Gold finally confirms silver upward movement.
Well, let’s see what the Dow
Theory has in store for us today. Today is a rich day in technically significant
events.
Are the markets sensing
liquidity, an improvement in economic conditions or this is merely the last
blow off before the onset of a secondary reaction? We really don’t know.
What I do know is that both
the SPY and the Industrials have bettered their Sep 14 closing high. The
Transports did long time ago (in mid December) better the Sep 14 closing high. So
even for “classical” Dow Theorists who only follow the Industrials and the
Transports, I think this is clearly bullish action. Of course, to be even more
sure about a bullish breakout, the Industrials should better their 10/05/2012
closing high (at 13610.15).
In any instance, for the
reasons explained in this post in this Dow Theory blog, I am of the
opinion that the primary trend turned from bearish to bullish on November 15, 2012
and was signaled by the Dow Theory on January 2, 2013. So thinks leading Dow
Theorist Schannep.
The market is getting
overbought and hence those happy longs should be prepared to endure a secondary
reaction. From a Dow Theory perspective the current primary bull swing that
started on November 15 has been in motion slightly more than 2 months
uncorrected. Statistically, the odds favor a correction soon.
The primary trend and
secondary trend of stocks remains bullish.
Let’s turn to volume. Here we
have news. Today’s volume was higher than yesterday’s. As higher prices were
confirmed by rising volume it has a bullish connotation. Thus, I added another
blue arrow on top of the volume bar.
However, today the SPY also
broke above its Sep 14, 2012 high (which was clearly a pivot day). When we
compare volume at the Sep 14 closing high with today’s volume we see that today’s
volume was lower than that of Sep 14. This is a bearish sign. Even though, in
itself, is not enough to end a bull market, it may be hinting that a secondary
reaction might be in the making soon. In any instance, breakouts are more
dependable when they occur on higher, not lower, volume. Thus, I added a red
arrow on top of the volume bar (which then has two conflicting arrows: it was a
bullish day, but a bearish breakout).
Here you have an updated
chart. You can see the Sep 14 closing high encircled with an oval. The pink
line connects today’s closing high with Sep 14 closing high. If you look at
volume at these two bars, you can see that volume is not supporting the
breakout.
Today's breakout out of the Sep 14 highs was not confirmed by volume |
So while I cannot discard all
the previous bullish volume readings which have been echoed here, I am a
little less bullish as far as volume is concerned.
Gold (GLD) and Silver (SLV)
closed up. The big news is that gold finally deigned to confirm silver breakout
of the 01/02/2013 highs. While such confirmed breakout of the minor (very minor)
01/02/2013 highs is bullish we shouldn’t get too carried away. The highs of
01/02/2013 barely qualify as a significant high under Dow Theory. As you
probably know if you follow this Dow Theory blog a movement must exceed 3% to
be relevant. While this was formulated for stocks, it roughly applies to
precious metals provided we adjust for their inherent volatility. While gold
has a daily volatility resembling that of the SPY, silver roughly doubles it. Thus,
for a rally in gold to be relevant under Dow Theory I demand at least 3%. For
silver I demand ca. 6%.
All in all, the 01/02/2013
highs didn’t come remotely close to staging a decent “rally” under Dow Theory. Therefore,
the breakout of such highs (first by silver today by gold), while certainly not
bearish doesn’t even qualify to turn the secondary trend as bullish. If my
calculations are right silver has rallied 5.97% from the 12/24/2012 lows at
28.94 (it closed today at 30.67). Gold has rallied 2.45% from the 01/07/2013
lows at 159.43 (it closed today at 163.35).
Here you have an updated
chart:
Today gold confirmed silver's breakout. However too soon to turn even the secondary trend bullish |
So the primary trend and
secondary trend for GLD and SLV remain bearish.
SIL and GDX closed down. Either
big accumulation o distribution is taking place. I have my own
fundamentally-based ideas about what is happening to the miners but, being
always leery of pontificating fundamental ideas, I keep them to myself for the
time being. I’ll just give you one clue: read Fofoa.
In the meantime, the primary trend remains bullish and the secondary trend bearish.
Here you have the figures of
the markets I monitor for today:
Data for January 17, 2013 | |||
DOW THEORY PRIMARY TREND MONITOR SPY | |||
SPY | |||
Bull market started | 11/15/2012 | 135.7 | |
Bull market signaled | 01/02/2013 | 146.1 | |
Last close | 01/17/2013 | 148 | |
Current stop level: Bear mkt low | 135.7 | ||
Unrlzd gain % | Tot advance since start bull mkt | Max Pot Loss % | |
1.33% | 9.06% | 7.63% | |
DOW THEORY PRIMARY TREND MONITOR GOLD (GLD) | |||
GLD | |||
Bull market started | 05/16/2012 | 149.5 | |
Bull market signaled | 08/22/2012 | 160.5 | |
Exit December 20 | 12/20/2012 | 161.2 | |
Current stop level: Sec React low | 11/02/2012 | 162.6 | |
Realized Loss % | Tot advance since start bull mkt | ||
0.39% | 7.83% | ||
DOW THEORY PRIMARY TREND MONITOR SILVER (SLV) | |||
SLV | |||
Bull market started | 06/28/2012 | 25.63 | |
Bull market signaled | 08/22/2012 | 28.92 | |
Exit December 20 | 12/20/2012 | 29 | |
Current stop level: Sec React low | 11/02/2012 | 29.95 | |
Realized gain % | Tot advance since start bull mkt | ||
0.28% | 13.15% | ||
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 | 01/17/2013 | 22.16 | |
Current stop level: Bear mkt low | 17.08 | ||
Unrlzd gain % | Tot advance since start bull mkt | Max Pot Loss % | |
1.51% | 29.74% | 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 | 01/17/2013 | 45.04 | |
Current stop level: Bear mkt low | 39.56 | ||
Unrlzd gain % | Tot advance since start bull mkt | Max Pot Loss % | |
-5.71% | 13.85% | 20.75% |
Sincerely,
The Dow Theorist.
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