Dow Theory update for Oct 5: Mixed day. Stocks up. PMs universe down.

Primary and secondary movement remains bullish

Today was a calm day which did not change the technical picture which remains bullish long and short term for stocks, gold, silver and their miners. This is the way I see things according to the Dow Theory: No changes.

The only thing worth mentioning are long-term bonds whose technical picture looks worse with each passing day. More on this below.

The Industrials, Transports and SPY all closed up for the day. As you know, in Dow Theory we only pay attention to closing prices, so intraday market action is not taken into account.The Industrials broke out above the previous high. However, such action has not been confirmed by the other two indices.

Volume was bearish, since it was an up day on lower volume. Since the highs of 09/14/2012 fifteen trading days have elapsed. Seven days had bearish volume. So volume is mixed.

As to gold, silver and their miners, all of them closed down today. However, no technical damage has been made. This down close was not a surprise to me after all the excitement we had yesterday in the precious metals universe. Hence this morning at 8:45 AM I wrote the following in this blog when answering a comment:

“Furthermore, experience shows that being at highest highs the market shows "discontinuity." It has roughly 80% likelihood of pulling back and 20% of shooting to the upside.”

http://www.dowtheoryinvestment.com/2012/10/dow-theory-update-for-oct-4-very.html?showComment=1349441118707#c7548589140591904378

Thus, it was scarcely surprising to see a down day. However, this has no bearing as to the long-term and intermediate trend which remain bullish. So no technical damage has been made.

More interesting is the long-term bond/gold ratio (BLV/GLD). As followers of this “Dow Theory Investment” blog know, I am closely monitoring this ratio, since a violation of the last secondary reaction lows may spell trouble for bonds and make gold really glitter. If this sounds queer, maybe you should read my post “Dow Theory spells trouble for bonds: Clouds on the horizon” which you can find here.

Here you have the chart:

Bonds at a difficult juncture. Epic battle between gold and bonds

 If we take a look at this chart, we see the following bearish signs for the ratio (that is for bonds):

1. The ratio is again dangerously approaching the green line which represents that last reaction lows.
2. There was a failed violation of a head and shoulders pattern in BLV. Normally, when such violation fails there should be a significant upside move. However, such move is fizzling out.
3. Furthermore, BLV (as well as the ratio itself) has had two declining highs. Not a bullish sign, certainly. 
4. BLV is again approaching the blue trend line joining previous lows. This trend line is an important one.

Really, you are seeing a dramatic chart that epitomizes the fight of the bonds (essentially the USD) against the power of gold. Who will win? My fundamental instincts say that gold; however, you know I attach relative value to my own fundamental forecasts, and such fundamental forecasts may take long to come to fruition (longer than you can stay solvent, as Keynes would say). Thus, I prefer the technical side of the Dow Theory to guide me in a time horizon of 1-2 years. One thing is clear: The chart reflects an epic battle.

Well, that’s all for this evening.

And now the figures of the day:

  

Data for October 5, 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		10/05/2012	146.14
Current stop level: Bear mkt low			128.1
Unrlzd gain %	Tot advance since start bull mkt	Max Pot Loss %
7.38%	14.08%	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		10/05/2012	172.62
Current stop level: Bear mkt low			149.46
Unrlzd gain %	Tot advance since start bull mkt	Max Pot Loss %
7.52%	15.50%	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		10/05/2012	33.44
Current stop level: Bear mkt low			25.63
Unrlzd gain %	Tot advance since start bull mkt	Max Pot Loss %
15.63%	30.47%	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		10/05/2012	25.39
Current stop level: Bear mkt low			17.08
Unrlzd gain %	Tot advance since start bull mkt	Max Pot Loss %
16.31%	48.65%	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		10/05/2012	53.68
Current stop level: Bear mkt low			39.56
Unrlzd gain %	Tot advance since start bull mkt	Max Pot Loss %
12.37%	35.69%	20.75%

Sincerely,

The Dow Theorist