The Dow blasted thru the resistance rail at 11,600. This is a major failure and any shorts or hedges you may have on should be taken off immediately. That goes for precious metals stocks also.

Dow daily breakout above 11,600 resistance.

Today we have arrived at the 11,600 backtest area of the upper S&R rail on the Dow. This backtest could go on for several days before we know for sure if its for real. A strong closing price above the S&R rail would be a negative. Note, our top S&R starts at the big double bottom hump. If you follow the top S&R rail to the right, starting at the double bottom hump, you can see how this rail has cleanly reversed it’s roll between support and resistance.

Dow backtest of the 11,600 S&R rail.

Below is an 8 month daily chart of GLD that I showed the other day. You can see the possible H&S that is forming on the S&R rail. We haven’t broken the neckline yet but the situation is looking more ominous as each day passes. Please notice the 2 blue arrows. One at the top of the chart at 1920 and the lower one at 1550 or so. Look hard at that decline. What you are seeing will be similar to what lies ahead for this next impulse leg down. A decline in price and time will be fairly equal to the first leg down off the 1920 top. If you still haven’t got your hedge on yet the next 3 to 4 weeks could be very painful if the neckline and the bottom rail of the red bearish expanding rising wedge fails. I plan on doing a more indepth weekend report based on this weeks support breaks on the stock markets and the dollar pattern that has developed, which will have a huge impact on the stock markets and the precious metals and stocks.

GLD 8 month little H&S top and the bigger bearish expanding rising wedge.

Below is our 6 month daily chart showing the inverse H&S bottom and the rally that ensued. After the first backtest to the neckline the HUI made a bee line straight to 615 that fell short of it’s price objective at 635. Now that we can look back at that failed price objective, at 635, I think it was a warning sign of weakness. Now on to our current area of support at the 530 area. We had another test of that low this morning. By looking at many other individual precious metals stocks and the bear flags that I’m seeing I think the 530 area in going to fail. But if your a hardcore gold bug and just have to buy you have a good low risk entry point right here with a sell/stop place below the neckline extension rail.

HUI 6 month daily 530 support zone.

But you better stick to charting…your Football Handicaping was a way off the mark…Detroit was a little overbought

🙂

I just want to wish everyone that celebrates Thanksgiving to enjoy the day with your family and friends.

I’m going to go out on a limb here and say the Detroit Lions are going to beat the Green Bay Packers today. Stranger things have happened.

All the best ….Rambus

This weeks chart was suggested by aulover who is interested in AUY, Yamana Gold. Of all the precious metals stocks that I track I have to say AUY has one of the stronger looking chart. We’ll start out with just a simple horizontal support and resistance zone. As you can see when AUY was below the S&R zone, brown area on chart, the price was always turned back, blue arrows. Then in August of this year it finally succeeded in breaking thru the resistance barrier that then reversed it’s role and held support green arrows. Note the nice pickup in volume when AUY was finally able to penetrate the brown resistance zone.

AUY daily support and resistance zone.

The weekly look goes back 6 1/2 years. There are two beautiful Diamond patterns. One was a 7 point diamond that formed the major top just before the big panic crash of 2008. Seven reversal points made it a reversal diamond pattern. The next diamond was formed after the first rally after the 2008 crash that chopped out an eight point, 2 1/2 year diamond consolidation pattern. It finally broke through the top rail of the diamond in July of this year which led to a 5 point rally. From there, like most precious metals stocks, AUY hasn’t been able to run to new all time highs. Close but no cigar yet. It looks like it could be in the process of building some type of consolidation pattern, maybe a triangle or a bull flag. Its to early yet to make any predictions. We need at least one more move lower and then a strong reversal from where ever that low comes in. I think its still too early  to jump in. Patience can be a virtue in the stock markets.

YRI.TO weekly diamonds.

The monthly chart shows the big H&S base that was built between 2000 and 2005 that launched YRI.TO’s bull market. I’ve marked in red the 9 month sideways trading range that helped Yamana finally break through the top rail of the diamond.

YRI.TO monthly look.

Bottom line with Yamana Gold is that it is one of the stronger precious metals stocks right now but that doesn’t mean it can’t go lower in here. There are many precious metals stocks that are looking very weak with some breaking down from bear flags this week. I would urge a little caution and patience in here until this correction has run its course. There may come a time in the not to distance future where we can buy up some of the better looking precious metals stocks if you have cash on hand to do so. I hope this look at Yamana helps you understand where this stock is and with alittle patience you will be able to buy in at a cheaper price.

All the best aulover….Rambus

Below is the 6 month daily chart of the Dow that I’ve been showing with the 5 point triangle reversal pattern. You can see the little backtest to the bottom blue rail last Friday that strongly suggested the triangle was indeed a reversal pattern. Its always important to observe how we interact with an important trendline such as the bottom rail of the triangle reversal pattern for clues. If we were able to trade back inside the triangle that would have put me back to neutral, but as you can see the backtest was successful and the Dow has dropped about 460 points so far this week. This Thanksgiving week is usually a positive week for the stock markets. I’ve marked 10,900 as a possible place for a counter trend rally to occur. I also drew in a thin dashed black horizontal rail that was the low of the backtest of the lower S&R rail that could offer alittle support. As you can see there isn’t much in the way of support until we get to that lower S&R rail at 10,900.

Dow 6 month dail look.

Below is the 6 month daily chart of the Dow showing our 5 point triangle reversal pattern with the breakout and backtest last week. Keep in mind that a reversal pattern is reversing a trend that has been in place. So now we know that the uptrend on the Dow has been reversed to the downside and that is the way you want to play the stock markets now. Until we get some kind of reversal pattern to reverse our current trend from down to up the trend will remain down except for some minor counter trend moves. There are many ETF’s now that you can play the downside or short the stock markets. Depending on your risk tolerance, there are 2 times or 3 times bear ETF’s. Some focus on the big caps some on the small caps or just about any corner of the market now has an ETF, exchange traded fund. QID is short the COMPQ, TZA is short small caps, SPXU is short the S&P 500. And one of my favorite, if the risk trade comes off is SMN which is short basic materials. These are just a few examples. There are many more to chose from. Anyway back to the Dow Jones. Yesterday’s move down broke thru the first support area at 11,600 the upper S&R rail. We could still do a backtest of that rail, which would be a good low risk entry point but its not mandatory. The next area of support will be the lower S&R rail.

Dow 6 month daily 5 point triangle reversal pattern.