Industrials make higher highs.
Yesterday, I couldn’t post. My apologies.
Readers of this Dow Theory blog know that I spare no punches when it comes to
criticizing some market letters writers. However, Dave Moenning, of the
“stateofthemarkets.com”, together with Schannep, of "thedowtheory.com", is worth of praise.
Yesterday, Dave posted his latest article entitled “2014: Macro Crowd Getting It Wrong, Again”
which is a must-read piece ( I do mean it; please read it) in order to
convince yourself about the deceptiveness of “macro” (which is a subset of
“fundamental”) investing. While Dave doesn’t use the Dow Theory, he heavily
tilts towards technical analysis, and, unsurprisingly, he tends to be on the
right side of the market most of the time. I quote one of his paragraphs (which
is no substitute for reading the whole article)
“For
those keeping score at home, this is the second consecutive year in which the
self-proclaimed masters of the universe have gotten it wrong – very wrong.
Recall
that at the beginning of 2013, everybody and their brother was projecting doom
and gloom. The "fiscal cliff" was going to kill the U.S. economy.
Europe was going to collapse and ruin the global economy in the process. And
China's growth rate was going to fall on its face. Therefore, all those
experts, with all of their fancy Ivy League degrees, told us that the sky was
definitely going to fall in 2013.
And
how did the market react? Ms. Market apparently took offense at all the
negativity being espoused and put up a gain of 30 percent. As a result, hedge
funds had another year of particularly weak returns. “
So much for “grandiose” ego-filled fundamental
predictions. Why not accept that we are not endowed with a crystal ball? Why
not accept our own fallibility? This is why Soros, while not strictly a friend
of technical analysis, is a successful investor. He’s humble enough to accept
when his judgment was wrong.
Please mind that I am keenly aware that the market is overbought, and it could well happen that it starts to decline in earnest. Thus, I am neither a bull nor a bear. When I criticise bears, I do it not because they are "bears" per se, but, rather, because they are blinded by fundamentalism. The same criticism would apply to "bulls" if the technical tone of the market were bearish.
The SPY closed down, Transports and Industrials closed up. The Industrials confirmed the higher high made by the SPY two days
ago.
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
closed up, 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. However, the secondary bullish reaction
against such old primary bear market is also getting quite old. Tie.
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. The recent rally nears SIL and GDX to the level (blue
horizontal line on the chart) where a primary bull market will be flashed. We
are not there yet, but as you can see on the chart, SIL and GDX are not that
far from the blue horizontal line (secondary bullish reaction against the
primary bear market).
 |
| Will the blue horizontal lines be broken up and a primary bull market signaled? |
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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