Monday, October 27, 2014

Dow Theory Update for October 27: Primary bear market for SIL and GDX reconfirmed today

The best and most concise article ever to debunk value and reassert momentum investing

The “optimal momentum” blog has just posted and article entitled “Value Investing Redux” which, in less than 3 minutes, manages to explain why momentum (both absolute –trend following- and relative –relative strength-) beat the pants off value investing.

Please, spare yourself 3 minutes and read the article here

My time remains in short supply, so I give you straight away the meat.

US Stocks

The primary and secondary trend for stocks is bearish. More details here and here.

Please be advised that renowned Dow Theorist Schannep still considers the primary trend as bullish. We diverge as to the importance to be given to the lows of the last completed (the preceding) secondary reaction. Other people using (or misusing) the Dow Theory seems divided into two camps (and all of them for the wrong reasons): Some are bearish and some are bullish.

Since this is an important issue, I hope to post a very extensive article in the coming weeks.  

Gold and Silver (GLD and SIL).

The primary trend remains bearish (notwithstanding the current rally).

Gold and Silver miners ETFs (GDX and SIL)

Today, GDX eventually capitulated and violated its 12/23/2013 closing lows (something which SIL did weeks ago). The veredict of the market is clear: The primary bear market has been confirmed. We don’t know whether it is a shakeout or we should look down below. In any instance, we know that the primary trend was bearish and it has been reconfirmed as such today. Here you have an updated chart (GDX at the bottom).

I don't regret having stuck to the Dow Theory, and, hence, have not prematurely jumped the gun (when many pundits were happily proclaiming a new bull market confusing a secondary bullish reaction for the real thing).

Primary bear market reconfirmed for SIL and GDX


The Dow Theorist

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