Friday, September 20, 2013

Dow Theory Update for September 20: Stocks closed down on high volume

 Trends unchanged

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

US Stocks

The SPY, the Industrials and the Transports closed down.

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

The secondary trend is also bullish for the reasons explained here.

Today’s volume was higher than yesterday’s, which is bearish, since lower prices were not joined by volume. Furthermore, today’s price and volume pattern is what technician L.A. Little labels a “Volume off the Top” bar, which consist of a lower high and a lower low on expanding volume. Such bar tends to beget lower prices in the days ahead. Please mind that lower prices in the days ahead do not mean a change of trend, not even of secondary proportion. In merely says that the odds favor some days of declining prices. However, we should also bear in mind that the day before yesterday was a bullish pivot day (as explained here). All in all, I am not going to pretend that I have a crystal ball. Volume readings are giving me mixed information, and, accordingly, I remain neutral, as far as volume is concerned.

Furthermore, as I will document some day in a future post of this Dow Theory blog, volume, while having some predicting power, is much less important than price action itself; and, accordingly, those followers of the primary trend live and die according to pure price patterns, irrespective of volume. Volume readings, though, is important for those traders interested in trading secondary trends and trying to call intermediate tops and bottoms.

Here you have an updated chart displaying the most recent price (SPY) and volume action.

Volume off the top pattern
Gold and Silver

SLV and GLD closed down. 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.

Here, I explained that GLD and SLV set up for a primary bull market signal. However, a setup is not the same as the “real thing," namely the primary bull market; thus, many “setups” do not materialize and until the secondary reaction closing highs are jointly broken up, no primary bull market will be signaled.

SIL and GDX closed down. 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 bearish, which is tantamount to saying that there is an ongoing secondary reaction against the primary bullish trend, for the reasons given here.

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



Bull market started
06/24/2013 157.06
Bull market signaled
07/18/2013 168.87
Last close
09/20/2013 170.72
Current stop level: Secondary reaction low


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

1.10% 8.70% 3.39%


Bull market started
06/26/2013 10.59
Bull market signaled
08/14/2013 15.36
Last close
09/20/2013 13.83
Current stop level: Primary bear mkt low
06/26/2013 10.59

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

-9.96% 30.59% 45.04%


Bull market started
06/26/2013 22.22
Bull market signaled
08/14/2013 28.7
Last close
09/20/2013 25.76
Current stop level: Primary bear mkt low
06/26/2013 22.22

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

-10.24% 15.93% 29.16%

The Dow Theorist

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