Wednesday, December 11, 2013

Dow Theory Update for December 11: Is a new secondary reaction beginning?

We will know soon.

A couple of days ago, the SPY made a higher closing high whereas the Industrials and the Transports failed to confirm. The longer such non confirmation persists the higher the odds for a secondary reaction to develop. Today’s dismal action makes it more difficult for the Transports or the Industrials to confirm the SPY’s higher high soon, which at the same time, increases the odds for a secondary reaction.

In any instance, we are not in the business of forecasting secondary reactions, but merely we are intent on determining the primary trend. So we will wait and see.

US stocks

The Industrials, Transports and SPY closed down.

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

The primary trend was reconfirmed as bullish on October 17th and November 13th, for the reasons given here and here.

Today’s volume was higher than yesterday’s. This is bearish, as lower prices were confirmed by stronger volume. I’d label the overall pattern of volume as bearish.

Gold and Silver

SLV and GLD closed down. 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 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. However, such set up will be nullified if GLD and SLV jointly violate the last recorded primary bear market lows, as I explained here.

As to the gold and silver miners ETFs, SIL and GDX closed down. The primary trend is bearish, as was profusely explained here and here. Likewise, the secondary trend is bearish.

Here you have the figures for the SPY which represents the only market with a suggested open long position:


Data for December 11, 2013


Bull market started
06/24/2013 157.06
Bull market signaled
07/18/2013 168.87
Last close
12/11/2013 178.72
Current stop level: Secondary reaction low


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

5.83% 13.79% 2.05%


The Dow Theorist

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