Gold moved closer to its declining short-term resistance line yesterday (it will be reached if we see another similar daily rally) but the move up formed on very low volume. It was not as extremely low as it was on Monday, but still very low. The breakout above the first Fibonacci retracement level (38.2%; $1.285) is by no means confirmed.

Silver didn't really move yesterday. No wonder, it remains at the upper border of the declining trend channel - right at the resistance level. Also, the next cyclical turning point is closing in for silver, so the fact that the most recent move was up, makes the turning point a bearish factor.

Speaking of cyclical turning points, We are about to see one in the USD Index. The most recent move was down, which means that we are now likely to move up. The USD Index hasn't declined below the 61.8% Fibonacci retracement level based on the June - July rally, which means that the move up is still likely to follow. Given that the turning point is just around the corner (next week), it seems that another rally will be seen soon, which is a bearish piece of information for metals and miners.

Moving on to the mining stocks, in the latest Premium Update we wrote that the upper border of the declining trend channel had not been reached. We also wrote the following:

"As long as the miners don't correct more than one half of their decline, this correction will be in tune with previous ones, and there are no bullish implications (please compare the retracements marked on the above chart)."

The above gave miners some room to rally without invalidating the downtrend (!). In fact, they can still rally a bit without changing the bearish outlook. How much can gold / silver / miners move higher before the bearish outlook is invalidated? You already know our take - our stop-loss levels for the current speculative short position are the borderlines at which the outlook would likely change. In case of the GDX ETF, the stop loss is at $26.55.

The HUI-to-gold ratio moved higher yesterday, but this move was not visible from the long-term perspective. That was just a blip on the radar screen, just like when miners rallied relative to gold in the previous months. The HUI:gold ratio remains below its resistance level in the form of the 50-day moving average. Gold stocks moved higher relative to gold yesterday, but in our view it's too early to say that the trend changed. So far everything is in tune with the previous patterns, which were followed by strong declines.

Moreover, the RSI and William's %R indicators based on the Gold Miners Bullish Percent Index are now both overbought and suggesting that a local top is near. In case of the previous local tops in the past few months, the William's %R indicator became overbought but the RSI was only "almost overbought" (below 70 level but close to it).

Overall, the outlook remains bearish for the precious metals market in our view.

We are not ruling out the case in which we're going to see a breakout today (which is not likely, even though another small move higher could be seen), and in this case the short position would have to be closed. Consequently, we suggest placing the following stop-loss orders:

• Stop loss for gold's speculative short position: $1,340
• Stop loss for silver's speculative short position: $20.90
• Stop loss for the HUI Index's speculative short position (theoretically, as you can't short the index by itself): 246
• Stop loss for GDX ETF's speculative short position: $26.55

To summarize:

(Before we start, if you don't have any positions opened, we think that it might be a good idea to open them now.)

Long-term capital: Half position in gold, silver, platinum and mining stocks. As far as long-term mining stock selection is concerned, we suggest using our tools before making purchases: the Golden StockPicker and the Silver StockPicker

Trading capital: Short positions (half) in gold, silver and mining stocks. We suggest placing buy orders for the speculative long positions in gold and silver for gold at $1,140 and silver at $17,40 (and closing the short position at that time - if these levels are reached). We don't have analogous price levels for mining stocks, but it seems that it will be a good idea to buy them (close the short position) when you buy gold based on the $1,140 target.

After the above-mentioned move higher (rally from $1,140 in gold) we expect metals and miners to decline once again and move to $1,090 (gold), $14,70, and 150 (HUI Index). It seems to us that these levels could be reached this month (July 2013).

If we don't see a sharp plunge to $1,140 in gold then we plan to hold the short positions until the final bottom near the $1,100 level. That is unless something makes us change our mind meanwhile - and you - our subscribers - would be the first to know in this case.

These levels could be seen along with USD Index at 86 - 86.4. At that time (if we see another downswing), we will suggest purchasing metals and miners at the following price levels (speculative trades):

• Gold: $1,105 (stop-loss: $970)
• Silver: $15.20 (stop-loss: $14.20)
• $HUI: 155 (stop-loss: 137)

These levels are slightly above the price targets to maximize the odds of entering the trade (if everyone thinks that gold will move to $1090 they will buy before it reaches this level and ultimately gold may not drop as low at all).

As always, we'll keep you 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) at least until the end of July, 2013 and we will send additional Market Alerts whenever appropriate. We have prolonged the time in which you - our subscribers - will receive Market Alerts daily for another full month.

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.

On an administrative note, this week's Premium Update will be posted one day ahead of the regular schedule - on Thursday, July 18.

Thank you.

Sincerely,
Przemyslaw Radomski, CFA