Just scanning my weekend charts and thought some of these tell quite a convincing story. I thought I would share:
THE USD. Amazing the contrast in the move of the USD vs gold and silver over the past 3 years. Makes the gold bugs and the Keynesians scratch their heads together. Note this recent bump up in gold and silver and how gold provided an important relative strength contrast. That’s not bullish. Silver should outpace gold in a bull market. The long term chart of the USD shows how it stalled out right at the 50% Fib for the bear run from 2001-2008. The RSI 88 is capping this move. My suspicions are we consolidate and correct here then resume the bull to the upside. I show two possibilities for the consolidation. Also notice how the stochastics are set up to reverse after reaching 98.42 which is the highest in the 16 year series shown, although they won’t confirm the move until below 78. We got a 7 month impulse count…its time for a rest
GDXJ- Mini Diamond top and classic 3 phases. As you all know I have used chartology to apply to Robert Rhea’s 3 psychological phases of a bull/bear market developed in the 1930’s. My unique original discovery is that we can actually apply phase categories to the price action which match the psychological phases. These patterns follow rules seen in bull and bear markets alike. The sequence I have discovered is:
Phase I- Initial top with break down.
Phase II- recovery, usually BMR#1, followed by extended decline leading to a POR which is normally a high volume crash. Post crash prolonged consolidation usually inclusive of several BMRs
Phase III – Breakdown from the phase II consolidation.
That’s the typical structure of a severe bear market. Rambus has often said the gold bull market was the purest form of a bull market from a chartology perspective. I must say this is true for the following chart in the bear sense. As frustrating as it has been to all of us it has followed all of these patterns. Note the minor H&S breakdown formed which completed its phase I. In character it set up a much larger H&S to run concurrently. Note the massive backtest of its breakdown during its first BMR in the summer of 2012. This was all pure classic action. So now while solidly in phase II the first BMR sucked in all the true believers with its first BMR then went onto a long extended decline. The slide in the winter of 2013 finally reached a head when Goldman gave it an extra push during the great Goldman bear raid of April 2013, panic ensued. We then entered the classic phase II post POR consolidation which lasted 18 months until October 2014. With the violation of that consolidation to the downside we then entered Phase III. Its been a frustrating Phase III to say the least since we have spent most of that time consolidating and back testing that initial breakout into the phase. But note on the weekly stochastic that we may be topping here at 77.77 which is a much lower top than the previous 3 BMRs in phase II. We would expect that. Same with the RSI which died at 51%, again that’s what we would expect. So one can see how pure this bear has been to the rules and principles discovered of bear market phases.
Next is the little mini 1 hour GDXJ topping pattern encompassing all of 2015. Most impressive is the dashed line off the diamond top is acting as resistance. It appears the top has been established.
GDX – since we are talking gold stocks… A review of the GDX is in order. The same analysis can be applied as the GDXJ, however the GDXJ is so pure in its representation. We are familiar with the price action as the current BMR has been very aggressive and has served to suck the believers back in apparently. Note the weaker volume in the second half of this ending BMR. But the big tell is in the Stochastics and the RSI. The weekly stochastic is a pretty loud klaxon that this thing is topping. The confirmation comes with a weekly close below 78 and it is now 77.07. Note I use Stochastic %K 10 whereas 14 is conventional. The on balance volume (Joe Granville RIP) is at critical support to also confirm. Lastly the RSI is a big tell as it peaked lower than the previous 2 BMRs. The last 3 candles have tails on the top with bodies below the 39 WMA. We wait for the MACD to confirm, but this is topping action.
When we zoom in on the weekly BMR chart we have what I call my I-Beam indicator. The 200 DMA acted like an I-Beam stopping the rally in its tracks. And now it looks like it just gave it up. Note how everything else has given it up. RSI just dipped below 50 and the MACD has crossed over and is accelerating downward, histograms going negative. Oh, and don’t miss that last volume bar.
OIL and BONDS They go together actually. As oil prices rise one would think yields would rise. Guess what, that’s what we got this week. Its amazing we got the first bounce in the oil market right when it hit the line off the bottom. Can you say dead cat bounce?
Now look at the 10 year. I have showed this before however I have added a new NL and labeled it S&R Rail. Holy cow this was a perfect measured move for the breakdown in yields. So Oil and Bonds bounced right where these could be expected to. So I would expect yields to petter out somewhere between the 50/200DMA on the 10Y. If I had to guess right between 2.10-2.15%
Finally I thought the CDNX looked interesting since it is putting in a pattern, maybe a bear flag, right where one would expect, at the 2008 bottom. Now this also is a pretty pure form Phase chart of a bear market. You can map out all the standard patterns we see in a severe bear. Note the stochastics are indicating a possible rally here. I would guess this is a halfway consolidation/bear flag to the downside. The CDNX is made up of lots of junior golds and oils. Another clue that oil goes lower I think. In all long term chartology can provide pretty strong predictive power.