Since gold rallied strongly from its July lows, many have wondered whether it was strong enough to reverse the major trend, and MoneyShow’s Tom Aspray takes a technical look to see whether you should be buying gold or the gold miners now.

The stock market was finally hit with profit-taking Thursday but the selling was not heavy. After the nice run from the late August lows, a pullback was overdue as the investors become even more skittish as we get closer to next week’s FOMC meeting.

The positive action in the technical studies suggests that a pullback should not be too severe and also not last too long. I would look for both the key ETFs and the stronger stocks to find support at their rising 20-day EMAs. It would take a sharp decline to reverse the signs that the market was bottoming.

Before the summer started, I recommended that the best course of action would be to “summer proof” your portfolio and take a cautious approach to the markets during the summer markets. This included adjusting the maturity of your bond portfolio, as well as preparing your portfolio for a 5-10% correction. We have not seen the stronger correction that I feared in May.

I also did not participate in the sharp rally in both gold and the gold miners from the late-June lows. Even though the metals were reaching a strong seasonal period the OBV did make new lows with prices, which was not consistent with a major low.

For the past two months, I have thought that the rally in the SPDR Gold Trust (GLD) was a bull trap while the action in the miners as of early September was looking more positive. The gold futures plunged Thursday down over $33 and are down over $11 in early trading. So has the technical outlook or my recommendation change?

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Chart Analysis: The weekly chart of the SPDR Gold Trust (GLD) shows that it made a high of $174.07 in October 2012, forming a doji. The following week, an LCD sell signal was triggered.

The rally from the low at $114.68 just reached the 38.2% Fibonacci retracement resistance from the October high.

The reversal this week is clearly a sign of weakness though volume has not been too heavy yet.

The weekly OBV barely rallied during the summer as it just barely made it above the declining WMA.

The OBV is now back below its WMA and looks ready to test long-term support at line d.

There is key resistance for the weekly OBV at line c.

As I tweeted Wednesday, the daily OBV was breaking its uptrend, which was a negative sign.

The OBV multiple time frame analysis, therefore, points lower.

The key support is now at $123.55 and a weekly close under this level will increase the odds that the lows will be tested.

The monthly pivot resistance is at $131.91.

The Market Vectors Gold Miners (GDX) rallied from a June low of $22.21 to a high on August 27 when a daily LCD was triggered.

The rally in GDX fell well short of the 38.2% retracement resistance in the $35 area.

The initial support at 427.05 has been broken with the monthly projected pivot low at $24.23.

There is more important support at $23.89, line e, which is now a key level to watch.

The weekly OBV broke its major downtrend, line f, in August which was a sign of strength.

The OBV is likely to close back below its rising WMA this week.

The OBV has next important support at the April low, line g.

The daily OBV (not shown) is below its WMA and has broken initial support.

There is initial resistance at $27.50 with more important at $29.

What It Means: Of course, gold like the rest of the world markets is waiting for the FOMC announcement next week. In order to support my view that the gold miners are bottoming, we need a higher weekly close in the next two weeks.

Both buy levels in GDX have been hit and we have no positions in GLD. I hope those who were long the Market Vectors Junior Gold Miners (GDXJ) took some profits or raised their stops.

Portfolio Update: For the Market Vectors Gold Miners (GDX), now 50% long at $26.74 and 50% long at $25.22, with a stop at $23.77.