I’ve been studying the GLD to figure out why GLD broke down the other day with a big gap. It drastically changed the short term picture that had been in place. It looks like there could be a small red bearish rising wedge halfway pattern that is showing up within the confines of a bigger blue bull flag. Elliot wave guys would call this an ABC correction within the uptrend channel. If we see some weakness today we will sell our UGLD.. The chart below shows the possible setup if GLD can’t trade back above the bottom rail of the red bearish rising wedge. The price objective would be around the 158.81 area.

This longer term chart for GLD shows the price action trading below the top rail of the rectangle.

Below is a 6 month time cycle chart for gold that has done a pretty good job of calling the bottoms since 2009. It shows another 6 month time cycle bottom is due around the 17th of December. This may indicate that gold still has some more chopping around to do for the next 2 weeks.

I just want to show you a quick update on the 2 1/2 year daily chart that shows the big 2 point gap that was made on the way down back in September of 2011. I have always kept the big gap on my radar screen knowing one day we would eventually be back to visit this area. You can see our little H&S bottom on the far right side of the chart that may give SLV enough energy to reach the gap area. For those that are studying halfway patterns there are a couple of good examples on the chart below.

About a month or so ago I wrote the Weekend Report on the US Dollar showing many dollar charts that were suggesting the dollar was close to topping out. Its important to pay close attention to the dollar as it affects so many markets especially Gold and Silver. I would like to update a few of the charts to see how the price action has been.

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First lets look at the Fibonacci retracements and see which one finally held resistance. The chart below shows the 50% retrace held which also corresponded to the top of the brown shaded support and resistance zone. Fridays price action also closed below the 200 dma and MACD at the bottom of the chart has now crossed giving a sell signal.

Next lets look at the H&S that was forming that has two left shoulders. It looks like the dollar has just completed the first right shoulder and is headed back down to the neckline. As you know symmetry plays a big role in how I look at the charts. As you can see on the chart below the left side of the H&S top has two shoulders. Its very possible that the dollar may build a second right shoulder before the H&S top is complete. Its possible that this H&S top could be of an unbalanced variety meaning two left shoulders and one right shoulder. We will just have to see what happens when the dollar reaches the neckline and take it from there. Note the MACD has crossed and is now giving a sell signal as well.

Lets take a look at the ROC indicator that was approaching the zero line, red circle on chart below. Its currently at a minus 1.25 which is still in negative territory. The 10 wma has turned up ever so slightly but with last weeks price action in the dollar there is a good chance it will start to roll over again. From this ROC indicator I still rate the dollar as on a sell signal.

Lets now take a peek at the Euro as it should have an inverse look to the US Dollar. The daily chart below shows a nice inverse H&S bottom forming that has a price objective up to 145 or so as a minimum move. Note the MACD indicator at the bottom of the chart has now crossed and is giving a buy signal.

I used a slightly different approach looking for the bottom for the XEU (The Euro ETF).  Notice the big green circle on the left side of the chart and how the little red bull flag formed right on top of the black dashed horizontal rail that acted as support. Now focus your attention to the right side of the chart and the big green circle that is showing the same setup. After testing the black dashed horizontal rail as support the euro began to liftoff last Friday. That bottom is also the bottom for the right shoulder I showed you on the chart above.

Lets see how gold looks from several different currencies. The chart below is a combo chart that shows how gold is trading against the US dollar and several of the major currencies of the world. As you can see gold has broken out of the red triangles and is in the process of doing some backtesting in some cases. The Yen to gold looks particularly strong in here as it will probably be the first currency to reach new all time highs with the euro right behind.

Lets look at one more combo chart that shows the US dollar on top and Gold on the bottom. This chart shows the inverse relationship between the two, purple vertical line. The most important thing to take away from this chart below is the neckline on the dollar and the top blue rail of the rectangle for gold. Those are both strong and hot rails. By the looks of it they will both hit their respective rails at the same time, the dollar the neckline and gold the top blue rail of it’s rectangle. That is what you can call an inflection point. I suspect they will both work through the breaking out and backtesting process together for their critical trendlines. Once the breakout and backtests are complete each trendline will reverse its role. The neckline once broken to the downside will act as resistance and the top blue rail of the rectangle will act as support when it finally gives way.

Lets look at one last chart that is the gold to silver ratio chart. When the price action is falling silver is outperforming gold. In a strong move in the precious metals I like to see silver outperforming gold. A break below the bottom rail of the blue rectangle will signal silver is the place to be for investments purpose. This would also be bullish for the stock markets.

OK,  one last chart of the gold to silver ratio that shows when silver is outperforming gold it’s good for the stock markets. Thats because its still looked at as a commodity. A strong stock market equals more demand for silver so the two go hand in hand. The SPX is above and the gold to silver ratio is on the bottom. As long as the black arrows point up for the SPX and down for the gold to silver ratio that should be a bullish setup especially for silver.

I’ve been working on a long term gold chart that will show you how beautiful this bull market has been. I still have a little more work to do but It should be finished for the Wednesday Report. So stay tuned as it will be one of a kind chart that you won’t find anywhere else on the net….All the best…Rambus

 
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Tonight lets look at some of the positive signs that are beginning to show up that are showing a bottom might be close at hand or already in for the precious metals stocks. The first PM stock index to look at has been one of the most symmetrical in several ways. The XAU has bounced perfectly off the neckline symmetry rail and shows a nice rally maybe starting. We still can’t rule out one more test of the neckline symmetry rail as alot of times there are two test of an important trendline before the real move begins.  If you look at some of the other tops and bottoms on the chart below you will see what I mean.

There is another form of symmetry, on the chart above that most won’t see,  is both the left and right shoulders of the inverse H&S bottom are both expanding wedges. The left shoulder is a bearish expanding rising wedge and the right shoulder is a bullish expanding falling wedge. With the double headed double bottom for the absolute bottom and the two expanding wedges for the left and right shoulders gives us an awesome looking H&S bottom. If the neckline symmetry rail is showing us the low for the right shoulder we can expect at least a 100 point rally in the XAU when the neckline is broken to the upside.

The GDX is also showing a very similar setup in regards to the neckline symmetry rail. It also has two expanding wedges as it’s left and right shoulders. I would like to see the MACD crossover to confirm the bottom is in.

The HUI has a similar setup to the other PM stock indexes. I’ve added an uptrend channel that may or may not come into play down the road.

The GDXJ small cap PM stock index show a little different look to the bigger cap stocks. It still has a double bottom with a smaller inverse H&S base. It also has an expanding falling wedge that backtested the neckline last week.

The next chart I would like to show you is a daily line chart for the HUI that shows the double bottom hump still working as support. Line charts are good for showing where real hidden support or resistance is by taking out the spikes that a bar chart can show. As you can see on the chart below the HUI is getting a nice bounce from the lower area of the brown support zone.

This next chart of the HUI shows the backtest taking place to the top blue rail of the downtrend channel. So putting some of the pieces of the puzzle together you can begin to see why I think the bottom is in for the precious metals stocks. The right shoulder, of the inverse H&S bottom is finding support on the top blue rail of the downtrend channel, is more common than most realize.

This last chart for the HUI is a long term monthly look that shows the whole bull market from the big complex H&S base to our most recent consolidation pattern, a potential bullish rising wedge halfway pattern. I have taken alot of flack in the past for showing a rising wedge as a bullish  consolidation pattern but they are no different than any other consolidation pattern. If they breakout to the upside its a consolidation pattern regardless of what the rules say. Also the expanding rising and falling wedges are another pattern that most chartists miss because they are not in the book of Technical Analysis. Notice where our current inverse H&S bottom is forming, right at the 4th reversal point of the bullish rising wedge. The H&S is a reversal pattern that was needed to reverse the latest downtrend and to put in a 4th reversal point for the big blue bullish halfway pattern. Notice how much bigger the bullish rising wedge is compared to all the other consolidation patterns in red. This is a huge consolidation pattern and has been in consolidation mode since the 2008 H&S top. Big consolidation pattern equals big moves.

As the precious metals stocks are showing some bottoming action lets take a look at Silver and see if it is confirming a bottom also. This daily chart shows a nice inverse H&S bottom that has already broken out to the upside three days ago with some backtesting already taking place. The price objective is to the previous high at the 35 area.

The last chart I would like to show you is a long term look at gold that is showing a parabolic curve taking shape. If the PM stock indexes are bottoming and silver is bottoming then gold should also show a bottom. If you look at the last bar on the top right hand side of this monthly chart you can see that bar is finding support at the last uptrend rail of the parabolic rise.

From a chartology perspective there is alot of evidence that is suggesting the precious metals complex has bottomed. I know thats is a strong statement to make but that is what the charts are suggesting to me right now. The last monthly chart above is showing gold on the launch pad with the breakout and backtest of the blue triangle finishing up on the bottom black rail of the parabolic uptrend arc. This is the 5th large consolidation pattern for the 12 year bull market that is suggesting a multiple year rally lies just ahead of us.  The chartology shows 3 different methodologies used for analyzing the charts above that don’t show up in most text books.  The neckline symmetry rail, the expanding rising and falling wedges and the bullish rising wedge. Its a little unconventional but whatever it takes to see the picture the charts are trying to show us is what its all about.   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 Answeres .
Most Members are Staunch Goldbugs who have seen Rambus in action from the 2007 to 2008 period at www.goldtent.org and now Here at Rambus Chartology since early 2012 .
To review his Work and incredible calls from the 2007-2008 period click on the top right sidebar in the “Wizard of Rambus” ….”What If !!” Post
To Follow Rambus Unique Unbiased Chart Work and participate in a Chartology Form with questions and answeres and learn the Art and Science and Mindset of a Pro Trader please Join us by subscribing monthly for $29.99 at
www.rambus1.com
We have many subscribers from all over the world who are glad they did as they enjoy the many daily updates and commentaries provided at this exciting new site
As you will see Rambus (Dave) has prepared us for this difficult period by being one of the only ones to see and warn about the incredibly debilitating PM smackdown as early as Jan 2 2012 …click on the” HUI Diamond in the Rough” Post in the “Wizard of Rambus” top right
More Recently Rambus called a Bottom in HUI in this post…and has had subscribers on board for a Powerful Run to the Upside
rambus1.com/?p=5651
BUT
What is he seeing Now ?
You will find Rambus to be a calm humble down home country tutor with an incredible repitoir 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 volitile and downright dangerous markets
See you at the Rambus Chartology
www.rambus1.com

In this weekend report I would like to look at some ratio charts that compare gold to many different areas of the markets. If gold is going to lead the the charge I would like to see it rally against just about everything.

This is  where ratio charts come into play. The first set of charts I would like to show you is comparing gold to some of the different stock markets. These monthly charts go back to the beginning of the bull maket for gold, that shows without a shadow of a doubt, gold has significantly outperformed the stock market as the charts below show. There are periods when gold has consolidated its run up against the stock markets but it has not lost much ground through it’s 12 year bull market run relative to the stock markets.

The first monthly chart I would like to show you compares gold to the  INDU. When this ratio is rising gold is outperforming the  Dow Jones. You can see the nice inverse H&S bottom that formed back in the 2000 timeframe. That was the base that launched gold against the Dow that had been in one of the strongest bull markets of all time. As you can see the ratio chart has been rising in a very bullish fashion that shows the first big pattern to form out of the inverse H&S base was big blue bullish rising wedge. That big blue bullish rising wedge was made up of several smaller red consolidation patterns. The top blue consolitation pattern is showing another bullish rising pattern that is forming it’s 4th reversal point. Keep in mind this is a monthly chart and changes are gradual.

Gold to the SPX shows a very similar setup to the ratio chart above. As you can see this ratio chart is trying to put in its 4th reversal point where the current price action is now trading. This is where gold and the stock markets might start to part ways. We just need to see this ratio start to rise and the steeper the rise the faster gold is outperfoming the SPX.

Lets compare gold to one more stock market that has been a little weaker than the Dow and SPX. Again you can see another bullish rising wedge that is bouncing off the bottom rail. What these ratio charts are showing you is that we could be very well at an inflection point where  gold really starts to outperform the stock markets in a big way. That can happen in one of two ways. The first way is that gold and the stock markets go up together but gold goes up much faster causing the ratio to rise moderately. The other way is for gold to rally and the stock markets fall which would cause a near vertical move in the ratio.

The ratio charts  above shows gold outperforming the stock market in a big way and is possibly getting ready to accelerate it’s move. These next set of charts shows how gold is performing against a basket of commodities by looking at the gold to the CCI index. The first thing that will jump out at you is the massive 20 year inverse H&S bottom that finally broke out in 2008. You can see the pretty blue bull flag that formed on top of the  neckline as the backtest. Since the breakout of the blue bull flag this ratio chart is putting in another bullish consolidation pattern, a red triangle that is nearing completion. A breakout of the red triangle will probably lead to a vertical move where gold is really outperforming a basket of commodities.

Lets look at a very long term ratio chart that compares gold to the old  CRB index. The chart below shows a massively long term 25 year bullish falling wedge. Please note the vertical move once the top rail was broken to the upside. That built up energy, once released, signaled gold was entering a brand new bull market against a basket of commodities. Notice the smaller blue bullish rising flag that broke out to the upside back in July in 2011. The price action has been consolidating on top of the blue bullish rising flag as another bullish rising pattern, the red bullish rising wedge, that is just now starting to breakout.

Lets now compare gold to the WTIC, oil index. This long term chart shows another massively large inverse H&S bottom. The head portion is comprised of a 5 point bullish falling wedge reversal pattern. You can see there is some pretty nice symmetry taking place on the left and right side of the chart that is showing a left and right shoulder. Notice how vertical the move was on the breakout of the 5 point bullish falling wedge. That is what a breakout looks like after being confined in a narrowing trading range for so long. All the energy is released and a vertical move follows. This chart shows that this ratio should be bullish for the precious metals producers as their cost of fuel is falling as the price of the precious metals is rising.

Lets now compare gold to silver to see how this ratio has been playing out over the very long term. You can see this ratio formed a very large rectangle that took about 11 years to complete. It finally broke down through the bottom rail when in 2011 silver had its massive bull maket run up to the 50 area. Once the move was over, the countertrend rally took the ratio back up to the center dashed rail of the recangle, that often times signals the counter trend move is over. Then a resumption of the primary trend is back in force, in this case backdown. I think before this bull market is over the gold to silver ratio will fall below the 20 area.

This next chart compares gold to the XAU that shows you how undervauled the precious metals stocks are compared to gold. After finally peaking out at an all time high back in August of this year the ratio formed a small double top. It now looks like the ratio is in the process of backtesting the breakout from the double top hump at 9.84. This is a critical backtest taking place right now. If the backtest is successful then all the work should be done and the XAU should start outperforming gold with the ratio falling.

The last ratio chart I would like to show you is the TLT to GLD ratio chart. The TLT is the 20 year bond and when you make a ratio chart that compares the TLT to gold it can show you which direction gold may travel. Below is a combo chart with the TLT to Gold ratio on top and GLD on the bottom. It clearly shows when the ratio is falling gold is rising and when the ratio is rising gold is falling. There is an interesting setup taking place right now with the ratio chart on the top forming a bearish rising wedge and gold itself is forming a triangle consolidation pattern. They have both broken out of their respective patterns and are in the proccess of doing the backtest move. Once the backtest is complete gold should be ready to rise to new highs.

What these long term ratio charts are telling us is that gold is at an inflection point with just about everything related to the markets. This is a good setup for gold right now if it can break free from all those consolidation patterns that I have shown you above. I think it can win the Academy Award for best performance of an asset class at the next awards ceremony. All the best…Rambus
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This chart of gold shows you the reason we bought our last shares for the UGLD Kamikaze trade this morning. Keep in mind it doesn’t shows today’s price action. There is the 300 dma that comes in at 1677. The H&S top price objective comes in around the 1660 area that also coincides with center of the big rectangle. The center of a rectangle sometimes acts as support on the last decline before the breakout. That is showing you strength as the last reversal within the rectangle fails to make it all the way back down to the bottom rail. I thought we might make it down to the 1650 area before we found support but today’s action is suggesting the bottom may now be in place. We shall see in the next few days.

I haven’t posted this chart of the XAU in awhile. Its shows the neckline symmetry rail helping support the bottom of the red bull flag. If this low can hold this stock along with the other precious metals stock indexes will all be forming an inverse H&S bottom. These inverse H&S bottoms, if completed, will have a price objective back up to their all time highs.

In this weekend report I want to take a good hard look at the US Dollar as its so critical to so many different areas of the markets. Generally speaking, if the dollar is rising then gold and the precious metals stocks are falling. Also if the dollar is consolidating so is the precious metals complex which seems to be the case for the last several months. Alot of precious metals complex investors are starting to become disillusioned with this latest rally in gold and precious metals stocks. This is exactly what corrections or consolidation periods are designed to do. These periods call into question the reasoning why you bought in the first place. Generally, by the time the correction is about over many have thrown in the towel just when they should be holding or adding to their positions.

Many are calling a bottom in the US Dollar right now that I think is a little premature at this time. The first chart I would like to show you is just a simple daily look that shows the 200 dma and the Fibonacci retracement levels since the top made back in August of this year. As you can see on the chart below there is a confluence of resistance points that come together right here. First the 200 dma was hit last Friday which coincides with a Fibonacci 38% retracement of the decline off the August high. The brown shaded area is what I call a Support and Resistance zone. When the price action is trading above the S&R zone it acts as support and when the price moves below, it reverses it’s role and acts as resistance. As you can see we are now just touching the bottom portion of this zone. The top of the S&R zone would come in at the 50% retracement. Until that is broken to the upside the US Dollar is in a confirmed downtrend IMHO.

This next chart of the US Dollar is basically the same chart above but I have added some chart patterns so you can see the different patterns that have formed over the last year. Some of the longer term subscribers may remember the blue 6 point triangle that formed back in the winter months of this year. If you recall at one point it broke below the bottom blue trendline that everyone was saying the breakout was complete. I told you not to give up on the blue triangle yet as it could still be a consolidation pattern to the upside, based at the time, on the internal structure that was still in the process of morphing, that was creating the 6th reversal point. As you can see on the chart below the 6th reversal point in fact did hold and a big rally ensued. You can see a second, blue smaller triangle formed, that looked as pretty as any triangle can look. It broke out just as expected but then something strange happened. It failed to launch. You can see it made 3 attempts to really breakout but each time it failed. This is always a very big clue that something is wrong and the appropriate action needed to be taken. As it turned out the US dollar made an unbalanced double top. Note the small red bearish falling flag that formed at about the halfway point in the decline that suggested the dollar had further to fall. One last note. The red circle shows the 50 dma crossing below the 200 dma signaling a sell signal. Also there are only 3 reversal points that have formed since the bottom in September. We need one more to complete a possible bear flag.

With this next daily chart lets look at a longer timeframe that highlights the brown shaded Support and Resistance zone. As you can see on the chart below the price action off of the September low is now running into a resistance zone that was previously support. If the price action stalls out somewhere around the brown S&R zone this would be the area for a right shoulder to form. Its to early to say for sure but the potential for a very large H&S top would signal much higher prices of the precious metals complex.

The next chart is a weekly look that shows an inverse H&S bottom that I was following for some time back in 2011. It looked very positive at the time and I had no reason to doubt that it would be successful. Whenever you have an important trendline its always important to see how the price action behaves. There can be some good clues as to the validity of an important trendline by the way the price action breaks out and backtests. As you can see the breakout of NL 1 was followed by a fairly strong backtest. The backtest eventually held and the rally began. Symmetry to the left side of the chart showed me where to add a second neckline. The price action broke out above NL2 which said everything was on track. You can see about 5 weeks after the breakout from NL #2 there was a nice clean backtest that still suggested everything was a go. As I’ve shown you on the daily charts above the rally was aborted with the formation of the unbalanced double top reversal pattern. This brings us up to the point of this weekly chart below. We know that NL #2 was hot by the way the breakout and backtest played out but after the failure to launch the price action broke below giving us another clue a top was in place. As you can see we are now trading right up to the underside of NL #2 which should now act as resistance.

This next chart for the US Dollar is a mechanical system that has been around for sometime. Its basically pretty simple. At the top of the chart is the ROC, rate of change indicator, that has a black dashed horizontal trendline that runs through the zero area. The other part of this system uses a 10 week moving average. When the 10 wma turns up or down you get a buy or sell signal. At that point you want to see the ROC trade above the zero line for confirmation. The green vertical lines shows the ROC trading above the zero line. If you look to the far right side of the chart I have place a red circle that shows the ROC indicator is still trading below the zero line and is still on a sell signal.

Next lets take a look at the EURO that has an inverse relationship with the US dollar. As you can see on the chart below the EURO topped out in the springtime of 2011 and then started it’s major downtrend that came to an end in August of this year. The top rail of the downtrend channel was broken to the upside in September which was a very bullish signal. I would now like you to focus in on the two green circles I’ve placed on the chart below. Note the black dashed horizontal rails that show you how support and resistance works. The basic principal of technical analysis is being able to read support and resistance areas. On the left side of the chart the green circle shows the little red bull flag that formed right on top of the black dashed rail. That is usually a very bullish setup as you can see. Now look to the right side of the chart where the green circle shows a very similar setup. The test of the black dashed rail comes in at 127.50. That should be the bottom of the red bull flag.

The last chart I would like to show you is the very long term look at the US dollar. Several months ago it looked like the dollar might be breaking out of it’s long term blue downtrend channel. As I have shown you on the charts above everything was looking good for the dollar to rally until that unbalanced double top came into play that reversed the uptrend to down. You can see that unbalanced double top formed just above the blue downtrend rail but once it was complete the decline took the price action back below the top blue rail signaling a false breakout at this time. That top blue trendline should now be back to its role as resistance.

The US dollar is now entering an inflection point. It will either rally strongly and break through all the overhead resistance points that I have shown you on the charts above or it will slowly turn over and continue it’s decline off the unbalanced double top that was made back in the summer months. There is never a dull moment in the markets as there is always something brewing if one knows where to look. 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 Answeres .
Most Members are Staunch Goldbugs who have seen Rambus in action from the 2007 to 2008 period at www.goldtent.org and now Here at Rambus Chartology since early 2012 .
To review his Work and incredible calls from the 2007-2008 period click on the top right sidebar in the “Wizard of Rambus” ….”What If !!” Post
To Follow Rambus Unique Unbiased Chart Work and participate in a Chartology Form with questions and answeres and learn the Art and Science and Mindset of a Pro Trader please Join us by subscribing monthly for $29.99 at
www.rambus1.com
We have many subscribers from all over the world who are glad they did as they enjoy the many daily updates and commentaries provided at this exciting new site
As you will see Rambus (Dave) has prepared us for this difficult period by being one of the only ones to see and warn about the incredibly debilitating PM smackdown as early as Jan 2 2012 …click on the” HUI Diamond in the Rough” Post in the “Wizard of Rambus” top right
More Recently Rambus called a Bottom in HUI in this post…and has had subscribers on board for a Powerful Run to the Upside
http://rambus1.com/?p=5651
BUT
What is he seeing Now ?
You will find Rambus to be a calm humble down home country tutor with an incredible repitoir 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 volitile and downright dangerous markets
See you at the Rambus Chartology
www.rambus1.com

Just a quick update so you can see the 4th reversal point is now starting to stand out. Keep in mind the bull flag won’t be complete until the top rail is broken out to the upside preferable on heavy volume or a nice long bar. I will post some stocks for the model portfolio tonight as the Wednesday Stock Report. We now have a few stocks that are breaking ahead of the PM stock indexes.