Thursday, June 20, 2013

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.

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