Dow Theory Update for December 9: US stock indices making confirmed higher highs

Trends unchanged

Gary Antonacci, of the “Dual Momentum” blog, has recently penned an interesting article named “Common Mistakes of Momentum Investors”.  Since the Dow Theory is closely related to appraising momentum and riding on it, the article is quite applicable to Dow Theorist and is an interesting read so that we avoid usual psychological pitfalls.  

US STOCKS

The primary and secondary trend is bullish since November 21^st, 2016, as explained here and here.

Following the primary bull market signal of November 21^st, stocks have given little respite to afford a more convenient entry price for latecomers. Almost with no noticeable decline stocks have continued to make confirmed higher highs, which is bullish long term. Stocks are short term overbought and theoretically should pause. However, overbought situations may persist longer than one expects.While we don't know at this stage how will the current bull market signal (and concomitant trade) end, the longer the upward momentum persists, the more likely (while not a certainty) the trade is likely to be closed at a modest loss or even with a profit. The entry price for the SPY (close of November 21st) was 220.15. The SPY closed on December 8th, at 225.15 which amounts to ca. 2.27% advance. If a secondary reaction where to begin from this point, and would further lead to an "average" exit signal which tends to be at ca. -7.7% below the top (more about it here), we would be likely to make a -5.43% loss. Hence, the higher the market goes before undergoing the first secondary reaction, the better. Please mind, that absent a secondary reaction leading to the setup for a primary bear market signal, the closing lows of the last primary bear market (November 4th, 2016 for the SPY at 208.55) are our Dow Theory stop loss (which lies at ca. -5.27% below the entry price of 220.15).

GOLD AND SILVER

The primary and secondary trend is bearish, as was explained here and here. The primary bear market was signaled on September 30rd, 2016

After what can be considered a secondary (bullish) reaction against the primary bear market (the rally retraced more than 1/3 of the previous decline on a confirmed basis), newer lows (breaking down below the last recorded primary bear market closing lows) has re-confirmed the primary bear market on November 14^th, 2016.

For the time being no secondary (bullish) reaction against the primary bear market in sight.

GOLD AND SILVER MINERS ETFs

The primary and secondary trend is bearish, as was explained here and here.

After what can be considered a secondary (bullish) reaction against the primary bear market (the rally retraced almost 1/3 of the previous decline on a confirmed basis), newer lows (breaking down below the last recorded primary bear market closing lows) has re-confirmed the primary bear market on November 13^th, 2016

For the time being no secondary (bullish) reaction against the primary bear market in sight.

Sincerely,

The Dow Theorist