Thursday, January 23, 2014

Dow Theory Update for January 23: Transports made higher closing high and the SPY and Industrials refused to confirm

Strebler, of the Dow Theory Letters, remains cautiously bullish

In recent “Dow Theory Letters," Jon Strebler, Russell’s associate in the “Dow Theory Letters," has confirmed the bullishness of the stock market, even though he cautions that, at best, a correction might be in the making. Furthermore, Strebler seems to be paying attention to the SPY, thereby slightly diverging from “Rhea/classical” Dow Theory and becoming closer to one of the tenets of Schannep’s Dow Theory (which includes the S&P as the third index to monitor). More about the conceptual difference between the “classical” and “Schannep’s” Dow Theory here. As to their respective performance, you can go here. In any instance, I appreciate Strebler’s analysis of the markets, and, to the best of my knowledge, he has provided more valuable, actionable and clear-cut advice than his mentor Richard Russell.

US stocks

The Transports closed up. The Industrials and the SPY closed down. Once again, the Transports made a new higher closing high, which has been unconfirmed. The longer this pattern of higher highs by the Transports remains unconfirmed, the higher the odds of a secondary reaction.

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.

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.

As to the gold and silver miners ETFs, SIL and GDX closed up. GDX made a higher closing high unconfirmed by SIL. If this secondary trend is to last, SIL should confirm soon. I see uncommon strength in the gold and silver miners’ ETFs. This is why, last Friday January 17th, and in accordance with the Dow Theory, the secondary trend was labeled as 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 23 , 2014


Bull market started
06/24/2013 157.06
Bull market signaled
07/18/2013 168.87
Last close
01/23/2014 182.79
Current stop level: Secondary reaction low

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

8.24% 16.38% 2.05%

The Dow Theorist


  1. dow theorist, the transports are coming down hard today looks like a secondary trend is being confirmed today...with vengence.

  2. Hi Travis,

    take a look at my Jan 24 post:

    There, I explain that we are near the signaling of a secondary reaction but we are not there....yet. If you take classical Dow Theory we are still quite far. If you take Schannep's, the time requirement (8 trading days as the average of all three indices) has not been met. However, I don't like volume readings and so many days of higher highs by the Transports unconfirmed by other indices has been a warning sign....but not there...yet.