Dow Theory Update for January 13: Stocks and gold and silver miners close to changing secondary trend

However, we are not there yet

If you are interested in reading the 2013 Dow Theory review please go here. You’ll see that we tended to be on the right side of the market most of the time.

US stocks

The SPY, the Industrials and the Transports closed down. The Industrials and SPY made lower lows, which is a bearish omen (short term). It is too early to signal a secondary reaction (as neither the Industrials nor the SPY have declined more than 3% from their respective market tops), however, we have seen several non-confirmations since January 1^st and, today, a minor low, has been jointly violated by two indices. All in all, according to the Dow Theory we see subtle signs of a secondary reaction in the making. Furthermore, the secondary trend of Chinese stocks is clearly bearish, which implies headwind for US stocks.

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

The primary trend was reconfirmed as bullish on October 17^th and November 13th, for the reasons given here and here.

Gold and Silver

SLV and GLD closed up. 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. Recent price action seems to confirm the bullishness of the secondary trend. Let’s see what happens.

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. The Dow Theory is close to signaling a secondary reaction against the primary bearish trend. However, we still need some more bullish action so that our minimum volatility requirements are met.

 

Data for January 13 , 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		01/13/2014	181.68
Current stop level: Secondary reaction low			165.48
Unrlzd gain %	Tot advance since start bull mkt	Max Pot Loss %
7.59%	15.68%	2.05%

Sincerely,

The Dow Theorist