Spectacular breakdowns

After plowing through several layers of support, gold and silver are entering oversold territory. The most spectacular breakdown has been shown by GDX, the gold-mining ETF, which has collapsed 30% since its recent peak of $51.84 less than four weeks ago. Meanwhile, the U.S. dollar index is making a spectacular moonshot, a parabolic ascent fuelled no doubt by frantic short covering. It is difficult if not impossible to predict when extreme moves such as these will end. What is virtually certain is that when they do, the reversals will be spectacular.

GOLD (daily)

December gold has fallen through its 50-day MA, its inner channel line, its 200-day MA and the Fibonacci 38.2% retracement level. First support is near the Fib 50% level of about $843, close to the target of the small head and shoulders with a neckline around $915. Next support is the bottom rail of the channel, in the vicinity of the round number of $800 and the Fib 61.8% retracement level just beneath it. RSI is just above the oversold zone and looks poised to enter it. A reversal back above 30 would be a bullish signal.

GOLD (weekly)

Gold is at its 50-week MA, which has served as support during the entire bull market since 2002. Any significant decline from here -- say, below important support just beneath $850, near the Fibonacci 50% retracement level -- would be technically damaging to the bull case, although all hope need not be lost until the uptrend line from July 2005 is violated. Ominously, RSI has fallen convincingly below 50, although it has reversed from similar levels in the past.

SILVER (daily)

September silver has fallen through its 200-day MA and the bottom rails of its magenta and blue channels. It is a little above the round-number price of $15, close to where it started the year. RSI is in oversold territory; a reversal above 30 would be a bullish signal. Meanwhile, there is no clear support on the daily chart.

SILVER (weekly)

Silver has sliced through its Fibonacci 50% retracement level and the 50-week MA. It appears to be headed for support at the Fib 61.8% level near $15. Last-ditch support may lie at the declining-tops line, about 50 cents below that. Weekly RSI is in the range from which it has invariably bounced during the bull market since 2002.

GDX (daily)

The gold-mining ETF collapsed through double-bottom support at $41.61, then sliced through the remaining channel lines, all on strong volume. RSI is well into the oversold zone. It is a safe bet that the gap above $38 will be filled eventually. Meanwhile, there is no clear support on the daily chart.

GDX (weekly)

Once it broke down from its channel and through the double bottom at the Fibonacci 61.8% retracement level of $41.61, GDX plunged directly to the bottom rail of its magenta channel, just above its 200-week MA -- which has held throughout the bull market since 2002. A significant decline from here would do serious technical damage to the bull case. It may be noted that the large head and shoulders with a neckline at $41.61 calls for a retracement of the entire move since last summer, and then some, which would be a failure of heroic proportions. RSI, however, is near the levels at which it bounced in April 2004 and May 2005.

U.S. DOLLAR INDEX (daily)

After breaching its downtrend line at the 200-day MA, the dollar blasted through the top rail of the green channel and launched itself into the stratosphere. RSI is over 80, well into the overbought zone. It is hard to say where the index will reverse, but it shouldn't be too long before it does.

U.S. DOLLAR INDEX (weekly)

The index has surmounted its 50-week MA for the first time since April 2006 and is approaching the vertex of the redrawn falling wedge. It would be extremely bullish for the dollar if it managed to break through resistance there. Weekly RSI is over 50 for the first time since October 2006 and has in fact risen above 60.

GDX:$GOLD (weekly)

The ratio of the gold-mining ETF to gold has collapsed out of its channel and is at a level not seen since the summer of 2002, shortly after the bull market began. Weekly RSI has entered the oversold zone; a reversal above 30 would be a bullish signal.