Agreements
and disagreements with Richard Russell
I agree with
Russell as to the existence of a bull market, more exactly, a primary bull
market.
Now begins my
disagreement.
True to a
bull market condition, he advises his readership to be invested in the DIA (Dow
Industrials ETF). However, he insists to put a stoploss at 154, which is an
extremely narrow stop, since the DIA closed last Thursday 25th at
155.12. In other words, Russell suggests placing a stop 0.72% percent below
recent price action. I am writing these lines before the open of Friday 26th,
so it is very likely that any minor decline will result in the trade being
stopped out. By the way, the basic tenet of the Dow Theory (of any flavor
whatsoever), namely, the principle of “confirmation” seems to be ignored by
Russell. Furthermore, Russell seems to forget that another basic tenet of the
Dow Theory is to disregard movements not reaching 3%, as they are simply
noise.
Therefore, I disagree as to the suggested stoploss, which has no basis under the Dow Theory,
be it the “classical” or the “Schannep” one.
Orthodox Dow
Theory of any flavor whatsoever makes clear that our exit point should be
either be the last recorded primary bear market lows or the last recorded
secondary reaction lows, which ever is higher. Under proper Dow Theory, there
is no place for whimsical stops, which more often than not end up being run.
Proper Dow Theory stops strike a wonderful balance between containing losses,
and giving the trade enough lee-room not to be stopped out by noise or stop
running. More about the Dow Theory trailing stop here.
“[o]ne can put an
arbitrary and narrower stop (i.e. 8% below current prices); however, such a
stop is technically defective, and wouldn’t benefit from the extraordinary
resilience of the Dow Theory record. This wouldn’t be Dow Theory”.
Stocks
The SPY,
Industrials and Transports closed up.
The primary
and secondary trend is bullish, as explained here, and more
in-depth here.
Today’s
volume was markedly lower than yesterdays, which is bearish as higher prices
were not confirmed by expanding volume. The overall pattern of volume is
bearish.
Gold and
Silver
SLV closed
down, and GLD closed up. The primary trend is bearish, as explained here and
reconfirmed bearish here. The
secondary trend is bullish (secondary reaction against the primary bearish
trend), as explained here.
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 for GDX and SIL is bullish, as explained here.
Here you have
the figures for the SPY, which represents the only market with a suggested open
long position.
| Data for
July 26, 2013 |
|
|
|
|
|
|
|
| DOW
THEORY PRIMARY TREND MONITOR SPY |
|
|
|
|
|
SPY |
| Bull market started |
|
06/24/2013 |
157.06 |
| Bull market signaled |
|
07/18/2013 |
168.87 |
| Last close |
|
07/26/2013 |
169.11 |
| Current stop level: Bear mkt
low |
|
|
157.06 |
|
|
|
|
| Unrlzd gain % |
Tot advance since start bull mkt |
Max Pot Loss % |
|
|
|
|
|
| 0.14% |
7.67% |
7.52% |
|
Sincerely,
The Dow
Theorist
