GLD and SLV remain in primary bear market
As followers
of this Dow Theory blog know most days are irrelevant from a Dow Theory
perspective, as neither the primary nor the secondary trend are changed. This
fact does not exempt us, though, from monitoring the markets on a daily basis,
since we never know which day will be the “relevant” day. Furthermore,
important setups evolve from daily action, which, even though are not the “signal”
are harbingers of the “signal”.
Today has
been a relevant day: A primary trend change has been signaled today for the precious
metals miners ETFs. More on this below.
US stocks
The SPY, Industrials and
Transports closed down. The Industrials closed up a couple of days ago and made
a higher closing high unconfirmed. The higher the non confirmation persists,
the higher the odds for a new secondary reaction. Let’s wait and see.
The primary trend was
reconfirmed as bullish on October 17th and November 13th, for the
reasons given here and here.
Today’s volume was lower than Tuesday’s.
This is bullish, as lower prices were not met by stronger volume. I consider
volume to be bearish for the reasons given here and
here. However,
if current volume actions continues, I could soon label volume as neutral. I
note volume has contracted as prices receded in the last few days, which is bullish,
as shown in the chart below:
Volume is neutral and it could change to modestly bullish soon |
Gold and Silver
SLV and GLD closed strongly
down. GLD and SLV are making lower lows, which is bearish.
For the reasons I explained here, and more recently 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, in spite of today’s lower
lows, 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 were flirting with a primary bear market signal, as was explained here and here. Today the flirt is over: GDX by violating the
secondary reaction lows (Oct 11 for GLD), finally confirmed SIL. Accordingly, a primary bear market has been signaled
for SIL and GDX. This implies that the whole movement from the last
recorded closing highs (08/26 for SIL and 08/15 for GDX) is to be reclassified
as the first swing of the primary bear market whose signal has been flashed
today.
Here you have an updated
chart:
Primary bear market signaled for SIL and GDX today |
Thus, as per the Dow Theory,
long positions should be exited. As I explained here, I don’t recommend shorting
because:
• Primary
bear markets last less than primary bull markets.
• Primary bear markets decline percentage wise less than bull markets.
• Hence, the amount likely to be made is lower than in primary bull markets, whereas the potential loss is higher (market reversal).
• Furthermore, shorting costs money: dividends have to be paid, and most brokers charge expensive shorting fees, which grow higher the longer the trade (it is like paying interest on the amount shorted).
• Shorting forces you to use a margin account. This is not the most suitable account for a long-term investor concerned with safety because it also implies that, when being long, shares can be loaned out.
• Thus, I don’t favor a short position along the primary bear market.
More thoughts about this
primary bear market signal tomorrow.
The secondary trend for SIL and GDX is bearish too.
Here you have the figures for
the SPY, GDX and SIL which represent the only markets with suggested open long
positions:
Data for November 20, 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 | 11/20/2013 | 178.47 | |
Current stop level: Secondary reaction low | 165.48 | ||
Unrlzd gain % | Tot advance since start bull mkt | Max Pot Loss % | |
5.68% | 13.63% | 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 | 11/20/2013 | 11.6 | |
Realized loss | Tot advance since start bull mkt | ||
-24.48% | 9.54% | ||
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 | 11/20/2013 | 22.85 | |
Realized loss | Tot advance since start bull mkt | ||
-20.38% | 2.84% |
Sincerely,
The Dow Theorist
No comments:
Post a Comment