Thursday, October 17, 2013

Dow Theory Update for October 17: Primary bull market re-confirmed for stocks

Technical picture for precious metals unchanged in spite of today’s accomplishments

Richard Russell takes a break due to illness

Richard Russell, of the “Dow Theory Letters” seems to be recovering after being sick. I wish him a good and swift recovery.

US stocks

The SPY and Transports closed up. The Industrials closed slightly down. Since two indices have bettered the last recorded primary bull market closing highs of 09/18 (SPY) and 09/19 (Transports), we have to conclude under the Dow Theory that:

1)     The primary bull market has been re-confirmed.

2)     The secondary trend has turned bullish.

Take a look at the chart below. The blue horizontal lines (primary bull market closing highs of 09/18 and 09/19) have been broken up. 

Primary bull market reconfirmed today
Thus, the primary trend is bullish, as explained here, and more in-depth here.

 As a reminder: The ongoing primary bull market started on June 24th, 2013 and was signaled on July 18th, 2013. So we are dealing with a young bull market.

Our stoploss remains fixed at the last established secondary reaction closing lows of October 8th. More about the Dow Theory trailing stop, its importance, and how it works, here.

The implication of our raising our Dow Theory trailing stop is, as you can see in the spreadsheet below, that our likely loss has been narrowed to a very modest -2.05%. As you can see, as prices advance, and each subsequent secondary reaction ends up at a higher level, so goes our stop higher and higher.

Today’s volume was lower than yesterday’s, which is bearish, as higher prices were not met by expanding volume. I consider volume to be bearish for the reasons given here.

Gold and Silver

Today there were fireworks in the precious metals arena. However, from a Dow Theory perspective, nothing has been accomplished.

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.

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 up. SIL and GDX, unlike GLD and SLV, are 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
10/17/2013 173.22
Current stop level: Secondary reaction low

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

2.58% 10.29% 2.05%



Bull market started
06/26/2013 10.59
Bull market signaled
08/14/2013 15.36
Last close
10/17/2013 12.8
Current stop level: Primary bear mkt low
06/26/2013 10.59

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

-16.67% 20.87% 45.04%


Bull market started
06/26/2013 22.22
Bull market signaled
08/14/2013 28.7
Last close
10/17/2013 24.5
Current stop level: Primary bear mkt low
06/26/2013 22.22

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

-14.63% 10.26% 29.16%


The Dow Theorist

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