Monday, April 29, 2013

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.


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


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


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

9.06% 17.39% 7.63%


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%


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%


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%


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%


The Dow Theorist.

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