Trends for gold, silver and their ETFs miners and interest rates unchanged.
US STOCKS
“Rhea’s /classical" Dow Theory
Today, 11/2/2021, the Dow Transportation finally confirmed the Dow Industrials in bettering its last bull market highs (5/7/21). As per the "original" Dow Theory, it means:
1) The Bull market has been reaffirmed.
2) The secondary (bearish) reaction against the Bull market has been terminated. Thus, both the primary and secondary trends are now bullish.
Brief summary of all the developments prior to today's break-up:
1) Last confirmed closing highs made on 5/7/21.
2) From such highs, there was a 29 trading days pullback that qualified as a secondary reaction.
3) Off the 6/18/21 secondary reaction lows, a rally followed. Such a rally set up the US stock indexes for a potential bear market signal. If the 6/18/21 secondary reaction lows had been jointly broken down, a Bear market would have been signaled.
4) The DJI broke up above its last highs (5/7/21) on 7/2/21. The DJT did not confirm. Hence, we could not declare the end of the secondary reaction, and the Bull market was not reconfirmed.
5) The DJT broke down below its secondary reaction lows (6/18/21) unconfirmed by the DJI. Absent confirmation, no Bear market was signaled.
6) So we were in a "tie" situation. We had a
break-up and a break-down unconfirmed. In such situations, the Dow Theory gives
the benefit of doubt to the current trend (Bull market). So during all this
period of hesitancy the trend was considered bullish.
7) Today, 2/11/21 by finally breaking topside its 5/7/21 highs, the DJT confirmed the DJI break-up, and the Bull market has been reconfirmed. End of the secondary reaction.
The Table below contains all the relevant data:
And the charts below say it all:
The appraisal of the trend in this specific instance
coincides with both the Dow Theory when one is not bound by the “three weeks”
time requirements and the “purist” (misguided) interpretation that strictly
demands at least three weeks for a secondary reaction to exist. More about two alternative way to assess the existence of secondary reaction here.
And what about the trend when appraised by the Dow Theory for the 21st Century (aka. Schannep’s Dow Theory)? As an appetizer, Schannep’s Dow Theory since 1953 outperformed Buy and Hold by 3.25% p.a. with a marked reduction of both the depth and time in drawdown. Schannep’s Dow Theory achieved such an outperformance by investing only in the major indexes, which is quite a feat. Furthermore, we went 100% invested on 4/6/2020 and have ridden the Bull to this date. On the other hand, the “original/classical” Dow Theory outperformed Buy and Hold by a modest 0.41% p.a., which is also OK given that drawdowns were also reduced. On a risked-adjusted basis, both Dow Theory “flavors” greatly outperformed Buy and Hold. Do you want to know more? Become a Subscriber, and you’ll get access to a wealth of information (i.e., access to our Letters since 1962 and their concomitant trade recommendations, the power of the consumer confidence report as a timing device, the special report about the yield curve, how to calculate profit objectives that work, and much more). More importantly, you’ll be punctually updated through our email service of any change of trends. Not accidentally, our Newsletter has consistently been ranked among the top investments Letters.
Sincerely,
Manuel Blay
Co-Editor of thedowtheory.com
No comments:
Post a Comment