Precious Metals Complex Reverse Symmetry

Be prepared for the next great transfer of wealth. Buy physical silver and storable food.

news.goldseek.com / By: Rambus / 19 April 2016

In mid January of this year it looked as if another leg down was in store for the precious metals complex. Most of the precious metals stock indexes broke down to a new bear market low which I was expecting, as I was looking for that one last capitulation move to shake out the last of the bulls. There was a pretty symmetrical H&S consolidation pattern that had developed at the lows going back to August of last year. The setup looked perfect for one last move down to end the bear market but that didn’t happen. Instead we got a two day shakeout below the previous low which ended exactly three months ago today.

I have been one of the biggest bears since the HUI put in its right shoulder high in 2012 which was the beginning of the bear market. The actual high was made in 2011 but the first real strong impulse move down started from the right shoulder high. Three and a half years or so was a long time to be bearish on this once thriving sector but when I seen the failed breakout to the downside in January of this year that caught my attention. There is an old expression in the markets that says if you see a false breakout from a well defined pattern, the chances are very good that it was a failed breakout and the price action will move rapidly in the opposite direction, leaving everyone who was on the wrong side of the trade in the DUST.

This is exactly what happened in the precious metals sector. After just two days below the neckline on the HUI for instance, the move back up has been breathtaking to say the least. Both the bulls and the bears were confused as to what just happened. How could sentiment change so quickly from the bottom falling out, to a rip roaring bull market just like that. That’s how many moves end. The bear market was so long and brutal that everyone who wanted to sell finally had their chance. With no sellers left the bulls took charge and a brand new impulse move up began.

We’re now at a critical point where both the bulls and the bears don’t know what to do. The bears keep hoping that they were right and the bear market isn’t really over yet and new lows will be on the horizon. The bulls on the other hand are waiting for a good correction in which to buy their favorite PM stocks in this new bull market but the precious metals stocks just keep going higher without any significant declines. Damned if you do and damned if you don’t.

Lets look at some charts so I can show you what I was looking at in regards to such a major shift in sentiment. These first charts will be what I call a ratio combo chart. The top chart will have a ratio which compares one item to the other, which shows how it’s doing compared to the item on the bottom chart. It’s a little bit like inner market analysis, but is easy to see and understand. How a ratio chart develops can have huge consequences for the underling stock or market.

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Thanks to BrotherJohnF