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The Dilemma Of The Two Edged Sword

  1. xerxes_ph

    9,081 Posts.

    This market is an enigma .... so hard to read at the moment.

    Gold looks to be in decisive uptrend and the US dollar looks fragile to say the least.

    There is still talk of an imminent global recovery and when ... IF ... this happens an avalanche of sidelined money will pour into stocks ... especially the cyclicals like RIO BHP WPL STO etc. Not to be in the market could mean that one might "miss the bus" entirely and miss out on massive gains.

    The question is "WHEN"?

    I have a large exposure to gold stocks ... my gut feeling is that the worst is not yet over ... and my charts tell me that gold is still in uptrend. Given global tensions in the Middle East and the Sub-Continent and the prospect of more terrorist attacks I think that exposure to gold is sensible "insurance"

    On the other hand, I am also heavily into major resource stocks just in case "The Titanic Turns Around" and the bogey of a double dip recession is avoided. I also have a good spread of blue chips bought cheaply on market down days.

    Strategy?

    Wait for a definite trend to emerge then either jettison the cyclicals and blue chips when gold soars and the US dollar collapses along with "quality" stocks" .... and buy more gold / silver stocks

    OR,

    Jettison gold stocks when there is clear evidence of an undisputed economic upturn ... and move cash into undervalued blue chips and resource majors.

    In the meantime, with a small percentage of funds trade "situational stocks" that move within predictable trading ranges.

    I don't pretend to have a crystal ball but my strategy has at least preserved my capital until a decisive direction materialises.

    This is quite a unique market ... a most challenging beast ..... compelling but also scary.

    Good luck.

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