Tonight I want to take an in depth look at the US dollar as it is so important to the overall big picture regarding the deflationary outlook that appears to be headed our way. There are just two pieces of the puzzle that need to come into focus and one is a strong US dollar and the other is a weak oil price. Everything else seems to be lining up. I have many different charts for the US dollar that are showing us nothing is broken and basically this consolidation area is still developing.

Lets start with a daily chart for the US dollar that I showed you a while back that shows an expanding triangle forming. Notice the brown shaded support and resistance zone that is made off the top of the blue 5 point triangle reversal pattern just below. As you can see  this expanding triangle has been getting bigger so has the volatility been increasing. This is volatility to the max.

With this next chart I want to show you a possible pattern that came into focus last week when the price action failed to reach the bottom rail of the expanding triangle. Please keep in mind this new pattern is still far from complete yet there is now a potential that the expanding triangle is maybe morphing into a big Diamond consolidation pattern which is how diamonds tend to form, expanding on the left side and contracting on the right side. If last weeks low can hold, which is most important for this diamond pattern to form, then we can connect the bottom rail that will start the contracting process on the right side of the chart. As you can see last weeks price action bounced between the 50 dma and the 200 dma with the 200 dma holding support. So we are at a critical juncture for the US dollar right here and now. The top blue rail on the right side of the chart is just a parallel rail to the one on the bottom left side of the chart so it’s not firm. I expect some more chopping on the right side of the chart before the possible Diamond pattern can be completed. This possible Diamond fits in nicely with the longer term charts that are showing resistance at this point in time. Whenever you have a strong support or resistance many times a consolidation pattern will form just below a resistance rail, for example, that gives the stock enough energy to finally break through to the other side. I’ve added some black arrows that will give is a rough look at what I would like to see happen to finish off this most important diamond consolidation pattern to the upside.

This next chart is a three year look that shows you two important support and resistance zones in the brown shaded areas. As you can see the top brown shaded support and resistance zone is still holding resistance. The lower support and resistance zone has been a little sloppy but the potential blue diamond has pretty much found support on top of the lower S&R zone. As you can see our blue diamond has formed between the upper and lower brown shaded support and resistance zones which makes sense if you think about it. Once the US dollar can overcome the top S&R zone it will then reverse its role and act as support from the topside. Also on this chart are the 50 dma and the 200 dma with their bull and bear crosses. So far the bull cross, in April of this year, is still intact.

Lets now go back further in time and look at a five year chart that shows that the US dollar has been in a nice confirmed uptrend channel for 2 1/2 years or so. Like the possible diamond pattern, that is forming on the daily chart above, you can see why this area is soooo important to hold support. I would really like to see our present low form just above the previous low made a couple of months ago giving us a higher low on the bottom rail of the uptrend channel.

Below is a long term chart that shows the big base being built that will launch the US dollar much higher once the black dashed support and resistance rail is finally broken to the upside. As you can see the price action has touched the support and resistance rail several times now in the last few months. This is where the diamond, I showed you on the second chart above, is forming. I believe that diamond is going to give the US dollar the energy it needs to finally overcome that support and resistance rail. I also expect once the big S&R rail is broken to the upside there will be a backtest at some point before the US dollar rally takes off. The red circle shows the area I’m talking about

Below is a 32 year chart, that shows the bottom above is a fractal to the one that formed back in the 1990’s. A big base equals a big move.

Below is a combo chart that shows the US dollar on top and gold on the bottom. What strikes me first when I look at this chart is how the dollar has been consolidating while gold has been declining. If the US dollar can bounce off of this most recent low that should put a headwind in golds face. This is what I refer to as an inflection point.

The last chart I would like to show is a long term monthly look at the US dollar that is showing how the price action keeps testing the support and resistance rail. This is telling us that this support and resistance rail, on the monthly chart, is very very hot and once it’s overcome the big base will be competed. It lets us know where we are in the big picture which is one of the most important aspects of charting. You have to know where you are, relative to everything else, in order to make the best judgement call one can make. These charts should get everyone up to speed on what may lie ahead in regards to the precious metals complex and the deflationary episode that looks to be in front of us. All the best…Rambus

HUI a good Hard Look
http://rambus1.com/?p=10133

Are We There yet ?
http://rambus1.com/?p=10590

Unconventional Look at Gold
http://rambus1.com/?p=10821

In this Weekend Report lets take an unbiased look at the HUI, gold and silver to see if there are any big changes taking place to upset the apple cart so to speak. Emotions can turn on a dime in the markets, as you are all well aware of, from bearish to bullish or the other way around in a heart beat. That’s what the markets thrive on. Being open to change and not being married to a position is critical to survival when you put your hard earned capital to work in the markets.

Lets start by looking at a daily linear chart for the HUI that shows the decline that started back in September of last year that formed the right shoulder of the massive H&S top pattern that most staunch gold bugs still can’t see. There are three chart patterns I’m going to show you that formed off the right shoulder high to the current low at 205. First I want you to look at the two blue bearish expanding falling wedges labeled #1 and #2. Those two patterns are almost exactly the same in time and height. For those that want to see what I mean just set your chart to linear scale and go back  a little over a year. Draw in the top blue expanding falling wedge, as you see on the chart below, and grab your top rail and pull it on top of where the lower blue wedge is forming. Then do the same thing with the bottom rail of blue wedge #1 and take it down to bottom of blue wedge #2. I’ve added two thin black rectangles that shows your how closely they are to each other in time and height, labeled one through four. There is a lot of information on this chart so I’ll post it right here so you can see how similar these two patterns actually are. Then I will post this same chart with some more information that is relevant to our most recent low.

Now looking at the same exact chart I want to show you how the little red bearish rising wedge worked out as a halfway pattern to the downside as measured by the blue arrows. As you can see the price action fell just shy of hitting its price objective at 249 which is close enough in this game. One of two things could happen at that first low in the lower bearish falling wedge #2 and that is the price action could form another consolidation pattern or a reversal pattern. As the HUI was in a strong downtrend I decided to see what would take place. Over the course of the next 2 months or so the bearish expanding falling wedge formed and then had that huge breakout gap to the downside that strongly suggested the pattern was a consolidation pattern. Note how similar the backtests were to the falling wedge #1 and #2, almost identical. They both had 2 backtests to the underside of the blue falling wedges. Everything looked fine at the second backtest. Nothing broken. Just after the second backtest to the lower falling wedge is when things started to change. As you can see the price action managed to close above the bottom rail but the next couple of days showed little conviction to the upside testing the bottom blue rail from the topside. Then a week ago this last Friday the HUI closed at the high for the day, just before the breakout gap on Monday of this past week. That was a game changer as the price action gapped above the 50 dma I was using as our sell/stop. I posted then that I was selling half of my DUST position and keeping the other half as a core position. As you can see the 50 dma has been cradling the price action since the big breakout gap on Monday. What has been so frustrating is that setup, for the price objective for the lower bearish falling wedge # 2, red arrows,  was down to the 175 area that would have put us into that 150 to 160 price target I’ve been expecting since early on in this major impulse leg down. A capitulation spike down to the 150 area would have been to easy as everybody and their brother, including me were looking for the same thing. With the false breakout of falling wedge #2 that makes it possible that we could see a counter trend rally now to trap all the bears that were looking for the 2008 low. An opportunity missed could very well be an opportunity gained.

Lets take another look at the 60 minute chart I posted Friday night that shows how the HUI has now been making higher highs and higher lows unlike anytime since the impulse leg down began last September. This is the first thing we have to see in order to get an uptrend. So this can’t be ignored. The double bottom trendline is now our line in the sand, above it’s positive and below it’s negative. Sir Matrix has asked me several times why do I show these indicators when I don’t speak of them much. One reason I like to watch them is for patterns that can form, such as the double bottom on the RSI at the top of the chart.

Below is just a simple bar chart with a support and resistance rail on it that shows a break above 272 would would be significant in the short term. This is also a point where an inverse H&S bottom could develop a right shoulder if the move up is going to be of an intermediate nature. This is why I call these areas inflection points as the price action could go either way yet.

Lets turn our attention to gold that is approaching critical overhead resistance right now. The apex of that blue triangle  is the key for the short term. If gold can manage to close above that apex, which comes in around the 1355 area, that would be bullish for the short term. The price action is  interacting with the 50 dma in here also.

Below is a long term look at gold that shows the 20 month rectangle that broke down in April of this year. If gold can take out the apex of the red triangle then the bottom of the big blue 20 month rectangle would be a concrete ceiling. The only way a new bull market can start for gold would be for it to takeout the bottom rail of the rectangle around the 1535 area. That would be showing considerable strength. That’s a huge consolidation pattern that won’t be easily overcome.

Below is the gold symmetry chart we’ve been following since I put that purple arrow on the right side of the chart. As you can see the price action hit the neckline? and bounced off telling us it’s hot. A break above that neckline that comes in above the 1350 area would be bullish for the bulls. So far nothing is broken yet on gold.

Below is a daily chart for gold that shows the fanlines made off the 2008 low. The red circle shows how gold fell to the 50% retrace and rallied backup to the underside of the 38% line. The last decline took gold almost all the way down to the 62% retrace where it is getting a bounce now to the underside of the third fanline. This chart is just one more example of why the 1350 area is so critical to hold as resistance if your short gold.

Below is the very long term chart for gold that I’ve shown you several times in the past. The only question I have is, does gold backtest the rectangle or as it shows up on this long therm monthly chart, an unbalanced double top at 1535. This chart doesn’t show a new bull market getting ready for takeoff anytime soon.

As with gold and the HUI silver is also at critical juncture right here at reversal point #6. That blue downtrend channel can be drawn two different ways. The first way is with the solid parallel trendlines that have completed 5 reversal points with the 6th one that could be the beginning of the move down toward the bottom. As it has 5 completed reversal points a breakout of above #6 would be bullish for silver as that would create a reversal pattern to the upside. Where the blue dashed trendline is positioned, takes out that Sunday night flash crash and rally back up the next day. If you takeout the flash crash you then have a bearish falling wedge. You can see the confluences at point #6 that makes that area critically important.

The daily look at the line chart for silver shows you a clearer picture of the blue bearish falling wedge and the potential 6 point red bear flag.  So we wait for further developments.

This next chart I overlaid silver over the XEU as they tend to move together. The XEU in red is coming back up to test the neckline symmetry rail again around the 33 area. The red neckline now has 4 touches that makes that rail very important if it ever gets broken to the downside. Silver has been diverging from the XEU where I put in the brown shaded area. While the XEU has been much stronger silver just consolidates and moves lower. One of the two is lying.

Below is a very long term look at silver that goes back to the 1980 high at 50. Like the long term gold chart above shows, silver to has a big top pattern in place. You can call it anything you like but once it broke below the black dashed horizontal rail or the bottom of its 20 month rectangle it became a top. As you can see it also has broken down below neckline #2 which if it was in a true bull market that neckline would have held support like the bottom one did.

This has been an unbiased look at the precious metal complex that shows us the long term look for this sector looks bleak for the foreseeable future. On the shorter term scale gold and silver are up against their resistance points with gold at 1350 and silver just below the 21 area. If the HUI breaks out and moves higher I think it will take gold and silver kicking and screaming higher over the short term. I have several precious metals stocks that I’ll recommend in the coming days as we see how the very short terms plays out. This is what a possible inflection point  feels like. Do we move higher or do we move lower. I want to see just a little more positive price action for gold and silver before I  pull the trigger. Keep in mind if the HUI does indeed breaks out to the upside this is just going to be a counter trend rally which we can choose to play or stay on the sidelines. Knowing myself I will choose to play the potential rally but that doesn’t mean everyone needs to do so. Sometimes having  a cash position while waiting for the next move in the primary trend maybe the best course of action. Keep your sell/stops in place as we await for a little more confirmation of a short term trend change to the upside. It won’t take much to pull the trigger if that is to be the case.  All the best…Rambus

…………WARNING KAMIKAZI TRADING CAN BE FINANCIAL SUICIDE…………….

So You Want to Be a Kamikazi Trader ?

Here’s The Deal :

Kamikazi Trades are the 3 X Precious Metals Bull and Bear ETFs

DUST – 3X PM Stocks Bear…………….NUGT – 3X PM Stock Bull

DSLV – 3X Comex Silver Bear………….USLV – 3X Comex Silver Bull

DGLD – 3X Comex Gold Bear……………UGLD – 3X Comex Gold Bull

AND NOW the new kamikazi’s on the block

JDST – 3X Junior Miner Bear………….JNUG – 3X Junior Miner Bull

…………….

The Most Volatile of these trades are JDST and JNUG

These vehicles are based on a PM Stock Index ..the GDXJ

Junior PM Stocks exhibit the wildest volatility of all the major market stock sectors

DUST and NUGT and now JDST and JNUG amplify this volatility.. (know as Vomitility at Rambus Chartology)… TIMES 3

They can.. and do.. move 20% in a day ..Plus

And regularly move 5% to 10% in Minutes

……………………..

The Next Most Volatile are the Silvers …followed by the Golds

……………………..

Rambus Has been probably the ONLY PM Analyst who has held Longer Term Positions in these vehicles

He Identified a Bearish Pattern developing in the HUI (PM INDEX) in December 2012

He had been invested in DUST from the Low 30s at that time to a high of 165 on June 26th

His Conviction to hold this vehicle through huge volatility was proven to be correct (if harrowing)

However even Rambus an experienced trader to say the least was humbled by the volatility when

3 weeks after the peak DUST had LOST $100 a share off its Price and a 500% gain was “reduced” to a 200% gain

…. Overnight…literally

…………………………….

After Great Debate about the merits and pitfalls of these 3x PM ETFs and Much Analysis at the Chartology Forum

and After watching new Subscribers jump in with both feet ..(even after a triple and quadruple of the Price of DUST)

and get crushed …we Decided to Require All Present and Future Kamikazi Traders to read this Information

We are calling this the Sir Lostalot Clause

In honor of our nearly departed New Member Sir Lostalot

………………………….

The Lostalot Clause :

1…Do Not Trade the Kamikazis if you are Not an experienced Trader

2…Do not trade the Kamikazis if you are an Emotional Trader ie prone to Excessive bouts of Fear Greed and Panic and Euphoria

3..Do Not Trade the Kamikazis with money you cannot afford to lose

…ie…Retirement Funds…Mortgage Money…Childrens College Funds…or Food Stamps

4…Do Not Trade the Kamikazis if you cannot read charts or do not understand Chartology Yet

5…If You Trade the Kamikazis take full Responsibility for the results

6…If you Trade the kamikazis…use Rambus Chartology as a guide as to the probabilities

and to help you stay predominately on the right side of the trade…do not trade exctly as Rambus does

unless you are totally comfortable with moves of 50% and more up and down in short periods

7…If you make Profits n the Kamikazis ..consider booking a portion of them…try not to overstay your positions

8…If you trade the Kamikazis hang out at the chartology forum with other traders

9…Understand that in Fast Moving Markets the kamikazis actually move MORE that 3X the Underlying asset…for or against you

This is called compounding

10…Understand that in rangebound choppy markets Kamikazi Trades decay and they lose value even as the underlying asset remains unchanged

This is Called Slippage

11…Understand that just because you lost a bundle on being Long the PM Markets and you want to recoup your losses fast

do not just jump on a Kamikaze as soon as you arrive here..

Watch them and learn ..read ALL the Timeless Tutorials and understand charting first

Then wait for a good entry point..based on Rambus Work..and start with Small Bites

12…Good Luck… you will need some of that too !

……………………………………..

OK Killer Go Get Em…Baaaanzaiiiiiiiiii

Sir Fully

A subscriber asked me this week why the precious metals complex has been falling and if the charts could show the reason why. From the Chartology perspective it’s really a no brainier why this sector has fallen on hard times.

Many of you may recall the bull market that occurred, in the stock markets, back in the 1990’s which was a traders dream come true. During that time gold and the precious metals stocks were not even on my radar screen as I was too busy trading the tech stocks to even consider the precious metals sector. I couldn’t tell you the price of gold or what a junior miner was. All I knew was that the action was in the tech stocks and that is all that mattered to me at the time. I know a lot of you folks were trading the precious metals stocks in the 90’s and by looking at a long term chart for gold or the XAU, which has the most history, those were some lean years to say the least.

As the stock market finally topped out in 2000 the precious metals complex was bottoming. I didn’t know it at the time that precious metals complex was going to be the trade of the decade as I didn’t know anything about this out of favor sector. It was in the spring of 2002 that I just happened  upon a long term chart for gold and I immediately seen the huge base that was being built, and from a Chartology perspective, that’s all I needed to see. I started the process of learning all I could about this new sector that was so foreign to me. I started to look at some of the big cap precious metals stocks and liked what I seen. I still didn’t know about the juniors yet but I quickly found out there could be some serious money made when I began to explore this sector.

The rest is history as they say. I traded the juniors exclusively, on the long side, until late last year when I began to notice some subtle changes being made in in the PM sector and also the stock markets. I was just as bullish on the precious metals complex as anyone else. I was expecting the latest consolidation pattern on gold to breakout to the upside and start the next impulse leg higher. I even did a post titled, All Hail the Queen, which I showed how I expected this next rally leg to unfold.

http://rambus1.com/?p=12141

It was only a week or two after I posted that article that I began to see some things which you don’t want to see when an impulse leg begins. The breakout of the little triangle kept stalling and failed to move out like all the other impulse legs did. Below is one of the charts that I used in the article, All Hail the Queen, that shows one of the most beautiful bull markets that a chartists could ever chart. As you can see each consolidation pattern broke out to the upside in an impulse move followed by another consolidation pattern. Note the last triangle at the top of the chart. At the time I thought this was going to be just another consolidation pattern followed by an impulse leg up just like all the rest. As you can see the top blue triangle did in fact breakout to the upside but there was no follow through. The longer it took for gold to make up its mind the more it began to look like a false breakout. I kept waiting for the backtest and then the move higher but the price action  just drifted slowly down not creating any hysteria.

I posted this next chart to show my subscribers where to look for the backtest. The dashed blue lines shows the breakout and the solid blue line shows the backtest. As you can see everything looked fine at the backtest point on the chart that had the top blue rail of the triangle and the bottom rail of the 2008 uptrend that should hold support. It did for about 4 weeks or so when the price action started to break below the 2008 bottom rail of the uptrend channel. That was all I needed to see to know something was amiss. This is where following the price action can keep one out of trouble. The long trade was failing and an important support rail was being broken to the downside. As you can see there was one more backtest to the top blue rail of the triangle that could have saved the day but that was not going to happen. The apex of a triangle is a strong area of support or resistance depending on which way the stock is moving as all the energy is focused to that one point.. A break down through the apex of the blue triangle signaled bad news ahead. For me it signaled a top in place which was even hard for me to believe as I was a staunch gold bull. The charts don’t lie it’s just the interpretation of the chart is where most run into trouble.

While gold was topping out in the fall of 2011 the SPX was just starting to build out a bullish rising wedge pattern that would lead to new all time highs. All the experts said this was still a secular bear market in the SPX and that we would see another crash and burn scenario like in 2000 and 2008. Again, if you just follow the price action you don’t have to worry about what all the experts are saying. You can see with your own two eyes what is happening. Below is a weekly chart for the SPX that shows the breakout and backtests of the bullish rising wedge. The SPX is right on the verge of making a new all time high regardless of what is happening in the economy. It doesn’t make any difference what the experts are saying, just look at the price action. That is the truth.

This next chart will answer any questions you may have on why the precious metals complex is in a bear market. If you are still holding your precious metals stocks hoping the bottom is in place and the next leg up is about to take off, this weekly ratio chart comparing the HUI to the SPX may give you a reason for concern. As you can see the HUI had been the place to be since it began its bull market in 2001. The HUI had outperformed the SPX handily until the HUI and gold topped out in 2011. That is the high on this ratio chart that began the steep decline for the precious metals complex. There is a massive topping pattern that has broken down below the bottom rail of the 5 point bearish expanding rising wedge reversal pattern. What this chart shows is that the breakout and backtest to the bottom blue rail in now complete. What the Chartology of this chart shows is that this ratio chart is going to start to accelerate to the downside meaning the SPX is going to outperform the HUI in a bigger way than has already happened. We are now entering the reverse symmetry portion of this chart that shows how this ratio went up is how it is going to unwind to the downside.

The chart above shows you why the precious metals complex is under pressure right now. Like the 1990’s when the stocks markets were in a major bull market, the precious metals were weak, as money was flowing into the stock markets. The exact same thing is happening again today. Money is leaving the precious metals complex and is finding a better return in the stock markets. I know how hard it is for some folks to believe how the stock markets can go up, with everything you read and hear and how can the precious metals complex be under such severe pressure. It’s in the charts folks. I don’t make up these charts, investors do. I only interpret their behavior by following the price action and pay no attention to the so called experts. Clarity and perspective are a must when one puts their hard earned capital to work in the markets. All the best…Rambus

As most of you know I’ve been bullish on the stock markets for quite sometime now. I  know there are a lot of investors that are bearish on the US markets and are looking for them to crash on burn. From my perspective nothing is broken that would tell me at this point in time to expect a major correction. So far the charts have been playing out beautifully and if nothing is broken there is no need to fix it.

The first chart I would like to show you is a very long term monthly look at the INDU that seems to be repeating a pattern that formed back in 2002 to 2007 rally phase. I’ve shown this chart several times in the past that shows the bullish rising wedge that formed as a halfway pattern in the middle of the 2002 to 2007 rally. No one at the time recognized this pattern, the bullish rising wedge, because everyone always considers these patterns as bearish. Nothing could be further from the truth as I have shown many times they act and perform just as any other consolidation if the price action breaks out through the top rail. The chart below shows the bullish rising wedge that formed in 2002 to 2007 as a halfway pattern that measured out perfectly in time and price to the 2007 high just before the crash. You can see our current bullish rising wedge that I’ve been showing since the breakout about 6 months or so ago.

This next chart is the exact same chart as shown above. It may look a little busy but it shows you what I’m look for with our current bullish rising wedge #2. Note the two black rectangles from 2002 to 2007 that measured out the bullish rising wedge #1 as a halfway pattern in time and price. Now look at our current bullish rising wedge #2 that is showing a price objective up to 18,870 as measured by the blue arrows with a time frame in January of 2015 or so. You will only see a chart like this at Rambus Chartology and nowhere else because no one is looking for this pattern. The bears were all over the bullish rising wedge before it broke out to the upside. Its now been about 6 months and nothing is broken.

This next chart is a closeup look at the 2002 to 2007 price action that measured out the bullish rising wedge as a halfway pattern.

The next chart is the COMPQ that also shows a bullish rising wedge that has broken out and has been in backtest mode for the last month or so. It looks like it is trying to breakout from the red bullish expanding falling wedge that is sitting on the top rail of the blue bullish rising wedge which is normally a bullish setup.

The COMPQ monthly.

Below is a 60 minute chart for the SPX I showed you several weeks ago as it was still forming its consolidation pattern. As you can see it closed just below the top rail last Friday.

The daily chart shows the bullish rising wedge with the bullish expanding falling wedge as the backtest. If you recall I was looking at 1560 as a potential low on this bar chart. Now it just needs to breakout through the top rail to enter the next leg up.

This next chart for the SPX is a weekly line chart that shows the breakout of the 13 year expanding flat top triangle. The backtest here comes in at 1580 or so which has already been tested. Again, as long as the top blue rail holds support nothing is broken and we have to follow the price action where ever it leads us.

The next chart shows a beautiful H&S consolidation pattern for the transportation index that broke out 6 months or so ago. Nothing is broke here either.

Next I want to update you on some of the indexes that I’ve been showing you once a month or so that are still in a bullish mode. The BKX, banking indexes, is still moving as expected after breaking out from the blue bullish expanding falling wedge followed by the red red bullish rising wedge. Note the 11 year support and resistance rail that gave anyone watching this index a huge clue that when the price action broke below the S&R rail a top was in place. You never know for sure how the move down would unfold but with such a big top in place you knew it couldn’t be good.

The BTK, biotech index. is still trading above its red bullish rising wedge I showed you when it broke out. Are you beginning to see a theme here with all the bullish rising wedges in play?

The RLX, retail index, is hitting new all time highs by the looks of this weekly chart. I would think this would have to be bullish for the stock markets. Also another bullish rising wedge that are built in fast moving markets.

Oil is at a critical juncture right here. It’s testing the top rail of the bigger triangle pattern. The moment of truth is now for oil.

Its getting late and I need to get this posted. I hope everyone had a fun filled 4th of July. I know I did. All the best…Rambus

Editor’s Note :

Free Trial http://rambus1.com/

In this weekend report I would like to show you some different currencies that are completing major reversal patterns that should be positive for the US dollar. By the looks of some of the base metals miners BHP, RIO and FCX they seem to be saying that deflation is on the horizon. These big miners look like the HUI before it broke down from its major H&S top pattern.

PART 1 :

Lets start with the US dollar that has been rallying back after hitting its long term resistance rail last month in a sharp sell off. I think that was the shake out before the breakout. This first chart of the US dollar shows a nice H&S consolidation that is getting close to breaking the neckline to the upside. A break above the neckline will put the US dollar at a 3 year or so high.

This next chart is a long term look at the dollar that shows the two fractal bottoms. After selling off in June the dollar is now approaching that all important top rail. Remember this is a monthly chart so things change very slowly compared to the minute charts.

This next chart is a comparison chart with the US dollar on top and gold on the bottom. Note the heavy purple dashed vertical line where gold broke below its long term neckline and the dollar broke above its 5 point triangle reversal pattern. As the dollar has been trading sideways, in what is beginning to look like an expanding triangle, gold had been selling off.

This last chart for the US dollar shows the nice rounding bottom with the price action now trading between the top rail and the bottom of the parabolic arc. The sell off we had in June found support just where we needed to see it come in, right at the parabolic arc. So far so good. Nothing is broken.

Lets now look at a few currencies that look like they are putting in some big topping patterns that are just now starting to breakdown. This weekly chart for the Canadian dollar looks an awful lot like the HUI before it broke down. Note the neckline symmetry rail that shows the top for the right shoulder.

The Australian dollar shows a beautiful blue 5 point triangle reversal pattern with a 7 point rectangle reversal pattern that formed out toward the apex. After breaking out through the bottom rail of the blue triangle you can see one quick little backtest before prices started to fall in earnest.

The British Pound has broken down from a triangle consolidation pattern and has had two backtest with the second one completing two weeks ago by the looks of it.

The Yen had a nice big H&S top before it broke down.

The XEU has been holding up pretty well compared to some of the other currencies. You can see the nice H&S top that has been forming for sometime now with the neckline symmetry rail holding resistance at the top of the right shoulder.

The Euro is the Last Component (and the largest) of the US Dollar Index to hold out . When / If this chart breaks, the deflation scenario will be baked into the Charts

…………………….

PART 2 :

In the second part of the Weekend Report I AM going to show you some charts for the risk off trade where commodities show weakness in a deflationary type setting. This generally happens with a strong dollar as I showed you in part 1 , with the strong dollar and weak currencies charts.

The first chart I would like to show you is the CCI commodities index that topped out in 2011 and has been in a slow downtrend that has taken on the shape of an expanding downtrend channel. Note the black dashed horizontal trendline labeled the S&R rail, support and resistance rail. Above is support and below it becomes resistance. As you can see by last weeks price action the CCI traded below that important S&R rail for the first time in a long time.

The old CRB index has been much weaker than the newer version of the CCI as it failed to make a new all time high back in 2011 and actually made a much lower high. You can see the H&S consolidation pattern that has formed on the right side of the chart that is now starting to breakdown after doing the breakout and backtesting move. It to is in an expanding downtrend channel.

I mentioned last night that some of the big base metals miners are showing some big H&S topping patterns. BHP has a very similar looking H&S top that the HUI has, only the HUI has led the way lower by breaking its neckline back in February of this year a good 4 1/2 months ago. There could now be a backtest to the underside of the the neckline before the real move begins lower.

The monthly chart for BHP looks extremely bearish as that H&S top is sitting right at the end of the 2008 crash low rally. Remember this is a monthly chart that takes a lot of time to build out a big topping pattern, but when it is finally complete there will be a big impulse move down. Right now it’s all about patience to see if it does a backtest to the underside of the neckline.

RIO is another big miner that shows a similar big H&S topping pattern with the breakout and now the possible backtest underway. Again, look at a 6 year weekly chart of at any of the precious metals stock indexes to see what awaits the completion of this big H&S topping pattern.

RIO monthly.

FCX has created a complex topping pattern that consists of an unbalanced H&S top with a 5 point triangle reversal pattern. It has been taking its sweet ole time breaking out and backtesting. There is a good chance it has finished the backtesting process. We won’t know for sure until the impulse move down starts in earnest.

FCX monthly.

Lets take a look at copper as that commodity really crashed during the 2008 deflationary episode. As the weekly chart shows copper made a H&S top back in 2011 which broke to the downside followed by the 6 point blue triangle consolidation pattern which also has broken down.

Notice the last bar on this monthly copper chart that shows it’s really close to making a multi year low with just a little more weakness. As you can see on the left side of the chart, impulse moves start when these big patterns finish building out. Chop chop chop and then bang.

KOL is a coal etf that is now starting to move lower after a long drawn out breakout and backtest.

SLX is a steel etf that just recently has broken down from a triangle consolidation pattern.

The GASO, gasoline chart, is still trading at the center dashed rail of a very large rectangle pattern. Many times a failure at the center of a rectangle will led to the breakout move.

The oil chart shows a potential large H&S top pattern. The blue triangle on the right side of the chart that is trying to form the right shoulder and has done a little morphing lately breaking slightly above and below the top and bottom blue rails. So we wait for further developments.

This last chart I’ve overlaid gold on top of the US dollar so you can see the inverse relationship between the two. It’s not always perfect but they tend to run opposite of each other. Notice the price action back in 2001 when the US dollar topped out and gold bottomed out. Now fast forward to our most recent price action where just the opposite is happening right now where gold is topping and the US dollar is bottoming. I’ve circled the area in 2006 where gold and the dollar crossed paths on their way to gold’s top and the dollar bottom. Is gold and the US dollar going to cross paths again in the not to distance future? Time will tell. It always does. All the best…Rambus

PS

These long term charts that I’ve been posting on the US dollar, currencies, and commodities are painting a picture of deflation IMHO. These are huge topping patterns that aren’t going to play out in weeks or months but possibly several years. I think the precious metals complex has been leading the way down with the currencies and commodities playing catch up at some point. We have to get the main trend right so we’ll know how to play this deflationary episode. That is 75% of the game. Trade with the big trend whenever possible. I think once the deflation period ends that is when we’ll see the real inflation picture take hold. We will know when the time comes by the bases that will have to be built just as these topping patterns are showing us the way lower now. Big trends don’t change on a dime, it’s like turning the Titanic around. At some point the US dollar and gold may cross each others path again. Maybe they will kiss each other and reverse back the way they came. We just have to watch the price action for clues. All the best…Rambus

OK…I know some (including Dave ) get a little tired of me “Pumping Rambus’ Tires”

But I gotta say …of all the impressive periods of Doubt you have lead us thru…this was maybe the toughest so far

with more to come I am sure

a Mere 12 trading days ago…Wednesday June 6…we were up against the 3 resistance points…at the brink of the dreaded 50day Moving Average

…D Day on this chart

and now just over 2 weeks later ..we have broken thru and are doing a classic chartology retest now

…R Day on this chart

DUST has gone from 70 to 136 in this time

This Chart should be everybody’s Screen saver IMHO

It is almost too perfect !

You out Rambused Yourself !

……………………………………

Then if this is not enough

Remember the Wednesday Report was written and posted the day before the big Drop in PMs

http://rambus1.com/?p=13952

So on behalf of the silent majority of members

Thanks for teaching us this stuff

Fully and the Gang

……………………….

Before we look at the charts tonight I just want to make it perfectly clear that I’m not a gold basher or wish for bad things to happen to the precious metals complex. I first found the bull market in the precious metals stocks in the spring of 2002 after having the ride of a lifetime trading the tech stocks up until the spring of 2000 where I cashed out based on a particular chart pattern that told me to either expect a decent consolidation period to begin or it was the end of one of the greatest bull markets in history. It didn’t take long to see a major top had formed and the place to be was on the sidelines. During that great run in the late 1990’s the precious metals stocks were not even close to being on my radar screen. It wasn’t until I looked at a long term chart for gold, in the spring of 2002,  that I seen a beautiful inverse H&S base that I couldn’t ignore. I didn’t know anything about the precious metals stocks at that time but with that beautiful H&S base I knew some of the precious metals stocks had to have a bullish look to them as well. I learned about the little juniors that everyone, who was connected to the precious metal complex, were talking about. This was game on for me and I  have traded exclusively in the precious metals complex for the last eleven years. The chart patterns that gold, silver and the HUI created during their bull market were some of the most  beautiful patterns a chartists like myself could ever expect to see. The reason I’m telling you this is because what the precious metals charts have been showing me is that, like the 1990’s bull market, the precious metals complex has topped out and is now in a confirmed downtrend. How long and how far down this complex will go is any bodies guess. All I know for sure is the 13 year uptrend has topped and is now making lower highs and lower lows which is by definition a downtrend. I hope when you finish reading this article you will have a crystal clear picture of the bull market and the top that has been in place for some time now.

Tonight I would like to show you some charts of the HUI using it as a proxy for the big cap precious metals stocks. We will start out with the very short term look and work our way out to the beginning of the bull market that began in 2001 or so.

This first chart for the HUI is a 30 minute look that shows the latest consolidation pattern that has formed since the top last fall. This consolidation pattern I call, an expanding falling wedge, because the top and bottom blue rails are widening and falling. It started out as a small triangle, labeled with the red numbers and has morphed into its current form. Most chartists won’t recognize some of my chart patterns and will tell me to go back to charting school to learn the right way to chart. I have been doing this for 35 plus years using the Edwards and Magee Technical Analysis of Stock Trends as my charting bible. I have taken what they have given me and added my own unique style that you will recognize when you see a Rambus Chart.

I won’t get into the details right here just to say when I build out a consolidation pattern I need to see an even number of reversal points, such as 4, 6, 8 or more for it to be valid. A top or bottom needs to have an odd number of reversal points to make a reversal pattern. As you can see on the chart below the HUI is working on its 4th reversal point to the downside. The pattern won’t be complete until the bottom blue rail is hit and at that point I can call it a consolidation pattern. Right now it’s still in the developmental stage. The heavy blue trendlines shows what I think will end up being that bearish expanding falling wedge consolidation pattern when it’s all said and done as I will show you further along in this article.

Lets now look at a daily chart to put our little bearish expanding falling wedge into perspective. What you will also see on this daily chart are three more consolidation patterns that you won’t see most chartists use but they are just as valid and useful as any other traditional consolidation pattern. Also what makes the HUI so negative looking is each consolidation pattern is sloping down into the downtrend. Under normal conditions, in a downtrend for instance, a small flag or wedge will slope up against the downtrend. When I see a consolidation pattern sloping in the same direction of the trend, it tells me the price action is in a hurry to go to the next level and when I see one form after the other in a series that tells me all hell is breaking loose.

What I have shown you on the charts above is only the tip of the iceberg that just shows the right shoulder of a massive H&S topping pattern. Many times a consolidation pattern can be made up of several smaller patterns that ends up creating the finish product. This next chart is a long term daily chart for the HUI that shows the massive H&S top formation. What I would like you to note is the 11 point diamond reversal pattern that makes up the head portion of the massive H&S top. As I mentioned earlier in this article some of the chart patterns you see will only be found at Rambus Chartology.

Lets look at a few weekly charts to gain a little more perspective in what has and is happening with the precious metals stocks. This long term weekly chart shows the big H&S top that has reversed the uptrend that started off the 2008 crash low. This weekly chart is a cleaned up version, of the many looks this H&S top has, so you can see it in all its glory. There is an important feature on this chart that happened about 2 months ago when gold and silver broke below their 20 month rectangles, that we’ll discuss at a later date, and that is the big halfway gap, brown shaded area. Most have forgotten about that gap but it;s going to play a big role in the price action going forward as the HUI was unable to close it. There is another important feature on this weekly chart and that is the 2008 H&S top that most missed at the time. You can’t believe the amount of  flack I took when I called that top. It was pure blasphemy to call a top in the HUI. How dare some one say something like that. When you say something the gold bugs don’t like you had better have all your ducks lined up because if your wrong your going to be a dead duck. Fortunately for me things worked out and I was spared to chart another day.

Deja Vu ?

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

Early in this article I said the precious metals complex, stocks and metals, produced some of the best looking chart patterns a chartists will see. Below is another long term weekly chart for the HUI that shows the beginning of its bull market and four beautiful consolidation patterns that formed until the 2008 H&S top called for an end to that leg of the bull market. Note the move out of each blue consolidation pattern that was an impulse leg higher. That is what a true bull market looks like. One consolidation pattern followed by an impulse move up followed by another consolidation pattern until a top is finally found and a well need rest takes place.

Symmetry plays a big role in how I view a chart especially in fast moving markets. This next chart shows the reverse symmetry that is taking place to the downside that is reversing the rally off the 2008 crash low. The two black rectangles are exactly the same size in height and width. I don’t know if the reverse symmetry down will be perfect and reach the bottom in October of this year but so far it has proven to be dead on the money since I first built this chart back in January of this year. Only time will tell but so far so good.

I would like to show you another form of symmetry that has to do with the halfway gap I showed you earlier and how it may play a big role moving forward. If that gap is truly a halfway gap, that shows up in the middle of a strong move, it will be confirming the October time and price objective that I showed you on the chart above. This time we are using two black rectangles that are exactly the same height and width that I’m measuring the halfway gap with. Again I don’t know how it will play out but so far its been working out better than I had expected when I first built this chart. As long as nothing is broken there is no need to fix it. So we’ll just have to see how it plays out. It is uncanny how one can come up with a time and price objective using two completely different methods. Sometimes the markets are stranger than fiction as you well know.

I would like to leave you with one last chart that doesn’t have anything to do with the precious metals stocks. At the beginning of this article I said there was a chart pattern that formed at the end of one of the greatest bull markets of all time. I know when some of you read that you were probably thinking ya right this guy is full of himself calling a top to an 18 year bull market. I only bring this up because chart patterns can give you the clearest view of the markets of any discipline I know. There are excellent Elliot Wave guys and cycles guys and many other forms of analysis that work very well for those that truly understand what they are doing. Charting gives me a way to follow the price action, and done correctly, keeps me out of trouble as so many in the precious metals complex are finding out again. I’m still amazed at how such an old school of charting the markets competes right up there with the best computer programs that are trying to get an edge on you.

Below is the weekly chart for the COMPQ that gave me one of the biggest clues of my life that it was time to really consider what was happening at the time. For those of you that traded during the tech bubble you know how super bullish the hype was and how hard it was to emotionally distance yourself from all the noise. Can we say the same thing about the precious metals complex right now? Only time will tell.  All the best…Rambus

Editor’s Note :

Rambus Chartology is Primarily a Goldbug TA Site where you can watch Rambus follow the markets on a daily basis and learn a great deal of Hands on Chartology from Rambus Tutorials and Question and Answers .
Most Members are Staunch Goldbugs who have seen Rambus in action from the 2007 to 2008 period … and now Here at Rambus Chartology since early 2012 .

You will find Rambus to be a calm humble down home country tutor with an incredible toolbag of all the TA based protocols tempered with his own one of a kind style…simply put…He wants to keep his subscribers on the right side of these crazy volatile and downright dangerous markets

What is he seeing Now ?

www.rambus1.com