Just the Intro and One Chart

The Rest …Including a Warning ….is for Subscribers

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“Tonight I would like to go over several possibilities that are presenting themselves in most of the PM stock indexes we’ve been following. The first and most important thing to understand is that the PM complex is still in a bull market until it is negated. I’ve mentioned this a million times that the job of a correction or consolidation phase is to make you doubt your conviction of why you ever got involved in the first place.

A correction can take two different forms during a bull market. A correction or consolidation phase can take time which can be a long drawn out affair which can frustrate you to know end until you finally throw up your hands in disgust and exit your positions. The other way a market can correct is through price. It can feel much worse than a time correction because the decline can be hard and fast and it can feel like the end of the world. The bottom line is that both types of corrections do the same job which is to shake you out of your positions before the next impulse move begins. It is just the nature of the game we chose to play.

Before we move on I would like to quickly go over our PM stock trades we began to accumulate on April 2nd of 2020. I don’t know how many remember the very hard shake out the PM complex had along with the stock markets into the March 23rd low? That was a classic example of a correction in price not in time. Those types of moves can be very hard from a psychological perspective to buy but we did and it worked out well for us.

The reason I’m bringing this up is because that was a very strong impulse move that lasted from March 23rd to the high in August. There was no way to know in real time, 100% for sure, that the August top was going to lead to our current correction which is now 6 months in the making. As the correction wore on I began to sell some of my PM stocks to raise some cash for future buys. Altogether I sold on 3 separate occasions until I closed out the last positions in January of this year going to 100% cash. We ended up coming within a few percentage points of doubling our $100,000 original investment in about 10 months.

I’m not telling you this to brag but how important it is to take profits when the game starts to change. Taking profits can backfire on you also when you take them too early and have to pay up to get back in.

Last week was the first time since our initial accumulation of PM stocks back on April 2nd of last year that I started to put those original profits back to work. At the end of each week and the end of each month I always show you the 2016 trading range which is the most important chart patterns these PM stock indexes have made in a very long time. I keep pointing out that the top rail of those 2016 trading ranges should offer key support but as you know nothing is 100% certain when it comes to the markets. All we can do is get the odds in our favor and have the discipline to execute the trade when the time is right.

Below is a long term weekly chart for the GDX which shows the 2016 trading range along with the impulse move out of reversal point #4. First note the breakout and backtest to the top rail of the 2016 expanding triangle which was classic Chartology. After the initial backtest was completed the GDX began to rise once again which could have been the next impulse leg higher but that wasn’t to be. From that August 2020 high the GDX began it correction which so far has been a correction in time unlike the price correction at reversal point #4.

This chart shows you the conundrum we currently find ourselves in. As you can see the price action above the top rail of the 2016 trading range has 3 distinct possibilities. The first one is the potential H&S top that broke below the neckline last week. The 2nd possibility is the blue expanding falling wedge that is still trading above the 2016 expanding triangle. The 3rd possibility is that the top rail of the 2016 expanding triangle is going to hold support as I’ve been suggesting ever since the initial breakout last year.”