After a long term bear market in most commodity related stocks we are starting to hear analyst talk about inflation. From a Chartology perspective the deflationary scenario is still in play but how much lower can this sector go? In tonights Weekend Report, I’m going to update some long term commodity charts we’ve been following for years to see where they are currently trading in their bear cycle.

Lets begin by looking at one of the most widely followed commodity indexes the CRB. This 20 year monthly chart clearly shows the bear market began in July of 2008 which puts the age of its bear market at 12 years and counting. The initial crash, out of the 2008 high, was the same crash that the stock markets and PM complex experienced. The countertrend rally out of the 2009 crash low setup the next important high in the ongoing bear market which was the 5 year H&S consolidation pattern. The impulse move out of that 5 year H&S consolidation pattern took the CRB index down to the January 2016 low where we saw another countertrend rally that concluded in May of 2018 forming the head of the 4 year H&S consolidation pattern. The H&S neckline gave way in February of this year and has reached the minimum H&S price objective at 134.23. The CRB index has now reached an important point within its impulse move down where we could see either another small consolidation pattern start forming, similar to the blue expanding triangle halfway pattern in 2005, or some type of reversal pattern.

This is what I wrote back on August 23, 2019. This next chart for the CRB index is the infamous 75 year quarterly chart which shows the trading range that formed between the mid 1950’s to the early 1970’s. This chart shows how the H&S top and the bearish rising wedge fits into the big picture which could have serious negative consequences for the CRB index. If the current bearish rising wedge fulfills its measured move as a halfway pattern to the downside the CRB index will be trading all the way down into the brown shaded support zone using the BO to BO method. Just measure from the breakout below the neckline to the first reversal point in the 2016 bearish rising wedge. Then just take that measurement and add it to the breakout point of the 2016 bearish rising wedge to get your price objective. As you can see the current price action is now approaching the top of the brown shaded support zone which goes all the way back to the mid 1970’s.

This next chart is a long term weekly combo chart which has the CRB index on top, with the US dollar in the middle and gold on the bottom. Since 2011 the CRB index has been moving inversely to the US dollar while gold has been moving generally up with the US dollar since the 2016 low. At this point a strong US dollar is still playing havoc with the commodities in general but not so much for gold.

One of the most important commodities on the planet is oil, WTIC. Since the parabolic move that ended at the 2008 high WTIC has been in a severe bear market going from 147 to the recent low just under 20. What is most interesting about this long term monthly chart is how the recent low came in at the H&S measured move price objective down to the 23.19 area which was also the bottom rail of the 2008 downtrend channel. I’m keeping a close eye on the shorter term daily chart looking for some type of reversal or consolidation pattern to form.

Just like the long term quarterly chart for the CRB index we looked at earlier the WTIC has a very similar pattern that goes all the way back to 1981 when the low in oil was 10.81. Note the massive double bottom which projected a move of 277% which was just a dollar or so off the all time high. I’ve often explained what a classic H&S top is. They start out with a rising wedge where the left shoulder and head form inside of the rising wedge with the right shoulder high forming close to the breakout point on the backtest to the bottom rail of the rising wedge. The short oil trade was our best performing leveraged trade during the 2020 crash.

Since we are looking at long term quarterly charts for commodities we shouldn’t be surprised that many have similar looking charts. This long term quarterly chart for Copper shows a similar look to the WTIC which shows its recent H&S top is also a classic H&S top. You can also see the massive base that began to develop back in the late 1970’s which broke out to the topside in the middle of 2005 and reached its price objective at 3.81. Note how the 2008 crash found support right on top of that massive flat top expanding triangle.

NATGAS, natural gas, is setup a bit differently in regards to its long term chart. The bear market for natural gas actually began in 2005 and has made a series of long term lower highs. When I first built this chart I put in two brown shaded support and resistance zones as the reverse symmetry was playing out so beautifully as shown by the back arrows. The upper brown shaded support zone has held support going all the way back to 1995. Is it going to hold support in 2020?

When we first opened up our doors at Rambus Chartology I would show this chart for UGA, gasoline, on Friday night after the market closed for the weekend. The trading range at the top of the chart ended up being a 5 point rectangle reversal pattern which ended up being the head for multiple H&S tops.

Lets finish up by looking at some different commodities and indexes. Last month the URA broke below the bottom rail of its 2016 falling wedge. So far this month the URA has managed to rally back up into the falling wedge negating the breakout for now. A move above the 30 week ema would help with a bullish outcome which is just overhead.

USCR, US concrete, has just achieved the minimum price objective for its H&S top after its massive bull market that began in late 2011.

LL, lumber, has just hit the bottom rail of its 2013 downtrend channel.

The REMX, Rare Earth etf, has experienced one countertrend rally during its lifetime going back to the 2011 high. Last month the price action broke below the bottom rail of a falling flag formation which is generally a bad sign unless the bulls come to the recuse and rally REMX back into the falling flag at a minimum.

After putting in a false breakout gap last November the LIT, lithium etf, the price action negated that breakout when it traded back into the downtrend channel. This month the LIT is attempting to breakout again trading back above the top rail.

The GYX, industrial metals index, is trying to find support on the bottom rail of its massive 2005 triangle.

Below is a ratio chart that compares gold to the CRB index. How much longer can gold outperform the CRB index in such a big way?

This last chart for tonight is a long term monthly chart for gold with the 2013 golden neckline. This month the 2013 H&S consolidation pattern minimum price objective has been met a 1791.

The bottom line is that most commodities have been in a bear market since their 2008 highs. Now most have reached their minimum long term price objectives which puts them at a critical inflection point where they can form a consolidation pattern to the downside which would most likely complete their bear markets. On the other hand they could be either starting to form a reversal pattern of some kind which could end their bear markets. Keep an open mind watching the shorter daily charts to see what kind of pattern builds out. Stay safe and all the best…Rambus

Tonight I would like to show you some very long term charts for the PM complex I used to look at the big picture and big reversal patterns. I like to use the quarterly line chart as it takes out much of the noise a quarterly bar chart can make. A quarterly line chart only uses the quarterly close so the symmetry isn’t there but the big reversal patterns still show up. Also I will switch back to a bar chart just for confirmation that the pattern I’m seeing is really the right one.

We know that gold has been the strongest area in the PM complex for quite sometime. It began to form its massive H&S consolidation pattern at the beginning of 2013 and finally broke out above the neckline in January of 2019. A line chart also shows reverse symmetry especially on the long term charts. This quarterly line chart for gold, on a quarterly closing basis, is not that far from hitting a new all time high.

Here is the exact same chart using the quarterly bar. I’ve mentioned many times in the past that big chart patterns lead to big moves. Note the massive base in the late 1990’s and early 2000’s which launched gold’s secular bull market. We should see a similar bull market out of the 2013 H&S consolidation pattern.

We also know that silver has been the weakest area in the PM complex as this quarterly line chart shows. Last year it looked like silver was going to breakout from its massive H&S bottom but failed to do so. The price action is attempting to hit the neckline once again.

Next is the long term quarterly chart for the GDM, gold miners index, which is beginning to poke its head above the neckline. Note the big double H&S base that formed in the late 1990’s which launched its secular bull market up to the 2011 H&S top.

Next is the quarterly line chart for the HUI which shows the current price action testing its 2013 H&S neckline. The HUI also formed a double H&S bottom in the late 1990’s and early 2000’s. What makes this chart so bullish is the possible reverse symmetry to the upside over the same area on the way down as shown by the blue arrows.

One of the PM stock indexes to keep a close eye on is the XAU, gold and silver index, as it has already broken out from is 2013 H&S bottom. The XAU also formed a double H&S base at the bear market low in 2000.

The GDX doesn’t have a lot of history yet but it’s attempting to breakout from its 2013 H&S bottom.

Below is the quarterly chart for the GDXJ, junior gold miners etf, which doesn’t have a lot of history and has been lagging the big cap PM miners for awhile now.

The HGU.TO is a 2 X long the Canadian gold miners etf which is forming a large double bottom reversal pattern.

Since we are looking at very long term charts tonight lets look at a 50 year quarterly chart for silver. This chart was the very first chart I ever posted during the early days at the tent. At the time the 2nd neckline was just completing with the blue bullish rising wedge forming the right shoulder for neckline #2. Note how NL #2 held support on the backtest during the 2008 crash which led to the near parabolic rising into the 2011 high. It’s possible that the 2011 bear market downtrend channel could form a handle for a massive cup and handle formation.

This last chart for tonight is another very long term quarterly chart for gold I haven’t posted in several years. Through the years the patterns are squeezing together which makes it hard to see what this chart is all about. Like silver’s long term 25 year H&S base gold also produced a massive H&S base with the neckline forming at the 720 area which was just below the all time high made back in 1980.

Early on I recognized how the price action was reversing symmetry to the upside which was doubling each move. This chart does an excellent job of showing you how resistance turns into support when broken to the upside. Note the red arrows that show resistance. Once the black dashed horizontal line was broken to the upside the blue arrows show how it reversed it role to support. It kept doing this all the way up to where the massive neckline was broken to the upside. Again note how that massive neckline held support during the 2008 crash, blue arrow. The last point I would like to make is that the 25 year H&S base had a price objective up to the 2035 area which was about 115 points higher than the actual high at 1920 which was pretty remarkable for the size of that 25 year base. Stay safe and all the best…Rambus