While I am still short SPY and QQQ, I covered the shorts on silver (SLV and ZSL) in order to hold remaining gold stocks (plus WDOFF & KNTNF added recently) without that indirect hedge. The reasons:
- After an extended decline, the moderately oversold precious metals complex is at risk of a strong bounce, at least, regardless of whether or not point ‘C’ of an A-B-C correction has yet been reached. Today looks a bit impulsive, as if machines were waiting for the first day of ’25 to buy the sector.
- Treasury bonds are also oversold and could bounce, or resume the uptrend (Goldilocks, disinflation, or outright deflation scare), which is the best macro backdrop for gold stocks.
- Last but not least, the seasonal that turns up now for silver, already turned up for gold and also is positive for gold stocks. Again, the seasonal is far from fool proof, but there it is anyway.
By removing the indirect hedge I’ll not worry about remaining positions in a sector that has had a lot of froth taken out of it. Maybe hedge again down the road. Maybe not. Meanwhile, we’ll look ahead to the next rally either sooner or later. In adding a couple positions over the last week or so, I am slowly trying to position for it.
