2016 low most commodities have been consolidating that first impulse move down with most now breaking down in their second impulse move down which could be the final washout. What happens at the end of this current leg down remains to be seen. The odds will be high that before the next inflationary cycle takes hold we’ll most likely see some type of multi year bottoming pattern buildout.

The big question on all the gold investors mind is how is the precious metals complex going to behave during this time? Initially is looks like the PM complex will decline with everything else which would be normal. If this deflationary event is anything like the 1929 event then the PM complex will be the first to bottom. So for now lets just take it one step at a time and focus on the current environment and see what is possible.

There is a pattern that has been forming on most of the PM stock indexes I’ve been showing you since the end of last year when it started to show itself. That pattern really came to life 2 weeks ago which has made this pattern even stronger and closer to completing

The chart pattern I’m discussing is the 2016 triangle which began to form at the January 2016 low. During the formation of big chart patterns there is usually a smaller reversal pattern that forms at each reversal point which is important to know as it can give you a good reference point on where to look for a reversal point. As you can see on this daily chart for the HUI that the 2016 low formed a double bottom which led to the impulse move up that was almost vertical and burned out in August of 2016. For those who were members back then you may recall that was the first time since the top in 2011 that I got fully long the PM stocks.

At that 2016 high I began to look for some type of smaller consolidation pattern to start forming that would lead to the next impulse move if the bear market was over and a new bull market was underway. Instead of seeing some type of consolidation pattern forming I saw the infamous 2016 H&S top buildout which was the last thing I wanted to see. From past experiences I learned long ago never dismiss a H&S pattern either a top or bottom no matter how bullish or bearish we are.

I’m never well liked when I have to issue a sell signal when I see one of these H&S patterns form. Back in 2008 I had to leave Goldtent because no one wanted to hear a top was forming after an eight year bull run. It wasn’t so bad when that massive 2011 H&S top formed that ended the bull market as I was able to show the price action way ahead of the actual breakout. We would watch one PM stock break the neckline followed by some more until finally all of the PM stocks had broken their respective necklines. I can still remember we were waiting for Goldcorp to finally break its neckline as it was one of the strongest PM stocks back then.

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