Dow Theory Update for January 24: Stocks close to signaling secondary reaction….

…But we are not there yet.

Today, even though no trend was changed, was one of those days where it pays off to follow the markets.

Thus, we saw stock indices collapse, whereas gold (GLD) managed to even post modest gains. By the same token, GDX managed to close with minimal losses. Maybe this time something is changing in the gold universe. If this is the case, there is no reason to hurry, and we patiently wait for the primary trend to turn bullish.

US stocks

The Transports, the Industrials and the SPY closed down. I’ve been warning for the last few days that the repeated higher closing highs of the Transports unconfirmed by at least one index was a red flag hinting at the development of a secondary reaction. Today’s action seems to suggest that we are very close to a secondary reaction. Take a peek at the chart below and see for yourself:

 

The ellipses display bearish action which could become a secondary bearish reaction against the primary bullish trend

Nonetheless, we are not there yet. Neither the classical Dow Theory, nor Schannep’s have signaled a secondary reaction. However, I am monitoring like a hawk the price action.

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 closed down, 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 down. GDX made a higher closing high unconfirmed by SIL. If this secondary trend is to last, SIL should confirm soon. In spite of today’s close, I still see uncommon strength in the gold and silver miners’ ETFs. This is why, last Friday January 17^th, 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 24 , 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		01/24/2014	178.89
Current stop level: Secondary reaction low			165.48
Unrlzd gain %	Tot advance since start bull mkt	Max Pot Loss %
5.93%	13.90%	2.05%

Sincerely,

The Dow Theorist