USLV has slightly broken the bottom red uptrend rail and has been hanging around the breakout point for most of the day. We are going to sell our USLV right here and take out profits on the kamikaze trade. We will be looking to go long again toward the bottom of the trading range around 40 or so.
USLV daily look showing a break of the bottom red trendline. Taking Profits.
Below is a 30 minute chart that I posted yesterday that shows a bearish expanding falling wedge. The bottom rail held support yesterday and we had a big gap up this morning. Nothing is broken yet. We are still in the chopping mode. If the dollar can get above the top rail that would not be good for the precious metals complex or the stock markets. On the other hand if the dollar breaks below the bottom rail then the precious metals complex should benefit greatly as a new down leg would be underway for the dollar. This is your typical consolidation pattern at work trying to frustrate both the bulls and the bears alike.
UUP 30 minute bearish expanding falling wedge with big gap this morning.
Below is the daily look that shows the support and resistance rail just above today’s price action. The colored arrows shows how the S&R rail has reversed it’s role with the last red arrows showing resistance. Until the the UUP can break back above the S&R rail we have to believe it will hold resistance.
UUP daily look showing the support and resistance rail still functioning at this time.
The Euro is now at a critical test of resistance at the old neckline of the one year H&S top. Its just as important to know when a good pattern works and when they fail. You can see the big H&S top, on the Euro chart below, along with alot of lesser degree H&S patterns. The dollar has an inverse look to the Euro’s H&S top with it’s own H&S bottom. So what the Euro does will have a direct impact on the dollar and visa versa with the dollar. If we can get the direction right for the Euro and the Dollar that solves the biggest question of what direction the stock markets, commodities and the precious metals are likely to travel. When the neckline was broken to the upside in early December all look good for the Dollar and bad for the Euro. We have now rallied all the way back up to the neckline as a backtest for the Euro. Normally this would be the end of the story as the backtest is the last step in the breakout process. Note the little inverse H&S bottom on the lower right side of the chart. If that little inverse H&S plays out that will put the price back above the big 1 year neckline negating the big H&S top. As you can see we are now testing the big one year neckline from below. Don’t be surprised if we see a big gap up in the next day or two. This Euro chart is telling us that if we start trading above the big one year neckline, that for the time being, the can is going to be kicked down the road for the foreseeable future and all will be right with the world again.
Euro 2 year daily look showing small inverse H&S bottom forming just under big one year neckline, red circle on chart. 
Below is a chart of the US dollar and it’s big one year H&S bottom, inverse look to the Euro. As you can see on the dollar chart it has already broken back down below the neckline that should have held support on the backtest. There is also a small red bear flag that has formed just below the neckline which is a bearish setup if the bottom red rail gives way. Note the big negative divergence on the MACD at the bottom of the chart.
US dollar with it’s own H&S pattern that is inverse to the Euro.
I think the stock markets and gold are already telling us that the dollar is going to keep going lower in the intermediate term, and the Euro is headed higher. This will confound many that are calling for an eminent correction in both the stock markets and the precious metals…All the best..Rambus
Just a quick update on the UUP that shows another test of the support and resistance rail from below, red arrows.
I guess today is a good day to look at how support and resistance works. In the other two post this morning, on SLV and the UUP, I showed how resistance turns into support when broken and how support when broken turns into resistance. The last time I showed this chart of the Dow we had just broken out from the red bullish rising flag pattern. Notice where that bullish rising flag formed. Right on the neckline of the H&S consolidation pattern. Again resistance turns into support when broken to the upside. You can checkout the other black dashed trendlines on the chart below to see several other fine examples of how support and resistance reverses its role once broken.
Dow daily backtest to top rail of bull flag looks complete.
While were on the Dow lets take a quick look at the Elliot Wave count I showed several weeks ago in the weekend newsletter. So far nothing looks broken. What we need to see, fairly soon, is a breakout into new highs for this move, above the 2011 H&S top. This move should be fairly straight up until we get to the top of wave 3. If the pattern stays the same we should get a 4 to 5 week correction, wave 4 down blue circle, and then the last move up to finish off wave 5 where we should get a bigger correction.
Dow weekly Elliot wave count.
Besides the Stunning Weekend Report
Rambus has posted 26 individual posts of Stocks (for members only)
22 Stocks plus GDXJ NUGT UGLD and USLV
The 22 Stocks plus GDXJ are listed in alpabetical order under “Model Portfolio”
The other 3 are in “Kamikazi Trades” as they are 3 X ETFs
Rather than trying to scroll back and access each post…I recomend you just click on the Individual Stock Tickers on the sidebar
This will bring you to the latest TA for each individual stock
There is a lot to absorb right now….so take your time
Fully
Today were going to look at the HUI from top to bottom. Its been a long two year drought for most of the precious metals stocks. When silver had it’s near parabolic move higher last year the stocks barely budged and even declined in many case. Same thing when gold had it’s big move later in the year. The frustration felt by the precious metals stock investors was beyond frustration. How could gold and silver have such big moves and the underlying stocks actually go negative. All I can say its the nature of the markets to make life as difficult as possible, to wear one out with frustration, and then when the investor finally can’t take it anymore he quits in disgust blaming everybody and everything for his failure. Remember we are competing against the best and brightest investors around the world who want your money. This is a game where only the strongest and smartest survive. So keep those thoughts in mind the next time you put your hard earned capital in markets. If it was easy everybody would be millionaires and we know that can’t happen no matter how smart we think we might be.
Friday I did a post on the HUI showing a two year bullish rising channel, bullish rising flag or running correction, whatever you want to call it. I showed how the symmetry should play out with the move off the 2008 bottom equaling this new move I see coming for the HUI and the precious metals stocks in general. I know many of you out there think its impossible for the HUI to have such a big rally in just over a year so I’m going to show two charts, one from the Dow rally off the 2002 -2003 bottom that was the first crash low off the secular bull market top in 2000. The second chart I’m going to show you is the COMPQ and the final move into it’s parabolic top at 5132 in 2000.
First, these patterns I’m about to show you happen all the time on different time scales. What amazes me is how few chartists actually see these patterns for what they are worth. They work just like any other consolidation pattern and generally show up as a halfway pattern. The patterns I’m talking about are the bullish rising wedge and the bullish rising flag or channel. They can also form in a down trending market as a bearish falling wedge and a bearish falling flag or channel.
The Dow formed a beautiful 6 point bullish rising wedge in the middle of it’s bull move off the 2002 – 2003 low to the 2007 high. That high in 2007 led to the infamous stock market crash of 2008. It took alittle over 3 1/2 years of sideways to upward chopping action to carve out the eventual bullish rising wedge. Not once during the formation of that pattern did the Dow ever make a lower low or lower high. Six months after the breakout through the top blue rail of the bullish rising wedge there was one last backtest, that for me, confirmed the pattern and that we would see a similar move higher equal to the first leg up off the 2002 – 2003 bottom. The way I measure these type of patterns, or any other consolidation patterns for that matter, is to measure the impulse leg up leading to the first reversal point in the consolidation pattern. Then I add that distance to the last reversal point in the consolidation pattern to get your price objective. On the Dow chart below the blue arrows shows how the bullish rising wedge worked out almost perfect, as a halfway pattern. The red rectangles shows you how the lower impulse leg up matched the upper impulse leg up in time and distance.
Dow monthly showing the bullish rising wedge as a halfway pattern.
The next chart I would like to show is weekly look at the COMPQ that shows a beautiful bullish rising flag that showed up smack dab in the middle of it’s last major leg up that ended in 2000. How many of you traders out there would have recognized that pattern for what it was worth and sold at top of the bull market. When you see these patterns show up in big moves like that you know that either the bull move is over, or that in the very least, a big consolidation will start. If one would have acted on what the bullish rising flag was showing he could have gotten out right near the top preserving the big gains from the massive bull market. I know from fist hand experience that very few recognized the big top in the COMPQ back in 2000. As is usually the case many of the experts were saying we are in a new paradyme and the markets where going to just keep on rallying. It was really hard to think outside the box back then as everything was being hyped up to no end. But just a simple chart pattern gave you everything you needed to see, that was happening in real time, a clear cut signal as to when to exit the markets. No second guessing. No emotional turmoil as what to do. Just a black and white signal to exit the markets. Below is the chart of the COMPQ that shows the bullish rising flag, as a halfway pattern, in the middle of the last big impulse leg up to the 2000 secular bull market high at 5132.
COMPQ weekly look showing the bullish rising flag as a halfway pattern.
Now that I have shown you how important it is to recognize these types of patterns its now time to look at the HUI and the implication of a very similar setup to the two charts above. After the precious metals stocks crashed in 2008 the HUI had a very good rally that lasted just about a year and recovered all the ground lost during the crash. From that point, at the end of 2009 is where our current bullish rising flag started to form. Its been a two year upward chopping move that has frustrated gold bugs to no end. Everytime it looked like a breakout was eminent the precious metals stocks would sell off hard. So now we find ourselves at the bottom of the bullish rising flag. The rally over the last week or so has left a bottom in place that just may be “THE BOTTOM”. Note the green arrows and their implications .As with the two charts shown above, we have the first impulse leg up off the 2008 low, the two year rising chopping action, with the now strong possibility of the second halfway impulse leg just getting started that will take the HUI up to 1645 in just over a year from now. I can assure you no one is looking at the HUI from this perspective as these bullish rising patterns are off the radar screen for most chartists.
HUI weekly bullish rising flag halfway pattern.
Bottom line is we now have a road map in which to follow this next impulse leg up in the HUI and the precious metals stocks in general. I can tell you right now that when we hit that price objective of 1645 a year from now the hype will be so strong that it will be hard to let go of your precious metals stocks. I’m not saying its going to be the end of the bull market but that a big correction, at the very least, will be in play going forward. So there you have it a road map to 1645 on the HUI in just over a year from now. Stay tuned for further developments. All the best … Rambus
Just a quick update on the UUP dollar etf. We have now firmly closed below the big one year neckline. This is the reason I moved the stop up last week to persevere any profits some might have had. Its just as important to know when something is not working vs when something is working. The rally should have moved up and away from the neckline after the backtest and the longer it lingered there the more doubt it showed. Anyway this should now be good for the precious metals complex and the stock markets going forward.
UUP false breakout.
