Friday, June 28, 2013

Dow Theory Update for June 28: Precious metals rebound or a dead cat bounce?



Primary and secondary trends unchanged.


Let's get started with our Dow Theory commentary for today.

Stocks

The SPY, Industrials, and Transports closed down.

The primary trend and secondary trend is bearish for the reasons explained here, and further explained here.

Today’s volume was much higher than yesterday’s, which is bearish as volume expanded with declining prices. The overall pattern of volume is bearish for the reasons explained here and, more recently, here.


Here you have an updated chart that says it all:

Volume expanded today as prices declined: bearish volume action continues
 
 
Gold and Silver

SLV and GLD closed up strongly. However, one day of strength is not enough to change any trend. Thus, the primary trend is bearish, as explained here and reconfirmed bearish here; the secondary trend remains bearish too.

GDX and SIL, the gold and silver miners ETFs closed strongly up too. The primary trend is bearish, as explained here and reconfirmed bearish here; the secondary trend remains bearish too.

Eventually, one of these primary bear market re-confirmations will be proven false. In the meantime, it is better not to fight the trend, and wait for a primary bull market signal in order to make a commitment on the long side.

Here you have the figures of the markets I monitor for today, which contain no changes as we are flat.


Data for June 28, 2013






DOW THEORY PRIMARY TREND MONITOR SPY




SPY
Bull market started
11/15/2012 135.7
Bull market signaled
01/02/2013 146.06
Exit June 21
06/21/2013 159.07
Current stop level: Sec reaction lows

161.27




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




8.91% 17.22%     None.








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%



Thursday, June 27, 2013

Dow Theory Update for June 27: Paper gold melting down



 Stocks rally on weak volume



Time to buy the junior gold miners ETF GDXJ?

Mebane Faber of Mebane Faber Research has penned an interesting article named “What happens when you buy assets down 80%”. In the article she analyses the subsequent 3 years return when you buy a sector, industry or country that has declined more than 60%, 70% and 80%. As you can guess the subsequent returns are mind boggling.

The article finishes by hinting the GDXJ (the junior gold miners ETF) might be a good buy right now given that it is extremely oversold.

Of course, buying extreme bottoms, which essentially is mean reversion, has nothing to do with the Dow Theory (which is pure “trend following”). However, I acknowledge that there are times (most) were one has to be a trend follower, and few and far between times were mean reversion may be indicated. Nevertheless, while agreeing with Mebane Faber that GDXJ may be a good buying opportunity, I’d couple the bet on mean reversion with some trend following, and I’d wait until the primary trend for the gold and silver miners turns bullish. No need to rush, even when this time catching a falling knife may seem statistically adequate.


Stocks

The SPY, Industrials, and Transports closed up.

The primary trend and secondary trend is bearish for the reasons explained here, and further explained here.

Today’s volume was lower than yesterday’s, which is bearish as volume contracted. The overall pattern of volume is bearish for the reasons explained here. Here you have a chart that shows lots of red arrows (bearish). You can notice that the last three days of price advance have not been confirmed by volume, which has grown smaller and smaller. The updated chart below shows clearly that the trend of volume is clearly bearish: Ascending when prices decline and descending when prices rally. 

Volume expands in declines and contracts in rallies: bearish

Gold and Silver

SLV closed unchanged, and GLD closed down once again in a climatic way. The primary trend is bearish, as explained here and reconfirmed bearish here; the secondary trend remains bearish too.

GDX and SIL, the gold and silver miners ETFs closed up. The primary trend is bearish, as explained here and reconfirmed bearish here; the secondary trend remains bearish too.

Eventually, one of these primary bear market re-confirmations will be proven false. In the meantime, it is better not to fight the trend, and wait for a primary bull market signal in order to make a commitment on the long side.

Here you have the figures of the markets I monitor for today, which contain no changes as we are flat.


Data for June 27, 2013






DOW THEORY PRIMARY TREND MONITOR SPY




SPY
Bull market started
11/15/2012 135.7
Bull market signaled
01/02/2013 146.06
Exit June 21
06/21/2013 159.07
Current stop level: Sec reaction lows

161.27




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




8.91% 17.22%      None.








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

Wednesday, June 26, 2013

Dow Theory Update for June 26: Precious metals gap down and fall out of bed



Stocks closed up


Piece of wisdom of Gartman, as quoted by Richard Russell.


Richard Russell, of the Dow Theory Letters, has nailed it down. When trying to call a bottom in gold, he wrote:

“I'm going to be kind and say that gold has put in a base at 1350. I'm going to side with Dennis Gartman when I say, "I don't give a damn about manipulation, price is price, and gold just can't get started."

That’s it! Be it because of manipulation, be it because of lack of demand paper gold is falling down. Why argue with price? Here Russell by siding with Gartman manifests a good deal of common sense.

However, such common sense should also have been applied to stocks when they were in the midst of the powerful cyclical bull market that ended last week. If stocks had been going up, if the trend was up, Russell should have heeded the clear message that the stock market was sending. Paraphrasing Gartman, I’d say, “I don’t give a damn about manipulation, price is price, and stocks were in a bull market” Even if the bull market was caused by manipulation, who cares? It is no secret that there are many vested interests in seeing a healthy stock market. The stock market has powerful endorsers, unlike gold. If stocks went up due to manipulation, or the FED, or for whatever reason, the truth is that there was more demand than supply. And this is all we should care, provided we are sure we are the rightful owners of the stocks we own (i.e. by avoiding margin accounts, unless one is a very short term trader).

Stocks

The SPY, Industrials, and Transports closed up.

The primary trend and secondary trend is bearish for the reasons explained here, and further explained here.

Today’s volume was lower than yesterday’s, which is bearish as ascending prices were not joined by raising volume. The overall pattern of volume is bearish for the reasons explained here. Here you have a chart that shows lots of red arrows (bearish). You can notice that the last two days of price advance have not been confirmed by volume, which has grown smaller and smaller.

Volume expanded during the decline and contracted during the present rally: Text-book bearish action
  
Gold and Silver

SLV and GLD closed down in a climatic way. The primary trend is bearish, as explained here and reconfirmed bearish here; the secondary trend remains bearish too.

GDX and SIL, the gold and silver miners ETFs closed down. The primary trend is bearish, as explained here and reconfirmed bearish here; the secondary trend remains bearish too.

Eventually, one of these primary bear market re-confirmations will be proven false. In the meantime, it is better not to fight the trend, and wait for a primary bull market signal in order to make a commitment on the long side.

Here you have the figures of the markets I monitor for today, which contain no changes as we are flat.

 

Data for June 26, 2013






DOW THEORY PRIMARY TREND MONITOR SPY




SPY
Bull market started
11/15/2012 135.7
Bull market signaled
01/02/2013 146.06
Exit June 21
06/21/2013 159.07
Current stop level: Sec reaction lows

161.27




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




8.91% 17.22%       None.








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