While we didn't change our mind regarding the precious metals market since yesterday, we're sending this message as would like to share a few additional thoughts with you. We will first re-examine the situation on the charts that we featured in yesterday's Premium Update (you may want to open it in your web browser while you read the rest of this message) and then we will comment on the relative performance of currencies, metals and mining stocks.

Let's begin by commenting on the currency indices:

- Euro Index - the weekly close is above the red support/resistance line, which is a bullish sign. However, euro needs to close above this line for 2 more days for the move to be confirmed.

- USD Index - huge daily decline was seen on Friday, but it took place right at the cyclical turning point (visible on the short-term chart), the dollar does no longer "need" to decline based on it. Friday's decline took USD right to the declining short-term red support line that it has broken several days earlier. Right now the decline looks like a violent - but still - verification of the breakout. The same can be said about the long-term chart. Basically, USD Index closed the week at the same level as 2 weeks ago - above the declining support line based on previous weekly closing prices. The situation remains bullish - which is quite strange as euro moved above its own support line - one of them will have to change the course and we think that it will be the euro. We expect that the rally in USD and decline in euro will continue. We will look for signs that say otherwise, though.

- Long-term S&P 500 chart - significant rally was seen on Friday, but stocks remain below the 2011 high (no big change from a long-term perspective).

- Short-term DIA ETF chart - the head-and-shoulders pattern was clearly invalidated, but the rally stopped at previous June high. At this time the short-term picture is mixed.

- Broker/Dealer Index (proxy for the financial sector) rallied but is still within the post-breakdown trading range - the suggestion is that the move up was a pullback and not the beginning of a major rally.

- Crude oil - a move higher was seen, which took prices back to the previously broken support levels. There was an invalidation of the breakdown below the support line based on intraday lows, but no invalidation of the support line based on weekly closing prices. All in all, this move still looks like a pullback. Please note that in 2008 we saw a similar pullback after the initial part of the decline that took RSI above the 30 level - this was also the case based on Friday's close. Implications for precious metals are still more bearish than not.

- Gold (short-term chart) moved to the rising black resistance line and then declined. Gold closed below the 50-day moving average. An interesting thing is that the volume that accompanied the $40 rally was average, when we would expect it to be high. What's particularly interesting is that if you examine the GLD ETF chart and focus on the June performance alone, you can see something that could become a head-and-shoulders pattern - the early June top being the left shoulder, mid-June high being the head, and the current top (if top forms) being the right shoulder. The price action itself is only half of the story - the really interesting thing is the volume - the first June top was formed on high volume, while the second top was formed on lower volume, and Friday's rally took place on even lower volume. This is something that accompanies (and confirms) head-and-shoulders formations, so if gold declines once again, then the breakdown below its neck level would likely ignite a decline below $1,500 - and you know what a confirmed breakdown below $1,500 is likely to lead to. A big sell-off.

- Gold:bonds ratio moved higher, but didn't move above the rising gray support line - the bearish picture still remains intact,

- Gold priced in yen - Friday's rally didn't take gold above the rising red resistance line - the bearish picture still remains intact,

- Non-USD gold - situation remains mixed,

- Silver - we've seen a reversal, but silver closed the week below the weekly close seen at the Dec 2011 low - the situation didn't really become bullish based on that,

- SLV ETF (short-term chart) invalidated the initial breakdown below the December 2011 low, but the rally didn't take silver above other significant resistance levels. Normally, we would view such an invalidation of the breakdown as a bullish sign, but given the situation in the long-term charts in the whole precious metals sector and related ratios, it seems that we will see another attempt to move lower.

- GDX ETF - mining stocks stopped at the 50-day moving average and the technical picture didn't improve. Actually, we have a bearish confirmation from volume as miners rose on volume that was lower than what we saw during Thursday's decline (while it actually rallied more than it declined previously).

- Dow:gold ratio - it's still above the declining resistance line - implications are bearish for gold and the rest of the PM sector,

- Silver:gold ratio - no changes here, bearish implications remain for the metals market,

What's even more interesting than the above changes is metals' performance relative to currency indices and miners' performance relative to metals. In short, they are weak and very weak, respectively. While USD Index closed the week more or less where it closed 2 weeks ago, gold closed the week $30 lower, silver closed $1 lower, and GDX ETF closed $2 lower. Moreover, gold moved 1.65% higher this week and at the same time the HUI Index moved only 0.17% higher. This is an important bearish indication. When markets are replying to bearish signals more than they do to bullish ones (like higher and lower USD values, respectively), it means that the current trend is down.

Summing up, we remain bearish on the precious metals in the medium term (but bullish in the long term) and it seems best for one to be mostly out of long-term precious metals investments and we also think that keeping the short position in the mining stocks is a good idea. We encourage you to read the following article about Jim Rogers' views on the market: http://finance.yahoo.com/news/financial-armageddon-happen-despite-eu-061542925.html . Rogers made a very good point in our view by saying the following: "How many times has this happened in the last three years - they (EU leaders) have had a meeting, the markets have rallied, two days later the market says wait a minute this doesn't solve the problem". Rogers says that the rally in euro and risk assets like oil will not last and this is the most likely outcome in our view as well.

As always, we'll keep you updated should our views on the market change - even if it means sending another message in several minutes. 

Thank you.