Today was
another day without changes. Both the primary and secondary trend of the
markets we monitor, namely, S&P, Industrials, Transports, Gold, Silver and their respective ETF miners continues unchanged.
The Industrials
closed slightly higher establishing a new record high since the inception of
the primary bull market on June 4 (signaled by the Dow Theory on June 29). The
SPY also closed slightly higher, albeit without establishing a new record high.
The Transports
closed down big time for the day at 4961.69. However, the significant lows to
be violated are at 4934.00 which correspond to the lows made on 07/25/2012 (lows
of the last primary movement “leg”). Thus, we have to see and wait.
Technically, as per Dow Theory, no damage has been made. We still have to wait.
I know that the
weakness of the Transports makes many analysts and investors leery as to the “goodness”
of this primary bull market. However, it is good to remember that:
1. On
June 29, both the SPY and the Industrial (so we had confirmation of two indices)
signaled a primary bull market in stocks. You can find more details as to this bull market here
2. On
Sept, 13, the Transports pierced the highs made in the preceding secondary reaction,
thus also confirming the bullish signal of the Industrials and SPY.
3. The
overall assessment of volume has been bullish.
Furthermore, Dow
Theorist Schaefer provided us with a valuable insight concerning the Transports.
Schaefer said that in the early stages of a primary bull market the transports
tend to show relative weakness because among investors the prevailing mood is still
bearish and hence the money flows to less speculative issues like the
Industrials. The Transports tend to catch up when the investor’s mood turns
bullish and a “risk on” more speculative mentality prevails. Of course, this
doesn’t happen in a young bull market (as it is ours, only 3 months and 2 weeks old)
because bull markets always start by climbing “a wall of worry”.
Thus, curiously
enough, the Transports action might be hinting us what we already know: That
most investors are skeptical about this bull market. Schaefer added that when
the Transports turn really strong and the Industrials do not confirm, this
tends to be a sign of an impending top.
All these
markets are consolidating. Nobody knows whether we will get an upside or downside breakout.
Volume was
higher than yesterday’s and given the prevailing bearish stance taken by stocks today;
I’d say that today’s volume was bearish short term. Is the weakness in the
Transports together with less bullish volume suggesting that the long-awaited
secondary correction might be in the making? Under Dow Theory it is too early
to tell. We have to wait.
As to the long
term bond (BLV), no news. No breakdown….yet.
The GLD/SPY
ratio is also trapped in a consolidation. If the ratio breaks up in favor of
gold, then we will have to keep even a closer eye to the US bonds. As I
explained in this blog in this post: “Is really Gold glittering? Who benefited
most from QE?", which you can find here
The GLD/SPY
ratio has to decisively break out of its consolidation in order to further confirm gold strength and
real trouble for the US long term treasuries.
Here you have an
updated chart of the ratio:
![]() |
The GLD/SPY ratio must break decisively above prior secondary reaction highs to confirm gold strength |
As I hope you
being to see, the beauty of the Dow Theory when properly applied (that is when investing
according to the primary trend) lies in its not being stressful. You go with
the flow; a slow moving flow which gives you ample time to patiently study the markets and ignore all the noise out there.
Here you have
the figures for the day. Nothing new. Still waiting for a secondary reaction.
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 | 09/20/2012 | 146,71 | |
Current stop level: Bear mkt low | 128,1 | ||
Unrlzd gain % | Tot advance since start bull mkt | Max Pot Loss % | |
7,80% | 14,53% | 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 | 09/20/2012 | 171,47 | |
Current stop level: Bear mkt low | 149,46 | ||
Unrlzd gain % | Tot advance since start bull mkt | Max Pot Loss % | |
6,81% | 14,73% | 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 | 09/20/2012 | 33,56 | |
Current stop level: Bear mkt low | 25,63 | ||
Unrlzd gain % | Tot advance since start bull mkt | Max Pot Loss % | |
16,04% | 30,94% | 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 | 09/20/2012 | 25,08 | |
Current stop level: Bear mkt low | 17,08 | ||
Unrlzd gain % | Tot advance since start bull mkt | Max Pot Loss % | |
14,89% | 46,84% | 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 | 09/20/2012 | 54,36 | |
Current stop level: Bear mkt low | 39,56 | ||
Unrlzd gain % | Tot advance since start bull mkt | Max Pot Loss % | |
13,80% | 37,41% | 20,75% |
Sincerely,
The Dow
Theorist.
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