Big S, you will see the downtrend channel that has been in place for one year now and shows all the consolidation patterns that have formed during this time. Looking at the top left side of the chart the first chart pattern you see is the black bearish falling wedge which at the time I thought would be a bullish falling wedge. Note the two day hard break below the bottom black rail of the bearish falling wedge. That was my cue that the black 5 point falling wedge was a reversal pattern to the downside. The red arrow and the purple vertical dashed line shows you where we took our first position in DUST, which is a 3 X short the precious metals stocks index, on December 3rd, 2012. As you can see we bought the backtest to the underside of the black falling wedge reversal pattern. We slowly kept building our short position as the downtrend unfolded. Take a moment and look at the downtrend channel starting at the top, following the price action bar by bar all the way down to the June low. You will see, for the almost one year decline, there wasn’t one time where the HUI made a higher high and higher low until the June low this year. So by following the price action we never had to sell our short position and just kept riding the downtrend. Notice all the small red lesser consolidation patterns that formed during the one year decline. They don’t look like much looking back but when you’re riding these little patterns out in real time it can make one insecure about the big picture and question if you are still on the right side of the market. I can always tell when subscribers start to get grouchy that the consolidation area is starting to get to them.

I now want to show the lower part of the daily chart that shows our current possible bearish expanding rising wedge. This pattern shows a different character than all the price action above. As you can see this blue pattern has made a series of higher lows and higher highs. The $64,000 question is, is this a bottom reversal pattern or a consolidation pattern that will show the way lower when it’s complete ? Right now the price action, over the last year, is trapped in a parallel downtrend channel. Notice the placement of the small double top at the top of the blue bearish rising expanding wedge and the top rail of the downtrend channel.  Is it a coincidence that the small double top formed where it did? Lets zero in on the latest price action that shows the black dashed down slopping  trendline that runs through the center of the blue pattern that is labeled a S&R rail, (Support and Resistance rail). Below it is resistance and above is support. You can see yesterday’s price action gapped below that S&R rail with today’s price action testing the S&R rail from below. You can also see the 50 dma comes in right here and now. We are going to have an interesting couple of days ahead of us as we watch how the price action interacts with the black dashed trendline and the 50 dma.

Lets look at the same area without the downtrend channel trendlines in place. As you can see it is obvious that we are in the biggest congestion area in more than a year. We won’t have confirmation of a continued down trend until the price action breaks below the bottom blue rail. The HUI is now trying to backtest the underside of the little red triangle that formed just below the double top.

Lets take a look at the other possible scenario that many are looking at which is the inverse H&S bottom. There is a certain symmetry taking place that has two shoulders on the left side of the head and with today’s price action we are now in an area where a second right shoulder could form creating the inverse H&S bottom. I’ve also put on two necklines that connect each left and right shoulders. Yesterday the price action gapped below the lower neckline with a backtest in progress today. In order for the inverse H&S bottom to have a chance the first order of business is for the HUI to break above the lower neckline.

Lets take a look at the daily line chart that show the potential symmetry taking place on each side of the head. Even though this inverse H&S bottom is not my favorite scenario right now I still have to keep an open mind for any possibility.

Lets put our one year downtrend into perspective by showing the massive H&S top and the price action that I showed you on the charts above that is the downtrend off of the right shoulder top. The first thing to note is this chart is in linear scale and shows the massive H&S top that has a price objective down to the 106 area. If our current blue bearish expanding rising wedge plays out to the downside we can expect a similar move that led into the pattern to take place as the price action leaves the pattern. I know it seems impossible at this time for such a move to take place but that is what will most likely happen if the bearish expanding rising wedge breaks down.

Looking at the same chart in log scale we get quite a bit higher price target for the HUI H&S top that comes in at 215 or close to the bottom of the blue bearish expanding rising wedge. Until something proves me wrong I’m looking at our current blue bearish expanding rising wedge as a possible halfway pattern to the downside with a price objective that would come in around the 112 area.

Now I want to look at some big cap precious metals stocks to see how much damage as been done during the last 10 week rally. Lets look at the longer term charts as they are much more important than the daily’s. Lets start with a look at AEM that shows the price action gapped below the bottom S&R rail in April of this year. AEM has made several attempts to rally back to the underside of the S&R rail as a backtest but so far without any luck. Note the most recent price action that shows the small double bottom that led to the 10 week rally that should now be offering support. As you can see the double bottom hump has given way this week. If AEM is going to form an inverse H&S Bottom it needs to find some support in this general area. Also note the nice big H&S top that broke down almost two years ago and the backtest to the neckline extension rail that  halted its advance.

The monthly chart shows 20 years of price action. Note the last two bars on the right side of the chart that looks more like a backtest to me than a reversal pattern to the upside.

Looking at the long term monthly chart for ASA we can see it broke below two important trendlines, the bottom blue rail of the expanding downtrend channel and the bottom rail of the black uptrend channel. As you can see the last 10 weeks or so have been a backtest move to the bottom rail of the blue expanding downtrend channel. This is a critical test taking place right now. So far it’s failing the test.

The AU monthly chart shows the beautiful reverse symmetry that took place during its one year decline that slammed into the 2008 crash low and has bounced. We’ll see if this is a dead cat bounce or something more important by the way the price action interacts with the 2008 crash low.

The last 10 week rally in BVN shows just some chopping action around the lower Support and resistance rail. It actually looks like it is trading at a 52 week low if it doesn’t rally pretty hard for the rest of this week. Note the reverse symmetry coming down compared to the rally phase that started in 2008.

The weekly chart for CDE shows an inverse H&S bottom that looks like it is failing. You can see the rally took the price up to the S&R rail which is actually the neckline on the monthly chart.

The monthly chart for CDE shows the breakout and backtest to the big H&S top neckline.

The weekly look at ELD.to  is showing another failed inverse H&S bottom. The ten week rally made a good  move toward backtesting the big H&S neckline but has fallen just shy or reaching it.

The long term monthly look at ELD.to shows some very nice chart patterns. Note the big black bearish rising wedge that has the neckline running through to top of it. Many times a rising wedge will encompass the left shoulder and the head as you can see. The backtest to the bottom rail of the rising wedge formed the right shoulder. Note the last two bars on the right side of the chart that show the backtest to the neckline over the last two months.

FNV used the 10 week rally to backtest the bottom rail of its bearish rising channel. It also looks like a possible H&S bottom that has formed just below the bottom rail is failing. FNV just experienced the the second backtest to the bottom rail of the bear channel.

The GFI monthly chart is begging for the price action to at the very least test the 2008 crash low.

The weekly chart for GG shows it used this 10 week rally to backtest the neckline at 32.35. The possible H&S bottom looks like it’s in trouble if it doesn’t find support pretty soon.

The monthly chart for GG shows it breaking below the neckline and the long term bottom rail of the uptrend channel.

The monthly chart for KGC shows how it used the 10 week rally to backtest the 2008 crash low from below. It has been one of the weaker PM stocks as it has already broken below the 2008 lows.

The last several months shows very little price action for NEM. It’s very close to testing the monthly low closing price that would go back to the same period as the 2008 rally. Again the 2008 crash low is begging for a retest IMHO.

Below is a weekly line chart for NGD that shows it used the 10 week rally to put in a right shoulder that will create a double H&S top if it breaks below the lower neckline.

It’s getting late and I need to get this posted. I have more examples of precious metals stocks that have used this last 10 week rally as a consolidation phase or a backtest to a much bigger topping pattern. Nothing is broken in the strong bear market the precious metals stocks have been in for the last year or so as far as I can see. This looks just like your normal backing and filling before prices start moving lower again. I hope these charts paint a clear picture for you of where I think we are in the bear market for the Precious metal sector. All the best…Rambus

Its been awhile since I showed you an updated chart for the Dow. As this long term weekly chart below shows everything is still moving along according to the game plan I’ve laid out. I’ve shown you many of these bullish rising wedges that appear on some of the major stock market indexes that have all broken out to the upside. These bullish rising wedges confuse a lot of trades as they see them as always being bearish. My interpretation of these types of patterns, that form in the same direction as the trend, tend to be very bullish as it suggests that investors are anxious to get in and aren’t waiting around for lower prices. Some may call these types of patterns running corrections. As you can see the Dow is possibly forming a smaller red bullish rising flag, which again shows investors aren’t waiting around for lower prices. We have just started the 4th reversal point to the upside. A breakout above the top red rail will signal the bullish rising flag is complete which I would then view as a halfway pattern. There are two ways I measure a halfway pattern. The first way is to measure from the breakout of the lower pattern to the first reversal point in the upper pattern, labeled reversal point #1 and add that measurement to the breakout of the upper pattern to get your price objective. The second way I measure a halfway pattern is to measure the impulse leg up that starts at the last reversal point in the lower consolidation, in this case reversal point #6 to the first reversal point in the upper consolidation. You are measuring the the first impulse leg. Again take that measurement and add it to the last reversal point in the red bullish rising flag to get your price objective. Many times these two methods will be very close in price to each other. If this possible red bullish rising flag plays out as expected it will look like it formed about the halfway point when the top measured move is reached. Note the beautiful H&S patterns that reversed both the uptrend and the downtrend and the one that was a consolidation pattern. This chart shows, by following the price action, and not trying to second guess every little wiggle that is made, one will always find they are aligned with the trend either up or down in the big picture.

Tonight I would like to show you some charts on the US dollar that is finally showing a little action after a month or so of chopping around towards the lows. I have many different looks that might give us a clue or two on what to expect over the next month or so.

The first chart is a 6 month daily chart that shows a potential double inverse H&S bottoming formation. As you can see the smaller inverse H&S #1 had a nice long bar on the breakout followed by a backtest the next day. That completed the smaller inverse H&S bottom. The rally only lasted one day which gave us a point to drawn in the 2nd Neckline. The price action is now getting ready to backtest NL #1 again that would create the right shoulder for the bigger inverse H&S #2. So this is a critical backtest taking place in the next day or two to the 81.90 area. If neckline #1 can hold support the price objective of the bigger H&S bottom would be up to the 84.85 area which would be back at the previous high made in July.

Some of you may recall the potential Diamond that was forming, that for a time at reversal point #10, looked like it may be failing. After about 3 weeks or so of testing the bottom blue rail the price action finally began to liftoff as the short term daily chart above shows. The top rail, on the right hand side of the chart, is not set in stone. It is just a parallel rail to the lower rail on the bottom left hand side of the chart. This chart is a little contradictory to the inverse H&S bottom on the chart above as the bigger H&S #2 has a price objective up to the 84.85 area which would put the price for the US dollar above the top blue rail of this diamond. The smaller inverse H&S bottom has a price objective up to 83.12 which could work for the 11th reversal point. For right now it just time to watch the price action very close and see what clue’s it’s going to give us.

Stepping a little further back in time one can see how the possible diamond pattern could fit in nicely with the overall uptrend that has been in place, for the US dollar, since the fall of 2011 when gold topped out. The dollar is still running a series of higher highs and higher lows. This combo chart that shows the US dollar on top and gold on the bottom shows where the US dollar refused to make a new low while gold had its parabolic run to 1920. That was a very good positive divergence for the US dollar to gold.

There are several more possible scenario’s the US dollar maybe showing us before it’s ready to move higher. This next chart shows a nice uptrend channel that has been in place since the spring of 2011. You can see where the double bottom hump trendline and the bottom rail of the uptrend channel come together and has held support so far, albeit a little sloppy.

Below is another look at the uptrend channel that shows the 200 dma holding support.

I have shown you how the apex of a triangle can be critical support or resistance depending on which way the price action is moving. Below is a weekly chart that shows a triangle formation where critical support was found at the apex, twice.

The next chart is a long term weekly look that shows the big base the dollar has been carving out for almost 10 years. That top support and resistance rail has been holding the US dollar back but if the dollar takes that rail out that will be a big deal. You can see, from the bottom on the right side of the double bottom, there is a series of higher highs and higher lows all the way up to our present trading area. Nothing is broken yet that would tell us if this huge base was going to fail.

This next chart shows us the big base that was built back in the 90’s that looks like a fractal to our current huge base #2. Keep in mind a big base leads to a big move. These are monthly charts so change comes slowly but change they will.

The next chart I would like to show you is a monthly line chart that will probably give us the earliest clue when the dollar finally breaks through the top rail. As you can see it has been testing that top rail for many months now. It looked like the dollar had a chance to breakout last month but the top rail wasn’t ready to break yet, so the US dollar pulled back again.

I would like to show you one more chart, in this first part of this US dollar report, which is a combo chart that has the US dollar on top and gold on the bottom. There is a chart formation that is called a rounding bottom. They usually take their time developing but when they complete you know you have a really good base in which to launch a major move. The two red arrows shows you how the US dollar has been rounding up while gold has been moving down. Regardless of what some folks think there is an inverse correlation between the two. It’s not always perfect but you can see it on the longer term charts.

Tomorrow we’ll look at part two where I’ll  show you some of the different currency and how they are behaving. It’s important to get the big picture look so we have a guide to work off of. We want to try and trade with the big trend as much as possible.  All the best…Rambus

Well after Riding the 9 Month PM Bear with Rambus …and hating every minute of it (except for the obscene profits)…

I was Thrilled when Rambus finally ( on August 8th)… turned to the Gold Bull Side and bought his first of 5 positions in NUGT

to soon be followed by 1 position in UGLD and 2 in USLV

but alas…The Bull Has Bucked and the worm has turned and Today Rambus has exited this trade (for now)

With the following Paltry Profits…(each position was $25,000 in the Kamikaze Portfolio)

UGLD …Bought @ 17.67
……..Sold @ 22.21
………25%
………Profit $6,420

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USLV …Bought @ 6.26 and 7.15
……..Sold @ 10.26
……..Average 55%
………Profit $27,375

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NUGT …Bought @ 67.5… 70.1…. 72.3… 73.5…. 78.3
……..Sold @ 82.66
………Average 15%
……….Profit $19,405

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Most of us were not quite as Nimble as Rambus…but anyone taking these trades even close to where they were reco’d

has done well…congratulations

Also I note that many members at the forum are trading both sides of this volatile market…and using Chartology Principles

with even greater success

This is Rambus’s Fondest wish for each and every one of you

Follow his lead by all means…but learn to fly solo if you can…and you will be rewarded over and over

Its all at the Timeless Tutorials…we invite each and every Member to take the time to read them…There is a valuable lesson in each and every one

……………

Hopefully all Members have the email alerts set in their profile

and hopefully most of you in the Kamikaze Trades are able to trade at a moments notice

These trades cannot be left alone for too long ..if at all

…………….

I really hope we can get back on the Bull Side soon

9 Months of Gruelling Bear followed by a mere 3 short but intense weeks of Bull… It just doesn’t seem fair !

Sir Fully ( Town Crier)

In this Weekend Report I would like to show you gold from the short term perspective to the long term look and everything between. As you know gold made a bottom back in June of this year that is still the low point for this two year correction. The question on everyone’s mind is this THE BOTTOM? There is never a way to know absolutely for sure until time passes but we can use some Chartology and see what it is showing us.

This first chart is a daily look that shows the June low and the price action that   gold has made trading off that bottom. You can see a black dashed down slopping trendline, Support and Resistance rail, that held gold in check. It wasn’t until the little red bullish expanding falling wedge developed that gold was able to takeout that S&R rail. Right now I’m looking at that little red bullish expanding falling wedge as a halfway pattern that projects up to the 1456 area as measured by the blue arrows.

Lets look at another daily chart that shows all the smaller consolidation patterns we’ve been following since last falls high. When I talk about following the price action this chart shows you exactly what I’m referring to. As you can see each blue chart pattern was a consolidation pattern to the downside with no signs of a bottoming or reversal pattern. Gold made lower lows and lower highs all the way down with the 50 dma working as overhead resistance. Since the June low you can see a change of character as gold has now put in a higher low and a higher high and is now trading above the 50 dma. It may seem subtle but this is the first step in creating an uptrend. How long this new uptrend will last is anybodies guess but I have a few charts that I will show you that may shed a little light on  how gold may progress from here.

Trading the markets is a lot like playing Chess. One always has to be thinking several moves ahead, trying to anticipate your opponents next move, so you don’t caught with your pants down. This next daily chart shows you what I think may develop over the next month or two that makes sense to me from a short term perspective to the long term look. From the short term look you can see the small rising channel, on the two charts above, with the bullish expanding falling wedge that has a price objective up to the 1456 area. That is an important area as it will setup a possible bigger pattern that I would like to see if the June low is going to be the bottom. On the chart below I’ve drawn in a possible neckline that runs from the counter trend rally in May after gold broke out of that 20 month rectangle. The 1456 area would be a perfect place for a possible neckline to be drawn in. The black arrows shows how I would expect a H&S bottom to form based on the Chartology of this area. I’ve added what I call a neckline symmetry rail which is just a parallel rail to the neckline that many times can give you a spot to look for a low for the right shoulder. Using this method the bottom for the right shoulder could come in around the 1300 area. The main reason I would like to see a H&S bottom form down here is because of the bottom rail of the 20 month rectangle that will act as resistance when it is approached. Many times when there is an important resistance rail a stock will form a consolidation pattern just below, that will then give the stock the energy it needs to absorb all the sellers and finally break through the resistance zone. In our current situation, if we in fact do build out a H&S bottom, that would be the perfect setup to then takeout the bottom rail of the massive 20 month rectangle. Keep in mind everyone who bought inside that 20 month rectangle are underwater right now and will be looking for a place to get out. So its going to take a lot of buyers to absorb all the sellers as the price action gets closer to the bottom rail of the big rectangle. The horizontal blue trendline is the bottom of the 20 month rectangle that comes in around the 1530 area. This chart below is just a possible scenario that may have to be tweaked once we know exactly where our current move stalls out. It maybe a little higher or lower than the 1456 price objective but this chart gives us a game plan to follow until it’s broken.

Now that we’ve covered this possible low in gold on the daily charts lets look at the bigger picture and see how the chart above fits in. We are going to go all the way back to the 2008 – 2009 bottom which was the most important bottom for the bull market at that time. As you will see there are some striking similarities between then and now. First, notice the H&S consolidation pattern that formed back in 2009 that was one of the finest H&S patterns I’ve ever had the pleasure to chart in real time. Let me show you what I mean. The chart looks busy but its all colored coordinate. If you divide the chart in half starting at the NL going straight down to the head that will leave you a left and right side to the H&S consolidation pattern. Start with the black arrows on each side of NL. On the left side follow the price action down to the green arrow. Then do the same thing on the right side of the chart following the price action down from the black arrow down to the green arrow. The do the something following the price action up from the green arrow up to the grey arrow on each side of chart. Next follow the price action down from the grey arrow to the purple arrows that made the low for the left and right shoulders. All the colored symmetry rails are parallel to the neckline. The symmetry continued on up to the pink arrows #1. Note the clean breakout and backtest to the big thick neckline.The reason I’m showing you this chart is that it maybe playing a very big role in locating our current June low. I’ve really darkened the neckline so there is no doubt what you are looking at.

Below is a long term weekly chart that shows the beautiful H&S consolidation pattern we just look at on the chart above. Notice how the neckline symmetry rail called the low for the right shoulder in 2009. I’ve extended the neckline all the way to the right side of the chart so you can see how this neckline extension rail has played a very important role in locating our possible June low. You can also compare the H&S consolidation pattern that was made back in 2009 to our possible H&S bottom that I showed you on the daily charts above. The black arrows shows how the price action may evolve in a perfect world. The black arrows are just a guide line based on where support and resistance resides. I’ve only shown the possible Blue expanding falling wedge one time, about 2 weeks ago, that could be the next consolidation pattern is a string of consolidation patterns that have been the hallmark of gold’s bull market.

This next chart is a long term monthly look that shows the 2009 low was actually made up of three separate chart patterns. There was the blue bullish expanding falling wedge, a red triangle that created the H&S consolidation pattern. Again notice the neckline extension rail made off the 2009 H&S consolidation pattern that extends to our June low. Another important feature of this chart is the black and white candles. As you can see when gold is in an impulse leg up it forms a string of white candles and when it’s in a downtrend, most recent decline to the June low, there were a string of black candles. If the month of August can end on a positive note for gold we will have our first two white candles that could be the start of the next impulse leg up.

Below is another monthly look at gold that shows the horizontal black dashed lines that are taken off the previous consolidation patterns highs that reversed their roll form resistance to support, black arrows.

Below is a chart I call just another brick in the wall. This chart shows you every consolidation pattern that gold has made since the beginning of its bull market. The $64,000 question is is our latest consolidation pattern, the bullish expanding falling wedge, just another consolidation pattern or brick in the wall. Stay tuned as things are starting to finally get interesting again after a two year consolidation period that maybe coming to an end. All the best…Rambus

PS: I forgot to add one more chart that compares gold to the XAU. This chart shows you how far out of whack this ratio is. You can see the spike made back in 2009 that was the all time high for this ratio. Now look to the right side of the chart and you can see this ratio went even further to the extreme. Note the little topping pattern and the breakout gap that occurred two weeks ago. This could be a very significance development as it shows the Precious Metals stocks may now revert back to the means where ever that may be. This is what we need to see if a new bull leg is being born.

Editors Note :

Last Weekend report , Rambus Showed a Provocative Scenario For the Precious Metals Markets dubbed “What If 1 : Circa 2013”

This Scenario was based on a comprehensive and rather complex analysis of the Chartology of the Precious Metals

http://rambus1.com/?p=15405 :

…………………………………………………..

This Weekend Report (actually Published for Members Wednesday Evening) Has quite a different , perhaps even more provocative postulation

At this point Both of these What If Scenarios are Viable

Here is “What If 2 : circa 2013”

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Tonight I would like to show you two stocks we bought, one yesterday and one today, that have nice inverse H&S bases. H&S patterns are generally reversal patterns that show up at the end of a move and in my book one of the more reliable chart patterns. They can also show up as a consolidation or continuation pattern but to a much lesser degree. Whenever I’m looking for a bottom I always look for a H&S or double bottom first as those two patterns usually show up there. There can also be a 5 point triangle, 5 point  rectangle or 5 point falling wedge, but the most common reversal pattern is the H&S.

Lets start with AG that we bought yesterday which has a double bottom head, black dashed horizontal line, at the double bottom hump,  and a left and right shoulders. We jumped the gun a bit yesterday but the pattern was too pretty to ignore. By pretty I mean the symmetry is beautiful. Note the H&S neckline symmetry rail that is a parallel neckline that measured the bottom of the right shoulder. The very nice double bottom that created two heads. It is just a very nice looking inverse H&S bottom.

At the forum today I wrote a post to one of our subscribers telling him  I was finding a lot of these types of bottoms in the precious metals stocks on the short term daily charts. I also said where these smaller inverse H&S bottoms were forming, on the longer term charts, maybe giving me some clues that this could be a very important bottom that is being made in the precious metals stocks. Remember it wasn’t until last Thursday that these right shoulders started to form so before last Thursday there were no H&S bottoms.

This is still a work in progress as I still have a lot of precious metals stocks to review yet but there are some promising chart patterns that are beginning to shape up for the big picture. As I told Sir Fully last night don’t get too excited yet as there is alot more work to do for these stocks to mature to their full potential. AG is a perfect example of what I’m seeing in some of the precious metals stocks that are giving me some hope this could be a very important bottom we are seeing right here. As I have shown you many times in the past, bigger chart patterns can be made up of smaller pattern, that create the final formation. In very large patterns the reversal points can and usually are made up of some type of smaller reversal pattern, such as a H&S or double top or bottom. Keep in mind the inverse H&S bottom, on the chart above, as it plays a big role in the long term weekly look below. Our current H&S bottom is the 6th reversal point in a very large 6 point, flat top triangle consolidation pattern. Notice I said consolidation pattern. These types of consolidation patterns are harder to pick up in real time because they keep making a lower low on the bottom rail. When you look at this weekly chart for AG the picture should be very clear to you of the potential for our current inverse H&S bottom to be the possible 6th reversal point in a very large consolidation pattern. Please keep in mind the 6th reversal point won’t be complete until it touches the top rail of the flat top triangle. Also this is a very large pattern so the price action will take time to reach its full potential. If this is a consolidation pattern it will be a very big deal as I will view the flat top triangle as a halfway pattern.

Below is another example of what I’m seeing when I look under the hood of the precious metals stock indexes. I’ve labeled all the reversal points on all the chart patterns so you can see what I mean when I talk about reversal patterns. In an uptrend the first reversal point will start at the first high and in a downtrend the first reversal point will always start at the first low. SLW is considered one of the better precious metals stocks to own during a bull market because of its leverage to the price of silver. Here you can see an unbalanced inverse H&S bottom that isn’t quite as pretty as AG, but it is still a valid reversal pattern. As you can see it had a nice breakout gap on Monday. There is still a possibility of a backtest to the neckline before the rally really gets going.

The long term weekly chart shows a similar setup that AG has only SLW has a bullish expanding falling wedge consolidation pattern. Notice where our inverse H&S bottom is located, reversal point #4, that I showed you on the daily chart above. I can’t tell you how important this potential bottom is in the overall big picture. WHAT IF, this is a consolidation pattern to the upside? I will let you use your imagination. Like I mentioned earlier this is still a work in progress but I have about 8 precious metals stocks that have a similar setup. As always we will follow the price action and see where it leads us. There is still a lot of work to do to make this possibility a reality but we do have something to guide us for as long as the picture stays clear. All the best…Rambus

So Now we have 2 Very Different medium to long term scenarios embedded in the Chartology of the Precious Metals Complex

Stay tuned as these scenarios continue to unfold

Rambus

In this Weekend Report I would like to show you a “WHAT IF” scenario that few are seeing at this time. There are two major camps in the precious metals complex, the bulls and the bears. The bulls are looking at this most recent low as THE BOTTOM and a new bull market is being born. They have been crushed all the way down from last falls high on the HUI calling every small bottom THE bottom.  On the other hand you have the bears that either got out or have been riding this almost one year decline, short the precious metals complex, and looking for more blood to the downside, to that all important 2008 crash low around the 150 area on the HUI. I have been in the bear camp since the first of December of 2012 until last week. Even at the beginning of last week I was still looking for lower prices for the precious metals complex. If you have been trading long enough you know the markets can change on a dime and when you start to see important trendlines begin to fail that changes everything no matter how bullish or bearish one may be.

Our logo at Rambus Chartology is a Golden Chessboard that represents how the markets are like a chess game. One needs to be thinking two or three steps ahead of the “WHAT IF” possibilities that can occur. Even though I’ve been bearish the precious metals complex since last December I’m always looking for, What If, the trendline breaks or what if this is a false breakout, or what could change my way of thinking, always keeping an open mind for any possibility. Its harder to do than most think as one can become ingrained into the trend and not see the forest for the trees.

In this Weekend Report I would like to show a possible scenario that makes the most sense to me right now based on the previous price action the HUI has shown in the past. As I have stated many times the bull market in the HUI, also gold, was one of beauty and symmetry that is still going on to this day. They have been a chartists dream come true for identifying important chart patterns in which to trade off of. I would like to start out with a daily chart for the HUI and work our way out to the possible scenario I see as a strong possibility going forward.

The first chart I would like to show you is a daily look at the HUI that goes back about a year and a half. Some of you may remember that small double bottom that formed in the summer of 2012 that looked like it was going to launch another leg up in the bull market for the HUI. There are several ways to draw a double bottom trendline. Most just draw a horizontal trendline off the double bottom hump to the right side of the chart and when the price action breaks through, the double bottom is complete. I have found, through many years of charting, that a double bottom or double top trendline can be slanted which can give you a better price objective depending if you have something to connect the double bottom hump on the left side. When you have a double bottom where both bottoms are at the same price its easy to get a price target. You just measure from the double bottom hump to the double bottom low, add that distance to the breakout of the double bottom trendline, to get your price objective.  Many times a double bottom will have one bottom slightly higher than the other which makes it a little harder to measure a price objective. The conservative way is to measure from the higher low of the double bottom, to the double bottom hump, and take that measurement and add it to the breakout point to get your price objective. Keep in mind a double bottom can go much higher than the price objective. The main take away from this double bottom is that it is reversing the downtrend that has been in place for almost a year now. Also note our most recent possible double bottom still hasn’t broken through the double bottom trendline yet to confirm the bottom is in so it’s still a work in progress.

This next chart is very busy but I want to show you why our possible double bottom, on the chart above, is sooo important for the bigger picture. I’ve had this next chart for many years which I use for Fibonacci studies. There is definitely something to using the Fibonacci ratio’s when looking for support and resistance points. As this chart is so busy lets start on the right hand side of the chart because that is the most import area to focus on at the moment. If our possible double bottom is in place we can now add in some Fib retracements and see what shows up. There are two tops we can start the Fib tool, the H&S top and the top for the right shoulder as both of those legs were impulse moves. Lets start with the blue arrows that measure the distance from the H&S top to our current low. As you can see we get a 38% retrace to 365 which is all the way back up to the big neckline. Now if we use the right shoulder top as the starting point the red arrows shows a 50% retrace that also comes in at the 365 area where the neckline resides. The green arrows shows us where a 38% retracement comes in at the 330 area. The brown shaded area will give us a zone to shoot for if this What If scenario starts to play out. You can see why this potential bottom is very critical to the bigger picture which I will show you a bit later.

As I stated earlier there is a lot of information on this chart so we’ll look at it again. Lets keep working our way to the left side of the chart and look at where the purple arrows are located. The two purple arrows on the left side of the chart measures the last two impulse legs up into the 2008 H&S top. So what’s so important about that? If you take your fib tool and measure the distance between the two purple arrows, that formed the two impulse legs up into the 2008 H&S top, without changing the settings, grab your fib tool and move it over to the right side of the chart then place the top rail on the top of the massive H&S top and see where the bottom rail of the fib tool rests. It rests right on our current low. We are reversing symmetry down. If this double bottom is the real deal we have just reversed the two impulse legs up into the 2008 H&S top with our own two impulse legs down to our current low at 206. Pretty amazing.

Before we move on there is still some critical information on this chart that needs to be discussed so lets now move over to the far left side of the chart that shows, what I called at the time, a Fib Template. I’ll try my best to describe what the Fib Template was and why it was so useful back in the bull market years. For those that have access to charting tools you will be amazed at how the Fib Template worked in both showing you where the next top was going to be and then showing you where to look for a  Fib retracement once a top was confirmed. As you can see on the chart below the Fib Template is set in blue and measures the first two impulse legs up. As you can see it shows the consolidation pattern #1 had a 50% retrace off the bear market bottom at 35 or so. I will post this chart right now so you can see what I’m taking about and then I’ll move the Fib Template up to the next black dashed line so you can see the next price objective.

Now I’m going to move the Fib Template up to the next black dashed line so you can see how it measured out the next consolidation top at #2. Also notice there was a 50% retrace in consolidation pattern #2.

I’m going to move it up one more time so you folks that don’t have access to a chart service can see what is happening. I’m now at the third black dashed line where the Fib Template gives us a price objective up to the top of red triangle at #3. As you can see that triangle #3 has a strong 38% retrace before it broke out to the upside.

That was the last time the Fib Template worked like that. As you can see the next price objective in line was for the HUI to move up to 720 or so which I thought at the time had a good chance of happening. Keep mind we had just broken out of the fourth red consolidation patterns since the beginning of the bull market. I know many of you know how bullish the precious metals complex was at that time. It was hard not to be a bull. As you can see the HUI ran out of gas before hitting my 720 price objective and started to chop out that infamous 2008 H&S top. Even though I was as bullish as the next gold bug, I was still able to see the H&S forming and what might happen if it completed. The rest is history they say. The takeaway form this Fib Template was, more than anything, it showed you where a retrace low may occur after the top was put in place. Those were some long drawn out consolidation patterns if you remember.  For those that have a Fib tool you can also measure each individual impulse leg up between each consolidation pattern and get a Fib retrace.

Now lets get into the What If part of this post. The reason I’ve been showing you these fib retracements is because I believe they are going to play an important role as we move south in the precious metals complex. This next chart shows how I think this bear market may unwind over the next year or two. As you know nothing goes straight down and the markets have to pause and refresh themselves before they can begin their next impulse leg. Again if we are putting in a bottom, on the daily chart above, we should have a decent rally just ahead of us. I don’t believe it is the start of a new bull market as there is a massive H&S top in place that is going to need time to play out. We have been in an impulse leg down in the precious metals complex for close to a year now. That has been close to the max for an impulse leg up in the HUI during the bull market years if you count from the last reversal point in those red triangles. What is interesting is that once the breakout occurred it took roughly six months to reach the top of the next consolidation pattern. As you can see on the chart below our impulse leg down from the right shoulder high is just shy of of one year. If you count the number of months since the HUI broke below the neckline we are right in that area, six months, to complete this move lower for now. A rally up to the 38% or 50% retrace seems like a possible scenario that will be the part of our next consolidation pattern. These won’t be as fun to trade as an impulse leg but with a little Chartology we will be gearing for a trading range mentality trying to catch the swings within the consolidation zone.

Lets take a quick look at gold that is showing a possible bullish expanding falling wedge as a halfway pattern up to the 1456 area. The bottom of that 20 month rectangle will be like a concrete ceiling if gold can make it that far.

Below is a weekly look at gold that shows where the important fib retracements may come in play.

Silver has broken out above its support and resistance rail. This is an important development IMHO. You can see all the touches that occurred during its formation. It may backtest the S&R rail before it moves higher. Below the support and resistance rail is bearish and above is bullish.

The weekly look at silver shows the Fib retracements. Again, like the bottom rail on gold’s 20 month rectangle silver to has a very large rectangle where the bottom rail should be very tough resistance if it makes it up that high.

The big question is, What If, this scenario plays out? It means we will be in a trading range for probably many months chopping out some type of consolidation pattern that will be recognizable when it’s all finished. Right now we are just working on reversal point #1 with 2, 3 and 4 to go before a consolidation pattern can be completed. This is nothing to fear but an opportunity to put on our trading hats and trade the boundaries of whatever type of consolidation pattern presents itself. These trading ranges can be very profitable if done right. The first thing is to recognize the possibility of a trading range as soon as possible by looking for reversal patterns within the the top and bottom of the trading range. This is why our potential double bottom carries so such weight. It could be our very first clue that a decent trading range is starting to develop and with the fib retracements we should get close to finding a topping pattern when the HUI closes in on one of the retracements. All we can do is wait and see what happens over the next week and see what clues the HUI will gives us as to the direction she wants to go. All the best…Rambus