Dow Theory Update for March 27: Precious metals seems to awake

Stocks meandering

Zero Hedge highlights bearish volume

In a post entitled “Autopsy of a Death Market”, Zero Hedge made clear today that volume in the last few days has been ominously bearish.

 We have taken a similar stand in this Dow Theory blog.

Stocks

The SPY closed unchanged. The Transports closed up, but failed to make higher highs (thus remaining the higher high made yesterday by the Industrials unconfirmed), and the Industrials closed down. This kind of market action, coupled with bearish volume readings (more on this below) tells us that technically this primary swing is losing steam.

Yesterday’s stock market action reminded me what happened on October 5, 2012 when the Industrials made a higher high and the other indices refused to confirm. Such unconfirmed high was the “high-water mark" mark” and from such point, a secondary reaction began. Are we seeing a repeat of the October 5, 2012 action? The odds for a secondary reaction are high because:

1.    The pattern of volume has been bearish for more than one month as shown here and here.

2.  The primary bull swing has been uncorrected for more than 4 months (since the 11/15/2012 lows). If past experience is to serve us as a guide, the primary swing is “old."

However, I insist that I am not interested in “timing” secondary reactions, as I recently explained here. I monitor, though, secondary reactions or their likely inception, because I feel that the more I understand markets, the better. Knowledge is never useless, even though I may personally decide not to trade secondary reactions.

Today’s volume was neutral. The SPY closed unchanged and volume was almost identical with the one we saw yesterday. 

Gold and silver

GLD, once again, didn’t either win or lose inventory yesterday.

GLD and SLV closed up. While it seems that a bottom has been made, if we apply Dow Theory patterns to GLD and SLV, it is too early to declare a change in trends. Not even the secondary trend has turned bullish as silver has barely budged from its February 28 lows at 27.54. I have to see silver rally by at least 5% to become convinced that the secondary trend has turned bullish. Hence, the primary and secondary trend remains bearish.

As to the gold and silver miners ETF (GDX and SIL) both closed up. The primary and secondary trend remains bearish, though.

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

 

Data for March 27, 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		03/27/2013	156.19
Current stop level: Bear mkt low			135.7
Unrlzd gain %	Tot advance since start bull mkt	Max Pot Loss %
6.94%	15.10%	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.