Last week I did a rather bearish post on gold. We have gotten our counter trend rally that I was looking for but it is too early to tell if we have topped out yet. I still believe this is not an impulse move up as we should be, at the very least, in a chopping consolidation between 1033 and the most recent low around 876.
The HUI has been chopping out, what looks like a possible H&S top formation. The pattern is not complete yet so there is still plenty of time to watch it develop and take action if one chooses to do so.The 15 minute look shows a possible expanding triangle consolidation pattern which would be the right shoulder of our H&S top.
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You can see how the symmetry is building out. We have 2 tops that make up the left shoulder and we are currently finishing off the second top of a smaller 2 top right shoulder. Its a little unbalanced but the symmetry is there. Watch the Neckline at 420 very carefully as this H&S pattern is close to 100 points. 100 minus the neckline at 420 = PO 320.
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There is alot to see on the daily chart starting with the rising wedge. When we failed to break thru the top rail of the rising wedge I knew something was amiss. If this was a strong bull trend we would have broken thru the top rail with no problem at all and we would be on our merry way to new all time highs on the HUI. BUT we didn’t, we ended up breaking the bottom rail which confirmed for me, that the true breakout was going to be to the downside. We have had several pullbacks to the underside of the bottom rail on the rising wedge which has taken on the shape of a H&S pattern. Also note the 3 rally phases within the rising wedge formation. Notice how the 1st rally leg up was strong and vigors, the 2nd rally leg alittle less impressive and the 3rd rally leg looks like it just ran out of gas, much smaller that the other two.


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I just want to say the reason I haven’t posted much lately is because I know I am in the small minority here and you all don’t need somebody with a bearish mindset to make you feel insecure about your long term positions. It isn’t about being right or wrong for me, about keeping it true. If the market changes I have to change or I will get left behind or trapped in a position that will be hard to recover from. I know most here are long term bulls with a long term look at things so until the market changes to the more positive side I will just post once a week or if something important happens to bring it to your attention.
All the best…Rambus