Evaluating the unrealized gains hitherto made in SPY by the current primary bull market signal.
It is time to
make a small recap about the current primary bull market signal and the
unrealized profit hitherto made by those following the Dow Theory. It is also
time to take a closer look at our stop loss (which will be the subject of a
separate post).
As you can
see in the spreadsheet below, the bull market was signaled on January 2nd,
2013. The SPY stood at 146.06.
On May 17, 2013,
the SPY closed at 166.94, which amounts to an unrealized profit of 14.30% (see
spreadsheet below for further details).
The word
“unrealized” must be stressed, though. No time to get over excited. Thus, if
the market corrects, most of this paper profits may evaporate. While it is always
tempting to sell out and cash some profits, this is not the proper procedure
under the Dow Theory (of any flavor whatsoever). We should not forget that trends
tend to last longer than expected and, accordingly, the odds favor the
continuation of the trend and, with it, the building up of further profits.
Within this context, it bears repeating that we are dealing with a young
primary bull market both in duration (only 4 ½ months since it was signaled)
and extent (14.30% gain). While nobody can predict the future, we know (as I
wrote here) that:
The average
duration of each transaction taking according to the classical Dow Theory
lasted 712 days. This is slightly less than 2 years.
The median
duration amounts to 565 days, which is roughly 1.5 years.
The shortest
investment lasted only 60 days (year 1990).
The longest
investment lasted 2799 days (secular bull market 1900-1998).
As to the average
gain made by following each primary bull market signal, it stands for the classical/Rhea
flavor at an average 32.33% (according to the Dow Theory track record since
1897). In a future post, I will provide the followers of this Dow Theory blog with additional details as to the average primary bull market signal gain
(with breakdown depending on secular bull and bear market conditions).
However, here it suffices to say that if we may reasonably expect to gain
32.33% (average return in the last +110 years), and we have just made less than
15% of unrealized profits, the odds favor a further buildup of gains.
Thus, we can
conclude: The current primary bull market signal of January 2, 2013 (or January
18, if the signal is to be determined according to the “classical/Rhea” flavor
of the Dow Theory) is still “young." 4 and ½ months versus an
average duration of almost 2 years, is clearly a young bull market. The
unrealized gain is still less than half the average primary bull signal gain.
Under these
conditions, it seems clear to me that we have to have the stomach to endure
the coming secondary reaction (one day it will come, as it is overdue) since the odds favor
the resumption of the primary bullish trend after the secondary reaction runs its course. Getting out too soon is a dangerous
proposal. To avoid devastating losses (or to lock in profits) if the trend suddenly
reverses, it is neither necessary, nor advisable to prematurely exit trends, as
we have a couple of tools in our Dow Theory arsenal to accomplish this goal. More
about such “tools” in a post that I hope to publish this weekend. Readers of
this Dow Theory blog stay tuned.
Stocks
The SPY,
Industrials and Transports closed up. The primary and secondary trend is
bullish.
Today’s
volume was higher than yesterday’s, which is bullish, as higher prices were
confirmed by rising volume. The overall pattern of volume remains neutral, as
the volume bullish action of the last few days is neutralizing past bearish
readings.
Gold and
silver
The gold and
silver universe rout continues.
GLD closed
down. So did SLV. GLD closed below the 04/15/2013 closing lows, thereby
re-confirming the primary bear market signals and turning the secondary trend as bearish. Here you have an
updated chart that says it all:
![]() |
Primary bear market re-confirmed in SLV and GDX. |
It is pertinent to remember that on December 20, 2012, I first alerted my readers about a primary bear market in gold and silver, as you can read here.
As to GDX and
SIL, the gold and silver miners ETFs both closed down and violated their most
recent primary bear market lows. GDX and SIL, in their abject weakness, unlike
gold and silver, were unable to stage even a secondary bullish reaction against
the primary bearish trend. Thus, the primary and secondary trend remains bearish.
Here you have
the figures of the markets I follow for today.
Data for May 17, 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 | 05/17/2013 | 166.94 | |
Current stop level: Bear mkt low | 135.7 | ||
Unrlzd gain % | Tot advance since start bull mkt | Max Pot Loss % | |
14.30% | 23.02% | 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.
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