Sunday, August 12, 2012

Brief portfolio update-reducing precious metal stock exposure

On Friday, I reduced my precious metal stock exposure in managed portfolios. This was largely due to two factors. First, I am leery of the technical setup on the GDX (the Marketvestors Gold Miners ETF), which I use as proxy for gold and precious metal stocks. (Note- I also use the Phily Gold/Silver Miner Index but the charting services I use do not provide volume figures for this index, an important factor in my technical analysis.) The ETF is short-term overbought on stochastics, following the 10% rise since 7/23. This run has occurred on decreasing volume, and I would not be surprised that we see a consolidation.






In addition, my concern on the short-term direction of precious metal stocks comes from the analysis of my gold and precious metal stock timing metal. Since 2000, there have been only nine instances where we saw similar gains following a buy signal. There tends to be a downward price performance bias of precious stocks in the subsequent one, two, and three week periods after outsized gains,

This reduction does not alter my long-term view of precious stocks. I continue to have an exposure to the group via prior accumulated gains and Friday's trades were merely me taking back my principal. I anticipate increasing my exposure again in a number of weeks.

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