Tuesday, August 27, 2013

Dow Theory Update for August 27: Secondary reaction for stocks continues



 GDX fails to confirm SLV’s breakup


Let’s get started with our commentary in this Dow Theory blog.

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 higher than yesterday’s. Since stocks closed down, surging volume has a bearish connotation, as lower prices were confirmed by volume. I’d label current volume readings as neutral.

Gold and Silver

SLV, and GLD closed up. SLV managed to break above the secondary reaction closing high that preceded the last primary bear market leg. If GLD had done likewise, a primary bull market signal would have been signaled. The longer GLD fails to confirm SLVs break up, the more suspect the current secondary reaction against the primary bear market becomes. Here you have an updated chart. The blue horizontal lines show the relevant price levels to be penetrated by SLV and GLD for a primary bull market to be signaled.

GLD refused to confirm SLV's breakup. Primary trend remains bearish.
 
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 strongly down. The pattern I see on the charts is an “outside reversal bar” (see chart below). While this kind of bar is extraneous to the Dow Theory, it clearly has a short term bearish connotation. Please mind, I wrote “short term”, and thus it lack magnitude to change neither the primary nor the secondary trend.

Outside reversal bar (blue ellipse) for both SIL and GDX. Time to take a breather?
 
SIL and GDX, 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.

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
08/27/2013 163.33
Current stop level: Bear mkt low

157.06




Unrlzd gain % Tot advance since start bull mkt Max Pot Loss %




-3.28% 3.99% 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
08/27/2013 15.71
Current stop level: Primary bear mkt low 06/26/2013 10.59




Unrealized gain % Tot advance since start bull mkt Max Pot Loss %




2.28% 48.35% 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
08/27/2013 29.1
Current stop level: Primary bear mkt low 06/26/2013 22.22




Unrealized gain % Tot advance since start bull mkt Max Pot Loss %




1.39% 30.96% 29.16%


Sincerely,
The Dow Theorist

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