Thursday, January 30, 2014

Dow Theory Update for January 30: Stocks closed up and volume fails to confirm

Strebler, of the Dow Theory Letters, nails it down, once again

Jon Strebler, Russell’s associate, of the “Dow Theory Letters”, has recently nailed it down again when he wrote “The fundamentalists tell us what should happen, but have a tough time identifying when

I couldn’t agree more. Strebler adds that not only poor timing plagues fundamental analysis. More often than not the fundamental analysis itself is flawed and thus the “when” does never materialize.

I feel Strebler is becoming better and better, and I praise him accordingly.

On the other hand, I regretfully have to say that Russell is being overtly imprecise. He interchangeably refers to “bear market” whatever seems to suit him best. Thus, he recently wrote that the Industrials have plunged to a new bear market low, which left me scratching my head. Does he imply that the primary trend is bearish? I don’t know. What I do know is that both under the classical Dow Theory (which he is supposed to follow) and Schannep’s, the primary trend is bullish as of this writing.

The only “bearishnes” I see on my Dow Theory radar, is the ongoing secondary reaction against the primary bull market. Furthermore, such a correction hasn’t been signaled yet, if one is to follow the classical Dow Theory, as Russell is supposed to do. Thus, Russell by not clearly defining the proper timeframe of his bearishness is inadvertently misleading readers.

US stocks

The Transports, the Industrials and the SPY closed up. Yesterday, I wrote that I saw two small “positives” on volume action provided “soon” stocks close up on big volume. Well, today stocks closed up, albeit volume was muted and clearly didn’t surge. Let’s see what happens tomorrow, but the longer it takes for stocks to rally on big volume, the higher the odds that the secondary reaction is far from over.

The primary trend remains 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.

The secondary trend is bearish (secondary reaction against primary bull market), as explained here.

Gold and Silver

SLV and GLD closed down. 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.

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 30 , 2014


Bull market started
06/24/2013 157.06
Bull market signaled
07/18/2013 168.87
Last close
01/30/2014 179.23
Current stop level: Secondary reaction low


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

6.13% 14.12% 2.05%

The Dow Theorist

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