However, precious metals still resilient
The three stock indices I monitor closed down for the day
and we get some news which I would label of “tertiary” importance.
I see three kinds of movements. The first is the
primary trend or primary movement which may span more than one year. The second
one is the secondary trend or secondary movement which may be aligned with the
primary trend or may be contrary to it, in which case we talk of a “secondary
reaction”. Secondary movements may last from two weeks to several months. While not officially labeled as a “movement” the
third minor movement are rallies and pullback which, under Dow Theory must meet
two requirements to be labeled as such: Firstly, it must have a magnitude of at
least 3%; secondly, it must break previous minor lows (highs). By “minor” low I
mean a recent low (high) not pertaining to a secondary reaction.
Today, the SPY has closed at 142.79 and, hence, has
experienced a pullback of 3.47% from its preceding high at 147.24. The
Transports closed at 4913.52 and have retraced 6.15% from their preceding high
at 5215.97. At the same time both indices have broken previous minor lows (SPY:
09/10/2012 low at 143.51 and Transports 09/05/2012 low at 4951.07. The Industrials
have refused to either retrace 3% or break a previous low.
So we can say that “officially” we have a pullback or
decline exceeding 3% and it has been confirmed by two indices. However, a
decline like this doesn’t qualify as a secondary reaction yet because it must
have a minimum duration of 10 trading days. Thus, we still have to wait. But one thing is clear, under Dow Theory when two indices break preceding lows and
the down movement exceeds 3% it is a bearish sign implying that a secondary
correction might be developing. Please mind that when I say “a bearish sign” I
don’t mean that the primary trend has turned bearish. I only say that it has a
short term bearish implication. Thus, such minor pullbacks or rallies under Dow
Theory tend to be more useful for the short term trader than for the long term
investor aligned with the primary trend of the market.
Volume was slightly lower than yesterday’s and since
it was a clear down day, this has bullish implications.
As to the gold and silver markets and their miners, I
was surprised to see that only gold closed down for the day. Silver and both
miners ETFs closed higher for the day. Thus, the precious metals universe has
hitherto refused to even witness a pullback under Dow Theory because no
previous lows have been violated yet. So
no even a “tertiary” down movement. I’d label today’s action in the PMs
universe as bullish long term.
Conclusion: Don't be fooled by the bearish comentaries you will read everywhere. It has taken 7 trading days for the SPY to lose 3% and qualify as a decline under Dow Theory (movements not exceeding 3% are to be ignored under Dow Theory). The primary trend, and for now, the secondary trend remain bullish. And as you know from other posts, I'm eagerly waiting for a full-fledged secondary reaction to arrive.
And now the figures for today of the markets I
monitor:
| Data for September 26, 2012 | ||
| DOW THEORY PRIMARY TREND MONITOR SPY | ||
| Bull market started | 06/04/2012 | |
| Bull market signaled | 06/29/2012 | |
| Last close | 09/26/2012 | |
| Current stop level: Bear mkt low | ||
| Unrlzd gain % | Tot advance since start bull mkt | Max Pot Loss % |
| 5,28% | 11,86% | 6,25% |
| DOW THEORY PRIMARY TREND MONITOR GOLD (GLD) | ||
| Bull market started | 05/16/2012 | |
| Bull market signaled | 08/22/2012 | |
| Last close | 09/26/2012 | |
| Current stop level: Bear mkt low | ||
| Unrlzd gain % | Tot advance since start bull mkt | Max Pot Loss % |
| 5,76% | 13,60% | 7,41% |
| DOW THEORY PRIMARY TREND MONITOR SILVER (SLV) | ||
| Bull market started | 06/28/2012 | |
| Bull market signaled | 08/22/2012 | |
| Last close | 09/26/2012 | |
| Current stop level: Bear mkt low | ||
| Unrlzd gain % | Tot advance since start bull mkt | Max Pot Loss % |
| 13,66% | 28,25% | 12,84% |
| DOW THEORY PRIMARY TREND MONITOR ETF SIL | ||
| Bull market started | 07/24/2012 | |
| Bull market signaled | 09/04/2012 | |
| Last close | 09/26/2012 | |
| Current stop level: Bear mkt low | ||
| Unrlzd gain % | Tot advance since start bull mkt | Max Pot Loss % |
| 10,44% | 41,16% | 27,81% |
| DOW THEORY PRIMARY TREND MONITOR ETF GDX | ||
| Bull market started | 05/16/2012 | |
| Bull market signaled | 09/04/2012 | |
| Last close | 06/26/2012 | |
| Current stop level: Bear mkt low | ||
| Unrlzd gain % | Tot advance since start bull mkt | Max Pot Loss % |
| 9,69% | 32,46% | 20,75% |
Sincerely,
The Dow Theorist.
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