Wednesday, January 9, 2013

Dow Theory Update for Jan 9: Stocks mildly bullish





Gold and silver slightly down


Let’s analyze the markets under the prism of the Dow Theory.

The SPY, Industrials and Transports closed up. The Transports have bettered its 01/04/2013 highs. However, neither the SPY nor the Industrials have confirmed.

The primary trend and secondary trend for stocks is bullish.

Volume today was slightly higher than yesterday’s. Since it was an “up” day, upward action was confirmed by volume, and hence it has a bullish connotation. As you can see in the chart below the number of blue (bullish) and red (bearish) arrows is quite similar. From such a standpoint, I’d label volume as neutral.

Volume seems to be supporting the new trend


However, I see two distinct bullish volume formations in the chart.

Firstly, as I wrote on January7  “we see that the last rally off the lows was supported by volume (volume expanding with price) whereas volume is contracting during the incipient consolidations we are currently seeing. I'd label this action as bullish." Thus, please notice the blue trend lines.


Secondly, as you know, I tend to pay attention to volume action at significant pivots. I see that the last two significant pivots have a bullish volume implication. Thus, volume at the 12/28/2012 lows was lower than volume at the preceding pivot low of 11/27/2012. Please mind the pink line connecting both lows so that you can spot them more easily. Lower volume at comparable price (pivot) levels implies that as such prices, there was not strong conviction. Conversely, the 01/02/2013 highs (which, by the way, coincide with the signaling of a primary bull market) witnessed higher volume than the preceding pivot high of 12/18/2012 which validates the upward movement. All in all, volume at the last pivot low was bullish (contracting volume) and volume at the last pivot high was bullish too (expanding volume).

So my overall assessment of volume is bullish.

The only thing that bothers me is the monster volume down day we saw on 12/21/2012. Normally, such monster volume days leave scars on the charts. The most obvious interpretation of such a day is that its range was resistance to further advance. Such resistance was clearly broken out, so now that day’s range should act as support for prices should they decline.

Please bear in mind that volume is clearly of secondary importance, and trends are made by price action not by volume. Volume merely serves to qualify the trend and helps us make an assessment as to whether the price trend is likely to continue (confirming volume) or not.

Gold and silver closed slightly down. The primary and secondary trend remains bearish.

SIL and GDX (the silver and gold miners ETF) closed up and down respectively. The primary trend remains bullish, and the secondary trend remains bearish.

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


Data for January 9, 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
01/09/2013 145.9
Current stop level: Bear mkt low

135.7




Unrlzd gain % Tot advance since start bull mkt Max Pot Loss %




-0.10% 7.53% 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
01/09/2013 22.12
Current stop level: Bear mkt low

17.08




Unrlzd gain % Tot advance since start bull mkt Max Pot Loss %




1.33% 29.51% 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
01/09/2013 44.36
Current stop level: Bear mkt low

39.56




Unrlzd gain % Tot advance since start bull mkt Max Pot Loss %




-7.14% 12.13% 20.75%




Sincerely,

The Dow Theorist.

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