The gold miners as represented by the GDX have seen some noteworthy technical developments recently:

  • Despite the hugely bearish sentiment swing in the commodities complex, primarily due to Thursday's OPEC meeting and the subsequent crash in crude oil, neither gold nor the miners made new lows

GDX_Daily_12.1.2014

  • Friday's holiday shortened session had all the characteristics of a capitulation panic sell-off (volume and sentiment) - today's large bullish reversal only adds weight to this assessment
  • Volume typically expands drastically at market bottoms - this is due to the fact that the large move lower in price causes longtime holders to capitulate and sell while simultaneously luring new participants to get involved at the new lower prices. The volume in the gold mining sector in recent weeks has been nothing short of extraordinary and quite characteristic of a bottoming process:

GDX_Weekly_12.1.2014

  • Finally, the price action and candlestick formation of the last two trading sessions is quite unique; a large gap lower and sell-off followed by gap higher and a rally in the very next trading session. The last time this pattern occurred on a magnitude anywhere near what we have just experienced in the GDX the gold miners went on to rally 20% over the next month:

GDX_2011

 GDX (June-November 2011)

While the herd has completely given up on the gold miners, the technical picture is growing more constructive by the day.