Dow Theory Update for April 29: Gold and silver setting up for a primary bull market

SPY makes unconfirmed higher highs. Secondary trend of gold and silver turns bullish

Today has been a day rich in Dow Theory events. We shall deal with them accordingly in this Dow Theory blog.

Stocks

The SPY, Industrials and Transports closed up. The SPY managed to make a higher high on a closing basis. However, such new high was not confirmed by the other two indices we monitor. The primary and secondary trend remains bullish.

Today’s volume was significantly weaker than that of Friday’s, which is bearish as higher prices were not joined by expanding volume. Today we witnessed a new pivot high (SPY). This pivot high was on lower volume than the preceding pivot high (connected by a horizontal pink line as you can see on the chart below), which has a bearish connotation. Furthermore, as you can see in the chart below, 3 of the last 4 pivots had bearish volume.

A bearish pivot high.

At the risk of repeating myself, what I see is a predominantly bearish volume picture, which is a harbinger of a secondary reaction. However, price action is more important than volume readings, and, by this token, we have to be patient.

Gold and silver

GLD puked again.

GLD and SLV closed up. Today gold and silver set themselves up for a change of trend. Let’s look at the charts under the magnifier.

 

The secondary trend for gold and silver turned bullish

Firstly, 10 trading days have elapsed since the 04/15/2013 lows. 

Secondly, GLD has won 8.36% (142.3 at today’s close versus 131.31 on 04/15/2013) and SLV has won 6.56% (23.54 at today’s close versus 22.09 on 04/15/2013). Thus, gold has staged a rally exceeding the minimum threshold of 3% for gold and ca. 6% for silver, given its larger volatility.  

Thus, a counter trend rally exceeding 3% (GLD) and 6% (SLV) has been staged by both precious metals. Thus, today we can label the secondary trend as bullish. In other words, a secondary reaction against the primary bearish trend has been signaled today according to the Dow Theory rules.

As to the primary trend, it remains bearish. However, now things get interesting. If either GLD or SLV experiences a pullback exceeding 3% (GLD) or ca. 6% (SLV) and after that pullback, new highs are made, then the primary trend will be declared as bullish.

Therefore, we have to keep a watchful eye on the GLD and SLV charts in the coming days.

As you can see, many days can pass by where the Dow Theory analyst has little to say, as trends tend to last longer than expected. Within this context, it is good to remember that the Dow Theory accurately detected the existence of a primary bear market in gold and silver on December 20, 2012, as was explained here. However, now we find ourselves in a juncture where in a short lapse of time, a change of trend of primary nature can occur.

From this point, two things may happen: Either the markets break below the 15/04/2013 lows, and the primary bear market will be reconfirmed, or the markets, after some modest pullback, break above the secondary reaction highs thereby signaling a new primary bull market.

SIL and GDX, the gold and silver miners ETFs closed up. However, it is still too early to call a change of the secondary trend. Let alone the primary trend.

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

 

Data for April 29, 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		04/29/2013	159.3
Current stop level: Bear mkt low			135.7
Unrlzd gain %	Tot advance since start bull mkt	Max Pot Loss %
9.06%	17.39%	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.