Dow Theory Update for April 30: Zero Hedge sees interest rates and the USD coiled too

The Industrials finally break above the December 31 closing high

Recently I wrote two times about the “coiling” of several markets. I said that the consolidation implies that a significant movement may be under gestation. You can find my two posts here and here.

Well, it seems that Zero Hedges, a couple of days later, though, is seeing the same thing. In its article “Coiling, Complacency, AndThe "Three" Coupon Treasury Markets”

In a similar fashion similar to this blogger truly yours, Zero Hedge says:

“Often times, narrow trading ranges act like coiled springs.  The longer markets stay in those ranges the greater the pressure builds.  Tight ranges over longer time periods cause ever-more-powerful movements once the ranges break.” (emphasis in original)

Furthermore, Zero Hedge adds the USD to the list of “coiled” markets. Thus, Zero Hedge reports that:

“The FT reported today that the 7% range in the dollar over the past two years is the narrowest over that length of time since late 1977.” (Emphasis in original)

Concurring with my own view, Zero Hedge also notes that in spite of the current Bull Run, stocks are getting “coiled." I’d add that I see a broadening formation on the SPY chart, which tends to show distribution.

“Despite huge intraday volatility in Q1 in various single name equities and sectors, the FT also says the trading ranges for broad market equity indices this year have been the narrowest in over a decade.”

All in all, all relevant markets are in narrow ranges. While I am not as apocalyptic as Richard Russell, of the Dow Theory Letters, the markets seem to be saying that something big is going to happen. The issue is that we don’t know whether it will be the demise of the USD, a bond and stocks and even paper gold collapse, or more rosy times ahead. My personal opinions, based on fundamentals are worth nothing, and hence I keep them to myself. I’d rather trust the Dow Theory and my charts.

Let’s see what the Dow Theory has in store for us today. Not much.

US Stocks

The SPY, Industrials and Transports closed up. Finally, the Industrials bettered their December 31^st, 2013 closing highs, something that the SPY and the Transports did weeks ago, as I explained here.

Here you have an updated chart showing the Industrials, Transports, and the SPY. Now all of them are above the December 31^st, 2013 closing highs.

The primary trend remains bullish, as explained here, and more in-depth here. 

The primary trend was reconfirmed as bullish on October 17^th, 2013, and November 13th, 2013 and March 7th, 2014, for the reasons given here, here and here.

So the current primary bull market signal has survived three secondary reactions.

The secondary trend is bullish too, as explained here and here.

Gold and Silver

SLV, and GLD closed down. For the reasons I explained here, and more recently here 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 27^th, 2013. From such highs the market declined without jointly violating the June 27^th, 2013 primary bear market lows.

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.

I profusely explained that SIL and GDX set up for a primary bull market signal. You can find all the relevant information from a Dow Theory standpoint here.

Please mind that a setup is not the real thing. So the primary trend has not turned bullish yet (or maybe “never”).

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.

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.

Sincerely,

The Dow Theorist