Is gold setting up for a breather?  It sure seems that way to me, and I have adjusted my portfolio accordingly.  I took profits on nearly all of my gold mining stock positions yesterday, and (gasp!) actually have daytraded gold futures from the short side.  Here are the signs that concern me:

1.  Silver non-confirmation.  For the last month, but especially the last few days, silver has noticeably underperformed gold.  Coupled with the fact that silver was unable to get anywhere near all-time highs even as gold set records (not inflation adjusted), this is a signal that gold may correct.  Of course, like any other divergence it could be reconciled by the lagging instrument catching up, but the divergence does increase the probability that gold pulls back.

2.  Junior mining stocks are relatively tepid.  Its hard to find a junior mining stock that posted gaudy gains over the past week, even as the metal hit new highs.

3.  Gold prices seemed to lose momentum just after they broke to record highs.  Could it be that stops were cleared, and now there is nothing to propel gold further in the short term?

4.  The anti-dollar trade feels *very* crowded.

Keep in mind that my analysis focuses on short-term movement.  For stock trades, I like to capture 2-6 week swings though I often hold positions for several months.  For futures, my holding periods rarely exceed a few days.  None of these factors change my long-term bullish outlook for gold.  Its just the next few weeks that worry me.

For a longer-term perspective, check out the way that Adam Hewison trades monthly signals on the gold ETF in his "Perfect Portfolio" series (free, reg. may be req’d).  The results are impressive, though obviously aided by some pretty strong trends over the past year. Like most trading systems, MarketClub’s trade triangles are trend-following. They will do well in trending markets and worse in choppy or lifeless markets.

DISCLOSURE:  for the moment I’m short gold futures and long USD futures.  I am a heavy user of MarketClub (MarketClub’s "Smart Screener" is the technology behind the Century Club scan I use to locate hot microcaps) and also an affiliate.

Related posts:

1. Quick hits (gold stocks, bankruptcy stocks, RHD, market outlook, FPBF.PK, CVM)
2. Gold reaches 18-month high; all-time highs in sight
3. Gold resumes march upward