Speaking theUnspeakable
This is the
title of the article penned by John Rekenthaler, Vice President of Research of
Morningstar. So, what’s the Unspeakable? Answer: The validity of technical
analysis as a legitimate investment tool. The article makes clear that
technical investing, and particularily, momentum investing definitely tends to
put investors on the right side of the market. Being the Dow Theory a subset of
technical analysis (and a very brilliant subset, indeed), investors should
humble themselves, and heed the signals displayed by the markets, which boils
down to: “Don’t fight the trend”
Of course,
relying on technical analysis implies relinquishing our ego; something which is
too much to bear for most investors.
US Stocks
The SPY and
Industrials, and Transports closed up, and the Industrials made a higher high
(unconfirmed). While today’s higher high by the Industrials confirms the higher
high made some days ago by the Transports (see here and here), and this
is a good sign, as higher highs have been confirmed by at least one index, I don’t like that:
a)
It took a good deal of days for the
Industrials to confirm.
b)
Today’s higher high by the
Industrials hasn’t been confirmed by either the SPY or the Transports.
Take a look
at the chart below, which says it all:
 |
| Industrials made a higher closing high unconfirmed |
The primary trend was reconfirmed as
bullish on October 17th, 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.
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 27th,
2013. From such highs the market declined without jointly violating the June 27th,
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 GDX 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 GDX 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
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