Dow Theory Update for June 20: Meltdown in all markets

Primary bear market in GDX and SIL reconfirmed

With no more preambles let’s get started with a day rich in Dow Theory relevant events.

Stocks

It goes without saying that the Industrials, SPY, and Transports closed down. As to our vital qualification of trends, here it gets tricky today.

If I’d follow 100% Schannep (and maybe I should, given his outstanding track record), today the primary trend turned bearish as the Industrials and Transports have violated the secondary reaction lows of June 5. Thus, according to a strict application of Schannep’s rules, today’s violation by the SPY and Industrials of the secondary reaction lows (June 5) constitutes a primary bear market signal.

However, I see things slightly different. I see that the Transports by closing at 6142.12 closed above the June 5 closing low at 6138.36. We have to bear in mind that the Transports was the only index that following the secondary reaction lows of June 5, underwent a rally exceeding 3%, which is the minimum requirement for a rally to exist under the Dow Theory (of any flavor whatsoever).  My own interpretation of the Dow Theory tells me that the market that underwent the +3% rally should also participate in the breaking of the secondary reaction lows. Thus, according to my judgment, while the bull market may be breathing its last gasp, I find premature to declare a primary bear market. Maybe tomorrow, IF the Transports break the June 5 lows.

Today’s market action is a carbon copy of the action we witnessed on November 10, 2012. On that occasion, the only index that had experienced a rally after the secondary reaction lows was the Transports, and the day the Industrials and SPY violated the secondary reaction lows, the Transports refused to confirm.

Those with an inclination for learning are adviced to read what I wrote on November 10, 2012, as on that date, I gave an in-depth explanation as to why I part ways in this very specific aspect with Schannep (whom I greatly admire and respect).

As per my own thought: The primary trend remains bullish, and the secondary trend is bearish.

Here you have an updated chart reflecting the current situation:

A primary bear market is nearing

Today’s volume was higher than yesterday’s, which is bearish. This is the third bearish volume day in a row. Furthermore, today we had a bearish pivot low, as today’s volume exceeded the volume seem at the preceding pivot low (both pivots are connected with a read horizontal line). So the overall pattern of volume is turning bearish. Here you have an updated chart:

Volume is turning bearish: 3 days bearish volume in a row and a bearish pivot

Gold and Silver

GLD bleeding continues. It has just lost the 1000 tonnes mark.

GLD and SLV closed down. The primary and secondary trend is bearish. I am happy that I have stuck to my rules, and not been premature in trying to catch a bottom.

GDX violated the last recorded primary bear market lows of 05/20/2013, and, accordingly, GDX confirmed SIL’s yesterday action. Since the primary bear market lows have been jointly violated, both the primary and secondary trend is bearish. Here you have a chart depicting the most recent action. The red horizontal line shows the last recorded primary bear market lows of 05/20/2013 which have been violated:

 

Primary bear market reconfirmed for SIL and GDX

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

 

Data for June 20, 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		06/20/2013	159.4
Current stop level: Sec reaction lows			161.27
Unrlzd gain %	Tot advance since start bull mkt	Max Pot Loss %
9.13%	17.46%	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.