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In the Wednesday Report, we looked at a few charts which were showing a possible short-term low that could be forming. There still needs to be a little more confirmation, but so far the possible short-term low is still holding. We’ll know this coming week if the low is going to play out.

The short-term low on the backtest to the top rail of the one-year bullish expanding rising wedge held support on Thursday on the daily chart for the CNDX.

In mid-April, the HUI formed a small micro topping pattern and began to consolidate the previous rally. Last Wednesday, the HUI strongly tested the bottom rail of the potential bullish expanding falling wedge, forming a possible small H&S bottom at the 4th reversal point. We should know early next week if the micro H&S bottom is valid. I will tweak the bottom trendline once the small H&S bottom is confirmed, which will show a slightly steeper lower trendline.

Next is a longer-term 2-hour chart, which shows how the expanding falling wedge on the 15-minute line chart above fits into the slightly larger picture. If you recall, I initially called the first reversal point a micro double top, and even though it’s very small, it was still a reversal pattern. Over the next month or so, the HUI has carved out the expanding falling wedge and is working on the all-important 4th reversal point.

On the 15-minute line chart above, the potential 4th reversal point looks like a micro H&S bottom, and on this larger timeframe chart, we can see a micro double bottom/H&S bottom (see thumbnail on the right sidebar). If this current low can hold support, then we can see another rally up toward the top of the possible new trading range.

The two possible scenarios we could see unfold are: the expanding falling wedge could be a standalone consolidation pattern, meaning the HUI will breakout above reversal point #1 and continue its next impulse move higher. What I think is more probable is that the HUI could be forming a larger consolidation pattern, which would need one more rally and decline to complete the four reversal points. Either scenario would have a bullish outcome.

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