Yesterday we wrote that the bullish picture in the precious metals sector remained in place as the decline in the mining stocks was virtually the only phenomenon that was not bullish. We provided two possible explanations for the weakness:

"1. Miners are now "catching up" with their underperformance because of the recent poor performance of the general stock market. The SPY ETF corrected to its 200-day moving average and so has the GDX ETF.

2. This is the end of the decline and an extreme situation that marks it. If this is indeed the reason, then we are very likely to see a buy signal based on at least one of our Extreme indicators based on today's or tomorrow's market closing prices."

Based on yesterday's closing prices we saw a buy signal from the SP Extreme #2 indicator, just like we mentioned in the second point above. We are likely at the end of the correction or very close to it in the whole precious metals sector. 

There's one more detail that we'd like to add for today (in light of declining gold prices - gold is at $1,716 at the moment of writing these words) - the recent price action is very much in tune with the True Seasonal patterns for gold. The yellow metal tends to move higher in the first week of November, then corrects until the middle of the month and then rallies strongly for several weeks. This is another bullish factor that is currently in place.

The buy signal from the SP Extreme #2 indicator means entering a long position in case of gold, silver and mining stocks with a 2-week trade in mind. At this time you can add to your speculative long positions if they have meaningfully decreased in value in the previous days. 

We also suggest holding your long-term precious metals investments intact. 

As always, we'll keep you updated should our views on the market change - even if it means sending another message in several minutes.

Thank you.

Sincerely,
Przemyslaw Radomski, CFA