It's kind of ironic when we've just posted a Premium Update and we're sending notification e-mails about it, and exactly at that time the situation on the market changes and consequently the "brand new" report is no longer "up-to-date". This is precisely what happened yesterday. Naturally, we could send out a Market Alert right away, but if the situation is tense and the signal is very important (and that is the case right now), we don't want to risk your capital by making decisions "in a rush".

While I don't have the exact numbers in front of me, I recall that there was a research dedicated to estimating the efficiency of predictions with regard to the time that they were made - during the market session, or after the session. It turned out that the decisions made after hours were better, which was attributed to the fact that after hours analysts can better focus on the facts instead of following their emotions. Our goal is to provide you with the best analysis possible, and therefore part of my job is also to analyze myself. Paraphrasing Sun-Tzu Art of War - "knowing the enemy (here: market) without understanding yourself is only half of a victory."

Anyway, moving on to the key part of this message - based on yesterday's action it seems that at least a temporary bottom has been put, and this message is a speculative buy alert.

The key bullish factors at the moment are:

- GLD, GDX (and to some extent SLV) have acted strongly yesterday relative to other markets, and they have already reached their targets for this decline,

- USD Index reached its target for the top,

- PMs managed to rise despite rising USD Index,

- Gold Miners Bullish Percent Index is currently even lower than it was in late January 2009, when HUI Index was below 300,

- the cyclical tendencies suggest turnaround,

- most of our indicators (from the Premium Charts section) already suggested going long, and it seems that the SP Gold Bottom Indicator is going to flash a buy signal any day now,

- traditional indicators (RSI, Stochastic) are oversold/overbought and confirm that the bottom is in for PMs, and that the top is in for the USD Index.

As we've stated in yesterday's update, there were many signs that we've just seen the bottom in PMs EXCEPT the way PMs traded relative to the general stock market. We've summarized by stating the following:

"Still, the general stock market is once again highly correlated with PMs (and with the USD Index), which means that one shouldn't ignore the strongly bearish signals that it generates. Yes, that is "only" one factor, but the risk of a severe breakdown in the main stock indices that would take other markets with it (as it was the case in the past) is currently too big, not to monitor this market carefully."

Yesterday's action suggests the following:

1. The general stock market is likely to move temporarily higher and the corrective upswing may take several weeks. It's much too early to say if the main stock indices will move above the January high - for now it doesn't seem likely.

In the latest Premium Update we've mentioned the "dragonfly doji" candlestick as a reversal pattern that often marks bottoms on high volume and - ironically - this is exactly what we've seen yesterday. The volume was indeed enormous.

2. PMs are likely to move up more rapidly than the general stock market. The precious metals market is more oversold than the general stock market (especially the mining stocks) and the general stock market was the main factor preventing gold, silver and mining stocks from rising. The current situation can be compared to a collapsed spring that is about to expand after one of the factors "squeezing it" is removed. The more this spring gets squeezed, the bigger move will follow.

In other words, even if the general stock market moves only slightly higher over a few weeks, it may correspond to a much bigger move in PMs and PM stocks, given their recent weakness, and their positive fundamental outlook.

The next Premium Update scheduled for Friday, Feb 12th 2010.

Thank you for your interest in our services.

Sincerely,
Przemyslaw Radomski