Dow Theory update for May 10: SPY and Industrials make higher highs

 Gold makes lower low unconfirmed by silver

What lies behind gold’s decline?

One Bad Adder is another follower of FOFOA’s blog whose comments, in my opinion, deserve to be heard. In this comment (posted on May 10 at 12:00 AM), he summarily explains the real cause behind gold’s decline. Contrary to conventional wisdom, gold went down not because the owners of physical gold were eagerly selling but, rather, because, avid buying of physical endangered the physical/paper gold ratio of bullion banks. Thus, the run on GLD.

 

In a similar vein, Casey Research has penned a very interesting article named “Why there may be a lot less gold than we realize," which displays hair-curling statistics. You can read the article here.

Stocks

The SPY, Industrials and Transports closed up. The SPY and Industrials made a higher high unconfirmed by the Transports. The primary and secondary trend is bullish.

Today volume contracted as prices advanced, which is bearish. The overall pattern of volume is neutral, so I don’t derive many clues about likely market direction from volume.

Gold and Silver

SLV closed up. GDX closed down. Neither GLD nor SLV has experienced a pullback from their recent highs that qualifies as a valid set up for a subsequent primary bull market signal. In other words, the rally that ended on 04/29/2013 (SLV) and 04/30/2013 (GLD) exceeded the minimum percentage requirements 6% (SLV) and 3% (GLD) to qualify as a secondary reaction and thus label the secondary trend as bullish. For more information, please read this post in this Dow Theory blog. However, what follows after that rally is important. Either gold or silver (or both) must experience a pullback of at least 3% (GLD) or 6% (SLV). Following such a pullback they must break above the rally highs (04/29 for SLV and 04/30 for GLD) for a primary bear market signal to be displayed.

Therefore, GLD and SLV are caught in no man’s land. They have not gone low enough to violate the last recorded primary bear market lows (04/15/2013), which would re-confirm the primary bear market and turn the secondary trend as bearish, nor have gone low enough to create the precondition for a subsequent primary bull market signal.

Thus, we have to wait. Subsequent market action will tell us whether we get a primary bull market or whether the current primary bear market will be reconfirmed.

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

Here you have the figures of the markets I follow for today.

 

Data for May 10, 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		05/10/2013	163.41
Current stop level: Bear mkt low			135.7
Unrlzd gain %	Tot advance since start bull mkt	Max Pot Loss %
11.88%	20.42%	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