As the first quarter of 2012 draws to a close, we’ve decided to sell two positions from our Short-Term Opportunities Portfolio. We have small profits in both positions after initiating them about a year ago, but it’s time to clear the decks for better opportunities.

When we first added PowerShares S&P Smallcap IT Portfolio (NYSE: PSCT) to our Short-Term Opportunities Portfolio, corporate spending on information technology (IT) was on the rebound, as businesses began refreshing their IT infrastructures after years of weak investment. We believed that would help drive revenue growth at small-cap IT firms and also spark a spate of mergers and acquisitions in the space.

But lately, we’ve begun to see slowing investment in IT. While signs of spending growth were initially promising, companies have been hesitant to invest in more cutting edge technology in favor of mission critical tasks such as updating operating systems and replacing aging equipment. As a result, we’ve made strong gains in our position in iShares S&P Global Technology (NYSE: IXN)–it’s up more than 18 percent so far in 2012. The exchange-traded fund (ETF) has benefited from its positions in large-cap names such as IBM (NYSE: IBM) and Microsoft (NSDQ: MSFT), while smaller, more speculative names have largely languished.

The flurry of deal-making we saw in the sector last year also turned out to be a flash in the pan. After a handful of deals during the first half of 2011, activity ground to a halt due to anxiety regarding the sovereign-debt crisis in Europe and the slowdown in China’s economy. While investors seem excited about high-profile initial public offerings in the social media space, we’re not looking for much deal-making activity to occur in the near term. Although many firms in the technology sector boast strong balance sheets, most of the potential acquirers appear more focused on bolstering their existing businesses than adding to them.

As a result, sell PowerShares S&P Smallcap IT Portfolio and continue buying iShares S&P Global Technology.

We’re also selling our position in Market Vectors Gulf States (NYSE: MES).

When we added the ETF to our Short-Term Opportunities Portfolio almost exactly a year ago, the Arab Spring was in full bloom, with repressive regimes toppling across the region. Since then, we’ve seen new governments emerge in nations such as Libya and Egypt. While pockets of trouble remain–Syria and Iran immediately come to mind–the region is generally on a path toward greater liberalization. Still, most of these countries have a long, difficult road ahead of them before reaching a true state of representative democracy.

Meanwhile, tensions in the region over Iran’s nuclear aspirations are posing a significant headwind for Middle Eastern equities. While Iran has backed away from its threats to close the Strait of Hormuz, an action which would severely impair global oil trade, there continues to be speculation that Israel might unilaterally attack Iranian nuclear sites in order to ensure its own security. If Israel were to pursue that course, the region could easily boil over into a full-scale military conflict, quite possibly involving US forces. Additionally, there have been recent reports that Iran has been hardening the defenses surrounding its nuclear sites. As a whole, these items have created a huge wall of worry that the market is unlikely to overcome any time soon.

With little hope of an improved outlook in the near future, sell Market Vectors Gulf States.