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MLR - Short term top in precious metals?

There has been virtually no safe harbor in today's market action.

Stock as well as commodities of all sorts- oil, steel, metals, etc are getting hit hard.

It is on such dire days as this one where being on the short side (TZA, QID, SQQQ, etc) reap great rewards. Of course, those of you who bought any inverse ETFs when the model went to a sell signal have probably bought smaller than normal positions or pyramided into the positions since 2011 has been a year of the whipsaw. This is a sound strategy in such rare and challenging markets.

As for precious metals, for those of you who have been buying silver and gold ETFs (SLV, AGQ, GLD, DGP) on our actionable reports over the last few weeks may consider taking some profit here. That is not to say they wont keep going higher over the longer term, but in the short term, they may continue to sell off as liquidity is raised to meet margin calls.

You will note that in late 2008 when the market had its slow motion crash from September through November, nothing was safe, with most stocks and commodities losing typically between 50-85% of their value peak-to-trough. Gold was perhaps the most robust out of all vehicles, but still sold off over 25% peak-to-trough.

While it is unlikely we will repeat late 2008 at this time, the market seems particularly vulnerable here, so it may be prudent to keep your long exposure to precious metals on the lighter side until the dust settles and the general market stabilizes. You can then always buy back what you sold.

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