Today’s session is very volatile, not only in case of the general stock market and the USD Index, but also in some parts of the precious metals market, and it’s a good example that a lot can change in a relatively short period.

Today’s session is definitely a significant one as there are not many cases when stocks and USD plunge sharply at the same time. Since it’s likely important, it’s also important that we check what is the likely impact on the precious metals sector.

As mentioned above, there were not many similar days to what we saw today on the stock market, but there is one day that is definitely similar. On Oct 15 2014 the S&P 500 declined significantly (after a big slide) and reversed in a major way. It was not the final bottom, but a day ahead of it. It looked very (!) similar to what we’re seeing today.

What happened on other markets? Was the session at least somewhat similar in them as well? Not only somewhat, but very.

That was a few days before gold’s local top and before a great shorting opportunity.

Silver was not outperforming before this local top, but there was significant intra-day volatility at that time. We’re seeing something similar also today and in the past few days.

After the initial sharp rally, mining stocks started to disappoint once again and Oct 15 2014 was a great day to be moving from long to short positions. Miners were rallying sharply recently, but started to underperform recently as well.

What did the USD do? It declined sharply to a significant support level (back then it was the 40-day moving average and right now the May and June 2015 lows serve as support - the USD Index moved temporarily below them but it’s once again above these levels at the moment of writing these words).

The implications of the above similarity are very bearish, and so is the precious metals sector decline despite a major slide in the USD Index.

We realize that having just one similar session makes this signal far from being confirmed, but the outlook for the precious metals sector was not extremely bullish anyway, and we believe the above analogy is not only enough to push the risk/reward ratio in favor of closing the remaining half of the long positions and taking profits off the table, but it’s actually enough to justify opening small (half of the regular size of the position) short position in gold, silver and mining stocks. Miners and silver are lower today than they were when we closed the first half of the long position, but gold is about $10 higher. Overall, the profits on this trade are quite significant taking into account that it’s less than a monthly trade (and even if we don’t take any leverage into account).

We want to send this to you as soon as possible, so we will not discuss target levels and stop-loss orders in greater detail now - we will do so in tomorrow’s alert, before which we will have much more time to think about it (and it usually takes quite a lot of thought to pick the right stop-loss). However, to make a long story short, we are probably looking at the beginning of another big ($100+ in gold?) decline in the precious metals sector.

We will keep you – our subscribers – updated.

To summarize:

Trading capital (our opinion): Short position (half) position in gold, silver and mining stocks is justified from the risk/reward perspective. We will provide detailed target and stop-loss levels in tomorrow’s alert.

Long-term capital (our opinion): No positions

Insurance capital (our opinion): Full position

On a side note, if you haven’t been following Paul Rejczak’s performance or articles lately, we encourage you to review today’s alert (and the previous free Stock Trading Alerts):

http://www.sunshineprofits.com/gold-silver/free-alerts/stock-trading-alert-2015-08-24/

Paul wrote about cashing in massive profits from the short position in stocks early in today’s trading. If trading stocks is something that you are interested in, we would like to let you know that there is currently a promotion that allows one to test it for 3 weeks for $1. You can take advantage of it here.

Thank you.

Sincerely,
Przemyslaw Radomski, CFA
Founder, Editor-in-chief

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