Gold and silver up. Has a bottom been made?
Let’s get
started with our Dow Theory commentary in this blog today.
Special note
on gold
GLD lost
yesterday (Feb 25) 7.82 tonnes of gold. Thus, inventories have been declining
for 5 days in a row. All in all, inventories have declined from 1322.97
tons to 1272.85 tonnes, that is 50.12 tonnes or 3.78%.
If my reading
of my data is correct, the last time (from 05/03/2011 to 05/09/2011) we
encountered five days of declining inventories in a row, GLD made an
intermediate bottom (5/5/2011 at 143.47), and a powerful rally ensued in the
next three months which brought GLD to 174.58 on 08/10/2011 (a gain of 21.68%).,
Furthermore, the 5 days in a row inventory “puke” experienced from 05/03/2011
to 05/09/2011 only involved 22.54 tonnes, whereas the current drain
exceeds 50 tonnes. Thus, the severity of the current “puke” is not to be
underestimated. Here you have a chart depicting those vital 3 months of market
action for GLD (the blue rectangle highlights the five consecutive days of
inventory losses):
![]() |
GLD's performance after five days of consecutive "pukes" |
The severity
of the current “puke” is noteworthy. Either a decent rally (let’s say +10%) is
staged in the next weeks or things can get serious.
If you want
to know why inventory drawdowns, contrary to conventional wisdom, are bullish
for gold, you are advised to go here
and especially, here (Victor the
Cleaner's blog)
You can
monitor by yourself GLD inventories by going here.
Speaking
about gold, Martin Sibileau has written an excellent article explaining the way
the price of gold is suppressed through gold loans. His post relates to current GLD inventory losses, and astute readers can make the connection between too
much “paper” gold (i.e. gold loans not 100% backed by gold) and inventory
losses (those who want their gold “physical” akin to a run on the bank).
Readers of
this blog may wonder why I have been writing so much about gold of late. The reason
is simple: The edifice of “paper” not fully allocated gold is likely to
collapse. Nobody can time it, not even the Dow Theorists (at best we will be
able to see in the charts that paper gold is going down, but as you should be
well aware if you follow this Dow Theory blog, no timing system can spot the
change of a trend in real time. Some lag is unavoidable). If such a collapse
occurs, it might have dire consequences to the USD and for the whole world.
Thus, and in spite of my “technical” inclinations, I keep a close eye on the
gold markets.
Stocks
The SPY, Industrials
and Transports closed up. The primary and secondary trend remains bullish.
Today we had
the seventh bearish volume day in a row, as today’s volume was lower than
yesterday’s. Thus, advancing prices were met with receding volume.
Thus, the
four bearish volume readings I alluded to yesterday remain fully valid.
Gold and
silver
In my
February 21 post, I was wondering whether gold was making a bottom based on the
loss of inventory of GLD.
Today’s action
seems to confirm that it is likely that a bottom has been made, as gold and
silver closed strongly up. Furthermore, they closed up for four days in a row. This
is bullish action, even though they are getting ready for a respite. Although I
shed lots of credence to the “puke” indicator (because it makes aprioristic
sense), we must bear in mind that the primary and secondary trend of GLD and
SLV remains bearish. If the primary bear market is really over we will soon be
able to spot a trend change in the charts.
SIL and GDX
(the gold and silver miners ETFs) closed up. Volume readings of some mining
stocks seem to denote that a bottom has been made. However, once again, we must
bear in mind that the primary and secondary trend remains bearish.
Here you have
the figures of the markets I monitor for today:
Data for February 26, 2013 | |||
DOW THEORY PRIMARY TREND MONITOR SPY | |||
SPY | |||
Bull market started | 11/15/2012 | 135.7 | |
Bull market signaled | 01/02/2013 | 146.06 | |
Last close | 02/26/2013 | 150.02 | |
Current stop level: Bear mkt low | 135.7 | ||
Unrlzd gain % | Tot advance since start bull mkt | Max Pot Loss % | |
2.71% | 10.55% | 7.63% | |
DOW THEORY PRIMARY TREND MONITOR GOLD (GLD) | |||
GLD | |||
Bull market started | 05/16/2012 | 149.46 | |
Bull market signaled | 08/22/2012 | 160.54 | |
Exit December 20 | 12/20/2012 | 161.16 | |
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 | |
Exit January 23 | 01/24/2013 | 21.69 | |
Current stop level: Sec React low | 11/15/2012 | 21.87 | |
Realized Loss % | Tot advance since start bull mkt | Max Pot Loss % | |
-0.64% | 26.99% | 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 | |
Exit January 23 | 01/24/2013 | 44.56 | |
Current stop level: Sec React low | 12/05/2012 | 45.35 | |
Realized Loss % | Tot advance since start bull mkt | Max Pot Loss % | |
-6.72% | 12.64% | 20.75% | |
Sincerely,
The Dow
Theorist
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