Stocks dodge, once again, a secondary reaction.
Let’s get
started with our Dow Theory commentary in this blog. Today was a day laden with
Dow Theory and technical relevant events.
Stocks
Last Friday
May 3rd, the Industrials broke above the last recorded primary bull
swing closing highs (04/10/2013). By doing this, the Industrials confirmed the
higher highs made by the SPY. According to Schannep’s version of the Dow Theory
(more about it here), we use 3
indeces (SPY, Industrials and Transports), and for a signal to exist it is necessary
that at least two of them confirm.
Today, May 6th,
the Transports closed at 6,297.98 and, accordingly, broke above the 03/14/2013
closing highs (primary bull market swing). Thus, higher highs have been unanimously confirmed by the three
indices we monitor. Hence, it doesn’t
matter which Dow Theory flavor you take. Be it with more “generous” Schannep’s
or with the “Rhea/Classical” Dow Theory (which only uses two indices, namely,
the Industrials and the Transports), confirmed higher highs have been made
and, accordingly, the primary bull market has been reconfirmed.
As a logical
consequence, the stock market has dodged once again a secondary reaction. Thus,
we are witnessing a long a powerful primary bull market swing that started on
November 15, 2013 and was “detected” by the Dow Theory on January 2, 2013 as
you can read here and here.
Of course, this is an already “aging·” primary bull market swing (please mind, I am saying "swing" and not an aging "bull market. The bull market ifself is young; however, this "leg" or "swing" is getting old), and the longer it lasts uncorrected, the higher the odds for a secondary reaction. However, for the time being, a correction is not on the horizon, as confirmed higher highs negate all (modest) declines hitherto seen (which failed to evolve into a secondary reaction) and, with it, any developing secondary reaction.
Therefore,
the primary and secondary trend of stocks is bullish.
The updated
chart below shows all recent price action. As you can see the SPY, Industrials
and Transports have neatly broken above the previous highs (shown with red
horizontal lines).
Today’s
volume was lower than Friday’s, which has a bearish connotation. As I have been
copiously writing, the overall picture of volume is quite bearish. However, as
I have also copiously written, volume merely qualifies price. In other words,
volume increases the odds for a change of trend to occur. However, the ultimate
“judge” is price action itself. Furthermore, for those interested in investing
along the primary trend, volume considerations are of very limited importance,
as the primary trend is defined by simple price action (i.e. penetration of
secondary reactions, irrespective of volume considerations).
Furthermore,
a primary bull market has been confirmed from an alternative analysis that has
nothing to do with the Dow Theory. More about this technical study and its
consequences for investors tomorrow.
Gold and
silver
I am gonna
simplify my life: I will omit any mention to GLD’s inventory changes until I
see one day when they go up. Until then, you may safely assume that the hemorrhage
continues.
GLD closed
up, SLV down. The primary trend is bearish, and the secondary trend is bullish.
SIL closed
down, and GDX closed up. The primary trend and secondary trend for both ETF
miners is down.
Here you have
the figures of the markets I monitor for today.
Data for May 6, 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 | 05/06/2013 | 161.79 | |
Current stop level: Bear mkt low | 135.7 | ||
Unrlzd gain % | Tot advance since start bull mkt | Max Pot Loss % | |
10.77% | 19.23% | 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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