Still forming a base

Gold, silver and GDX are still in the process of forming a base, and the U.S. dollar index is probably in the process of forming an intermediate-term top.

GOLD (daily)

Upside: Gold made a higher low on Tuesday. MACD has made a bullish crossover.

Resistance: Fibonacci 50% retracement level around $843; middle rail of blue channel; Fib 38.2% retracement level around $888; the 200-day MA; the 50-day MA just above it.

Downside: The yellow metal continues to respect the Fib 50% level as resistance. The 50-day MA is close to making a bearish cross over the 200-day MA.

Support: Tuesday's low around $810; round number at $800; Fib 61.8% retracement level at about $798; bottom of channel, a little below that.

Bottom line: Gold appears to have made a small inverted head and shoulders with a neckline at the Fib 50% level. It would be bullish, with a target of over $900, if the yellow metal managed to break through this resistance; conversely, a failure of the formation would be bearish.

SILVER (daily)

Upside: Silver made a higher low and a hammer-like candlestick on Tuesday. MACD has made a bullish crossover.

Resistance: Round number at $14; bottom rail of blue channel.

Downside: Resistance at its previous low from earlier this month and the round number at $14 is holding silver back. The 50-day MA has made a bearish cross over the 200-day MA.

Support: Tuesday's low around $13; this month's low at $12.31.

Bottom line: Silver may be making a bullish ascending triangle. It needs to break through the resistance around $14 soon, or else the formation will fail, which would be bearish.

GDX (daily)

Upside: GDX bounced neatly off the bottom rail of its blue channel after filling the gap around $37.

Resistance: Next blue line, a little above $39; former double bottom at $41.61; falling 50-day MA at $42.58.

Downside: RSI and MACD-Histogram are flattening out.

Support: Bottom of channel; recent low at $33.86.

Bottom line: GDX may fluctuate between the bottom two blue lines before resuming its rise.

U.S. DOLLAR INDEX (daily)

Upside: The index managed to make a higher high on Tuesday. The 50-day MA looks poised to make a bullish cross over the 200-day MA.

Resistance: Tuesday's high at 77.62.

Downside: The last three days have seen long-tailed candlesticks similar to the bearish hanging man. RSI is showing a bearish divergence. MACD may be making a bearish crossover.

Support: Upper rail of green channel.

Bottom line: The bottom panel of the chart, in which the purple line is the inverse of the dollar index, shows that gold fell in lockstep with the rise in the U.S. dollar from mid-July to mid-August, but the yellow metal has begun to pull away slightly over the past week, remaining steady as the dollar rises. If gold continues to rise, it won't be long until the dollar will start to fall to close the gap between the gold and purple lines, as it did in February and the first half of March.

Bottoming

Gold bounced smartly from the low it made on Aug. 15 and has run into recent support turned resistance. The gold-mining ETF is starting to outpace gold to the upside, which is bullish for the yellow metal. The long-term charts suggest that an intermediate-term low is being made this month, though the bottoming process could take a little while. Beyond that, the precious metals typically show seasonal strength in the autumn.

GOLD (daily)

Upside: Gold successfully tested the bottom rail of the blue channel. RSI has sprung out of the oversold zone and shows a bullish divergence. MACD is poised to make a bullish crossover.

Resistance: Fibonacci 50% retracement level around $843; middle rail of blue channel; Fib 38.2% retracement level around $888; the 200-day MA; the 50-day MA just above it.

Downside: The yellow metal respected the Fib 50% level in its first assault on it.

Support: Round number at $800; Fib 61.8% retracement level at about $798; bottom of channel, a little below that.

Bottom line: While it is conceivable that gold will retest its Aug. 15 low, it is more likely that it will make a higher low before mounting another attack on resistance in the $843-$850 range.

GOLD (weekly)

Upside: Gold bounced rather precisely off the bottom of its channel.

Resistance: Fibonacci 50% retracement level around $843; rising 50-week MA at $870.50.

Downside: The yellow metal respected the Fib 50% level in its first assault on it. MACD continues to fall.

Support: Fib 61.8% retracement level at about $798; bottom of channel, a little below that.

Bottom line: Gold could gyrate for a while between its Fibonacci 50% and 61.8% levels, as it did last fall, before making a sharp move.

SILVER (daily)

Upside: Silver made a higher low and a hammer-like candlestick on Tuesday. RSI has risen from the oversold zone. MACD has stopped falling.

Resistance: Bottom rail of blue channel; bottom rail of magenta channel.

Downside: Silver was rebuffed by resistance at its previous low from earlier this month and the round number at $14. The 50-day MA is poised to make a bearish crossover at the 200-day MA.

Support: Aug. 15 low at $12.31.

Bottom line: More work may need to be done before the bottoming process is over.

SILVER (weekly)

Upside: Silver bounced after barely penetrating its green uptrend line. RSI has reversed just shy of the oversold zone.

Resistance: Magenta declining-tops line.

Downside: Silver was repelled by the magenta line and round-number resistance at $14. MACD is still falling.

Support: Green uptrend line; rising 200-week MA at $11.74.

Bottom line: Silver could gyrate between the green and magenta lines for a while before making a clear move.

GDX (daily)

Upside: GDX has broken back into its channel and tested the bottom rail from above on Friday. MACD has made a bullish crossover.

Resistance: Next blue line, a little under $40; former double bottom at $41.61; falling 50-day MA at $43.21.

Downside: RSI has turned down.

Support: Bottom of channel; recent low at $33.86.

Bottom line: GDX may fluctuate around $37 briefly to fill the gap before resuming its rise.

GDX (weekly)

Upside: GDX briefly penetrated the rising 200-week MA before rising back above it. RSI has bounced from just above the oversold zone.

Resistance: Middle rail of green channel; former double bottom at $41.61.

Downside: GDX surmounted the middle green rail briefly but has fallen back below it. MACD is still fallin.

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

Bottom line: GDX needs to rise quickly above the middle green line, or else it may fall back below the 200-day MA.

U.S. DOLLAR INDEX (daily)

Upside: On Friday, the index recouped most of the sharp decline on Thursday.

Resistance: Area of congestion just above; recent high at 77.41.

Downside: RSI has fallen out of the overbought zone.

Support: Upper rail of green channel; flat 200-day MA at 74.19; breached downtrend line.

Bottom line: The dollar could easily retrace 50% of its recent steep rise from 71.31 to 77.41, which would bring it back near its 200-day MA and the previous high of 74.31.

GDX:$GOLD (weekly)

Upside: RSI dipped just below 30 into the oversold zone, then bounced from there.

Resistance: Bottom rail of channel.

Downside: MACD hasn't turned upward yet.

Support: Recent low.

Bottom line: The ratio of the gold-mining ETF to the price of the yellow metal may fluctuate for a while to form a solid bottom before re-entering its channel.

A critical week ahead

One year since their rallies began, gold is back at important long-term support, and silver is also there or close to it. GDX, the gold-mining ETF, is the weakest of the lot, having broken its 200-week MA. If a reversal doesn't materialize within a matter of days, look out below! The U.S. dollar index has peeked out above an important downtrend line. Either the buck stops here, pronto, or it could rise much higher.

GOLD (daily)

December gold closed on Friday just below the bottom rail of the channel and close to the Fibonacci 61.8% retracement level, after having been repelled precisely at the Fib 50% level on Thursday. In a sign of weakness, RSI failed to break out of the oversold zone.

GOLD (weekly)

Gold touched the uptrend line dating back to July 2005. RSI is the lowest it has been during the entire move since 2002. MACD is approaching zero, close to where it bounced in 2003, 2004, 2005 and 2006. If the uptrend line is decisively broken, gold could conceivably fall another $100 and even completely retrace the move from exactly a year ago. But given the steepness of its decline in the past several weeks, a bounce is likely here.

SILVER (weekly)

Silver touched the uptrend line from June 2006, where the similarly dramatic correction of the 2005-2006 bull move ended. Both RSI and MACD are at their lowest levels of the bull market since 2002. If silver doesn't bounce convincingly here, it could tag the 200-week MA, just 60 cents below, or even completely retrace the move from exactly a year ago. But its almost vertical descent in the past two weeks suggests that a bounce is likely here.

GDX (daily)

The gold-mining ETF was repelled by the bottom rail of the blue channel and fell back on Thursday and Friday in an apparent attempt to test Monday's low, which was made on exceptionally high volume. RSI has returned to the oversold zone. A successful retest could propel GDX back into the channel.

GDX (weekly)

This is one ugly chart. GDX has broken below its 200-week MA, on record volume, for the first time since the autumn of 2001. RSI is the lowest it has been since the autumn of 2000, the very beginning of its bull market. If it doesn't bounce soon, GDX could completely retrace its move from exactly a year ago. It could conceivably test the green uptrend line from November 2000. Until then the bull market is, in theory, hanging on -- by the skin of its teeth.

U.S. DOLLAR INDEX (daily)

The index has risen from strength to strength and is within spitting distance of its 2008 high, made in January. RSI, at nearly 84, indicates that the dollar is severely overbought. The index is now as high above the downtrend line as it was below it when the dizzying rally was launched exactly a month ago. A reversal is likely imminent.

U.S. DOLLAR INDEX (weekly)

The index has penetrated an important downtrend line, which has been touched no fewer than six times since November 2005. Unless it reverses practically immediately, there is a chance the U.S. dollar could really rally from here, perhaps as far as its 200-week MA.

GDX:$SPX (weekly)

The ratio of the gold-mining ETF to the S&P 500 index has plunged profoundly in the past month or so. In the past week it broke below its 200-week MA on nearly record relative volume and now rests on the downtrend line from May 2006. RSI is still above oversold levels, so it is possible that the ratio will test its uptrend line from November 2000. A failure there would indicate the bull market was over.

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.

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.