Stocks make higher highs
On December
20, 2012, this Dow Theory blog signaled the existence of a primary bear market
in gold and silver, as was explained here.
Well, last
Friday December 20, 2013, the primary bear market signal grew 1 year old. So
happy anniversary for those that heeded the signal.
On December 20,
2012, we had the following prices for GLD and SLV:
GLD 159.73
SLV 29
On December
20, 2013, one year later, we had the following prices:
GLD
115.94
SLV
18.62
Accordingly,
GLD has lost -27.41%, and SLV has lost -35.79% in the year following the December 20, 2012 primary bear market signal.
Here you have the chart that says it all:
Here you have the chart that says it all:
I don’t want
to brag about the timeliness of last year’s primary bear market signal, and the
carnage avoided by those following the Dow Theory as, evidently, not all
signals are proven “right." However, those that have followed this Dow
Theory blog since its inception can get a glimpse of what it means under the Dow
Theory to “be right” and to “be wrong." When we have a failed signal, our
losses tend to be contained, as we have our Dow Theory stops in place (more
about them here). However, when we
are right, our profits (or, more importantly, the losses avoided) are sizeable. Please mind that the beauty of the
Dow Theory lies not so much in “beating the market” when there is a smooth sail
(which by definition is almost impossible to achieve) but, rather, in avoiding
devastating losses when the going gets tough. Last year’s action with SLV and
GLD attest to this fact. We outperform markets by slightly under performing in “good”
years (that is when markets go up) and greatly outperforming in “bad” years
(that is when markets collapse).
This is why in a year like 2013 when the
S&P might even make 30%, it is close to impossible for any trend follower
to emulate such performance, since by definition, one always gets in and out too
late. However, should the S&P lose 30% next year, then we would see the
beauty of the Dow Theory once again. Personally, I prefer a system that acts as
a kind of insurance. The premium I pay is slightly lower performance in good
market years, while the insurance kicks in bad years through stark out
performance (i.e. reduced losses or even marginal profits). The overall
performance profile is a smoother one, with fewer bumper years but also fewer
devastating losses. I feel such a profile is much better for our mental and
cardiac health. The "Face off" series, which you can find here, highlights the intricacies of the Dow Theory.
US stocks
The
Industrials, Transports and SPY closed up; all of them bettered, once again,
the last recorded closing highs, which means that the primary bull market
remains in good health.
The primary
trend was reconfirmed as bullish on October 17th and November 13th,
for the reasons given here and here.
Volume
contracted today and was much lower than yesterday’s, which is bearish as
higher prices were not joined by expanding volume. However, being Christmas’
eve I wouldn’t ascribe too much value to today’s volume reading. Given the
bullish volume pivot we saw two days ago (more about it here) and recent
volume readings, I label volume as bullish.
Gold and
Silver
SLV and GLD
closed up. With today’s close, GLD remains has managed to close above the
primary bear market lows of June 27th. SLV remains above such lows,.
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.
As to the
gold and silver miners ETFs, SIL, and GDX closed up. 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 24, 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 | 12/24/2013 | 182.96 | |
Current stop level: Secondary reaction low | 165.48 | ||
Unrlzd gain % | Tot advance since start bull mkt | Max Pot Loss % | |
8.34% | 16.49% | 2.05% |
I wish you
all a merry Christmas.
The Dow
Theorist
merry xmas dow theorist..im applying it to my forex trading with alot of success!!!
ReplyDeleteSame to you! Wish you the best
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