After a brutal decline during the past month the gold miners had one of the most significant trading sessions in many years today:

Click to enlarge

GDX_Daily

Enormous volume on today's bullish reversal after Tuesday's ugly sell-off

Some of the key factors which make today's action so significant:

  • Volume was more than 3 times average volume
  • Price made a new multi-year low early on in the session and closed near the high of the day +7.5%
  • Multiple bullish divergences in terms of momentum and volume (particularly on the weekly time frame)

GDX_momo_divergence

  • Sentiment on the gold miners couldn't be any worse

Sector_Sentiment

Via Sentiment Trader

  • Total assets in the Rydex Precious Metals Fund (a strong contrarian indicator) hit a new 12-year low yesterday

Rydex_Precious_Metals

  • A new low in price that is not confirmed by volume or momentum (force index at bottom of the chart below) is often extremely vulnerable to a sharp upside reversal fueled by short covering and/or buyers who suddenly realize they may have just missed a bottom - a similar bullish divergence occurred at the December 2013 bottom

GDX_Weekly_force

  • If today's low holds a double-bottom is now in place (with the December 2013 low)

So, is the bottom in? From our vantage point everything we look at points to a strong probability that the gold miners put in a cyclical bear market bottom today and a stair-step process higher will occur over the coming weeks/months. A $24 short term target for GDX appears to be quite reasonable; which means that the sector could easily see 10-15% gains within 1-2 weeks from today's closing levels.