The GLD ETF moved slightly higher on extremely low volume. The size of the volume suggests that we are close to a major move. Low volume means that neither bears, nor bulls were willing to make transactions at this time. Both camps seem to be waiting for a more decisive move to either add to the existing positions or to throw in the towel and close the existing ones. In case of spot gold, we saw another failed attempt to move above the 38.2% Fibonacci retracement level. The situation is becoming more an more tense with each day as at the same time we have an additional daily close above the declining resistance line, and a close below the 38.2% retracement.

The SLV ETF moved above the declining resistance line, but the breakout materialized on very low volume - not only is it unconfirmed as it's been only one close so far, but it also seems suspicious based on the very small volume.

Yesterday we wrote that "miners (GDX) moved close to their declining resistance line without breaking it, which means that they can move even slightly higher and it will still not invalidate the bearish outlook for the short- and medium term." Miners have, in fact, moved to the above-mentioned declining resistance line so a local top might have just been formed.

Palladium moved to the higher of the two declining resistance lines that we featured in our latest Premium Update - there was no breakout.

Basically, what we wrote about the breakouts being "a little" confirmed remains up-to-date also today, so we will quote a part of yesterday's alert:

"Overall, the breakouts in the precious metals sector have only been 'a little' confirmed. Naturally, a single breakout on a chart can be simply either seen or not and a short-term breakout can be confirmed or not based on how long the price of a given asset has stayed above the broken level. However, in today's globalized economy it is quite rare that one market can move on its own - the markets usually move together, even though the directions and shapes of relationships change over time. That's why we're looking at so many charts (actually, much more than we feature) and see if one with a clearer outlook can tell us more about the ones with less clear outlooks. In this case, we have no breakout in mining stocks, a relatively small (when viewed from the broad perspective) move above the 2008 high in case of silver, and a mixed situation in case of gold. The situation is quite unclear, so let's see what other markets can tell us."

Interestingly, the situation in the stock market and in the currency indices didn't change yesterday. Again, quoting yesterday's Market Alert seems appropriate:

"Stocks (S&P 500) have broken above their previous 2013 highs without an overbought status on the RSI indicator - the outlook remains bullish, which is bad news for metals and miners. They have rallied together recently, but even the short-term correlation coefficients are still negative.

An important event is that the Euro Index has moved very close to its 2013 high, which is a major resistance level.

Moreover, when analyzing the USD Index in the latest Premium Update, we mentioned that the USD index had moved to 2 important support levels based on the 2012 and 2013 lows. It had moved to the lower of the support lines on an intraday basis and closed at the higher one. It looks like the bottom is in or very close to being in.

The implications of the above are important, because major support and resistance levels were reached and, since then, it seems the moves have come to a halt in general. While this doesn't necessarily mean that the general stock market won't rally any more as stocks are already after a major breakout, it does seem to suggest that the move higher in metals and miners is over or very close to being over."

As it was the case yesterday, we will summarize by staying that, overall, we think that the situation is still bearish enough to justify keeping small short positions in the sector (half of the regular size) and at the same time being in the market with only half of one's long-term precious metals investment capital.

To summarize:

Trading – PR: Short position (half of the regular size of the position) in gold, silver and mining stocks.

Long-term investments: A 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

The stop-loss orders for the speculative short positions are:

• Gold: $1,330
• Silver: $22.60
• HUI: 240
• GDX: $26

As always, we'll keep you - our subscribers - 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 October, 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