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

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 :

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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

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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 !

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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

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