Oldtent Archives 2007 - 2008

As many of you know from reading what I have said about my bullish rising wedges in bull markets, the same thing can be said about bearish falling wedges in bear markets. They are nothing more than a consolidation pattern in the direction of the major move. The thing I like, for instance about a bullish rising wedge, is that they tend to move rather quickly when they breakout in the same direction of the upward slant. The same can be said about a bearish falling wedge. They tend to move rather quickly when they break down thru the bottom rail of the downward slant, as they are saying that I want to go from point A to point B in a hurry for whatever reason. I have been watching this bearish falling wedge unfolding now, since the last reversal point from the 9th of Oct. at the 300 area. Yesterdays weak close gave me a clue that today might be the day we break through the bottom rail and start the next leg down that will take us to new lows on the HUI. I’m hesitant about posting this negative view as I know it will pi$$ off some perma bulls but I also know that there are alot of folks on this forum that want the truth to be told no matter how bad it may be just like we want to be told by our government the truth about what is really going on. Give me the truth so that I can deal with the problem not some gibberish to make me feel good, just the plain old truth for me.

The 30 minute look. The 60 minute look. The daily look.

A couple of weeks ago my last post on the forum was showing the possibility of a breakout to the upside of two flag patterns. All we had to do was show some strength and break the overhead resistance, but again the bulls failed to deliver and we sold off without breaking through that critical top resistance area. This told me the bulls were not in charge and the bears had the stronger hand. Below is a chart of the DZZ ETF which goes up when gold goes down and the chart just below the DZZ is that of the GLD which is long gold. Whats important to notice on the chart below is how resistance turns into support by looking at the Bull flag on the DZZ and how the top red rail is now acting like support and how support turns into resistance on the bottom red rail on the Bear flag on the GLD. Also notice the bigger, black dashed rail on the GLD and how it has turned from support during the bottom in Dec. of 07 to the breakdown in August of 2008. We had 3 shots at breaking the support rail on the DZZ and 3 shots at breaking the resistance rail on the GLD but to no avail. Today gold is letting go and seeking a new lower level IMHO.

Silver just completed a nice little triangle halfway pattern complete with the breakout and the backtest yesterday. I believe silver is now on it’s way to finding a lower low close to the 7 area. This chart doesn’t include today’s action which will be considerably lower.

I know alot of folks think Technical Analysis is voodoo or something that is total useless because they don’t have any clue as to how it works or what it really represents, which is investors psychology. I’m here to tell you that just a simple understanding of how support and resistance works can save you a whole lot of grief by warning you that by making a lower low is not a good sign and you should tighten up your stops. I have mentioned on numerous occasions about getting trapped in the stock market and how painful it would be. The psychology will be, the pain will be the greatest when we hit the bottom and that is when most will sell, out of fear, frustration and just plain wanting to end the misery. The lessons to be learned from the stock markets are many but being trapped in a downward spiral is one of the most painful as it is to late to sell but you still don’t know where the bottom is. So the pain keeps on getting more intense until one cracks under the pressure and finally capitulates to end the suffering. If you are a young perma bull you have time to wait however long it takes to recover but if you are not so young, well that is a different story and one that only each individual can answer for themselves.
Below are just a few more charts that have been showing how TA has been working beautifully in calling the top to the HUI and this downtrend that has ensued from that top.
This 5 point bearish rising wedge that I have been showing since way back in the summer. I really don’t know if the bottom of the bearish rising wedge will hold as the bearish falling wedge on the daily look is calling for a lower low to perhaps the 145 area.

Next the HUI uptrend channel, on linear scale, that had the measured move right to the very exact top of the bull market. I didn’t know at the time if we would just have another consolidation in line with all the other previous consolidation patterns but when we formed that H&S top at the end of this bull market there was little doubt as to the outcome. Again notice the breakout from the bottom uptrend rail of the major channel and the backtest to the underside telling us again it was over.

One last chart on the dollar. Fully this one is for you as you couldn’t understand at the time what I was seeing. You and almost everyone else for that matter was looking for the “waterfall” down and a crash to new lows. When we broke above the unbalance double bottom resistance point that signaled to me the dollar was going to rally higher. Just a simple matter of making a higher high. Its really so simple if you can have an open mind to what is happening. Then you may recall the small bullish rising wedge halfway pattern that I showed you and you still couldn’t believe what was happening. After that little bullish rising wedge pattern was completed we then had a decent correction that formed a bigger bull flag that created the right shoulder of our now H&S base formation that is saying the downtrend is now over for the dollar. Can you see Fully, how TA works one step at a time, creating one formation after another which creates a bigger pattern that tells how investors psychology is working. You listen to the market and not tell the market what its supposed to do, and as a prem bull, you are telling the market what its supposed to be doing instead of the other way around.
This is JMVHO as to what is going on with TA and that it really does work if one has an open mind. Please everyone do your own DD as this is all just one man’s opinion on how he see’s things from a TA perspective.
All the best to everyone under the tent…Rambus