Gold and silver should rally soon or else….
Let’s begin our Dow Theory commentary for today.
US stocks
The Transports, the
Industrials and the SPY closed down. Volume, once again, was bearish as today’s
volume was higher than yesterday’s (when stocks closed up). So, we are seeing
expanding volume on declines and contracting volume on rallies…not a nice
picture. While excessive bearish volume usually sets up stocks for a short
rally (as volume becomes “oversold”), it tends to portray lower prices in the
days ahead. The only thing that could change the volume picture would be a down
day on lower volume followed by an up day on surging volume. Hitherto we haven’t
seen this and, accordingly, I feel that the odds for the ongoing secondary
reaction to continue remain quite high. Here you have the an updated chart
displaying volume:
The primary trend was
reconfirmed as bullish on October 17th and November 13th, for the
reasons given here and here.
The secondary trend is bearish
(secondary reaction against primary bull market), as explained here.
Gold and Silver
SLV closed down and GLD closed
up. For the reasons I explained here,
and more recently here, 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.
On a statistical basis the
primary bear market for GLD and SLV is getting old. More than one year since
the bear market signal was flashed has elapsed. However, I am extremely
skeptical as to the predictive power of statistics. I prefer price action to
guide me, and the Dow Theory tells me that the primary trend remains bearish
until reversed.
Furthermore, the June 27, 2013
lows remain untouched. The longer this situation lasts, the higher the odds
that something might be changing. But I wait for the verdict of
price action.
As to the gold and silver
miners ETFs, SIL and GDX closed down. The secondary trend is bullish, as
explained here.
The primary trend for SIL
and GDX remains, nonetheless, bearish, as was profusely explained here and here.
Here you have the figures for
the SPY which represents the only market with a suggested open long position:
Data for January 31 , 2014 | |||
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 | 01/31/2014 | 178.18 | |
Current stop level: Secondary reaction low | 165.48 | ||
Unrlzd gain % | Tot advance since start bull mkt | Max Pot Loss % | |
5.51% | 13.45% | 2.05% |
Sincerely,
The Dow Theorist