Great article on “The Reformed Broker” debunking pet indicators
Joshua M
Brown’s article “Margin Debt: Another Bogeyman Slain” has done a good job in
debunking “doom” indicators, which after careful analyses are proven to be
worthless because of the faulty assumptions inherent in them.
Thus, Joshua
Brown analyses, one by one, the insider selling, the Baltic Dry Index, the
moving average “death crosses," the Hindenburg Omen, and the currently in
vogue “margin debt total." You are encouraged to read the article.
The article
makes clear to me that most of the “tools” we use to time the markets are pretty
close to worthless and reaffirms my faith in the Dow Theory because of:
· 1)
Its simplicity (the rules are simple
to understand and the fewer rules the more robust).
·
2) It makes aprioristic sense (i.e. the
principle of confirmation makes rationally sense).
3) It has the proper time frame. Neither
too long (with the concomitant risk of getting devastated by bear markets); nor
too short (which results in frantic trading that will deplete you financially
and mentally).
·
4) It has a sufficiently proven track
record spanning more than 110 years.
US stocks
The SPY,
Industrials and Transports closed up.
The primary
trend was reconfirmed as bullish on October 17th, for the reasons given here.
Today’s
volume was higher than yesterday’s, which is bullish, as higher prices were met by stronger volume. I consider volume to be bearish for the reasons given here and here. Furthermore, the trendline of volume of the last
few days is ominously bearish, as volume has steadily contracted as prices
advanced.
Gold and
Silver
SLV closed
down, and GLD closed up. For the reasons I explained here, and more
recently here, I feel the primary trend remains bearish, all
the recent strong action notwithstanding. 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 closed down, 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.
Data for October 25, 2013 | |||
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 | 10/28/2013 | 176.23 | |
Current stop level: Secondary reaction low | 165.48 | ||
Unrlzd gain % | Tot advance since start bull mkt | Max Pot Loss % | |
4.36% | 12.21% | 2.05% |
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 | 10/28/2013 | 13.74 | |
Current stop level: Primary bear mkt low | 06/26/2013 | 10.59 | |
Unrealized gain % | Tot advance since start bull mkt | Max Pot Loss % | |
-10.55% | 29.75% | 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 | 10/28/2013 | 26.54 | |
Current stop level: Primary bear mkt low | 06/26/2013 | 22.22 | |
Unrealized gain % | Tot advance since start bull mkt | Max Pot Loss % | |
-7.53% | 19.44% | 29.16% |
Sincerely,
The Dow
Theorist
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