Dow Theory Update for Dec 7: Stocks and precious metals up

No changes in trends.

What are other Dow Theorists saying? Richard Russell, of the Dow Theory Letters fame, is mixed (as far as I can conclude). He says that as long as the 11/15/2012 lows are not violated there is hope for the bulls. However, until the October highs are not broken out, he will not be a convinced bull, since in his opinion the market has been bearish for a long time. So, as far as I understand, he is ambiguous about the market. On a longer time frame, and applying Schaefer's 50% principle, he says there is hope for the bulls. I'd tend to say that on a secular basis (50% principle), he finds the trend bullish, on a longer term (1-2 years) he finds the trend bearish and on the short term, he is agnostic.

What is my take on Russell’s opinion? Well, as you may know I am quite skeptical as to forecasting the secular trend. In a future post on this Dow Theory blog, I will explain why. As to the long-term trend (1-2 years) my Dow Theory “flavor," says that the market is in a primary bear market, and it seems there is agreement on this time frame across the Dow Theory fraternity (see my post “Dow Theory recap: What are other Dow Theorists saying?” which you can find here).

The SPY, Industrials and Transports closed up. Under Dow Theory, the primary trend remains bearish and the secondary trend bullish. The SPY and the Industrials have broken above the secondary reaction 11/30/2012 highs. This merely means that we have to change the meaningful highs of the secondary reaction. Now our new reference point is 13155.13 for the Industrials and for the SPY 142.41. It goes without saying that if this rally further continues; we’ll have to adjust the relevant secondary reaction highs.

Volume declined again. As it was an up day, this has a bearish tone. Overall, this rally has not been supported by volume. So we have two minuses: On the longer term (i.e. six months) we are under a primary bear market, so the odds favor declining prices irrespective of volume; on the shorter term (i.e. two weeks) advancing prices have been negated by declining volume, which is also bearish. Let’s see what happens.

Here you have an updated chart containing volume:

Volume with a bearish bias

 

As to gold, silver and their respective ETF miners (SIL and GDX) all of them closed up. Technically, however, nothing has been accomplished and their primary trend remains bullish while the secondary trend remains bearish.

Here you have the figures of the markets I monitor for today:

 

Data for December 7, 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		12/07/2012	142,41
Current stop level: Bull market high			147,24
Price chg since bear mkt signaled	Tot decline since start bear mkt	Max Pot Loss %
4,43%	-3,28%	-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		12/07/2012	165,16
Current stop level: Sec React low		11/02/2012	162,6
Unrlzd gain %	Tot advance since start bull mkt	Min Pot Gain %
2,88%	10,50%	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		12/07/2012	32,03
Current stop level: Sec React low		11/02/2012	29,95
Unrlzd gain %	Tot advance since start bull mkt	Min Pot Gain %
10,75%	24,97%	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		12/07/2012	22,43
Current stop level: Bear mkt low			17,08
Unrlzd gain %	Tot advance since start bull mkt	Max Pot Loss %
2,75%	31,32%	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		12/07/2012	45,93
Current stop level: Bear mkt low			39,56
Unrlzd gain %	Tot advance since start bull mkt	Max Pot Loss %
-3,85%	16,10%	20,75%

Sincerely,

The Dow Theorist.