Quite a lot happened last week in the precious metals market, but actually not much changed.

Taking weekly closes into account, there was no invalidation of the rising long-term support line in case of spot gold. Consequently, what happened in the first days of the last week didn't really matter much.

The gold:UDN ratio ultimately closed below the rising support line, which became a resistance line. The implications are bearish.

The GLD ETF moved higher on Friday, but the move was relatively small and accompanied by relatively low volume. This rally doesn't make the situation bullish.

Meanwhile, silver closed slightly below the lower of the long-term resistance lines. The outlook remains bearish even though the white metal moved sharply higher in the first days of the last week.

The XAU index closed the week well below the rising long-term support line and below the support created by the previous 2013 low. The HUI Index moved slightly higher last week (less than 3 index points), which didn't change anything - it remains weak and below critical support levels. What's interesting, mining stocks didn't move higher on Friday even though gold did - which is another bearish sign.

In case of the general stock market represented by the S&P 500 Index, last week we saw the biggest weekly decline in a few months. This is a bearish sign. As you may recall, precious metals have been following stocks lower but not higher (when stocks rallied). The above has bearish implications.

The Euro Index formed a bearish shooting star based on a weekly candlestick and it also reached a long-term resistance line last week. The implications are clearly bearish. The USD Index moved back up after touching the medium-term rising support lines - no bearish breakdown here.

Summing up, it seems that the decline in the precious metals sector is about to continue. The situation in silver became much more bearish based on Thursday's decline, and we suggest re-entering the short position in this market - using only a small part of the speculative capital at this time.

We might see a bounce when gold reaches its previous 2013 low, so we suggest closing the speculative short positions in both gold and mining stocks when gold moves close to this level (at $1,190), but not before that happens. We do not suggest making adjustments to the long-term investment capital when that happens.

To summarize:

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

Long-term investments: No positions.

Stop-loss orders for the speculative short position:

• HUI Index: 214
• GDX ETF: $22.80
• Gold: $1,272
• Silver: $20.25

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.

The trading position presented above is the netted version of positions based on subjective signals from your Editor, and the automated tools (SP Indicators and the upcoming self-similarity-based tool). You will find more information by following links in the summary of the latest Premium Update.

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