Monday, September 30, 2013

Dow Theory Update for September 30: After my brief hiatus, nothing changed




Primary and secondary trends remain unchanged



After four trading days of absence, and now with a somewhat less congested schedule, here I am again, ready to analyze the markets under the prism of the Dow Theory.

The last four days did not result in any noteworthy Dow Theory event, which accounted for my silence. Accordingly, neither the primary nor the secondary trend of the markets I monitor changed.

Let’s reacquaint ourselves with the current state of the markets.

US Stocks

The SPY, the Industrials and the Transports closed down.


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


The secondary trend is also bullish for the reasons explained here, even though if the current pullback extends its decline it could turn soon bearish.

Today’s volume was substantially higher than Friday’s, which is bearish, as lower prices were met by expanding volume. Four trading days have gone by, and I still found the same indecisive pattern: I still see the overall pattern of volume as neutral, as I explained here. However, the bearish “volume off the top”  (orange ellipse) bar I spotted here, has resulted in lower prices.

 Here you have un updated chart depicting price and volume action:

Volume still undecisive. "Volume off the top" bar should run its course soon


Gold and Silver

SLV and GLD closed down. For the reasons I explained 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.

SIL and GDX closed down. SIL and GDX, unlike GLD and SLV, are unambiguously in a primary bull market under the Dow Theory, as explained here and here.

The secondary trend is bearish, which is tantamount to saying that there is an ongoing secondary reaction against the primary bullish trend, for the reasons given here.

Here you have the figures for the SPY, GDX and SIL which represents the only markets with suggested open long positions.

 

Data for September 30, 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
09/30/2013 168.01
Current stop level: Secondary reaction low

163.33




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




-0.51% 6.97% 3.39%

 
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
09/30/2013 13.22
Current stop level: Primary bear mkt low
06/26/2013 10.59




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




-13.93% 24.83% 45.04%




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
09/30/2013 25.02
Current stop level: Primary bear mkt low
06/26/2013 22.22




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




-12.82% 12.60% 29.16%


Sincerely,

The Dow Theorist


Tuesday, September 24, 2013

Warning: During the rest of this week, it is likely that I will not be able to post



 
Dear readers of this Dow Theory blog.

Due to a busy schedule, I fear I am not going to be able to post my daily commentary.

Only if I saw a change in primary trends, then I’d endeavor to find time to provide you with an update. Otherwise, “no news good news”.

Sincerely,

The Dow Theorist

Monday, September 23, 2013

Dow Theory Update for September 23: Deflationary day



 

No change in trends.



Last weekend I posted this article which makes clear the beauty of the Dow Theory at keeping drawdowns and losses under control. You can read it here.


US Stocks

The SPY, the Industrials and the Transports closed down.


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


The secondary trend is also bullish for the reasons explained here.

Today’s volume was substantially lower than Friday’s, which is bullish, as lower prices were not joined by expanding volume. I still see the overall pattern of volume as neutral, as I explained here.


Gold and Silver

SLV and GLD closed down. For the reasons I explained 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.

SIL and GDX closed down. SIL and GDX, unlike GLD and SLV, are unambiguously in a primary bull market under the Dow Theory, as explained here and here.

The secondary trend is bearish, which is tantamount to saying that there is an ongoing secondary reaction against the primary bullish trend, for the reasons given here.

Here you have the figures for the SPY, GDX and SIL which represents the only markets with suggested open long positions.

 
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
09/23/2013 169.93
Current stop level: Secondary reaction low

163.33




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




0.63% 8.19% 3.39%


 
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
09/23/2013 13.48
Current stop level: Primary bear mkt low
06/26/2013 10.59




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




-12.24% 27.29% 45.04%




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
09/23/2013 25.17
Current stop level: Primary bear mkt low
06/26/2013 22.22




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




-12.30% 13.28% 29.16%

Sincerely,

The Dow Theorist

Saturday, September 21, 2013

Dow Theory Special issue: Visualising drawdowns





Buy and hold versus Schannep’s Dow Theory



An image is worth than thousand words. I have profusely written on this blog about the excellent job Schannep’s Dow Theory does at containing losses.


Well, today I won’t give stats. Just three charts (created by courtesy of TradeStation ®) which are self-revealing.

The first chart is the Dow Industrials from 1/02/1953 to 09/20/2013. It epitomizes the “buy and hold” philosophy. As you can see the drawdowns are hair curling. Would you have survived (both financially and mentally) such drawdowns in real life?


Industrials: Buy and Hold. Drawdowns destroy the real investor





The second chart is Schannep’s Dow Theory during the same time period on a non-capitalized basis (each position with same starting capital of 100 K USD). You don’t need to be a market guru to realize that risk (draw downs) are contained.



Industrials: Schannep's Dow Theory. Drawdowns contained





The third chart is Schannep’s Dow Theory on a capitalized basis (which is the closest thing to reality and the proper "apple to apples" comparison with buy and hold). Since the chart is non-log, drawdowns appear larger than they really are, as the compounded profits mount. The chart shows a compounded profit north of 14 million dollars (with a starting capital of 100 K USD) versus the more modest 5.3 millions made through a “buy and hold” approach during the same period with the same starting capital. 


Schannep's Dow Theory on a compund basis. Profits explode. Drawdowns contained



I will just give you two pieces of data to highlight the net solidity and outperformance of Schannep’s Dow Theory:

a)    Largest loss: -10.45% .
b)   Deepest drawdown (caused by largest string of 3 consecutive losing trades): -19%

Now it is up to you dear readers to draw your conclusions.

Have a nice weekend

Sincerely,
The Dow Theorist