The Rhea version of the Dow Theory flashes primary bull market signal.
There are days when I keep
this daily commentary short. No reason to babble when the market has nothing
relevant to say.
Today is not one of such days.
Dow Theory relevant events are piling up.
As you know I announced in
this Dow Theory blog that on January 2, 2013 the Dow Theory signaled the
existence of a new primary bull market. More details here.
However, since I follow in
many aspects Schannep’s version of the Dow Theory (more about it here and
here), it could be argued that I was too premature, since, after all,
the Industrials were below their October 5, 2012 closing highs.
Today, the Industrials closed
at 13649.70 clearly breaking above the close of October 5, 2012 at 13610.15. Since
the Transports already bettered their 6/19/2012 closing highs on 12/18/2012,
today a primary bull market has been signaled by the “classic” Dow Theory.
So now the three Dow Theory “flavors”
are in alignment. Schannep’s (the most reactive and slightly shorter term
oriented), the “Rhea” or classical flavor, normally followed by Richard Russell,
and even the secular term oriented Schaefer’s Dow Theory flavor, since
according to the 50% principle (to be studied in a future post in this Dow
Theory blog) the very long-term trend is bullish.
Here you have a chart
containing only the Industrials and the Transports and the relevant highs that
have been penetrated:
 |
| A primary bull market signal has been signaled by the "classical" Dow Theory |
So much accord, even seems like a contrary indicator. Is a big correction lurking?
One thing is clear: We don’t
know what the future has in store for us. We don’t know whether as it is
announced everywhere we are on the verge of a meltdown. What we do know is that
the primary trend is unambiguously bullish by any technical measure.
I hope that Richard Russell,
of the Dow Theory letters, will notice soon today’s bullish breakout.
Now the customary sentence: In
case it was not clear, the primary trend and secondary trend of stocks remains
bullish.
Volume today’s was notably higher
than yesterdays. This makes it a bullish volume day as advancing prices were
supported by expanding volume. Furthermore, today’s volume has been the third
largest volume since September 2012. This has also bullish implications in the
short to medium term. However, such explosions of volume normally tend to
signal imminent short term tops to be later continued by the prevailing trend. All
in all, volume is too bullish and given the overbought condition of the market
it is susceptible to a pullback. However, after such a pullback the bullish
condition of the market should reassert itself with higher prices.
Furthermore, today’s big
volume makes me question whether yesterday’s break out pivot volume was
actually bearish. Yesterday I wrote:
“[t]oday 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”.
However, today’s follow up
volume seems to show that the breakout has been indeed confirmed by higher
volume, although delayed by one day.
Furthermore, the latest rally
out of the consolidation of the last few years has been supported by expanding
volume. To sum up:
1)
Daily readings of volume are bullish (I see
more blue arrow than red arrows).
2)
The trend of volume has supported the last two
rallies, which is bullish.
3)
Volume at the three last significant pivots has
been bullish. The last one seemed bearish but today’s volume makes think
otherwise.
Here you have an updated chart
containing the SPY and volume.
 |
| Volume continues bullish |
Bottom line: While anything
can happen and the market could correct soon, this is not a market to short.
Let’s turn our attention to
gold and silver.
Silver (SLV) closed up, and
gold (GLD) closed down. If all the chatter about the Bundesbank gold
repatriation doesn't move gold, nothing will. This is why yesterday, I didn’t
jump the gun and in a strict technical fashion, I refused to label the
secondary trend as bullish. For the time being both the primary and secondary
trend remain bearish. I am not the one to make fundamental assessments in this
blog, but those interested in trying to find what may be going on with paper
gold (GLD), should well read this post at Fofoa’s blog and the comments
thereto (since most of the comments are made by well informed people).
SIL (silver miners) closed down,
and GLD (gold miners ETF) closed up. Another day of meandering and nothing
being accomplished. The primary trend remains bullish and the secondary trend
bearish.
Later today I will post what I
hope is a very telling post about the power of the Dow Theory and how it
performed in the last +116 years. A real tour de force I haven`t seen published
anywhere else.
Here you have the figures of the
markets I monitor for today:
| Data for January 18, 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 | 01/18/2013 | 148.3 | |
| Current stop level: Bear mkt low | 135.7 | ||
| Unrlzd gain % | Tot advance since start bull mkt | Max Pot Loss % | |
| 1.55% | 9.31% | 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 | 01/18/2013 | 22.05 | |
| Current stop level: Bear mkt low | 17.08 | ||
| Unrlzd gain % | Tot advance since start bull mkt | Max Pot Loss % | |
| 1.01% | 29.10% | 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 | 01/18/2013 | 45.11 | |
| Current stop level: Bear mkt low | 39.56 | ||
| Unrlzd gain % | Tot advance since start bull mkt | Max Pot Loss % | |
| -5.57% | 14.03% | 20.75% | |
Sincerely,
The Dow Theorist
No comments:
Post a Comment