In the latest Premium Update we wrote that the main stock indices may be ready to move higher once the recent breakout is verified and PMs (and PM stocks) are likely to follow. The main stock indices have just moved to their previous highs and managed not to close below them. Moreover, they managed to move back up before the end of yesterday' session. Therefore, we have just seen the abovementioned verification, which means that the general stock market, gold, silver, and PM stocks are likely to move higher from here.
The USD Index moved higher, and at the same time it tested its previous high along with the recently broken lower border of the previous trading channel. Both levels managed to prevent the USD Index from rising further, which means that USD Index is likely to move lower from here. Still, the volume (in the UUP ETF - proxy for the USD Index) was not low during this upswing, which makes us concerned.
Additionally, we have just seen a buy signal from the SP Short Term Gold Stock Bottom indicator, and we were very close to get one from one from the SP Gold Stock Extreme Indicator.
Summing up, taking into account the above points and the analogy to August 2009, it seems that PMs are ready to move higher from here. This may not take place right away, as it was the case in August, but the odds currently favor a move up. It is too early to say how high would this move take us, but a move to the December 2009 high (in PMs / PM stocks) is possible. We will have more to say once we are sure that the bottoms in indeed in.
What action you decide to take based on this information depends i.a. on your attitude toward risk, but it seems that it might be a good idea to open a small speculative long position in the precious metals sector (including mining stocks), and add to it once we get a confirmation that the bottom is indeed in - for instance in the form of a daily upswing on strong volume.
Should the situation change and the points made above are no longer up-to-date, we will send out another Market Alert, or comment on that in the next Premium Update.
Thank you for using the Premium Service.
Sincerely,
Przemyslaw Radomski
