Yesterday we saw a dramatic sell-off in gold stocks and gold in the morning. By the close the XAU reversed and went into the green while gold finished only a few points in the red. It looked like a key reversal day for gold stocks, but was it?

I've been watching the action carefully hour by hour and wasn't convinced enough to buy. I need confirmation to tell me that this was a bottom. If gold had fallen at some point yesterday while the stocks just sat there and firmed up then I would have bought. But that didn't happen. Instead both gold and the stocks bottomed during the day and went up together into the close.

If they did indeed bottom then at some point over the next few days we'll see the gold stocks defy a drop in the metal and give us confirmation that the bottom is in. This is how they bottomed in June and last year in May - the stocks bottomed before the metal and then the metal made a new low while the stocks held up.

If there was no bottom yesterday then this bounce will end in the next few days and we'll see another move lower over next week - one that I think would come with gold faling faster than the stocks to give us a clear buy signal.

In the final analysis I'm not sure if the gold stocks bottomed or not. As you can see Andy doesn't think so. Matt Frailey doesn't think so. Some people do think so. I don't know. What I do know is what I want to see to buy - and that is what I'm waiting for. If that means buying a few percent from a higher level or waiting another one or two weeks for another drop then that is what I have to do.

I do think though that whatever the gold stocks do from here gold is likely to make a new low and go through the 550 level. Gold stocks fell through their June lows yesterday. I'd like to see gold catch up with the drop in the stocks and do the same thing. That would tell us what we have in the stocks.