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A month ago the Power of the Pattern reflected that the miners were about to get whacked on the head again (see post here) In the 30 days following that post, GDX lost another 10% in value, now losing over 40% since last summer highs.
Many have sited that the Gold/Gold stock ratio is at extreme lows and you should own the miners, yet sometimes it can be painful when trying to catch a falling knife in the miners complex! (see ratio/falling knife here) Has it paid to own the miners even though the ratio has been low? NOPE!
Why consider taking an ownership position in the miners right now? The 40% decline since last summer and 10% decline in a months has…. the above chart reflects that the Gold Bugs index is on a 10-year support line, at its 61% Fib retracement level of the 13-year rally in the miners and two other support lines also come into play, plus it is very hard to find any bulls in the Gold bugs camp right now.
Should the 10-year year support line not hold….yikes, look out below!!!