No secondary reaction in the
precious metals' universe yet.
Not all days are relevant
under Dow Theory. Today this post in this Dow Theory blog is going to be short,
since today in spite of the bullish display of the markets, is an inconsequential
day. I will spare my letters and words.
The three stock indices we
monitor closed strongly up for the day. However, the last recorded highs have
not been broken out and, hence, the secondary trend remains bearish. We have to
see further market action. The primary trend remains bullish.
The Transports continue
displaying good relative strength. I think this is a bullish sign since the
former weakest index is turning stronger.
Volume was again bullish
today. We had a clearly up day on higher volume. Little by little the short
term pattern of volume is turning bullish (4 bullish days in the past 4 days).
Here you have an updated chart.
Volume is turning short term bullish |
If I had to make a guess, I’d
say that the odds strongly favor the termination of this secondary reaction. Volume
is becoming bullish short term (and it has always been bullish long term) and
the stronger Transports seem to suggest underlying strength for the whole
market. However, as I constantly repeat we are not in the business of
forecasting or trading secondary reactions. They are too unpredictable and
there is little to gain by trading them. Again, I insist that we study
secondary reactions because we need them in order to set our trailing stops. More
on secondary reactions and its usefulness for setting stops in my post “Why
Dow Theory matters: Outstanding Risk Reward Ratio thanks to the Dow Theory’s
trailing stop” which you can find here.
To close with the issue of
secondary reactions. Even though I feel that it is likely that the secondary
reaction may have finished, as with primary trends, it is impossible to know in
real time when the secondary reaction has finished. We just can make guesses,
as I have just done right now based on volume, non confirmations, etc. We will
only know for sure that it is finished when the last recorded highs of 10/05/2012 (DIA) and 09/14/2012 (SPY and Transports) are
penetrated. However, there is nothing wrong with that, since we don’t trade
them.
In a future post, I will show
you some numbers that will convince you about the futility of attempting to
trade in and out of secondary reactions. Unless you are a master trader, it is
a waste of time and energy that would be better applied in becoming a master
investor along the primary trend.
As to gold, silver and their
ETFs, all of them closed up for today. Technically, there are no changes. All of
them refuse to correct. Thus, both the primary and secondary trend remain
bullish.
I wrote a post earlier today
that may be helpful in order to provide investors with the big picture and how
to survive financially in these very challenging times. It’s named “Jim
Rogers and the Dow Theory”, and you can find it here.
Here you are the figures for
today:
Data for October 16, 2012 | |||
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 | 10/16/2012 | 145.54 | |
Current stop level: Bear mkt low | 128.1 | ||
Unrlzd gain % | Tot advance since start bull mkt | Max Pot Loss % | |
6.94% | 13.61% | 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 | 10/16/2012 | 169.42 | |
Current stop level: Bear mkt low | 149.46 | ||
Unrlzd gain % | Tot advance since start bull mkt | Max Pot Loss % | |
5.53% | 13.35% | 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 | 10/16/2012 | 31.93 | |
Current stop level: Bear mkt low | 25.63 | ||
Unrlzd gain % | Tot advance since start bull mkt | Max Pot Loss % | |
10.41% | 24.58% | 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 | 10/16/2012 | 24.95 | |
Current stop level: Bear mkt low | 17.08 | ||
Unrlzd gain % | Tot advance since start bull mkt | Max Pot Loss % | |
14.29% | 46.08% | 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 | 10/16/2012 | 52.67 | |
Current stop level: Bear mkt low | 39.56 | ||
Unrlzd gain % | Tot advance since start bull mkt | Max Pot Loss % | |
10.26% | 33.14% | 20.75% |
Sincerely,
The Dow Theorist.
Disclaimer:
Dow Theory Investment and its author is not a financial adviser. Dow Theory
Investment and its author does not offer recommendations or personal investment
advice to any specific person for any particular purpose. Please consult your
own investment adviser and do your own due diligence before making any
investment decisions. Please read the full disclaimer at the bottom of the
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