During the bull market years between 2000 and 2011 the US dollar and currencies played a key role in the PM complex bull market. Tonight I would like to go back and visit some of these old charts and see how they pertain to our current bull market.

Lets start with a simple GOLD:USD ratio chart that goes back to the 2011 all time high in gold. The bottom for the ratio came in toward the end of 2015 and has been slowly rising  in what we can now call a bullish rising 5 point rising wedge reversal pattern. The 2011 bear market in the ratio ended in June of 2019 when the top rail was broken to the upside. Less than a year later the price action took out the top rail of the blue bullish rising wedge reversal pattern and is starting to impulse higher. This is a very bullish development.

How did the GOLD:USD ratio look during the 2000 to 2011 bull market in gold? From a Chartology perspective the price action showed a classic bull market for gold vs the US dollar with one consolidation pattern forming on top of the previous one with a perfect parallel uptrend channel.

Lets look at a combo chart which actually shows what the USD and gold have done since gold peaked at 1920 in September of 2011. As you can see the USD has enjoyed an almost 10 year uptrend channel while gold was stuck in its downtrend channel until it broke out above the top rail of its  2011 bear market downtrend channel in January of 2019 where the two have been moving somewhat together until recently, red circle. Note how the US dollar is trading right on top of its 2011 bull market uptrend channel. It’s possible we could see a small bounce off the bottom rail before breaking through to the downside. That bottom rail on the US dollar is the most important trendline on the planet as it will affect so many other areas like the PM complex, commodity complex, and most of the important currencies in the world.

This next chart I posted just one time shortly after reversal point #3 was confirmed which was showing a possible large rectangle forming. There should be major support at the brown shaded S&R zone between 88 and 89. There isn’t much in the way of support until that area is hit.

Below is a combo ratio chart which has the USD:XJY on top with gold on the bottom. Note how these two generally run inversely to each other. The ratio chart on top just completed its 4th reversal point and is starting to move lower in a possible 5th reversal point if the price action breaks below the bottom rail which would be very bullish for gold. It appears gold is leading the XJY. The bottom rail on the bullish or bearish falling wedge is going to be an important inflection point if or when it is hit.

The XJY has been building an 11 point triangle that began to form in the middle of 2015. The 2 sets of blue circles show how the original triangle has morphed into a slightly bigger triangle as shown by the black dashed trendlines. A breakout above the top rail would be very bullish long term for gold.

This next chart is a combo chart which has the XJY on top with the HUI on the bottom. Looking at the brown shaded area as a whole you can see how these two basically had the same bear market in time. Here again you can see how the HUI has already broken out and backtested the top rail of its 2016 five point triangle reversal pattern while the XJY is just now attempting to breakout from is own 2016 triangle. This combo chart also shows you how the XJY and the HUI tend to move together.

We’ve been following that massive H&S top on the XEU when the right shoulder bearish rising wedge was still under construction. The neckline gave way in 2014 which completed the H&S top. Then after a 3 month decline the XEU threw us a curve ball and formed the  5 point triangle reversal pattern which sent the XEU higher to backtest the neckline in February of 2018. From that point the price action has been declining in what is now a bullish falling wedge after the top rail gave way. A price objective for the falling wedge is where it began to form which would be back up to the neckline as a possible 2nd backtest.

This long term monthly chart for the XAD, Australian dollar, just recently reached the H&S price objective at 56.50 using the breakout to breakout method using the bearish rising wedge as a halfway pattern. Since the H&S top price objective has been met could we see a rally similar to the one we saw back at the 2009 crash low?

The XSF, Swiss franc, has traded sideways in the 2015 rectangle which has completed 5 reversal points so far which technically puts the rectangle into the reversal category to the upside if the top rail can give way which would be very bullish for gold.

To see how well the GLD and the XJY track each other below is a long term monthly chart where I’ve overlaid GLD on top of the XJY. We are not looking for a perfect correlation but the similarities of the big trends.

This next chart shows a pretty close correlation between the XJY and the HUI.

This next chart shows a pretty close correlation between the USB 30 year bond and the price of gold.

I would like to finish up by looking at 2 price objective charts, one for GLD and the other for Silver. This first chart for GLD makes sense from a Chartology perspective as it has some classic chart patterns. Starting at the March 23rd low which is the beginning of our current impulse move the first consolidation pattern that formed was the blue bull flag that formed roughly in the middle of the initial leg up to the first reversal point in the black 6 point  rectangle which I’ve labeled as a halfway pattern. The blue arrows show the impulse method for a price objective which is up to the 189.89 area.

Below is a daily chart for Silver which is showing us an unbalanced H&S bottom with 2 necklines. The price objective for NL #2 is up to the 30.45 area.

I would like to leave you with a few long term quarterly line charts that I post at the end of each quarter which shows the big chart patterns that are so important to understanding the big picture to know if you are in a bull or bear market. If you recall I’ve been showing you how these quarterly line charts are reversing symmetry to the upside over the same area on the way down. I said we are in the sweet spot right now with very little in the way of overhead resistance. This is about as bullish as it can be from the long term perspective.

HUI quarterly:

The GDXJ was one of the last of the PM stock indexes to breakout from its massive H&S base.

GDX is moving through the sweet spot.

The HGU.TO is now breaking out above its double bottom trendline.

SIL is finally breaking out above its H&S neckline.

Silver has just competed its 2016 five point triangle reversal pattern.

If there was only one chart I could use to make a case for the PM complex bull market it would have to be this quarterly line chart for gold. First note the beautiful and symmetrical H&S consolidation pattern we followed in real time and the reverse symmetry over the same area on the way down as shown by the blue arrows. On a quarterly time basis you can see gold is trading at new all time highs. The last thing to observe is the 2000 to 2011 bull market which made higher highs and higher lows on a quarterly basis.

All the best…Rambus

Rambus is away from his office tonight . This is a repost of the May 20 Wednesday Report at his request :

Fullgoldcrown:

Before we look at tonight’s charts I would like to go over some challenges that we’ll face as the current impulse move in the PM complex continues to move higher. It’s not everyday that you will find yourself getting in close to the bottom of a multi month rally. One of the biggest problems I’ve witnessed over the years, especially with PM stock investors, is they grow complacent as the rally phase starts maturing. They believe they are invincible as their profits rise and everything is right with the world. That complacency usually means not getting out close to the end of the impulse move which is extremely hard to do even if you’re looking for a top. They will either sell in panic as the correction takes hold or hang on to their positions during the entire correction which is emotionally hard to do.

I know many here traded in the 2000 to 2011 bull market in the precious metals complex. During that great bull market how many actually made any serious money? By making serious money I mean actually taking it out of the market to payoff debt or take a major vacation or help someone in need or whatever to actually use it. What the markets give us during the impulse rally will usually take it back during the following consolidation phase as investors aren’t aware of what is taking place until it’s too late. It’s just the nature of trading the markets.

Now more than ever is the time to be on our toes looking for anything that could go wrong. That means we have to have discipline and focus to stay on top of our game and not get carried away by counting our profits before we actually take them. How rare is this current rally in the HUI for instance? There has only been 2 impulse moves since the 2008 crash low. The 2008 rally that ended the bull market in 2011 and the other impulse move that only lasted 8 months from the January 2016 low to the August 2016 high. For the precious metals investors that could’t bring themselves to trading the stock markets life in the PM complex has been hell and I don’t think I’m exaggerating. Again, after all these years we finally find ourselves at the start of a brand new impulse move that is very likely the start of the 2nd half of the secular bull market in the PM complex.

There is one more point I want to bring up. When I began to put our PM stocks portfolio together I said I was going to be unconventional and not buy the big cap PM stocks not because I don’t like them but because this is a unique sector. Compared to most sectors in the stock markets, which are very huge, the PM stocks make up a small universe of stocks that you actually get to know personally tracking and trading them for many years, at least from 2000 to 2011.

If you didn’t trade the PM stocks in the 2000’s bull market then you are not aware of how differently the big cap and juniors would trade. What I learned back then and why I structured our portfolio like I have is because the juniors can catch fire and have large percentage gains VS the big caps. The large cap PM stocks are going to really do good during his impulse move and you’ll be happy in the end. For me personally, I won’t be satisfied with just matching what the PM stock indexes do or for that matter what the big caps will do. My game plan is to massively outperform the PM stock indexes and the big caps because this sector offers that possibility. You may have already noticed some nice percentage moves in several of the juniors in the PM stock portfolio.

There is one last little point I want to mention. Many PM investors believe that the only real important money you make trading the PM complex is to only trade the big caps. For some reason, because you are invested in the big caps that money is more important than the money you will trade the juniors with. If you understand this sector nothing could be further from the truth. When all is said and done at the end of the day your play money used to trade the juniors and the big caps will have the same value but the junior portfolio could have a much bigger percentage gain.  Please understand this is only my opinion and each investor will have to decide for themselves on how they want to play the PM complex.

Tonight I would like to show you what some of the impulse moves looked like during the 2000 to 2011 bull market up close and personal. These charts should give you an understanding for what may lie ahead. There is no way we can know every twist and turn an impulse move will make only that it will be very powerful. We do know that there will  generally be several small consolidation patterns that will form along the way that should be recognizable.

First let me show you the history chart for the HUI so you can see the consolidation patterns that formed during the 2000’s bull market. Each 4 point consolidation pattern has a red number on it  so you can match up each consolidation pattern with the charts to follow. This is a general guide of how our current impulse move may unfold over the next many months.

Below is the history chart for the HUI showing the consolidation patterns that were made during the 2000 to 2011 bull market.

This first chart shows you the very end of the bear market and the beginning of the 2000’s bull market. Back in the old days during the start of the bull market there was a 6 month time cycle that was usually dead on the money but over time it lost some of its luster. Here you can see the very first impulse move up that formed 3 small consolidation patterns and ended 6 months later at in May of 2001 at 79.63. Note the vertical move out of the small H&S consolidation pattern that led to the first phase of the new bull market. From that May 2001 top came the first consolidation phase in the new bull market that formed a very symmetrical triangle and lasted 6 months until the low 6 months later in November of 2001.

Reversal point #4 on the blue triangle consolation pattern was the beginning of the second impulse move in the new bull market that formed 3 small red consolidation patterns before it came to an end. That 2nd impulse move lasted from November of 2001 to the top in June of 2002 which was just a little over 6 months. This chart shows you 2 separate impulse moves with the blue triangle as a halfway pattern between the 2 moves. All halfway patterns don’t measure out perfectly but they do give you an idea of where you may start looking for an end to the impulse move.

This next chart shows you the triangle consolidation pattern labeled with the red #2 on the History Chart For the HUI. This chart starts where the previous one above stops at the June 2002 high. As you can see the 2nd consolidation phase lasted quite a bit longer than the 2001 consolidation phase. The 4th reversal point on the June 2002 triangle was actually the beginning of the next impulse move. You can see the small red bull flag that formed just below the top rail of the blue triangle which we have seen many other times in the past which will strongly suggest the breakout of the consolidation pattern is going to take place.

This impulse move formed 2 small consolidation patterns but not a good measuring pattern. There is another measuring technique I use sometimes especially with rectangles and sometimes with triangles. You measure the width of the triangle between reversal points #1 and #2 and add that distance to the breakout point above the top rail to get your price objective and in this case it was dead on the money at 255.

This next chart starts where the one above left off at the 2003 top. Here you can see the HUI built out another very symmetrical triangle to consolidate the previous impulse move. Again the impulse move began at the 4th reversal point. This impulse move completed 2 red consolation patterns before it finished moving higher. What you may have noticed is that each consolidation pattern is getting a bit bigger and each impulse leg is getting longer.

I can’t find the last impulse move in the 2000’s bull market but I do have the 2008 H&S top and the 2008 crash that followed the completion of that H&S reversal pattern. When I mentioned complacency early in the post this is a good example of what I meant. When this H&S top was building out I strongly suggested it could be a very symmetrical H&S top which could reverse the bull market that began in 2000. I was literally booed off the stage for making such a statement. No one wanted to see the party come to and end so no one was looking for any type of reversal pattern. I alway say I didn’t know how strong the impulse move would be only that the trend was reversing from up to down. I wasn’t expecting the crash scenario but that is what we got, when no one was expecting it. The crash was short and sweet but could you have held all your pm stocks then? And if you did hold your PM stock how would you have felt during the crash sequence?

Now is the time to be focused and not take our current impulse move for granted. These moves don’t come around everyday. This could be a life changing event for some of you if there are no serious mistakes made. We’ll take it one day at a time keeping an open mind to what the PM complex throws at us. Stay safe and all the best…Rambus