Friday, December 7, 2012

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.

1 comment:

  1. I think you are right to expect lower prices. The vast majority of things that I am looking at suggest lower prices, and perhaps substantially lower prices, but it feels like some distribution is taking place prior to the next leg down, to perhaps 1320/30 or lower on SPX.

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