I'll be the first one to admit to being surprised by the strength of the dollar rally. At first it looked like the dollar was going to "crawl" along the 50 DMA and breakdown. Well obviously that didn't happen. What has unfolded is a picture perfect T1 pattern. After testing the consolidation zone the dollar is now in the process of the next leg up which should take it to new highs.

If this pressures gold enough to force it back below $850 then I would have to say that the recent rally was nothing more than a powerful bear market rally in an ongoing cyclical bear market.

I will note that every commodity other than gold is obviously in a cyclical bear market. It might be asking a lot for gold to resist the downward pull of the rest of the commodity markets.

If the cyclical bear market continues in gold then it will be safer to trade gold from the short side as the larger trend will be down for the time being.

Now is not the time to try and pick a bottom in the miners. The cycle low isn't due for gold until at least next week and possibly not until Oct. 20th. Let's see where gold goes to at that low before we try to be a hero and load up on mining stocks.