In today’s alert we wrote the following:

“If today’s session provides us with additional bearish signs, we will consider opening an extra-large short position (at this moment the public hates the USD and loves gold due to the result of the elections, while in reality much less changed and once we get the technical confirmation the risk to reward ratio will likely be even more favorable).”

Today’s session has indeed provided us with additional bearish signs. First of all, the entire huge pre-market rally in gold and silver, as well as the early rally in mining stocks have been erased. Trump’s presidency is a big unknown and a bullish factor for gold, right? At least that’s what is commonly believed. Therefore, gold, silver and miners should rally. They didn’t. That’s a big bearish sign. Secondly, GDX moved above the declining resistance line earlier today and once again invalidated the breakout. If the biggest surprise of the month isn’t able to push miners above it, then the odds are that a big decline will follow shortly, not a rally. Thirdly, without considering the underlying event, today’s sessions in gold, silver and mining stocks are all enormous reversals that very strongly suggest lower prices in the short run. Fourthly, the action in the USD Index is extremely bullish. The index not only moved to our target area and reversed at the turning point, but it actually rallied today. Thanks to the pre-market slide, the corrective downswing is extremely likely over and much higher values of the USD Index appear to be on the horizon.

The extremely favorable technical situation despite beliefs of many investors and analysts that the victory of the anti-establishment candidate is “the end of the world” or close to it, suggests that the top in the precious metals market is in or at hand and that there’s a lot of investors that can sell their holdings / enter short positions at lower prices.

Consequently, it seems that we now have the rare situation when extra large short positions (150% of the regular size of the position) in gold, silver and mining stocks are justified from the risk to reward perspective. The stop-loss levels and target prices remain unchanged from today’s previous alert.

As always - we’ll keep you - our subscribers - informed.

Thank you.

Sincerely,
Przemyslaw Radomski, CFA
Founder, Editor-in-chief, Gold & Silver Fund Manager

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