Yesterday, we sent out 2 Market Alerts and in the latter we suggested taking profits off the table (gold was a few dollars above $1,350 at that time) and in fact switching from speculative long positions to short ones.
Basically, metals and miners haven't moved much since we sent out the second Market Alert, so what we wrote in it remains up to date:
"Gold moved to it's declining resistance line based on Feb and Aug highs which corresponds to the 61.8% retracement based on the Aug-Oct decline. The analogous declining resistance line was reached today in case of the HUI Index. We can also say the same thing about the HUI:gold ratio.
The USD Index is right at the cyclical turning point after a medium-term decline. Please note that dollar's cyclical turning points sometimes worked on the precious metals market even if they were not that precise on the currency index itself (in late August 2013 for instance).
On a very short-term note, gold and miners have reversed direction after reaching our target levels and we now have a good possibility that they will form a bearish shooting star candlestick patterns - that is if they close without falling once again. These patterns will be bearish for the short term, which could ignite much bigger declines based on the medium-term resistance lines being reached in case of gold and mining stocks (the declining resistance line in case of silver had already been reached a few days ago)."
The candlestick pattern was not a perfect shooting start pattern, but with the clearly visible intra-day reversal, we view yesterday's session as a bearish short-term indication anyway.
Taking silver into account, the declining resistance line (based on daily closing prices - February and August highs) was reached several days ago and now silver is declining along with it. If we consider an analogous line - based on intra-day highs, we will see that it creates resistance at $23.25.
The Euro Index moved very close to the lower of the declining long-term resistance lines. It could still move higher and the precious metals sector could (it's not crystal clear, though, especially given the above-mentioned resistance lines that were touched on Monday) move temporarily higher without invalidating the bearish short-term picture. Consequently, we placed the stop-loss orders a bit above the resistance lines, so that a small intra-day move doesn't get us out of the trade.
To summarize:
Trading – PR: Half position: short 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
Stop-loss orders for the above-mentioned speculative short positions:
- Gold: $1,392
- Silver: $23.90
- HUI Index: 268
- GDX ETF: $28.80
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) 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
