Single day can change a lot on the market and yesterday's session is a good example for it. Here's what happened:

The Euro Index corrected half of the October - November decline and then pulled back down once again. The USD Index moved very close to our target level that we mentioned yesterday (80.50, while the USD moved to 80.60). That's close enough for us to assume that the local bottom in the USD Index might be already in.

Stocks finally declined yesterday and it might very well be the case that the 2-week decline that is likely to take place this month due to the True Seasonal patterns has just started. Based on the most recent correlation values from our Correlation Matrix, such a decline would likely impact mining stocks more than metals, but based on what we've seen in the past few days, it seems that silver could be affected as well.

The Dow-to-gold ratio moved above the 12.5 level - to 12.56. The breakout is small and unconfirmed by the moment, but we are one step closer to the next (and probably final) plunge in the precious metals sector.

The HUI-to-S&P500 ratio (gold stocks vs. all stocks) moved below its early 2013 lows - the medium-term decline continues from this perspective.

Palladium declined sharply yesterday and such moves used to herald big downswings also in the rest of the precious metals sector.

Gold broke below the rising support line once again - that's the same line that was unsuccessfully broken just a few days ago. That's particularly interesting given that the USD Index "should have" helped gold to move higher when it declined in the first part of the session. Instead, gold moved lower and ended up closing below the significant support. That is a big warning sign and a strong bearish factor.

Silver and mining stocks declined visibly as the strength in the general stock market was no longer present.

The combination of these bearish factors - especially, a good possibility that the USD Index has formed a local bottom and gold's extreme lack of strength on Monday - is much more important than last week's intra-week reversal.

While we will wait for at least a confirmation of the breakdown below the rising support line in gold in order to suggest making adjustments in the long-term investment part of the portfolio, it seems that it's a good idea to re-enter short positions in the precious metals market. We are already suggesting a standard position size at this time and are placing stop-loss orders relatively far - even if we see a move higher in metals and a move lower in the USD Index, the downside in the latter seems very limited and, given today's weakness in gold, it's quite unlikely that any short-term upswing would invalidate the bearish tendency.

In case you're wondering why it wasn't a good idea to enter short positions yesterday, while prices were higher - of course, with the benefit of hindsight we know that we would have entered these positions at better prices, but the risk was much higher yesterday and the risk/reward ratio was less favorable. Please note that the USD Index declined as we expected it do - the only surprising factor was gold's weakness. We learned about this factor only after yesterday's session - and today is the first day that we can act on it - and we do.

To summarize:

Trading – PR: Short position in gold, silver, platinum and mining stocks.

Long-term investments: 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 order details for the speculative (trading) short positions:

• Gold: $1,306
• Silver: $21.10
• HUI Index: 236
• GDX ETF: $25.3

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