Dow Theory update for Sep 18: No news. Both primary and secondary movements remain bullish.

Long term bonds: Still not ready to collapse.

The good thing of applying Dow Theory to analyze  the markets is that it is sufficiently long term to allow you not to be glued to the screen all day long, while, on the other hand, it is nifty enough, to get you out soon when trouble is brewing. This is the subject for another post in this blog.

Personally, I found with the Dow Theory the perfect balance between being a buy and hold investor (which I find eventually may blow up in your face) or being a hectic day trader that eventually risks losing emotional balance.

As I have written in other posts in this blog, a BOE calculation of the average investing period following  Dow Theory tells that the median duration of our investments is 2.5 years. This is an optimal time-frame. Long term enough not to get lost in the day-to-day noise of market news, commentators (except this one, yours truly), etc.

Today is another inconclusive day. The Industrials went slightly up, whereas the Transports and S&P went down. However, such down movement doesn’t even qualify as a minor pullback under Dow Theory and has zero significance.

Gold and silver went up and so did the miners (SIL, GDX).

SLV has made a higher high for the move. Gold almost broke above its preceding highs but failed to do so. Silvers continues to outperform gold which clearly gives bonds a respite.

As to the miners, both SIL and GDX broke above the preceding highs, thus establishing higher high (absolute highs since the primary bull market got started).

From all these readings we can conclude that the primary and secondary movement remains bullish in all these markets. As to Treasuries, you know from my post in this blog “Dow Theory spells trouble for bonds: Clouds on the horizon”, which you can read here, that I’m watching like a hawk the evolution of the ratio BLV/GLD (long term bond/gold). If the green horizontal line that you can see in the chart is finally broken by the ratio (the red thick line), then the ratio will be in a primary bear market and will give confirmation to the bearish reading that the BLV/SPY already signaled months ago. 

Long term bond/Gold ratio still in a primary bullish trend. Bonds technically are not ready for a big plunge...Not yet?

 

You can see in the chart that the trendline hasn’t been broken yet. Thus, technically, and in spite of the gold bull market (more on it here) I don’t see a bear market in bonds yet, all the QE catastrophic talk notwithstanding.

Volume today was neutral, so if we keep in mind the bullish readings of past days, we can conclude that volume remains short term bullish.

Here you have the figures for today:

  

DOW THEORY PRIMARY TREND MONITOR SPY
			SPY
Bull market started		06/04/2012	128.1
Bull market signaled		06/29/2012	136.1
Last close		09/18/2012	146.62
Current stop level: Bear mkt low			128.1
Unrlzd gain %	Tot advance since start bull mkt	Max Pot Loss %
7.73%	14.46%	6.25%
DOW THEORY PRIMARY TREND MONITOR GOLD (GLD)
			GLD
Bull market started		05/16/2012	149.46
Bull market signaled		08/22/2012	160.54
Last close		09/18/2012	171.72
Current stop level: Bear mkt low			149.46
Unrlzd gain %	Tot advance since start bull mkt	Max Pot Loss %
6.96%	14.89%	7.41%
DOW THEORY PRIMARY TREND MONITOR SILVER (SLV)
			SLV
Bull market started		06/28/2012	25.63
Bull market signaled		08/22/2012	28.92
Last close		09/18/2012	33.71
Current stop level: Bear mkt low			25.63
Unrlzd gain %	Tot advance since start bull mkt	Max Pot Loss %
16.56%	31.53%	12.84%
DOW THEORY PRIMARY TREND MONITOR ETF SIL
			SIL
Bull market started		07/24/2012	17.08
Bull market signaled		09/04/2012	21.83
Last close		09/18/2012	25.02
Current stop level: Bear mkt low			17.08
Unrlzd gain %	Tot advance since start bull mkt	Max Pot Loss %
14.61%	46.49%	27.81%
DOW THEORY PRIMARY TREND MONITOR ETF GDX
			GDX
Bull market started		05/16/2012	39.56
Bull market signaled		09/04/2012	47.77
Last close		09/18/2012	54.32
Current stop level: Bear mkt low			39.56
Unrlzd gain %	Tot advance since start bull mkt	Max Pot Loss %
13.71%	37.31%	20.75%

 

 

Sincerely, 

The Dow Theorist