The DIA ETF moved lower yesterday and the RSI based on it moved below the 30 level - almost to the 26 level. Since the beginning of 2008 there have been exactly 7 cases when we saw something similar. In 4 of them, this meant that an important bottom had just been formed. In the remaining 3 cases, a major bottom was formed shortly anyway. The short-term implications are bullish and medium-term ones are very bullish.

Moreover, the financial sector (Broker-Dealer Index) stayed above its 2011 high - there was no invalidation of the breakout above this important level we saw in early July.

The Euro Index moved higher, but the move was temporary and the currency is now back at the 61.8% Fibonacci retracement level based on the January - July decline. The USD Index invalidated its small move below one of the medium-term support lines and, given the cyclical turning point, the outlook here looks very bullish.

Both stocks and the USD Index suggest lower prices for precious metals and mining stocks.

Gold moved higher initially only to decline once again later in the session and we can say the same about silver. Miners simply declined.

The HUI Index once again closed below the 61.8% Fibonacci retracement level based on the entire bull market. Also, the HUI to gold ratio declined by over 4% yesterday, which is quite a significant drop. These are both bearish signs.

Based on yesterday's price moves we think that the just-opened short position is even more justified from the risk/reward perspective.

To summarize:

Long-term capital: Half position in gold, silver, platinum and mining stocks.

Trading capital: Short position (half) in gold, silver and mining stocks

Stop-loss orders:

• Gold: $1,393
• Silver: $23.80
• HUI Index: 287
• GDX ETF: $31.4

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 August, 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