Monday, June 24, 2013

Dow Theory Update for June 24: Stocks and Gold and silver miners ETFs make lower lows




 Digging deeper into a secular bear market


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

Is the secular bear market still alive?

Last Friday when I was assessing the last position taken in pursuance of the Dow Theory, I wrote that my “benchmark” was the average gain and duration of transactions taken during secular bear markets. I also wrote that defining in real time, whether one is in the midst of a secular bear market is not so easy.

Sy Harding has recently posted a very interesting article on Seeking Alpha whereby he cogently explains that the secular bear market is far from over. If we couple the valuation issues (as explained here by Doug Short) with Harding’s explanations, I can reasonably conclude that more suffering is down the road. In other words, the secular bear market is not behind us yet.

Being mindful of the existence of an ongoing secular bear market should make us even more respectful of the current primary bear market signal that was signaled here and further explained here, as primary bear markets (of a cyclical nature), as those spotted by the Dow Theory, tend to be more vicious when they occur within a secular bear market. 

Time to be cautious.

 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 lower than yesterday’s, which makes it a bullish volume day, since declining prices were not confirmed by volume.

Furthermore, today we had another bearish pivot low. If you compare today’s volume with the volume seen at the last recorded pivot low (shown with an ellipse and connected with a horizontal red line), today’s volume was much higher, which implies that today’s new low enjoyed more market participation (conviction) than the preceding pivot low on 05/01/2013. This makes it a bearish pivot. This is why today’s volume has been marked with one red arrow, which denotes the bearish pivot volume inference.

Please mind that any given day can simultaneously be bullish and bearish as far as volume is concerned. This is no contradiction. Pivot volume readings tend to have a longer-term repercussion (being “long term” some days and even weeks), whereas daily volume readings do not have an individual connotation, but rather the clustering of such days.

If we look at the chart below, we can find:

1.    A bearish outside reversal bar with bearish volume on 05/22/2013 (which marked the top of the primary bull market)

2.      A bearish pivot on 31/05/2013.

3.      A very dubious bullish pivot (volume was marginally higher) on May 31, 2013.

4.      A bearish pivot on 06/20/2013.

5.      Another bearish pivot on 06/24/2013.

6.      A clustering of red arrows (bearish volume days irrespective of pivots).

So, all in all, the overall picture of volume is bearish.

A bearish volume picture. Red arrows cluster
Gold and Silver

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

GDX and SIL 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. As you can see, now I talk of “realized gain” for the SPY as the trade has been closed today. My reading of the Dow Theory tells me to be flat in all markets: GLD, SLV, GDX, SIL and now the SPY. Time to sit on cash (being mindful of the dangers stalking cash in order not to be cyprused).

 

Data for June 24, 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

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