Last week (trading dates July 23 - 27, 2007) witnessed the second significant stock market correction this year. The precious metals experienced some declines like most asset classes and I thought a quick comparison might be in order.
Since my last blog post here (July 18 on Fool.com blog) through last Friday, July 27th, the Dow Jones Ind. Average lost approximately 5.05% GLD lost 0.52% and SLV lost 1.51% SLV once again showing it's higher "beta" relative to GLD--a basic observation and assumption behind this Allocation System here.
Compared with the broad (but shallow) market correction in February of this year, Au and Ag showed good relative strength to this most recent correction in equities which is noteworthy. Interestingly, this Allocation System also then signaled a second "buy" confirmation as of last Friday (27th) that we should be fully invested in the Precious Metals including Silver during this period of time. When the System generates that second buy confirmation signal (it often does), it is also an early indication that we will likely want to take some profits soon.
At this point during this latest cycle, we may not have much in the way of profits except in selected metals mining stocks but we also have outperformed the broad domestic and international stock market indices.
Expect a sell signal here soon.
For the most aggressive and short-term oriented traders, this second Ag buy signal as of last Friday, July 27, could be interpreted as a signal to make short-term speculative buys in the PM's and/or select PM mining stocks. As any market watcher knows however, now are some of the most precarious times in markets that we have witnessed in a long time. Speculator beware! Please heed any and all disclaimers and warnings I post on my site here.
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