Fearful symmetry

This blog's first post was on Sept. 4, 2007, exactly a year ago, the day gold broke out of its 15-month consolidation and began its rocket-propelled ascent to its all-time high of $1,033.90 in March.

Six months later, on March 10, we said:

Our indicators and, especially, our trend lines have kept us onside for virtually the entire rally, although there were a couple of weeks when its potency and longevity surprised us.

But trees don't grow to the sky, and there are signs that a significant correction is in store. Gold has not revisited its 200-day moving average since mid-August and not even its 50-day MA since mid-December. One or both of these are likely to be touched before gold is able to make serious headway into the four figures.

A week later, gold hit its high and promptly reversed dramatically. On March 22, we wrote:

The bull run from last August is over. This correction could last several months, possibly more than a year.

At the time, the last sentence would have been considered somewhat pessimistic, as many were predicting a retest of the high in short order. In the event, our comments look realistic, as gold sliced through its 50-week moving average and today sits at $803.20, just above critical support.

Gold is vacillating between its Fibonacci 61.8% and 50% retracement levels. The yellow metal lies just above round-number support at $800 and the bottom of its channel. MACD is at a low unprecedented in the entire bull market since 2002.

It looks as though the bulk of the correction is done in terms of price, though not in terms of time. Gold may need to creep along the bottom of its channel for quite a while to form a base for the next rise to the top of the channel to challenge its March high.

Silver is vacillating between the magenta and green sides of a symmetrical triangle. Not far below lies the rising 200-week MA. Given the extremely low level of MACD, silver's breakout, when it comes, will probably be to the upside.

In a fearful symmetry, GDX's low today of $32.16 equals the low of August 2007 to the cent. In other words, the gold-mining ETF has completely retraced its rise from August to March.

Although it is conceivable that GDX could fall further to the important green uptrend line a little below $29, the extremely low level of MACD suggests that the bulk of the decline from the March high of $56.87 is behind us.

The U.S. dollar index has convincingly broken out above its three-year downtrend line. Although MACD may not be done rising, RSI is close to levels from which it has retreated in the past.

The buck could conceivably rise to strong resistance at its falling 200-week MA, currently at 82.82. Unless a remarkable decoupling takes place, that would be hugely bearish for gold.