Strong breakout

Gold burst out of its pennant on Wednesday and closed three days in a row above the downtrend line, confirming its breakout for any remaining doubters out there. At $844.60, the yellow metal's high on Friday fell just shy of this bull run's twin peaks of $848 early last month.

Some resistance might be expected at that old high and the broken channel line slightly above it. It is unlikely that this resistance will detain gold for very long, since RSI is rising strongly, as is MACD -- which has made a bullish crossover, its first since late October. That was at much higher levels, however. This week's crossover more closely resembles the one in late August that marked the beginning of the bull run.

Silver, too, broke out of its flag on Wednesday, though not with quite as much exuberance as gold. The white metal returned to test the top of the channel on Thursday and found support near the Fibonacci level of $14.70 the next day. Recent resistance at the psychologically significant round number of $15 came into play Friday, as silver managed to touch $14.99 but closed a little below that at $14.90.

Next resistance lies at this bull run's closing high of $15.55 early last month. RSI is rising slowly, and MACD has made a bullish crossover.

The Fibonacci lines have been revised on the GDX chart after StockCharts.com adjusted historical prices for a dividend on Monday.

The gold-mining ETF broke through strong resistance at the Fibonacci 38.2% retracement level around $45 on Wednesday, tested support at that level on Thursday, and broke through resistance at its 50-day MA on Friday to close 26 cents above it.

RSI is convincingly above 50 for the first time in six weeks, and MACD is rising strongly after making a bullish crossover similar to the one in late August that coincided with the beginning of the bull run.

GDX could encounter some resistance at the Fibonacci 23.6% retracement level around $48, but after that it should be relatively plain sailing until the early-November high of $52.95 is tested.

The U.S. dollar index has declined dramatically after being rebuffed at the blue line -- the bottom of its long-term falling wedge. The index fell through support at its 50-day MA on Friday to close at 76.20, precisely on the neckline of the recent inverse head and shoulders.

RSI has fallen sharply through 50, and MACD is making a bearish crossover, so it is unlikely that support at current levels will hold for long. Next support is at last month's closing low, around 74.8, and last-ditch support is at the all-time low of 74.48.

The GDX:$GOLD ratio has broken out from its falling wedge, signifying that the gold-mining stocks are leading gold again, which is bullish for the sector. RSI is threatening to break above 50, and MACD has made a bullish crossover. The last time MACD did so at a similar level was in late August, at the start of the bull run.

While the GDX:$SPX ratio has yet to break out of its seven-week flag, RSI has broken sharply above 50, and MACD has made a bullish crossover, so it shouldn't be long before the breakout occurs. When it does happen, it would confirm that the gold-mining stocks have again begun to outperform the general market, which could draw more capital to the sector.