Keep an eye on gold and silver
Well, we finally got our
primary bear market signal under Dow Theory. We got it by just some cents, but
we got it after all.
Today the Transports closed at
4891.27. The secondary reaction lows of the Transports of 09/28/2012 stood at
4892.62. So just by some cents the Transports closed below the relevant lows
thereby signaling a primary bear market signal.
Under Dow Theory, it is
immaterial whether the relevant low is violated by just one cent or two
hundred points, and hence, we have to declare that today the market has told us
that the primary trend is bearish. Furthermore, those doubting the validity of
this signal because it was just given by a penetration of some cents are well
advised to read my Dow Theory special issue “Is the primary trend for stocks
about to change?” which you can find here.
If you go to that post, you
will see that Schannep already signaled a bear market signal on 11/07/2012.
While my Dow Theory flavor is slightly less aggressive than Schannep’s, one
thing is clear: I wouldn’t argue too long with Schannep and his outstanding
track record. Today even under my somewhat more conservative interpretation of
the Dow Theory a primary bear market signal was signaled.
Please note that I don’t say
that today the primary trend has turned bearish. The primary trend turned
bearish when the last confirmed highs were made on 09/14/2012. Since that date,
the stock market was unable to make higher confirmed highs. The Industrials made
higher highs on 10/05/2012 but unconfirmed. Thus, all the price movement we
experienced since 09/14/2012 is to be relabeled as the first primary swing of
the new primary bear market.
Today those investing along
the primary trend should have gotten out of stocks or, at the very least, sell
down to 50%. While we don’t know what is in store for us, as the Dow Theory
doesn’t make the pretense of knowing the future, we do know that the odds favor
the continuation of the bear market. Even if the market might reverse and shoot
up in the weeks and months ahead, we must be disciplined and heed the signals
given by the Dow Theory. Discipline is vital and to have discipline you have to
understand the intricacies of the Dow Theory.
I will post later today or
tomorrow Saturday a special Dow Theory issue where I will further analyze the
implications of this primary bear market signal. Please stay tuned.
The Industrials and the SPY
closed up for the day. However, their action under Dow Theory was not enough to
dodge the bullet.
Volume was higher today and
being the SPY up today it has a bullish implication. However, the overall pattern
of short term volume remains bearish.
Gold and silver closed down
today. By closing down they begin to approach dangerously the secondary
reaction lows made on 11/02/2012 If such
lows are violated, then gold and silver will have signaled a bear market of
their own. Here you have an updated chart:
 |
| If the red line is jointly violated a primary bear market signal for gold and silver will be flashed |
The gold and silver miners
ETFs (GDX and SLV) both closed up today. Technically, nothing has changed.
Here you have the figures of
the markets I monitor for today. Please note that for the SPY, I changed the column
“unrealized gain” and wrote, “Realized gain." Since the investor is
supposed to have exited stocks at today’s close following the bear market
signal, the SPY unrealized gain became a realized gain. As you can see even
under adverse conditions and with a “failed” primary bull market signal, the
Dow Theory follower has managed to escape the debacle unscathed. More on this
in the Dow Theory special issue that will follow soon.
| Data for November 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 | 11/16/2012 | 136.37 | |
| Current stop level: Bear mkt low | 128.1 | ||
| Realized gain% | Tot advance since start bull mkt | Max Pot Loss % | |
| 0.20% | 6.46% | 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 | 11/16/2012 | 165.88 | |
| Current stop level: Bear mkt low | 149.46 | ||
| Unrlzd gain % | Tot advance since start bull mkt | Max Pot Loss % | |
| 3.33% | 10.99% | 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 | 11/16/2012 | 31.21 | |
| Current stop level: Bear mkt low | 25.63 | ||
| Unrlzd gain % | Tot advance since start bull mkt | Max Pot Loss % | |
| 7.92% | 21.77% | 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 | 11/16/2012 | 22.26 | |
| Current stop level: Bear mkt low | 17.08 | ||
| Unrlzd gain % | Tot advance since start bull mkt | Max Pot Loss % | |
| 1.97% | 30.33% | 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 | 11/16/2012 | 46.47 | |
| Current stop level: Bear mkt low | 39.56 | ||
| Unrlzd gain % | Tot advance since start bull mkt | Max Pot Loss % | |
| -2.72% | 17.47% | 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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