Presenting the Goldcorp Test

After getting slammed last week into a post-earnings gap down, gold miner Goldcorp has since recovered a bit, at least stabilizing and moving higher with the precious metals and mining complex this morning. 

Much like GFI a few weeks back, a good litmus of whether a sector has indeed bottomed is when we see improved price action which sees a given set of stocks becoming and then staying overbought, not giving back much of recent gains. We also look to see if sentiment is cautious, even among bulls, as the first leg of a new bull market often features most market players looking to fade the move. 

Thus far, precious metals and miners have largely held serve, though silver likely needs to play catch-up to gold a bit. Still, most miners have done an excellent job of fulfilling some initial elements of a potential bear market bottom. 

Nonetheless, we now want to see the likes of GFI and GG recovery sharply from earnings gaps lower, essentially seeing the bad news bought up aggressively. This type of action would further the case for a new bull run in miners, with bears being squeezed at each and every single juncture, even when it seems as though they were in the driver's seat. 

On the GG weekly chart, below, note that despite the earnings gap down we have a setup we not seen in years here--A bull flag on the 50-period weekly moving average. 

Resolving this bull flag higher, back over $16, would be another notch in the belt for gold bugs arguing a multi-quarter bull market in the miners has commenced.