Primary and secondary trends unchanged for all the markets I follow
US STOCKS
By way of exception some non-Dow Theory musings concerning the trend for
US stocks.
US stock indices have making been higher highs and
technically, and particularly according to the Dow Theory, the primary trend is
strongly bullish with no secondary reaction in sight.
Long time readers of this blog know that I also trade US
stocks short term (with some strategies incorporating a Dow Theory filter). What
I am seeing in the last 3-4 trading days is weakness which is not yet apparent
on the charts of indeces. I see weakness for the following reasons:
·
Suddenly
almost all my shorts are performing well (when the tide is strongly up, even
though, I can be profitable shorting, the number of losing trades is much
higher). Now shorting seems piece of cake, which is not normal.
·
Some
of my long trades experienced sudden weakness and the stop-losses have been
hit. I use ample stop-losses (i.e. 16% or a generous ATR multiple). Normally,
my stop-losses never get hit, as I am able to exit even a losing trade well
before the stop loss is hit. Thus, being suddenly stopped out of longs means
some stocks suddenly are really weak. If memory doesn’t fail me I hadn’t been
stopped out of a long position for months.
· The
trading candidates after requiring a minimum of volatility and volume has
declined. Hence, I have a small universe of trading candidates. Historically,
the “drying up” has been harbinger of a change of trend, at least of
secondary proportions (secondary reaction).
·
I
see that US interest rates (TLT and IEF) are going once again down. As per the
Dow Theory the primary trend is bullish (hence, declining interest rates) and the secondary trend bearish (secondary reaction). While not officially ended yet, the secondary reaction seems to be on its death throes. A new up leg
in US interest rates coupled with the weakness I see in the internals of the
stock market (my own trading) has suggested in the past a decline in US stocks.
Of course, this is not Dow Theory but I’ll be keeping
an attentive eye to the market.
Having said this, I brief reminder of the current
situation of the stock markets according to the Dow Theory
Under Schannep’s Dow Theory
The primary and secondary
trend turned bullish on October 25th, 2019, as was explained here and here. The three US stock
indices continue making higher highs, now with the Transports joining the
parade. As of this writing we are far from a secondary reaction. As Schannep is
fond of saying, now stocks are “in the clear”.
Under the Rhea/Classical
Dow Theory
If we appraise the trend
under the “Rhea/classical” Dow Theory, the primary trend is bullish since April
1st, 2019, as was explained here
The secondary trend is now
bullish, as the Transport bettered on January 14, 2019 their secondary reaction
closing highs (of 04/29/2019) hence confirming the Industrials. The
primary bull market has been reconfirmed.
All in all, now both the
primary and secondary trend is bullish.
GOLD AND SILVER
The primary trend and
secondary trend was signaled as bearish on 11/07/2019 as was profusely
explained here
The secondary trend is
bullish (secondary reaction against the primary bear market) as was profusely
explained here.
GOLD AND SILVER MINERS ETFs
The primary trend is
bullish since 12/18/2018 as explained here. No changes. This
specific signal is now more than one year old. Hence, we are dealing with a
trade whose duration seems quite in line with what is to be expected under the
Dow Theory (trades lasting more than one year on average, please mind the word
“on average”).
On 09/04/2019 SIL and GDX
made its last recorded primary bull market closing highs. From that date both
ETFs declined and the secondary trend turned bearish (secondary reaction
against the primary bull market) as explained in-depth here. The secondary
reaction closing lows were jointly made on 10/15/2019
On 10/25/2019 the setup for
a primary bear market has been completed as explained here
From that date GDX flirted
with violating its secondary reaction closing lows which it did not. SIL was
much stronger and has hitherto remained at a safe distance of those lows.
On 12/24/2019 SIL bettered
its primary bull market closing highs unconfirmed
by GDX. (blue arrow on the right side of the upper chart). Hence, we cannot
declare the secondary reaction as extinguished. Thus, we remain in a primary
bull market with an ongoing secondary reaction.
US INTEREST RATES
As it was explained here, TLT and IEF (two ETFs
that relate to US interest rates) are in a bull market (since 12/18/2018 or
11/19/2018 depending on the way one appraises the secondary reaction). I also
explained that they are currently under a secondary reaction.
Sincerely,
One Dow Theorist
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