Trends unchanged.
Let’s begin with our Dow Theory commentary for today.
US stocks
The Transports closed up, and
the Industrials closed down, and the SPY closed up.
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 highs where broken out, the primary bull market would be reconfirmed. You can
gather more information about the current juncture, here and 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 down. For
the reasons I explained here, and more recently here, and in spite of all the bullishness
than now surrounds gold and silver, the primary trend remains bearish.
For the primary trend to turn
bullish, SLV and GLD should jointly
break above the secondary (bullish) reaction highs. As a reminder, the
secondary reaction closing highs were made on August 27th, 2013
(shown with blue horizontal lines). From such highs the market declined without
jointly violating the June 27th, 2013 primary bear market lows
(shown with red horizontal lines). Once again, we see the importance of the Dow
Theory tenet of “confirmation”. GLD briefly traded below the horizontal red
line; however, since SLV did not
confirm, a reconfirmation of the primary bear market was averted. Now we are
seeing bullish action; nonetheless, such a bullish action must be put in
context or, more accurately, put in the context of the proper timeframe. Thus,
according to the Dow Theory the bullishness we are seeing merely is the
“secondary trend” (actually, the secondary bullish reaction against the primary
bear market). It is too premature to qualify the primary trend as bullish. A
primary bull market signal will be flashed when jointly SLV and GLD break above the blue horizontal line (secondary
reaction highs).
By the way, I alerted that the
secondary trend turned bullish long ago (on July 22, 2013), when most market
pundits were solidly bearish, as you can read here. Now, those very
pundits are very bullish as only the sky was the limit. I take the middle road
based on the Dow Theory: Since July 22, 2013 there was technically good reason
not to be so bearish; on February 14th, 2014, there is no reason to be long
term so bullish.
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 down. 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 21, 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 | 02/21/2014 | 183.02 | |
Current stop level: Secondary reaction low | 174.17 | ||
Unrlzd gain % | Tot advance since start bull mkt | Max Pot Loss % | |
8.38% | 16.53% | None |
Sincerely,
The Dow
Theorist
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