GDX and GLD - A bet on reversion to the mean

CCI has previously described an options strategy around the gold ETF (GLD) and the gold miners (GDX).

A key to that strategy was the assumption that since these two entities have traded with high correlation in the past they would continue to do that in the future.   Take a look at the recent chart below.

Two year chart of GLD vs GDX

Surprise, surprise....over about the past 2-3 months gold has been relatively flat and the gold miners have lost nearly 20%.   Hmmm.  That could mean
a). something is causing this correlation to no longer be true (like general stock market concerns)
b). gold is due to fall
c). the miners are oversold and due for a bounce back.

Common sense would seem to dictate the miners would follow the price of gold so CCI chooses "c". On Friday bought a lot of GDX just over $52.50. 

Hopefully earning season will bolster the confidence in these stocks.  We will be watching the relationship on  this chart hoping to see the pattern "revert to the mean" and GDX get a nice bounce over the coming months.