In the last Premium Update (posted on Friday, March 27th) I indicated that we may be reaching a local top in the precious metals stocks, and that the 41 level on the GDX ETF would be a good point to exit our long positions.

I am sending this Market Alert, because I believe that we may not get this high.

Today the HUI index and XAU have reached their previous highs after a quick two-day rally. The volume, however, is very low and this. It is not very common for a breakout to take place after a rally on a tiny volume, and even if we do get past the resistance level, I would consider the following rally doubtful. The high-quality gold/silver stocks are now lagging behind the sector, and previous laggards catch up - all of this often signals that a top is near.

I'm not saying that this is 100% sure and that one should short the market. All I'm saying is that the risk/reward situation for speculative positions in this market is no longer favorable in my opinion. Even if we do rally from here, I believe there will still be other moments to get back in with our speculative capital.

Additionally, please consider the following chart: http://sunshineprofits.com/files/images/market_alert_apr12009.png

Please excuse the poor quality of the chart, but I want to send this message to you ASAP.

Therefore, I am closing the speculative long positions in gold and silver stocks that I opened on March 18 (/research/articles/art,110,e-mail.html)

The same goes to the underlying metals - we may go temporarily lower in gold and silver, so if I had a speculative(!) long positiion in gold and/or silver, I would close it today.

If you are a long-term Investor, then I don't think that you need to worry about a possibility of another temporary downturn.

More comments on the current market situation in the next Premium Update, before market opens on Monday (I will try to post it on Friday).

Sincerely,
Przemyslaw Radomski