Stocks remain caught in nowhere’s land
Let’s begin with our Dow Theory commentary for today.
US stocks
The Transports, the
Industrials and the SPY closed up.
Volume was bearish, as higher
prices were not supported by expanding volume. The overall pattern of volume
remains bearish. Furthermore, the high volume we saw when prices were declining
could turn into supply as now prices advance and hence make the rally stall. In
other words, if volume had shrunk when prices approached their early February
lows, then we would have to fear less profit taking as prices rally.
Furthermore (please mind that
this bears significance only for the short-term, i.e. 2-10 days), I see one of
my short-term pet indicators, namely, the ratio of SPY’s volume to the total
volume of the individual S&P 500 stocks has dramatically declined,
showing that volume on the SPY has significantly contracted more than that in the
underlying stocks (which tends to show that speculative fever is drying out as
short term moves are fueled by speculators). Such divergence tends to signal a
short-term top or, at best, range-bound price action. In addition to that the
TRIN seems to be pointing at a short term top.
Of course, all the above musings have nothing to do
with the Dow Theory (except the observation that volume expanded on declines
and contracted during the present rally). I feel almost embarrassed to clutter
this blog with volume observations, which are not directly related to the Dow
Theory and are only marginally (as volume qualifies but doesn’t dictate price
action) relevant. However, traders make money “on margin” (pun intended) and
hence,” marginal” information is significant for the short term trader.
In any instance, the market remains caught in a
technically complicated juncture. If the February lows were violated a primary
bear market would be signaled. On the other hand, if the last recorded closing
lows where broken out, the primary bull market would be reconfirmed. You can
gather more information about the current juncture, here.
Here you have an updated chart depicting the current
stalemate. The blue and red horizontal lines say it all.
 |
| Critical juncture: Soon should the primary bull market be reconfirmed or a new primary bear market be signaled |
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. The secondary trend is
bullish, as explained here.
In spite of short term bullish accomplishments, SIL and GLD are not in a
primary bull market.
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 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 | 02/13/2014 | 183.01 | |
| Current stop level: Secondary reaction low | 174.17 | ||
| Unrlzd gain % | Tot advance since start bull mkt | Max Pot Loss % | |
| 8.37% | 16.52% | None | |
Sincerely,
The Dow
Theorist
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