In the long term chart below I've marked the major 3 year cycle lows with red arrows (actually the cycle tends to run about 3 to 3 1/2 years). The shorter yearly cycle lows I've marked in blue.
You can see that only major 3 year cycle lows have been able to rally strong enough to penetrate the 200 day exponential moving average to any significant degree. All shorter yearly cycle lows (marked in blue) during this secular bear market have ultimately been turned back by a declining 200 day EMA.
Also notice that despite the severe deflationary scare last year the most recent rally out of the 3 year cycle low was unable to make a higher high above the `05 rally. The trend of lower lows and lower highs is still intact. This is still a secular bear market.
The recent rally in the dollar slightly penetrated the 200 EMA and has been declining now for almost four weeks. The next major cycle low isn't due till at least the spring of 2011 and the current 3 year cycle is apparently very left translated having lasted only a year before topping out last March. Left translated cycles almost always move below the prior cycle lows. (The cycle that started in `01 is an example of a left translated cycle.) That puts the odds heavily in favor of this cycle moving below the March `08 lows by 2011.
On another note almost all bear markets manage three major phases. So far this bear has only put in two major down legs. The first bottomed in Dec. `04 and the second in March of `08. We appear to be in the process of putting in the next phase down of this secular bear market.
So often we as investors and traders get caught up in the day to day swings of the market that we completely forget to take into account the big picture.
Does anyone really think gold is going down if the dollar breaks to new lows? Does anyone really think inflation is going to be controlled with the dollar becoming more worthless every year?