The stock market moved above its short-term resistance line (based on May and June intraday highs) on relatively high volume. The lack of a rally in case of mining stocks is particularly disappointing given this breakout.
The Euro Index moved higher yesterday and closed right at the previously-broken neck level of the head-and-shoulders formation. A lot depends on what happens next with this index. A further decline will mean a confirmation of the breakdown, completion of the head-and-shoulders pattern and very bearish implications. The USD Index closed at 84.41, so the breakout above the May 2013 highs has not been invalidated in terms of daily closing prices so far.
Precious metals being the anti-assets at this time are likely to be negatively affected by higher levels of the USD Index and the US stock market, so the above paint a bearish picture for gold, silver and mining stocks.
The HUI:gold ratio declined once again yesterday as mining stocks declined despite a rally in gold and the general stock market. This is not a bullish sign for gold and silver.
Gold moved higher on relatively low volume yesterday, which - again - is not a bullish sign. The volume was relatively low also in the SLV ETF (actually, in this case it was extremely low).
All in all, the situation didn't improve yesterday, and our yesterday's comments remains up-to-date.
Long-term capital: Half position in gold, silver, platinum and mining stocks.
As far as long-term mining stock selection is concerned, we suggest using our tools before making purchases: the Golden StockPicker and the Silver StockPicker
Trading capital: No positions. We suggest placing buy orders for the speculative long positions in gold and silver for gold at $1,160 and silver at $17,40. We don't have analogous price levels for mining stocks, but it seems that it will be a good idea to buy them when you buy gold based on the $1,160 target.
After the above-mentioned move higher (rally from $1,150 in gold) we expect metals and miners to decline once again and move to $1,090 (gold), $14,70, and 150 (HUI Index). It seems to us that these levels will be reached this month (July 2013).
These levels could be seen along with USD Index at 86 - 86.4. At that time (if we see another downswing), we will suggest purchasing metals and miners at the following price levels (speculative trades):
- Gold: $1,105 (stop-loss: $970)
- Silver: $15.20 (stop-loss: $14.20)
- $HUI: 155 (stop-loss: 137)
These levels are slightly above the price targets to maximize the odds of entering the trade (if everyone thinks that gold will move to $1090 they will buy before it reaches this level and ultimately gold may not drop as low at all).
As always, we'll keep you updated should our views on the market change. We will continue to send out Market Alerts on a daily basis (except when Premium Updates are posted) at least until the end of July, 2013 and we will send additional Market Alerts whenever appropriate. We have prolonged the time in which you - our subscribers - will receive Market Alerts daily for another full month.
Thank you.
Sincerely,
Przemyslaw Radomski, CFA
