Via Energy and Gold.com:

While the gold miners (GDX) continue to experience significant day to day volatility the ratio chart of GDX relative to the S&P 500 (SPY) shows a clean double-bottom pattern with a notable bullish momentum divergence:

 

GDX/SPY (Daily)

GDX_-_SPY

 The October/November decline in the miners made a marginal new low in the GDX//SPY ratio, however, the relative strength index (RSI-14) did not even fall below 30 at this new low in price.

This is a significant development considering that the gold miners have been in a 4+ year bear market while the S&P 500 has been enjoying a 6 1/2 year bull run. Moreover, this year’s trading volumes are extraordinarily high (record volumes for GDX) which is characteristic of a bottoming process:

GDX_5_years

If we are in the ‘accumulation’ phase of the bottoming process it will take a break-out above major support/resistance near .085 in the GDX/SPY ratio to confirm that a long-term bottom has indeed been put in place in this ratio:

Accumulation

The best part about watching this ratio and/or putting on a long GDX/short SPY pairs trade is that we have a clear reference price level that can let us know when we’re wrong (the double-bottom level ~.062).