Just when we were posting the update yesterday, the market was moving considerably lower, and it didn't take long for the precious metals prices to move below levels mentioned in the update. Moreover, the same can be said about the USD and Euro Indices, and all of these moves were accompanied by large volume, so they are significant.

In seems that the 50/50 odds that we mentioned while analyzing the GDX:SPY ratio this time meant a direct top signal here. Of course, gold might go back up at this time, but at this point it does not look very probable. Unless gold closes above $1,226 today - the 2009 high, the situation will start to look bearish even for long-term Investors. At the moment of writing these words (1.5 hours before the market opens) gold moved up to $1,208.

So, the question is what are the implications for Short-Term Traders and Long-Term Investors.

Short-Term Traders - Yesterday's move was both sharp and big, so it would not surprise us see the markets move up today (or for the next few days) even if only for the sake of quick consolidation. We suggest using the possible strength today to exit one's long positions.

From the short-term perspective "there's always the next train". In other words one should keep long positions as long as higher prices are very likely. When it is no longer the case, one should close the position and wait for a better moment to re-enter the market. This is the case today. Simple as that, but so difficult to implement for many Traders, as for instance a lot of people tend to base their exit prices on their entry prices instead of focusing what the market is most likely to do next.

Long-Term Investors - We suggest waiting for the weekly closing price to determine the next big move in the sector. The odds slightly favor the bearish scenario, but since a large amount of capital is usually at stake when it comes to long-term investments, we would like to see additional conformation before suggesting getting temporarily out of an asset that is in a secular bull market. That might also be a good moment to bet on lower precious metals prices with one's speculative capital. We will send out an additional Market Alert, should we believe that it is a good idea to get out of one's long-term investments in the precious metals sector (we're not referring to bullion here - please refer to the Key Principles section for details).

Thank you.

Sincerely,
Przemyslaw Radomski