The precious metals sector moved insignificantly higher yesterday - please note that it had moved higher before we suggested increasing the size of the short positions, so you did so (if you decided to follow this suggestion, that is) close to the intraday high.

What's most interesting about yesterday's rally in gold, silver, and mining stocks is the volume. It was tiny in all precious metals markets. This can be examined in two ways. One is that the volume has been low in the past 3 days as the sector has been consolidating and preparing to continue it's move - and since the preceding move was to the downside, the implications are bearish. The second way is to view yesterday's session in isolation - we saw a daily rally, which materialized on very low volume - again, the implications are bearish.

Actually, if you consider spot gold and take into account the last 3 trading days, you will see that on each day gold moved to the previously broken 38.2% Fibonacci retracement level (Aug - Oct decline) and failed to move above it each time.

The Euro Index corrected to its rising resistance line and the USD Index corrected to its declining support line. Both lines held, and so did our outlook for both markets.

Interestingly, palladium moved above its declining resistance line. However, we are not certain if this is really a bearish development. A declining resistance line was broken also in early August, and a local top was seen right after that.

To summarize:

Trading – PR: 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