Dow Theory Letters and daily noise.
In the latest “Dow Theory Letter”, Mark Kerkhoff, has
stated that they have a tough job at the Dow Theory Letters because they must
analyze the markets daily whereas their focus is the Primary Trend. I
understand Mr. Kerkhoff, since daily movements tend to be mere noise. However,
one cannot avoid keeping an eye on them, since one never knows for sure when
the trend will change. As readers of
this Dow Theory blog know, most of the days are plainly irrelevant as far as
the primary, and even the secondary trend, is concerned. However, since one
never knows for sure what the markets have in store for us, we have to keep an
eye daily on the markets, while
resisting the urge of trying to make poor predictions based on daily activity.
This is why some days I almost copy and paste previous
posts on this Dow Theory blog. When trends don’t change, it doesn’t make any
sense to pretend that the markets are telling us something when, in fact, they are
silent. I feel readers will be best served by merely giving them links to the
relevant posts (“relevant posts” are those when there is a change of
trend, where I try to produce an in-depth Dow Theory based analysis).
Of course, readers looking for a thrill will be
disappointed, as most of the days are dull by definition. However, those
investors really intend on protecting their capital are unconcerned by daily
clutter and emotions. They just want to get an answer to the most difficult
question: Tell me when to buy, not what to buy.
Experience has shown me that the more bells and
whistles, the more “excitement” a financial writer offers to her readership,
the more likely his analysis is to be wrong. I have some names on my head,
which I keep to myself. Of course, dismissing daily noise, as I do, is not a
guarantee for sound analysis, but, at least to me, this is a good start.
US stocks
The SPY, Industrials, and
Transports closed down.
The primary trend was
reconfirmed as bullish on October 17th and November 13th, for the
reasons given here
and here.
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 17, 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 | 12/17/2013 | 178.65 | |
Current stop level: Secondary reaction low | 165.48 | ||
Unrlzd gain % | Tot advance since start bull mkt | Max Pot Loss % | |
5.79% | 13.75% | 2.05% |
Sincerely,
The Dow
Theorist
No comments:
Post a Comment