The Dow is breaking out of a nice tight 6 point bullish rising flag with a price objective up to 13,412 as measured by the blue arrows.

Below is a daily line chart for the HUI that is showing the backtest taking place at 412. This is a critical test of the neckline right here.

Tuesday SLV had a big gap move above the top rail of the downtrend channel. Today SLV gaped below the same trendline. With today’s move SLV has basically closed the gap from Tuesday. If SLV can trade back above the top rail of the downtrend channel that would be a big positive. Right now we can view the top rail of the downtrend channel as a Support & Resistance rail, Above positive and below negative. There are a couple of positives we can see on the chart below. There is a positive divergence on the RSI indicator at the top of the chart. Also the MACD indicator at the bottom of the chart has just crossed over. So until SLV can trade above the top rail of the downtrend channel we have to be cautious for the time being. I would like nothing more than to see SLV get back above the top rail on some nice volume.

SLW has rallied back up to the blue rail of the bear flag which has acted as a support and resistance. Above positive and below is negative. SLW is a very important stock to follow to gauge the strength or weakness in silver. If SLW can trade above the bottom blue rail of the bear flag it will be talking to us. Like the SLV chart above we are getting close but we just need a good strong up day to get above the overhead resistance.

This morning’s gap up took the price up to the top rail of potential triangle consolidation pattern. The high for this morning stopped right at the top rail. You can also see two gaps below today’s price action that may need to get filled at some point. The 300 dma comes in around 160 also. This is the point where the bulls have to show their strength and break through the top rail of the triangle to get the ball rolling to the upside. If they fail right here and prices start to decline and break through the bottom rail of the red triangle the triangle will be a consolidation pattern to the downside. If that is what happens then the horizontal support at 149 will be taken out and that will usher in a move to new lows since the top at 186 for GLD.  Today’s high is 157.21 so that is the number we’ll watch very carefully.

Yesterday I posted a look at SLW and SIL that showed their big bear flags that had broken down and had their backtest to the underside of the bottom rail. Today I want to show the other stock in the trilogy of big bear flags. I posted this chart of the GDXJ at the same time I posted the charts of SLW and SIL a month or so ago.

Lets start with the daily look that shows the big blue falling bear flag. Instead of rising against the trend it is falling with the downtrend which is even more bearish. Note the breakout gap that accompanied the breakout of the bottom blue rail. The backtest took on the shape of a rising channel or bear flag, in red. The backtest was a little strong as you can see on the chart below but it held and now the downtrend is now in progress again.

The weekly chart that I showed you had the bearish falling flag that is just part of the much bigger H&S top pattern. You can see there are two H&S top patterns which is more common than one might think. The top, smaller H&S pattern, is just the head portion of the the much bigger H&S top. Also notice how the brown zone or neckline stopped the advance of the right shoulder.

If you are invested in some of the junior precious metals stocks stocks I want you to take a good hard look at this monthly chart of the GDXJ. The only thing that has changed on this chart since the last time I posted it is the last bar on the right side. Folks, that’s a massive H&S top that is in the same league as the ones on the HUI and GDX that I been showing since the first of the year. Very few precious metals investors understand the significance of these massively huge tops that are reversal patterns. They are reversing the uptrend that had been in place since the 2008 crash low. As I said in 2008 and again this year, never ever ignore the implication of these H&S tops. Rambus

In the Wednesday stock report we took an indepth look at gold to see what the chart patterns were telling us. Tonight I want to look at silver as there is a chart pattern similar to the gold rectangle that no one is seeing at the moment. This pattern is very large and will have a major impact for the silver price going forward. Before we look at the bigger picture I want to bring everyone up to speed on the daily look that shows the chart patterns that have formed since the first of the year.

The daily chart shows silver finally breaking down from the blue bear flag that has been forming since the middle of May. If you recall this pattern started out as a 5 point triangle reversal pattern that looked like it would workout to the upside when it had a big breakout gap on nice volume. The next day it gave back all its gains and looked like it was doing a backtest to the top rail of the triangle. I remember at the time, dragging the bottom rail up to the high made the day before. This  showed you  that silver could have a false breakout and to watch the potential for this pattern to morph into the blue  bear flag that we now see as the correct chart pattern. Sometimes when you get a false move to the upside like silver had, and you can detect it early enough, you will get a good move in the opposite direction, in this case back down. The high point on the blue silver bear flag is what I’m talking about.

The thin red dashed line, on the chart above,  shows the top rail of the triangle, with the big breakout that failed to materialize, and caught many traders by surprise when prices fell back below the red dashed rail.

This next chart is a weekly look that shows the blue expanding flat bottom triangle that no one is recognizing yet. You can see the bottom rail of this pattern is part of the big horizontal support zone, at 26,  that has been in place since the end of 2010. I can’t stress enough how important the horizontal support rail at 26 is for silver. If silver breaks below, it will reverse it’s role and act as resistance on any rally attempt. You can see our little red bear flag that I showed you on the daily chart above that may be giving us a big clue that the bottom rail at 26 is going to fail. Another clue that the bottom support rail may break to the downside is that  flat bottom triangles usually break through the horizontal rail, not always but most of the time.

Lets look at another weekly chart that goes back over five years to put everything into perspective. I’ve also added a downtrend channel that is expanding in nature. I’ve also labeled the reversal point for the expanding flat bottom triangle so you can see it is a completed pattern. You can also see the little red bear flag that has been forming on the bottom blue rail. If the bottom support rail breaks down I’ve extended a neckline extension rail that was made back in 2009 during the formation of that big H&S base that helped launch the huge rally to 50. The neckline extension rail would be the first logical place for silver to find some decent support.

The next chart I would like to show you is the long term look that goes back to the beginning of the bull market for silver. Its been in a very nice uptrend channel. The top rail off the major uptrend channel had to be moved one magnitude higher when silver went on its near parabolic run to 50. This is the same technique I showed you on the gold chart on the Wednesday Stock Report. You can see there is only one touch of the top rail that was put in place by the height of the measuring stick made off the upper black dashed rail. Silver could conceivably trade down to the bottom rail of the major uptrend channel and still be in it’s bull market.

The last chart I would like to show you leans toward the bullish side for silver. This chart goes back 30 years and takes in the top that was made back in 1980 at 50. There are two huge H&S bottoms that were made when silver was in it’s major bear market after the 1980 high. I’ve labeled each neckline on the H&S bases #1 and #2. First lets focus in on H&S #1 and how it fared. It broke the neckline in November of 2005 and reached it’s price objective at 19.92 in March of 2008. That high was made just before the 2008 crash began. As you can see the 2008 crash took the price of silver all the way down to just above 8 which was also the backtest to the neckline.

From that backtest low in 2008 silver started the rally that would take the price all the way back up to the 50 area. Now we need to focus in on neckline #2 that was broken to the upside in November of 2010. On the chart above I’ve labeled where we might see the backtest to neckline #2, brown area around the 22.50. The red arrows shows a 62% retrace of the entire bull market comes in around the 24 area.

Its going to be interesting to watch how things unfold and see if neckline #2 holds support like neckline #1 did. For me, this chart represents the most bullish aspect for silver because if neckline #2 holds, on a backtest, the second H&S base calls for a price objective to 130 or so. Stay tuned as things are really starting to get interesting for both the short term and the long term.   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 this 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
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

I’ve been showing a potential huge H&S top that has been forming on oil for almost 3 years. Yesterday we had a critical break of the neckline. I first want to show you a daily chart and the bearish falling wedge that broke down yesterday as well. I’ve shown you many instances where a small consolidation pattern, that forms right on an important trendline, will give the bigger pattern the strength it needs to finally confirm the pattern once the last bit of support is gone. Think bear flag on the SLV chart that has formed on the horizontal support rail at 26.. A backtest to the bottom red rail of the bearish falling wedge would come in at 80.78.

Below is a four year weekly chart that shows the huge H&S top pattern. A backtest to the neckline would come in around 81.25.

I want to put this H&S top into perspective by showing you an 8 year weekly look that takes in the parabolic rise to 147 and the crash that followed.

The last chart I want to show you is a 20 year look that shows the old top of the trading range at 35 that kept oil in check until it finally broke through in 2004 that was the very beginnings of the parabolic run to 147. This chart clearly shows that when a parabolic move has run it course the move down can be even faster than the move up. I think this oil chart is giving us a very big clue to the deflation wave that is coming our way.

Tonight  I want to take an unbiased look at gold from every angle I can find. There are some clear cut chart patterns that have been formed since the beginning of this secular bull market that began at a low price of 255. I’ve said it before and I’ll say it again, this bull market in gold will be studied by future analyst as we have studied the great bear market from the 30’s. From a chartists perspective this bull market has produced one beautiful chart pattern after another starting with the bear market low at 255. Keep in mind every impulse leg up is followed by a serious correction and that pertains to our current situation. Even though I’m very bullish longer term we are in one of those consolidation patterns that began last fall from the bull market top at 1920. The consolidation pattern that has been forming since last years high is still not revealing itself yet. There are several possibilities we’ll take a look at that may give us a road map to follow as our current consolidation pattern matures.

First, lets look at a daily chart for gold that is showing only a part the bigger consolidation pattern. The reason this pattern is only part of the bigger chart pattern is because it has formed below the bull market top at 1920. I’ve not seen any chartists out there that is showing this beautiful rectangle that has been forming since gold crashed off of it’s 1920 high to the first reaction low at 1535, red #1 on chart below. I’ve labeled the reversal points with red numbers that show a completed rectangle pattern. With the touch at point #5 the rectangle was completed.

There are two possibilities for this rectangle on the chart above. The first scenario would be that the rectangle will end up being a consolidation pattern to the downside. If that is the case the price objective would be around the 1400 area as measured by the blue arrows. The other scenario could be that this is a 5 point rectangle reversal pattern that would end up being the bottom for this corrective move off the 1920 high. Whenever I see a rectangle pattern I always put on a mid point trendline, dashed blue horizontal rail, that often times will act as resistance before the rectangle finally breaks down to new lows. So how gold does at the mid rail will give us some important clues going forward.

Next lets look at a two year daily chart that shows what I think maybe forming and that is a large bull flag. In any valid consolidation pattern you need at least an even number of  reversal points, such as 4,6,8 or more. As I’ve shown you on the first chart above the rectangle has four completed reversal points completing the pattern. On the chart below, the pattern I’m focusing in on,  is the potential bull flag in black. To complete the bull flag we need to have at least one more low put in somewhere below the blue rectangle. Again, if the blue rectangle is a consolidation pattern to the downside that will give us a place to look for a low in which to connect the bottom rail for the 4th reversal point.

There is a possible clue, on the chart above, that the next low may come in on the bottom black rail of the bull flag. Symmetry plays an important role when I look at chart patterns. The red circles shows a gap above and below the rectangle that has created the angle for the top rail of the bull flag. I’ve shown to our subscribers how these types of patterns can morph into the true pattern once the symmetry from the top, red circle, is placed below the bottom rail, red circle. What I mean by this is, if you were to draw the initial trend line across the first to tops of the bull flag the angle of your top trendline would be much steeper than the present one. You also would have had a false breakout of the original downtrend rail, top red circle.

Symmetry says to put the bottom red circle at the bottom of the blue rectangle. As you can see on the chart above this is giving us an almost perfect parallel bull flag or downtrend channel. Now if the bottom rail of the rectangle gives way then I believe the bottom rail of the possible bull flag will come into play.

The next chart is a weekly look at the uptrend channel that formed off the 2008 crash lows. This chart shows why I think we have another leg down before we hit the correction lows. Note the beautiful uptrend channel off the 2008 lows and how the bottom rail held support during that big advance. About 7 weeks ago that bottom rail was broken to the downside and has reversed it’s role from support to now resistance. You can see gold has been bumping up against the bottom rail for at least 4 weeks now without penetrating it. This is classic TA. If the potential bull flag is going to be the correct consolidation pattern,  you can see we need at least one more low to create the 4th reversal point.

There is one more important feature to look at on the chart above. Notice the uptrend channel that formed below the dashed mid rail. It was very clean and tight. When gold went nearly vertical in it’s move to 1920 it doubled the lower channel, exactly. This was a good clue that gold was probably burning itself out and would need to have a good correction. And as you can see that is exactly what has happened.

The next chart is the same weekly look that shows all the smaller consolidation patterns that formed from the 2008 crash low to the 2011 top at 1920, in red. When you hear me talk of reversal points in a consolidation pattern take note of all the smaller red consolidation patterns. You will see at least four reversal points in each pattern starting at the top of each pattern.

One more important takeaway from the chart above is the two blue patterns. The 6 point bullish falling expanding wedge that was built as part of the 2008 consolidation area and our current but still incomplete bull flag that looks like it will be a bookend for the big rally off the 2008 lows. When our current bull flag is completed it will most likely be a halfway pattern as measured off the 2008 low. I won’t get into that right here but it is a strong possibility.

This next chart is a monthly look that shows the entire bull market to date. This is my interpretation of all the most important chart patterns that have formed over the last 12 years or so. Note how the red and blue patterns alternate. By just simply visualizing this uptrend channel you can see how the red consolidation patterns have formed roughly halfway between the blue patterns. The real question now is will our latest consolidation pattern, the possible bull flag, tag the bottom rail of the major uptrend channel similar to the 2008, 6 point bullish expanding falling wedge?

Next lets look at some other charts to see where we are in this correction over the last year or so. This next chart is a 3 way combo chart that shows the HUI, gold and silver. I call this chart my short term history chart because it has some important turning points that some of you may recall. The purple dashed vertical lines represents those turning points made since the first of the year. You may recall the December bottom that so many analysis were calling the bottom for the precious metals complex. As you can see it was a bottom but not the bottom. Its labeled December 29th pivot lows. The next important reversal point came when we had the flash crash. How many recall that day made on Feb. 29th. I remember well all the talk of market manipulation that was being bantered about. The last reversal point on the chart below is the May low that many analysis are calling the low for the PM complex. It is possible that the May low could be The Low, but if the HUI and silver which are strongly testing their bottom rails, give way the precious metals complex could have another leg down. Note how gold is holding well above it’s lower trendline.

Next lets look at another combo chart with the HUI on top and gold on the bottom. This chart shows you how the HUI and gold generally breakout of similar patterns at the same time. Even though gold has been much stronger than the HUI they generally form a very similar consolidation pattern. The yellow area shows the 2008 H&S top on the HUI and gold and our current H&S patterns. You can see the HUI is doing a critical backtest to the neckline at 465 as we speak.

The next chart is the Rydex precious metals stock. It doesn’t give many buy and sell signals. The latest signal was a sell signal that was made when gold hit it’s all time high at 1920. When the 20 week crosses over the 50 week ma is when you get your buy and sell signals.

I need to wrap this essay up as its getting a little long but there is one more chart that I would like to show you. Several years ago the Aden sisters showed a chart that described the 8 and 11 years time cycles. It basically shows an eight year low followed by an elven year high. They took these 2 cycles all the way back to the 1960’s. Below is my interpretation of their work. I have to say its pretty impressive in calling important tops and bottoms. You may need to study this chart to get the full affect of its meaning. Right now the most important feature on the chart below is the February 2012 high that has followed the 2001 eight year low. 2001 plus 11 years equals a top in 2012. So far it looks like the cycles are still in play.

So there you have it a look at gold from the Rambus perspective. Everything seems to be pointing to a larger correction than most are looking for. At the very least we need to see gold trade above it’s 300 dma before we can start to get excited about a move higher. Whatever direction gold wants to move we have a road map that will let us know if its in a bullish or bearish mode….All the best…Rambus

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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 this 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
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

Below is a chart of GLD that shows what I consider to be the most important moving averages. They are the 150, 200 and 300 day moving averages. The 150 and 200 dma have turned down while the 300 is still trending up. If GLD can ever get above those three moving averages that would show some considerable strength. We just need to be patient awhile longer and see what GLD has on its mind.

…………………….

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 this 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
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