Performance Update & Anticipating Allocation Adjustment

Note: This post was prepared the evening of June 6th to be posted during the day of June 7th. The market move substantially to the downside that day so I was going to update the content and then post. Instead, given the last two days in the markets, I have elected to post this as-is and then another post immediately following revisiting the subject and to provide the transparency I'm looking for here. After reading this post, please be sure to read my second post on this date to insure you have the complete picture and assessment of where I think we are in this current market. This is an important time to be vigilant.

My two most recent posts, of May 10th and May 18th, should serve as setting some near-term background and context for this update. To further understand the theory and assumptions behind this Precious Metal Allocation System, some of the earlierst posts from April provide more detail.

As expected and predicted in the two posts in May, GLD and SLV have been performing relatively on-par with one another during most of this time and this has been a slightly longer and less volatile phase in the market. A period of correction essentially but mostly expressed over time rather than via severe price fluctuations as can sometimes typify the Precious Metals. Not all that distasteful if one has the patience to do nothing while waiting. After the sharpest declines in this corrective phase that occurred in the last week of April, at which time Silver predictably lost roughly twice as much ground as Gold, we've been positioned back in both Gold and Silver instruments and roughly 50%/50%

The relative performance of both metals was quite similar for another two weeks confirming the wisdom of having moved back into a 50% position in Gold. Then, as anticipated in the post of May 18th, a bottom was put-in and a modest rally phase began between May 18th and 24th. As is common for new rally phases in these metals, Silver took the lead. During roughly the last two weeks or a little more, SLV has outperformed GLD by about 3 to 1. Since May 24th GLD has gained a modest ~2.5% while SLV has returnd ~6.8%

The data underlying the Allocation System are beginning to signal the need for a possible shift. The days immediately in front of us should probably provide more clarity. We would likely take profits in Silver but it must be noted that Gold has been particularly weak and there is a small chance that we could actually shift from Gold to some extent. Other methods of technical analysis--that are not necessarily primary tools for this Allocation System but nevertheless are monitored--indicate that Gold may need to spend some time testing support down in the per-ounce price range near $630. That is approximately 5% below prices today. Decreasing our allocation to Silver is the more tradional and likely scenario however, at this stage in the market but, as mentioned in recent posts, the patterns of late and seasonal factors are also revealing this period to be somewhat a-typical.

Keep checking this blog for a possible signal in coming days or weeks at the very most.