Let’s begin our Dow Theory commentary for today.
The Transports closed down, the Industrials and the SPY closed up. Volume was bearish as today’s volume was lower than Friday’s. As I have been written in the last few days, I still have to see a volume explosion on an “up” day. Furthermore, after three consecutive “up” days, it is a little bit late to get a volume explosion, since rather than strength it could be indicative of a short-term top. In other words, I like to see volume exploding in the first day of the bull swing. All in all, the pattern of volume remains bearish and increases the odds for a reversal.
As I wrote last Friday, stocks set up for either a primary bear market or a reconfirmation of the primary bull market. So we are approaching a “moment of truth” in the stock market.
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 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 up on surging volume. Such a volume explosion after four consecutive “up” days, tends to imply that a short-term top is in the making. However, and after some mild correction, it is bullish. The secondary trend is bullish, as explained here. Furthermore, the hitherto highest secondary reaction closing lows have been jointly broken out, which tends to beget higher prices in the days ahead. However, since neither SIL nor GDX underwent a volatility-adjusted relevant pullback, we didn’t get today a primary bull market signal. So today’s higher closing highs merely say that the ongoing bullish secondary reaction against the primary bearish trend is in good health. However, bear in mind that a secondary reaction is not the “real thing”, namely the primary bull market. So I see bullishness of “second decree”, which has a shorter life-span than the real thing. Here you have an updated chart:
|Secondary bullish reaction against primary bear market for SIL and GDX|
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 February 10, 2014|
|DOW THEORY PRIMARY TREND MONITOR SPY|
|Bull market started||06/24/2013||157.06|
|Bull market signaled||07/18/2013||168.87|
|Current stop level: Secondary reaction low||174.17|
|Unrlzd gain %||Tot advance since start bull mkt||Max Pot Loss %|
The Dow Theorist