The HUI Index moved - and closed - below the 430 level yesterday, which triggered the stop-loss orders that we had mentioned in the past several alerts and the latest Premium Update. Therefore, we suggest closing half of the speculative position in mining stocks. 

Why are we suggesting closing only half of the long position in the miners (the following part of the message is a quote from yesterday's Market Alert)? Because according to the Gold & Silver Portfolio principles:

http://www.sunshineprofits.com/research/key-insights/portfolio-structure/

(you will find details on the pictures at the bottom of the page)

we believe that the trading capital should be split between part dedicated to our subjective analysis and objective signals from the SP Indicators. As far as the latter are concerned, we just saw a buy signal from the SP Extreme #2 Indicator, which suggests being long for 2 weeks without placing a stop-loss order for this trade.

You can examine details and reasoning for this approach on the following pages:

http://www.sunshineprofits.com/services-products/charts/sp-indicators/details-and-performance/

http://www.sunshineprofits.com/services-products/charts/sp-indicators/stop-loss-details/

We - subjectively - expect to send you a "get back to full long position" alert soon, however for now we believe sticking to our original "play it safe" approach is a prudent thing to do. This means following the stop-loss orders and getting partially out of the speculative long position in miners. 

At this time we remain half-way in with the speculative long positions in gold, silver and mining stocks.

We believe that long-term investments in the precious metals sector should be left intact.

There was one more interesting thing visible on the mining stock sector and that is the significant decline of the Freeport-McMoRan Copper&Gold - one of the biggest gold and copper producers. We believe that you might be wondering if this should make you concerned. In short, not really. The story behind the 16% daily plunge (and this is one of the very few times when we can really reply the "why" question regarding daily price swings) is the company's takeover of two other companies: Plains Exploration and Production (PXP) and McMoRan Exploration (MMR). Most mergers don't work in terms of increasing profits of the company making the acquisition and markets - knowing that - are discounting the failure in the price. Since markets assume that the company making the purchase overpays for other companies, the shares of the former decline and shares of the latter rally - and this is what happened. PXP moved higher by 23% and MMR rallied 87%. Consequently, decline seen in FCX is based on company-specific events, not a representation of a huge bet against copper and gold prices, and should not concern us - especially that FCX was the last company on our long-term ranking (Golden StockPicker - long-term perspective), so you were likely not invested in this company anyway.

In other news, the GLD ETF declined in early trading yesterday but managed to pull back before the end of the session, which is a bullish indication. Not an extremely strong one, but still bullish. Additionally, the RSI indicator based on gold priced in euro moved to the 30 level thus indicating a buying opportunity. 

We will analyze charts in detail in tomorrow's Premium Update.

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