Dow Theory Update for August 26: Stocks continue in a secondary reaction

 Zero Hedge and What to expect of secular bear markets?

Under the title “Is The Secular Bear About To Growl?”, Zero Hedge has published an interesting article concerning the extent of cyclical bull markets that occur within secular bear markets, and more importantly the losses likely to be made when the bear reasserts itself. On several occasions (example here) I have written that I believe we are currently under a secular bear market, cyclical primary bull markets as the current one notwithstanding. I have also written in the past that assessing in secular bull and bear markets “in real time” is not an easy feat. Thus, in spite of the secular condition of the market, my Dow Theory studies suggest that we should take all primary bull market signals, as even under secular bear markets the Dow Theory, of any flavor whatsoever, manages to extract profits and contain losses. We are talking of profits exceeding 5% for each primary bull market signal that occurs under the spell of a secular bear market, as you can read here.

 

Stocks

The SPY, Industrials, and Transports closed down.

The primary trend is bullish, as explained here, and more in-depth here.

The secondary is bearish, which implies an ongoing secondary reaction against the primary bullish trend, as explained here.

Today’s volume was lower than Friday’s. Since stocks closed down, receding volume has a bullish connotation, as lower prices were not confirmed by volume. I’d label current volume readings as neutral.

Gold and Silver

SLV, and GLD closed up. For the reasons I explained here, I feel the primary trend remains bearish. Here I analyzed the primary bear market signal given on December 20, 2012. The primary trend was reconfirmed bearish, as explained here. The secondary trend is bullish (secondary reaction against the primary bearish trend), as explained here.

GDX and SIL closed up, and, unlike GLD and SLV, are unambiguously in a primary bull market under the Dow Theory, as explained here and here. The secondary trend is bullish as well. SIL made a higher high, unconfirmed by GDX.

Here you have the figures for the SPY, GDX and SIL which represents the only markets with suggested open long positions.

 

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		08/26/2013	166
Current stop level: Bear mkt low			157.06
Unrlzd gain %	Tot advance since start bull mkt	Max Pot Loss %
-1.70%	5.69%	7.52%

 

DOW THEORY PRIMARY TREND MONITOR ETF SIL
			SIL
Bull market started		06/26/2013	10.59
Bull market signaled		08/14/2013	15.36
Last close		08/26/2013	16.36
Current stop level: Primary bear mkt low		06/26/2013	10.59
Unrealized gain %	Tot advance since start bull mkt	Max Pot Loss %
6.51%	54.49%	45.04%
DOW THEORY PRIMARY TREND MONITOR ETF GDX
			GDX
Bull market started		06/26/2013	22.22
Bull market signaled		08/14/2013	28.7
Last close		08/26/2013	30.41
Current stop level: Primary bear mkt low		06/26/2013	22.22
Unrealized gain %	Tot advance since start bull mkt	Max Pot Loss %
5.96%	36.86%	29.16%

Sincerely,

The Dow Theorist