The Energy Select Sector SPDR ETF (XLE) closed below $60 for the first time since last September, and it is in the process of testing its Aug. 24 low just south of $58. The major moving averages are still in a downward trend, and a drop below $58.75 could lead to additional selling pressure. This is a very important development for the XLE, as a test to $55 could follow a breach of that level.

To play further weakness in XLE, bearish traders could target the XLE January 54 puts (XLE160115P00054000) if XLE shares fall below $58.75. These options traded more than  5,000 contracts on Friday, and open interest is higher than 50,000 contracts.

A close back above $60 might be a bullish sign to go long XLE for a short-term trade to $62-$63. The XLE January 62 calls (XLE160115C00062000) are worth watching if the bulls reclaim the $60 level.

Looking elsewhere in the commodity space, gold rebounded on Friday as a result of the pullback in the U.S. dollar, but it remains in a longer-term downtrend. The yellow-metal is holding the $1,050 level for now, but continued closes below this level should get the $1,000/ounce level in play. There is a good chance that gold can rally to $1,080-$1,090 on continued strength, but I wouldn’t trust any moves until $1,100-$1,125 and the 50- and 100-day moving averages are cleared. I have predicted that gold could test $900-$800 at some point in 2016.

Meanwhile, silver rebounded to hold the $14 level on Friday, but its chart is just as bearish as that of gold. Near-term support remains at $13.75-$13.50, but the 50-day moving average fell below the 100-day moving average last week. This suggests further weakness to $13-$12 if silver falls below $13.50.