Figure 1 shows a weekly chart of the Market Vectors Gold Miners ETF (symbol: GDX).

Figure 1. GDX/ weekly

The pink and black dots represent key pivot points and these are the best areas of support (buying) and resistance (selling). As you can see, GDX is in a range, and it is at the lower end of that range with support at the 52.47 level.

The fundamentals for gold and vis a vie the gold miners continue to remain solid even though there is a high likelihood that the US economy is in a recession. A recession is deflationary, and this should not be good for gold. However, I believe that gold takes its cues from interest rates, which are headed lower. Similarly, many might consider the rising US Dollar a headwind for gold, but I have a different take - especially over the last 10 years of gold's bull market. Lastly, with short term interest rates far below the level of year over year CPI (i.e., the inflation rate) and with this dynamic likely to continue for several more years, gold will remain in a bull market.

So here is the set up, and for this, we need to look at a daily chart of the GDX. See figure 2.

Figure 2. GDX/ daily

Once again, the red dots are key pivot points. With today's price action, it is likely that price will close below the most recent key pivot (inside the gray oval). This is at 53.39. Often times, particularly over the past several years, such closes below support serve as "shake outs". Prices close below support; the weak hands sell, and prices reverse back through old support leaving investors to chase prices higher. This bottoming pattern is common.

Therefore, a daily close above 53.39 would be reason enough to get long GDX. Failure of GDX at these levels -particularly a weekly close below 52.47 -- implies much greater weakness ahead for the gold miners with prices dropping to 48 and possibly down to 42. This represents a good low risk set up for those looking to get long the gold miners, but wait for confirmation.