In the last several Premium Updates we have focused i.a. on the GDX:SPY ratio in the search for signals of a top. We found none - up to this point, as today the volume for this particular ratio has been very high. Moreover there is no doubt that this volume accompanied a move to a strong resistance level that we've also mentioned in the past as the possible target for the end of the rally. Please take a look at end of the Precious Metals Stocks section in the June 18th Premium Update for details.

On the other hand, at times (Sep 2009, Oct 2009, Jan 2010), this signal was a bit premature meaning that the final top is yet to be seen in the following days. Still, this situation makes us concerned that the targets mentioned in the previous updates will not be reached during this rally; especially that the volume today has been much higher than it was the case on Friday - higher volume during a decline than during the preceding upswing is a bearish sign.

So, what does it mean for the precious metals market? It means that the probability of higher prices in the next 2 weeks is now lower.

Generally, the situation is tense because of the popularity of gold in the media (for instance, your editor has recently seen commercials featuring "golden ice-creams") and this is why the market is particularly vulnerable to a sell-off. In fact, this very positive sentiment is actually the main factor that we don't think that this rally has much further to go.

Summing up, this is NOT a sell signal YET, because the trend for gold, silver, and mining stocks is still up (the rising support line has not been broken). The reason that we're sending this message to you is to prepare you for the possible "sell" signal in the following days, so that it doesn't come to you as a surprise. Consequently, we're still waiting for additional confirmations for instance in the form of a rise higher on tiny volume.

If the above points are no longer up-to-date and we will change our mind regarding the precious metals market or there are more clear signs, we will send out another Market Alert, even if it means sending it several minutes after sending this one.

On an administrative note, the next Premium Update will be posted one day ahead of the regular schedule - on Thursday, July 1st 2010.

Thank you.

Sincerely,
Przemyslaw Radomski