Dow Theory Update for April 9: Industrials make higher highs unconfirmed

Precious metals strong but no change in trends

The value trap

Dorsey Wright’s blog “Systematic Relative Strength” has recently published an interesting article concerning blind value investing, namely buying stocks because they look cheap. The main thesis is that stocks, unlike staples or commodities, don’t have a predetermined value or utility und, thus, what works for consumables (i.e. getting cheap toilet paper) doesn’t necessarily work for assets, which by definition are not to be consumed but to be held for a long time. Cheap apples when held long time can and do turn rotten. So investors beware of blind value investing. Don’t fall into the value trap.

One way to avoid such a value trap is, of course, to be a technical trader.

Stocks

The SPY and Industrials closed up. The Industrials made a higher high on a closing basis whereas the SPY failed to do so. The Transports closed down. According to the Dow Theory, the primary and secondary trend remains bullish.

Today’s volume was higher than yesterday’s. Since it was an up day, it has a bullish connotation. The overall pattern of volume remains bearish.

Gold and silver.

GLD did not either win or lose inventory yesterday.

GLD and SLV closed up. Silver was stronger than gold. The primary and secondary trend remains bearish. I need to see more market action to at least label the secondary trend as bullish as per the Dow Theory. We are still far from that. 

GDX and SIL, the gold and silver miners ETFs closed up. The primary and secondary trend remains bearish.

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

 

Data for April 9, 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		04/09/2013	156.75
Current stop level: Bear mkt low			135.7
Unrlzd gain %	Tot advance since start bull mkt	Max Pot Loss %
7.32%	15.51%	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