Dow Theory Update for Nov 7: Precious metals universe holds its own

Stocks sharply down

 

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

Stocks were down today. The SPY and the Industrials jointly penetrated the 10/24/2012 lows hence confirming the secondary bearish trend. However, technically nothing has changed yet. The primary trend remains bullish and the secondary one bearish.

Volume was higher than yesterday’s and, given the monster down day we experienced today, it has a bearish connotation short term.

Gold closed up, silver closed mildly down and both ETFs miners closed up. The precious metals universe seemed oblivious to the debacle occurring in stocks. As you may guess, under Dow Theory nothing has changed. The primary trend remains bullish. The secondary trend for gold and silver remains bearish and for the ETFs it remains doubtful whether they are in a secondary reaction, thus displaying greater strength.

Thus, while we shouldn’t get too excited when markets go up, we shouldn’t get too pessimistic when markets go down like today. What’s really important is to monitor the primary trend. Furthermore, even though in the depths of a secondary reaction, it seems the world is going to end, it is good to remember that 70% of Dow Theory primary bull markets end up with profits. While we cannot know whether this one belongs to the fortunate “70%”, we know that, even if this time it is a failed signal, we have stop-loss at the June 4 bear market lows, which limits our losses to 6.25% (for the SPY).

Curiously enough in spite of the lousy stock market action we have witnessed today, the SPY still keeps an unrealized gain of 2.7% from its entry on June 29 (date of the Dow Theory primary bull market signal). You can see the details in the table below.

 

Data for November 7, 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		11/07/2012	139,78
Current stop level: Bear mkt low			128,1
Unrlzd gain %	Tot advance since start bull mkt	Max Pot Loss %
2,70%	9,12%	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		11/07/2012	166,5
Current stop level: Bear mkt low			149,46
Unrlzd gain %	Tot advance since start bull mkt	Max Pot Loss %
3,71%	11,40%	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		11/07/2012	30,83
Current stop level: Bear mkt low			25,63
Unrlzd gain %	Tot advance since start bull mkt	Max Pot Loss %
6,60%	20,29%	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		11/07/2012	24,46
Current stop level: Bear mkt low			17,08
Unrlzd gain %	Tot advance since start bull mkt	Max Pot Loss %
12,05%	43,21%	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		11/07/2012	51,07
Current stop level: Bear mkt low			39,56
Unrlzd gain %	Tot advance since start bull mkt	Max Pot Loss %
6,91%	29,10%	20,75%

 

Sincerely,

The Dow Theorist.