Dow Theory Update for Oct 24: Bearish day

 Stocks: Primary trend remains bullish. Secondary trend bearish.

Let’s get started with our Dow Theory analysis for today.

Today this post in this blog is going to be short, since I just posted some time ago an in-depth study as to whether the gold and silver miners ETFs are experiencing a secondary reaction. You can find the details here

 

The stock market was clearly down today. All the three markets we monitor were down in unison (SPY, Transports and Industrials).

Volume today was bullish since it was lower than yesterday’s and hence negates the downward movement of today. However, as I wrote extensively yesterday, the overall pattern of volume short term (i.e. 2-10 days) remains bearish.

In my previous post, I struggled to qualify the downward movement of the gold and silver miners ETF as a secondary reaction because the total amount retraced didn't  even reach 1/3. This is not the case with stocks. The Industrials have retraced ca. 35% of the previous up leg. The SPY has retraced ca. 32% (which is almost 1/3). So their pullback is a Dow Theory text-book example of a secondary reaction.

 

As to gold and silver and their respective ETFs all of them closed down today, save SLV. Furthermore, SIL refused to violate the lower boundary of its line by just a few ticks. So in spite of the rout we are seeing, the silver universe is displaying good relative strength. I always think that stronger silver is subtly showing that the world is not ending.

Bottom line: Nobody said that secondary reactions are sweet. Even though they can be nerve wrenching, what we are witnessing is “mild” by Dow Theory standards, and it can get even worse (i.e. see a retracement of 70% of the previous primary up leg).

However, the primary trend of stocks, gold, silver and their miners remains bullish.

Tomorrow I will try to talk about the bonds and the vital BLV/GLD ratio. For the time being bonds have dodged the technical bullet that was threatening them.

Here you have the figures of the markets I monitor:

 

Data for October 24, 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		10/24/2012	141.02
Current stop level: Bear mkt low			128.1
Unrlzd gain %	Tot advance since start bull mkt	Max Pot Loss %
3.61%	10.09%	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		10/24/2012	164.86
Current stop level: Bear mkt low			149.46
Unrlzd gain %	Tot advance since start bull mkt	Max Pot Loss %
2.69%	10.30%	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		10/24/2012	30.71
Current stop level: Bear mkt low			25.63
Unrlzd gain %	Tot advance since start bull mkt	Max Pot Loss %
6.19%	19.82%	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		10/24/2012	23.92
Current stop level: Bear mkt low			17.08
Unrlzd gain %	Tot advance since start bull mkt	Max Pot Loss %
9.57%	40.05%	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		10/24/2012	50.06
Current stop level: Bear mkt low			39.56
Unrlzd gain %	Tot advance since start bull mkt	Max Pot Loss %
4.79%	26.54%	20.75%

Sincerely,

The Dow Theorist.