SLV (ETF) Sell Signal for Conservative Investors - April 11, ' 07

As mentioned in prior posts, I began blogging on this developing Gold and Silver ETF Allocation System via the "CAPS System" on Motley Fool's site, fool.com. Due to the scoring-system used at CAPS though, I am making this blog the primary location online where I will document my progress refining this System and its performance in the market. This entry below was originally posted April 11, 2007 @ CAPS. I've copied it here to provide a complete history to the reader who wishes to research my Allocation System development over time and confirm the transparcency of my process. One can obviously view the original entry from that point in time via my CAPS blog there but I encourage one to primarily follow my Allocation System via this blog, Greham's Day in the Sun.


I will document the theory and rules behind this Silver & Gold Allocation System in a later, separate blog post. For now though, today the system I am testing signaled a shift to be made in the allocations for more conservative investors. 50% of holdings in the Silver ETF (SLV)--or proxies for it--should be sold today, April 11. Since the last signaled change in allocation March 2nd (before I began at CAPS), SLV has returned 7.53% and GLD 5.42%, over 40 calendar days. Annualized, those returns would be over 67% and 48% respectively. This can be viewed from several perspectives but using simple probabilities, one would find it prudent to take profits. At least for conservative investors using this system.

In the real-money markets, this system could be followed simply using two tickers, SLV and GLD (or IAU), the Silver and Gold ETF's respectively (there are others in the market now that will be detailed in my future posts). If one were just using those two vehicles though and considered themselves a "conservative" investor (definitions to be discussed in subsequent blog posts as well), they should take profits by selling one-half of their position in SLV and putting those proceeds into GLD (this system maintains a 100% invested position in the two Precious Metals at almost all times). As stated in the pitches for each of the 11 vehicles being used here in CAPS though, in order to always meet the minimum of 7 picks, more tickers are being used. Several "pure play" mining stocks are being used here as well as an adaptation for CAPS rules. And since Precious Metals Mining stocks tend to be more volatile, that is, should have a higher "beta" relative to the bullion-backed ETF's, those will be sold first to take profits as might be prudent for a more conservative user of this system. Accordingly, SLW and SSRI were sold at the market open on April 11th, 2007.