Yesterday was a day of a bearish rally in our view.

Let's start with the USD Index. It moved lower once again. The previous move below the Fibonacci retracement levels was invalidated 2 days ago, and yesterday the USD made another attempt. The breakdown was not confirmed, and we don't expect it to be confirmed. In fact, based on the cyclical turning point, we expect the USD Index to invalidate the breakdown and rally in the following weeks.

Nonetheless, taking only yesterday into account - the USD declined by moving below this week's lows. Did metals and miners move sharply above the highs that they had established earlier this week? Not even close.

Gold moved higher on tiny volume and didn't even close above Monday's closing price.

Silver was almost unchanged.

Mining stocks moved just a little higher, closing visibly below their Monday's closing prices.

This lack of real reaction is a bearish sign - also something that we saw before the June plunge. Low volume. Very low volume in the GLD ETF during the upswing is another bearish confirmation.

All in all, the outlook for gold, silver and mining stocks further deteriorated yesterday (even though gold closed higher than on the previous day) and it remains bearish.

Given the above, we are becoming particularly bearish for the following weeks and we think that increasing the size of the speculative short position (perhaps by doubling it) in gold, silver and mining stocks might be a good idea now. It was supposed to be half of the regular position and now we think that the regular size of the position is justified from the risk/reward point of view. Please keep in mind the stop-loss orders when adding to your positions.

To summarize:

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: Short positions in gold, silver and mining stocks.

We are not ruling out the case in which we're going to see a breakout today (which is not likely, even though another small move higher could be seen), and in this case the short position would have to be closed. Consequently, we suggest placing the following stop-loss orders:

• Stop loss for gold's speculative short position: $1,356
• Stop loss for silver's speculative short position: $20.90
• Stop loss for the HUI Index's speculative short position (theoretically, as you can't short the index by itself): 273
• Stop loss for GDX ETF's speculative short position: $29.40

We suggest placing buy orders for the speculative long positions in gold at $1,105 and for silver at $15.20 (and closing the short position at that time - if these levels are reached). The analogous level for the HUI Index is 155. If gold moves to $1,105 but other market don't move to their targets - we suggest closing short positions in gold, silver and mining stocks and going long these sectors anyway. If silver or the HUI reach the target but gold doesn't, we suggest closing all above-mentioned short positions, but going long only the market that has reached its target. In this case you will likely hear from us shortly, but you know what our take is even before that happens.

Entry levels and stop losses for the above rather-soon-to-be-opened long positions:

• 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.

As a reminder, Market Alerts are posted before or on each trading day (we usually post them before the opening bell, but we don't promise doing that each day). If there's anything urgent we will send you an additional small alert before posting the main one.

Thank you.

Sincerely,
Przemyslaw Radomski, CFA