Wednesday, May 29, 2013

Dow Theory Update for May 29: Yesterday’s higher high by the Industrials remains unconfirmed



 Trends remain unchanged





The secular bear market is not finished yet

Danielle Park of the “Juggling Dynamite” blog, echoing Vitaliy Katsenelson, is of the opinion that the secular bear market in stocks that began in the year 2000 is far from over. PER and profit margins (and record highs) speak against a new secular bull market. As a consequence, we should brace ourselves for, at least, one more cyclical bear market.


From a Dow Theory perspective or, at least, from a Rhea/Classical Dow Theory perspective, it is immaterial to us whether we are in a secular bull or bear market, as we are mainly interested in the cyclical bull and bear markets. Thus, on November24, 2012, I wrote:

I personally tend to ignore the secular trend and, like Schannep, I feel comfortable spotting cyclical bull and bear markets. This implies a time frame of ca. 1-2 years, which is long term enough not to be a short term trader but short term enough not to be a “buy and hope," sorry, “buy and hold” investor. The secular trend is important, though: It helps me determine the total amount of capital to be committed to stocks. In a secular bull market like the nineties, I'd feel comfortable with an 80% allocation to stocks. Under a secular bear market, I'd decrease my commitment even under a cyclical bull market.

Furthermore, my Dow Theory studies show that the investor is able to extract profits (albeit more modestly) from the market even under secular bear markets, as explained here.


Stocks

The SPY, Industrials and Transports closed down. The higher high made by the Industrials yesterday remains unconfirmed.

Today’s volume was slightly higher than yesterday’s. Accordingly, it has a bearish connotation as declining prices were confirmed by stronger volume. The overall pattern of volume is neutral, since, in spite of some bullish volume days, volume action was clearly bearish on 05/22/2013. Here you have an updated chart.

Volume is neutral.
 
Gold and Silver

GLD and SLV closed up. However, one “up” day is not enough to change trends. The primary and secondary trend remains bearish.

GDX and SIL closed up. The primary and secondary trend remains bearish.

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

 

Data for May 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
05/29/2013 165.27
Current stop level: Bear mkt low

135.7




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




13.15% 21.79% 7.63%




Alternative Schannep's stoploss: 


Highest closing high
05/21/2013 167.17
16% stoploss from highest closing high

140.42


Max Pot Loss %


-3.86%




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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