No change in trends.
Today, there are important
changes that affect both GLD and SLV. Read intently the end of this post on
this Dow Theory blog.
Stocks closed up today. Technically, under Dow Theory, both the primary trend and secondary trend remain bearish.
Volume was mildly bullish, as
it was higher than yesterday’s in an “up” day. Overall, the pattern of volume
continues bearish. Please go to my yesterday's post to find more ample information about volume patterns.
Gold and silver closed down
today. Technically, there are no changes. The primary trend remains bullish and
the secondary trend bearish.
SIL closed down, and GDX
closed up. Technically, there are no changes. The primary trend remains bullish
and the secondary trend bearish.
Today you better pay
attention to the figures of the markets I monitor. There are changes.
As you can see I changed
the stop level for GLD and SLV. Why?
As I wrote on this blog on
November 12, gold and silver made on Nov 2 secondary reaction lows followed by
a rally. Under Dow Theory, a set up for a primary bear market signal was made.
Please bear in mind that I am not saying that a primary bear market signal was
flashed, merely that technically the setup was completed. If the gold and
silver better the 10/04/2012 highs, then the primary bull market will be
reconfirmed. However, if the current rally off the 11/02/2012 secondary
reaction lows peters out and such lows are jointly violated a new primary bear
market signal will be flashed. To know more about such setup and the calculations
I made to determine it, please go read my post “Dow Theory Update for Nov
12: Gold and silver setting up for primary bear market signal” which you
can read here.
So I am not jumping the gun, and
I will let market action tells us whether a new bear market has been born or if
such lows are not violated, the primary bull market continues in good health.
However, the setup in itself
is important to us followers of the Dow Theory. As I wrote in my post “Why
Dow Theory matters: Outstanding Risk Reward Ratio thanks to the Dow Theory’s
trailing stop”, which you can read here:
“as the market undergoes corrections
our “exit” point is lifted higher and higher. Thus, the Dow Theory provides
us with a very effective trailing stop that automatically adjusts to the
advancing trend.”
Gold and silver have
unambiguously established the lows of the secondary reaction on 11/02/2012. If such lows are
violated, then we have a new primary bear market, and, thus, the talk will not
be anymore of a “reaction” but a primary bear leg or swing. If they are not
violated, then sooner or later the 10/04/2012 primary market highs will be
broken out and from that point a new secondary reaction (please bear with me: a
new one, not the current one) will develop at some time in the
future.
As the market stands now one
thing is clear: Once we had a qualifying rally after the 11/02/2012 lows, our
exit point was not anymore the last lows seen in the last leg of the primary
bear market that finished on 05/16/2012 at 149.46. Our new exit point stands
at 162.6 for GLD (11/02/2012 lows).
If you do the math, this means
that even if GLD and Silver violate such lows, it is very likely that some
profits have been locked in.
The chart below clearly
illustrates the current situation for GLD and SLV.
 |
New exit level when/if two red lines violated |
The short red line represents the
price level of the secondary reaction lows.
The pink line represents the
entry price when a primary bull market was signaled (August 22). Here
you can find more information about the primary bull market signal for gold and
silver.
The blue rectangle displays
the distance between both lines. This distance is the amount of profit likely
to be locked in even in case of a primary bear market signal. While, this is
not carved in stone, as profits only exist when the trade is closed, clearly
the investor in gold and silver follower of the Dow Theory is in a comfortable
position.
Armed with all this
information, you are in a better position to understand the changes I made on
the cells containing information for GLD and SLV.
The cell “Maximum Potential
Loss” has been changed. Now it reads “Minimum Potential Gain” since, even if
the worst comes, some gains are likely to be locked in. The percentages
displayed correspond with the difference between the entry price (cell: Bull
market signaled) and the secondary reaction lows (cell: Current stop level: Sec
Reac Low)
What about SIL and GDX? More
about them tomorrow.
Data for November 28, 2012 |
|
|
|
|
|
|
DOW
THEORY PRIMARY TREND MONITOR SPY |
|
|
|
|
|
SPY |
Bear market started |
|
09/14/2012 |
147.24 |
Bear market signaled |
|
11/16/2012 |
136.37 |
Last close |
|
11/28/2012 |
141.46 |
Current stop level: Bull
market high |
|
|
147.24 |
|
|
|
|
Price chg since bear mkt
signaled |
Tot decline since start bear mkt |
Max Pot Loss % |
|
|
|
|
|
3.73% |
-3.93% |
-7.38% |
|
|
|
|
|
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 |
|
11/28/2012 |
166.55 |
Current stop level: Sec React
low |
|
11/02/2012 |
162.6 |
|
|
|
|
Unrlzd gain % |
Tot advance since start bull mkt |
Min Pot Gain % |
|
|
|
|
|
3.74% |
11.43% |
1.28% |
|
|
|
|
|
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 |
|
11/28/2012 |
32.62 |
Current stop level: Sec React
low |
|
11/02/2012 |
29.95 |
|
|
|
|
Unrlzd gain % |
Tot advance since start bull mkt |
Min Pot Gain % |
|
|
|
|
|
12.79% |
27.27% |
3.56% |
|
|
|
|
|
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 |
|
11/28/2012 |
22.78 |
Current stop level: Bear mkt
low |
|
|
17.08 |
|
|
|
|
Unrlzd gain % |
Tot advance since start bull mkt |
Max Pot Loss % |
|
|
|
|
|
4.35% |
33.37% |
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 |
|
11/28/2012 |
47.9 |
Current stop level: Bear mkt
low |
|
|
39.56 |
|
|
|
|
Unrlzd gain % |
Tot advance since start bull mkt |
Max Pot Loss % |
|
|
|
|
|
0.27% |
21.08% |
20.75% |
|
Sincerely,
The Dow Theorist.