Friday, December 27, 2013

Dow Theory Update: Indistinct day on low volume

Gold and silver come to life, close up for 5 consecutive days, but no trend has changed

US stocks

The Industrials and Transports closed slightly down, and the SPY closed unchanged. Unrealized gains continue mounting (please mind the word "unrealized") and near 9% for the position that was initiated on July. I would welcome a secondary reaction right now, as it would help us raise our Dow Theory stop and lock in some profits. More about such stop here.

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.

Chinese Stocks

I see that Chinese stocks (FXI and HAO ETFs) are undergoing a secondary reaction against the primary bullish trend (which was signaled on September 12, 2013 on this Dow Theory blog)

Look at the chart below and you will see the orange rectangle highlighting the ongoing secondary reaction against the primary bullish trend. 

Orange rectangles show ongoing secondary reaction against primary bull market in Chinese stocks

I feel Chinese stocks might be telling us that US stocks could be nearing a secondary reaction. Furthermore, we better monitor the evolution of Chinese stocks the following days, as they could be setting up for a primary bear market signal. We are not there yet; but it is worth to keep an eye on them. In the meantime, the primary trend remains bullish (albeit much less convincing than that of US stocks).

Gold and Silver

SLV and GLD closed up. There has been five consecutive “up” closes, albeit it has not been enough to change our trend readings. Accordingly, 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 27, 2013


Bull market started
06/24/2013 157.06
Bull market signaled
07/18/2013 168.87
Last close
12/27/2013 183.85
Current stop level: Secondary reaction low


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

8.87% 17.06% 2.05%


The Dow Theorist

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