Yesterday we wrote that a small move down in the USD Index would not surprise us as the recent rally had been very sharp. We saw this move yesterday, and while metals and miners had a good opportunity to show strength (there was a positive trigger for a rally in the form of the dollar's move down), they didn't utilize it. Silver moved a bit higher, but gold actually moved slightly lower (signals from the yellow metal are more reliable). Miners were basically flat.

This makes the situation more bearish and, in our opinion, bearish enough to justify re-opening short positions.

We have not seen a confirmed breakdown below the previous 2013 low in gold priced in the USD, so we don't suggest using a significant amount of trading capital for this trade (at least not yet). Also, we are not suggesting betting on silver's decline, as the white metal has been very volatile and might temporarily move to the upside before plunging (hitting stop-loss levels before the trade becomes profitable).

To summarize:

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

Long-term investments: No positions.

Stop-loss orders for the speculative short position:

• Gold: $1,240
• GDX ETF: $21.60

Profit-take level (close both positions - in gold and mining stocks and take money off the table at this level):

• Gold: $1,160

The situation is too unclear to say how low miners will go when gold moves to $1,160, so we're focusing on the yellow metal in case of both markets.

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