Although not shown on the chart, 41.50 was also a very important support and resistance level for GDX in2006 through 2008. In fact, it was the move below this price that preceded the major collapse in mid-2008,so the market's memory will be strong here.What initially tipped me off to the changes in the mining sector were several significant one-day reversalevents in some of its biggest companies.For example,Barrick Gold(ABX), the largest stock in the group by market capitalization, had been fallingall year (see Chart 3). On July 26, after announcing disappointing second-quarter earnings, it dropped 8% atthe start of trading to a new low with very heavy volume.
However, it did not stay down and rallied back to cut its loss by about two-thirds. In technical jargon, itformed a "gap-down upside reversal, "which suggests that after a long decline the bears had used up all of their energy. Supply was exhausted and the trend has eased higher ever sinceTo be sure, that same day Mario Draghi, head of the European Central Bank, pledged to "do whatever ittakes" to save the euro and the market as a whole rallied. From a stock-specific point of view; however,new economic stimulus in Europe and the U.S. would likely depress the dollar, give gold a boost and helpgold-mining stocks.The same pattern also appeared in other major gold stocks such asNewmont Mining(NEM) andGoldcorp
(GG).Smaller gold miners, such asCoeur d'Alene Mines(CDE) andAgnico-Eagle Mines(AEM) do not show
the climactic selling of their larger peers, but they show other positives. The clearest are breakouts to the