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

In this weekend report I would like to go into the Rambus Chartology tool box and bring out a tool that you will only find in my tools of the trade tool box. I’ve shown you some charts recently that show “reverse symmetry” but I would like to dig a little deeper in the subject and show you in more detail some charts that are showing some beautiful reverse symmetry right now.

When I speak of reverse symmetry I’m referring to how a stock goes up, especially in a fast moving advance, will reverse back down in a similar fashion, once a top is put in place. In fast moving trends either up or down there is little time to create much in the way of consolidation patterns. Consolidation patterns are the key to keeping an uptrend or downtrend intact as they produce support or resistance zones when there is a correction. Without those consolidation patterns a stock can have very fast moves in the opposite direction similar to the way it went up. This is what I call reverse symmetry.

Head & Shoulder patterns are good examples of how reverse symmetry starts out, at least to the neckline. You have the formation of the left shoulder followed by the rally to the head then another decline that sets up the neckline with one last rally attempt that stalls out before reaching the top of the head. The price action then rolls over in reverse symmetry down that is similar to the rally on the left side of the head.

The CDNX shows you a good example of what I described above. Note the rally on the left side of the chart created the expanding triangle that is the left shoulder. As the bulls were still in charge the expanding triangle broke out and rallied to the red arrow which was the top. The bulls now were exhausted and had no energy left to take prices higher so the bears took over and took charge to the downside. The first really big clue that a H&S top could be forming is when the bulls failed to hold support at the top of the expanding triangle on the way down from the Head. As you know the top of consolidation patterns normally offers strong support for the next leg higher. When you see a failure like this this is a big warning that the trend is changing from up to down. As you can see the bears took the price action all the way down to point #4 at the bottom of the expanding triangle. By this time the bears were becoming exhausted and couldn’t push prices lower so the bulls came back in and a made a feeble rally attempt that could only push the price up to point #2 on the bearish rising wedge. As you can see the bulls and the bears fought it out creating the bearish rising wedge. For those that can visualize this, if you take the H&S pattern and fold it to the left side like a book, using the red arrow as your center point, you can see how the two sides match up, reverse symmetry. You can see how the bearish rising wedge, on the right side of the chart, lays on top of the expanding triangle on the left side of the chart.

Below is the same chart above that shows all the annotations and chart patterns. You can see once the big neckline was broken to the down side CDNX formed a H&S consolidation pattern that was the backtest. There is also a very large 5 point bearish falling wedge that broke out to the downside about 6 weeks ago and had a backtest 3 weeks ago. I expect the reverse symmetry to play out fairly hard to the downside since the breakout of the 5 point falling wedge that should take prices down to the 2008 bottom.

There are several precious metals stocks that have created large rectangle reversal patterns for their bull market highs. Reverse symmetry is showing up here as well. The first chart is a weekly look at EDR.To that shows the big blue rectangle reversal pattern. You can see where it broke down from the rectangle and had its backtest to the underside of the blue rail, that is now acting as resistance that corresponds to the price action leading into the rectangle on the left side of the chart. I’ve labeled the two symmetry points with a S that now shows a H&S top.

You can see a very similar setup on this weekly chart for BTO.To with the breakout and backtest on the right side of the chart that matches the same area on the left side of the chart.

CSI.To shows a similar setup that is a little bigger with more reverse symmetry taking place. Note the 7 point diamond head reversal pattern that has a red expanding bull flag on the left side of the chart and the red 6 point diamond consolidation pattern on the right side of the chart. Keep in mind it’s more of an art than a science sometimes. Even though the patterns are different in size it’s where they formed is the key. Again note the price action around the neckline that I’ve labeled with two heavy black S’s that shows the reverse symmetry on the left and right side of the chart. One last important note on this chart. Notice the rally off the 2008 low that started out in a vertical move before it created the inverse H&S bottom. That vertical move up in 2008 will offer very little resistance for this next leg down that is now starting. There is a good chance this stock will fall like a rock until it hits the 2008 low.

Lets look at one more example of a rectangle reversal pattern that showed reverse symmetry and is quite a bit further along in its move down than the charts above. Again the heavy black S’s shows the reverse symmetry. Note our current price action that is taking place right now on the right side of the chart. It looks like FNV has put in a small double top with a backtest over the last 3 days. For the more experienced trades this is a good low risk entry point for puts or shorting this stock. The double top trendline is your line in the sand.

Now that you should have a fairly good grasp of what I’m referring to when I talk about reverse symmetry I want to show you some weekly line charts for some of the precious metals stocks that will drive home the point of what I’m trying to get across here. These chart aren’t for the faint of heart as they show the carnage that has and is taking place right now regardless of all the reason the precious metals stocks should be bottoming and going up. I’m still in total amazement of all the bottom callers, all the way down, that fail to look at the most basic principals of technical analysis. Lower lows and lower highs equals a downtrend. Folks you don’t have to be the brightest bulb in the room to see what a downtrend looks like. Below are some examples of what I mean.

These charts will speak for themselves. First GFI weekly line chart.

IAG

AU

BVN

CDE

ELD.To

NEM

On a weekly closing basis ABX is testing its 2008 crash low. It’s supposed to be the leader. What does that say about the rest of the precious metals stocks?

Lets take a quick look at the weekly line chart for the HUI. It could still backtest the 268 area just above at the previous S&R rail on a weekly closing basis. If I switched this line chart to a bar chart you would see that 268 was hit last week as the high

This chart below is exactly the same chart above only I’ve made it a bar chart instead of a line chart. Note how the price action rallied up to the 268 that showed resistance on the line chart.

HUI daily line chart…

I’ve shown you this daily line chart for gold that shows how I’ve been looking for some reverse symmetry down once the big rectangle was broken. It’s finding support right now on the symmetry rail that goes back to the left side of the chart with the purple arrow. A break below this latest support rail will usher in the next leg down.

There are few times in the markets when they present such a clear picture of what is happening. The precious metals complex has been showing itself since the October 2012 highs with one of the most relentless moves down I can remember. Just look at those weekly line charts. Anybody looking for strength to get out of their precious metals stocks are trapped and they know it. They are now at a point where there are few options for them. They either sell and cut their loses or they have to ride the whole thing down. The problem is there is no law that says the 150 area on the HUI is going to be THE bottom. It looks like a good place for a bounce but will it be just that? I’m just glad we are not trapped in that situation right now. Even if you haven’t traded any of the short etf’s you have your hard earned capital intact. There will come a time when we get an intermediate term rally in which we can take advantage of but until we see some kind of bottoming pattern there is no bottom. Have a great week

…All the best…Rambus

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Editors 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 where he has prepared us for this debilitating PM smackdown.

What is he seeing now ?

http://rambus1.com/

In this weekend report I would like to answer some questions presented at the forum this weekend. First lets look at silver and see what the charts are telling us especially after last weeks price action. Lets start with a daily look that shows the downtrend channel that began back in October of last year. You can see all the different chart patterns we’ve been following during this delcine. You can see what happens when a strong support rail gives way. The bulls were exhausted and the bears took charged and moved the price down to the 22 area where we are getting our first counter trend rally after the breakout.

This next daily chart is the one I showed you on Friday night that shows the parabolic arc and the backtest to the 25.60 area. There are a lot of resistance points in that red circle that should hold any rally in check. If for some reason silver cuts through that overhead resistance that would be a warning flag that silver is stronger than what the chart are saying right now. It’s just something to keep in the back of your mind.

The weekly chart shows a classic 6 point rectangle consolidation pattern. Point #4 is the only flaw where the price action poked above the top blue rail during the week but close the week below the top blue rail so I view that as an aberration. The backtest will come in at the 26 area where the bottom rail should now reverse its role from what was support to now resistance.

The monthly look shows the major uptrend channel for the bull market that started back in 2002 after finally breaking out of the blue 4 year bullish falling wedge. At the top right hand side of the chart you can see our current downtrend channel that started off the 50 all time high made 2 years ago this month. You can see that this monthly chart is showing lower lows and lower highs which is the definition of a downtrend. If silver trades within the parallel downtrend channel all the way down to the bottom rail of the major uptrend channel, silver could fall as low as 16 where the two bottom rails intersect. That would give the RSI indicator, at the top of the chart, a chance to reach the area of the two previous major lows at 36.50 purple arrows. If it did play out close to what the charts are showing and silver bottomed out at the bottom rail of the big uptrend channel that would still leave the bull market intact. I would have to consider that area a major buying opportunity.

Next I would like to show you several weekly chartS for SLV that show two different type of consolidation patterns, that fit with the Chartology of chart patterns. The first weekly chart for SLV shows the 8 point diamond consolidation pattern that we’ve been following since the first of the year.

Produced December 21 2012

So far its played out beautifully making lower lows. The big blue diamond gave us an early indication that the big 20 month rectangle was going to break to the downside. You can see the diamond broke out in the middle of December of last year at 31.50 a full 5 1/2 points higher that where the big rectangle broke out at 26 or so.

This next weekly chart for SLV shows another consolidation pattern that also makes sense from a Chartology perspective. First lets look at the parallel downtrend channel that shows 2 red circles toward the top. Those two red circles show what I call, Symmetry Failures. Failures to reach the top and bottom rails of the downtrend channel. These are impossible to see early on. It’s only after the downtrend channel starts to mature that you can finally recognize them as such. It’s always important to tweak your trendlines  once you have more information to work with. Now lets look at blue bearish falling wedge that broke out two weeks ago with that huge gap. Whenever you see a gap and, Especially on a weekly chart, it’s always good to pay attention. Many times the gaps will show up at breakout points. That gap made 2 weeks ago on this chart also shows up on many of the precious metals stocks as well. The backtest would come in around the 24.75 area. The brown shade area shows the minimum price objective down to the 17.80 to 18.35 based on two measuring techniques I use.

Lets take a look at the US dollar that shows it consolidating in a loose rectangle just above the brown shaded support and resistance zone. I call it loose because the top rail is sloppy, but you can see the trading range that  has completed 4 reversal points and is now trading halfway down to the lower trendline. It’s trading smack dab in the middle of the rectangle right now. Usually the US dollar charts shows fairly nice tight trading ranges but lately they have seemed a little sloppy to me. The patterns are there but harder to define for most folks. The price objective for the red rectangle halfway pattern would be around the 86.25 area which will help our EUO trade.

The next chart shows why the US dollar is trading in this rectangle trading range. It’s basically trapped between the top brown shaded support and resistance zone and the brown shaded support and resistance zone I showed you on the chart above which is the top point of the 5 point triangle reversal pattern.

I posted this next chart the day the US dollar broke out of the 5 point triangle reversal pattern. The blue shaded area shows where the US dollar and gold were trading on that day. As you can see the inverse relationship is still alive and well. I think once the dollar breaks out above the red rectangle gold will be finishing up with its counter trend rally.

Lets take a look at the weekly log scale chart for the HUI that shows the weekly gap is still in play as the HUI failed to close it completely this week. The black rectangles measures time and price. If the bottom of the halfway gap plays out similar to the top half then the HUI could reach the bottom around the 160 area in October of this year based on both halves being equal.

Here is an interesting observation. On the chart above I showed you how the 2 rectangles each measured time and price  from the halfway gap that gave us a price objective down to the 160 area in October of this year. This next chart I’ve shown you before that shows the reverse symmetry taking place from the rally off the 2008 low to the height of the left shoulder. What is interesting is that the 2 rectangles on the chart below are unrelated to the two rectangles that measures the halfway gap. As you can see on the chart below both charts come up with the 160 price target in October of this year using 2 completely different scenarios.

On a positive note lets look at the very long term 30 year chart for Silver that shows two massive inverse H&S bottoms. This month the price action has come down and is testing the big neckline #2 which comes in around 23 the area. If silver ever closes below neckline #2, on a monthly basis, that would that would be bearish. If this big base holds then silver is going considerably higher as shown at the top of the chart. The main thing right now is to watch the price action on the shorter term charts and see how the bottoms of the consolidation patterns that I showed you earlier, hold up. If we start to see prices breaking above some of those bottom rails on the 20 month rectangle or the bottom rail of the bearish falling wedge then we will need to re-evaluate the situation accordingly. Silver will talk to us, we just have to listen.

Below is a 30 year line chart for silver that shows the backtest still in progress down to the 21 area on a monthly closing basis.

This last chart I would like to show you is a long term look at gold using an 8 year low followed by an 11 year high cycle chart that the Aden sisters posted back on June 22, 2010. Their chart shows up at the end of the article.

http://www.safehaven.com/article/17245/golden-times

After studying  and seeing their chart I built my own chart so I could follow the 8 and 11 year cycles as they described them. Last year, in February was when the next 11 year cycle top was supposed to come due. At the time I noted it on my chart and just observed to see what would happen. I knew if the 11 year cycle high was in place that some sort of top should also be in place. Two weeks ago when gold had the big breakout move down, that confirmed for me, that the 11 year cycle high must be in place even though a whole year went by before the breakout came. You can now see the top, clear as day, on the chart below.

Oh I almost forgot for those inquiring about a Gold Target I posted this as the Friday Nite Chart:

Usually on Friday night I’ll post a few charts that may be interesting to the current environment. Tonight lets look at an old, long term, 6 year daily line chart for gold that shows a H&S consolidation pattern that formed back at the crash low in 2008. It was one of the most symmetrical H&S patterns I ever charted. It’s hard to tell from this long term look but it was a thing of beauty. It’s hard to remember for some but the gold neckline came in at 1005 as shown by the blue and red arrows. I’ve extended the neckline, brown shaded area, all the way to the right side of the chart. If I was looking for the ultimate support zone it would have to be the brown shaded neckline.

I hope these charts gets everyone up to speed as to where we are and where we might be headed. The best I can tell right now is that the last quarter of this year looks like a decent place to see a good bottom for the precious metals complex. We might get more clues as this decline matures. We might see a consolidation pattern or two form before we bottom out that may give us a little insight. Right now, with the information we have, October through to December looks ripe for a time and price objective that could yield a good low. I’ll show you a few more things in the Wednesday Report that I’m looking at that might shed some more light on the bottom area later this year. All the best…Rambus

Editors 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
where he has prepared us for this debilitating PM smackdown.

What is he seeing now ?

http://rambus1.com/

Insomnia is setting in after reading Rambus Ultimate Targets tonite

As a Goldbug these targets are devastating !

As a Trader (Darth Trader)…I am trying to remember this from a Rambus Post This past February (hard to believe its only 2 short months ago)

http://rambus1.com/?p=10039

“The easiest and hardest thing trading this decline, once it starts, will be to ride the trend lower without getting kicked off. Easiest in that you don’t have to do anything but stay in your position. The hardest because it will be very difficult to ride out the volatility. When you look at the charts above it looks easy to ride the move down to the H&S price objectives but when your living through it it’s an altogether different thing. Once below the necklines the volatility will increase dramatically where there could easily be a 100 point swing in the HUI. I expect to see at least one good consolidation pattern form that may show up halfway down to the price objects. Another possibility is there could be a series 2 or 3 smaller consolidation patterns form before the bottom is reached. Its time when one has to get mentally ready for what could be the ride of a lifetime if things work out as expected. The big money will be made by those that can stay with the trend and not panic every time there is a rally. Easier said than done.

all the best

Rambus ”

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Goodnight Chartologists where ever you are

Fully