Tuesday, July 9, 2013

Dow Theory Update for July 9: Stocks close to breaking the last recorded highs



 Possible change of trends for stocks at hand


Gold GOFO rates turn negative

Zero Hedge reports that GOFO rates have just turned negative.

As the article explains, it is difficult to isolate “in real time” what caused this dislocation. However, irrespective of the specific cause, a negative GOFO indicates that something is wrong with the gold market. Likely causes, according to Zero Hedge, are:

  • An ETF-induced repricing of paper and physical gold
  • Ongoing deliverable concerns and/or shortages involving one (JPM) or more Comex gold members.
  • Liquidations in the paper gold market
  • A shortage of physical gold for a non-bullion bank market participant
  • A major fund unwinding a futures pair trade involving at least one gold leasing leg
  • An ongoing bullion bank failure with or without an associated allocated gold bank "run"
  • All of the above

Stocks


The SPY, Industrials, and Transports closed up.

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

The secondary trend has just turned bullish. More about this change of trend tomorrow. However, since we are just interested on the primary trend in order to make commitments on the long side, we shouldn’t get too excited with this change of the secondary trend.

However, as you can see on the chart below, prices are steadily nearing the last recorded highs (actually, the last primary bull market highs). Such highs are shown with a horizontal blue line (the date of those closing highs is: 05/28 for the Industrials, 05/17 for the Transports, and 05/21 for the SPY). If these closing highs are jointly broken, a new primary bull market will be signaled.

 
Keep an eye on the blue horizontal lines: If broken up, a new primary bull market would be signaled


So, I’ll keep a close eye on the three indices I monitor.


Today’s volume was lower than yesterday's, which is bearish as volume didn’t support higher prices. The overall pattern of volume is slightly bearish.

Gold and Silver

SLV, and GLD closed up. 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 July 9, 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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