Testing, testing

Gold and silver are testing the breakouts from their downtrends (or the necklines of their inverted head and shoulders), while the volatile GDX is showing comparative weakness and the U.S. dollar index has broken back into its rising channel. We should know within a few days whether the breakouts are fakeouts or the real thing.

GOLD (daily)

Upside: August gold is still above the broken downtrend line/neckline of an inverted head and shoulders.

Resistance: First lower high at about $960.

Downside: Gold appears to have encountered some resistance at $950, a little above its Fibonacci 23.6% retracement level. RSI and MACD-Histogram have turned down.

Support: Downtrend line at a little below $920; flat 50-day MA, currently at $893.60; Fib 38.2% retracement level at about $888.

Bottom line: Gold may be in the process of testing its broken downtrend line. If it does that successfully, the yellow metal could enjoy a run of about $100 -- the depth of the head in the inverse head and shoulders. A breakdown back into the channel would be quite bearish.

SILVER (daily)

Upside: Silver cleared resistance at both the magenta and blue lines, then bounced off its broken downtrend line on Friday. MACD-Histogram still rising.

Resistance: Recent high of $21.44.

Downside: RSI has turned down.

Support: Broken downtrend line, just above $18; magenta line just below that; rising 50-day MA, currently at $17.12.

Bottom line: Silver has broken through the top rail of its blue channel, or the neckline of an inverted head and shoulders, with a possible target of about $20 if it follows through.

GDX (daily)

Upside: GDX has closed the gap between about $46.50 and $47. The decline on Thursday and Friday has been on low volume.

Resistance: Rising 200-day MA at $47.47; bottom rail of purple channel at about $48; recent high at $50.09.

Downside: GDX may have made a double top and has broken back out of its purple channel and down through its 200-day MA. There's another gap between $44 and $45 that may need to be filled. RSI is falling sharply after failing by a hair to reach 70. MACD-Histogram is declining.

Support: Flat 50-day MA at $45.55.

Bottom line: The gold-mining index is showing appreciable weakness, which does not bode well for the yellow metal.

U.S. DOLLAR INDEX (daily)

Upside: The index has broken back into its green channel. RSI is rising strongly. MACD-Histogram has turned up.

Resistance: Rising 50-day MA, currently at 72.97; top rail of blue channel.

Downside: No clear indication.

Support: Bottom rail of green channel, currently at about 72.5; bottom rail of blue channel.

Bottom line: The apparent fakeout could provide the impetus for a decent rally.