Metals weak, dollar strong

There is little sign of strength in gold or silver, as these precious metals continue to grind away within their broader channels. The gold-mining ETF has shown remarkable weakness, coming within hailing distance of its December and May lows this past week. Meanwhile, the U.S. dollar is looking decidedly perky. The traditional late-summer-to-early-fall rally in gold and silver may still be weeks away.

GOLD (daily)

Upside: Gold bounced off support at the thin blue downtrend line and is sitting on support at its flat 50-day MA.

Resistance: Fibonacci 23.6% retracement level around $944; top rail of new, wider channel at around $970.

Downside: The yellow metal failed to surmount resistance at the Fib 23.6% level and could be testing the neckline of a small bearish head and shoulders. RSI is back below 50. MACD continues to fall.

Support: Flat 50-day MA, just under $917; round number at $900; old downtrend line, just below that; rising 200-day MA at around the Fib 38.2 retracement level of about $888.

Bottom line: There is a confluence of layers of support not far below Wednesday's low that need to hold if gold is not to break down into the bottom half of its broader channel.

GOLD (weekly)

MACD failed in its attempt to make a bullish crossover, which is quite bearish for gold.

SILVER (daily)

Upside: Silver bounced off support at its rising 200-day MA. MACD-Histogram is rising.

Resistance: Top rail of blue channel; thin magenta line.

Downside: Silver was repelled by the top rail of its blue channel. RSI was repelled at the 50 mark.

Support: Rising 200-day MA at $16.76; bottom rail of magenta channel.

Bottom line: Silver could grind along in its broader channel for a while more.

GDX (daily)

Upside: GDX bounced near support at the double bottom at $41.61.

Resistance: Bottom purple line; falling 50-day MA; falling 200-day MA.

Downside: GDX crashed through the bottom purple line, recovered briefly and is below it again. RSI and MACD continue their slide.

Support: Double bottom (green dotted line) at $41.61.

Bottom line: Woe to GDX if support at its double bottom gives way. The gold-mining ETF is really struggling here.

GDX (weekly)

The gold-mining ETF has declined on strong volume since the failure of MACD to make a bullish crossover. However, GDX appears to now be sitting on support at the bottom rail of its blue channel, which happens to coincide with the Fibonacci 61.8% retracement level of $41.61, which is precisely where GDX's decline was arrested in December and May, and which may now be the level of the neckline of a fairly large head and shoulders. All this spells critical support, wouldn't you say?

U.S. DOLLAR INDEX (daily)

Upside: The index bounced off its rising 50-day MA on Thursday, in the process making a bullish hammer candlestick. RSI and MACD are rising.

Resistance: Falling 200-day MA, currently at 74.28, and the blue downtrend line.

Downside: No clear indication.

Support: Falling 50-day MA; bottom rail of channel.

Bottom line: The dollar still seems headed for its important blue downtrend line.

[Bonus chart] GDX:$SPX (weekly)

The gold-mining ETF has fallen sharply relative to the Standard & Poor's 500 index in the past few weeks, on strong relative volume. RSI has fallen back below 50, and MACD has made a bearish crossover. The precious-metals miners have fallen out of favour relative to the broader stock market. The ratio is just below its rising 50-week MA, which has served as an important level of support and resistance in the past. A failure of support here, as in the spring of 2004 and the fall of 2006, would be ominous in the medium term for the miners.