No change in trends.
Let’s get started with our Dow
Theory commentary for today.
Today the markets were on a
bullish note.
The three stocks indices we
monitor close strongly up.
Volume was much lower today,
which has a bearish connotation, since it was an up day. Furthermore, the last
recorded pivot low had lower volume than that the preceding one (see chart
below) which is bearish too. Thus, volume seems to suggest that the bear is holding the upper hand.
 |
| Last pivot low bearish. Overall pattern of volume is bearish |
However, today’s market action
hasn’t changed either the primary or secondary trend which remains bearish for stocks.
Of course, it goes without
saying that it irks me that a primary bear market signal was flashed by just
some cents. Should the Transports have closed just 1 point higher we would be
in a primary bull market (at least according to my Dow Theory “flavor”) and
hence we would have enjoyed today’s up move.
However, we must bear in mind
that:
1)
We must have discipline to stick to a sound
timing method such as the Dow Theory. If we begin to break solid rules, we will
be ultimately doomed. We simply don’t know what the market is going to do on a
given day. However, we do know about odds. And we know that if a primary bear
market has been signaled (even by some cents penetration) it is a valid
primary bear market signal to be heeded. Ignore it at your own peril.
2) Aprioristically, the rules of the Dow Theory
make sense. We know that trends exist. Furthermore, as Dow greatly explained in
his writings, there are fundamental and psychological reasons for its existence.
Thus, once the market has shown a definite degree of weakness (i.e. violation
of secondary reaction lows), the most likely outcome is the continuance of such
a trend. A couple of quotes from Charles Dow are illustrative in explaining the
existence of trends:
On February 21, 1901, Dow
wrote:
“But after
allowing for all these things, it is fair to assume that the trait in human
nature which makes cycles in trade has not changed and that it will work out
the same over-trading and over-commitments which have been the cause of
declines heretofore.”
On July 31, 1901, he wrote
that:
“the
tendency to over-do in times of prosperity rest on a principle in human nature,
which makes a man always want to make money, no matter how much he has made."
Thus, trends exist and the
investor is long term better off not fighting them.
Therefore, even if this
primary bear market signal resulted in missing profits as the market shoots up
and makes new highs, we should find comfort in knowing that on the long pull we
are going to outperform slightly the market, while, more importantly, keeping
losses short. What kills investors is not a lack of performance but draw downs.
Fear is more important than greed and thus, our first task is too keep losses
short, even if this entails occasionally foregoing profits. You can find more
details about the primary bear market signal here and here
Gold, silver and their
respective miners ETFs closed up for the day. For the time being, it seems that gold
and silver are not violating their 11/02/2012 secondary reaction lows. By
refusing to break such lows, a primary bear market signal is being avoided.
Thus, the primary trend remains bullish and the secondary trend bearish.
The miners continue in a
secondary reaction. The primary trend remains bullish.
Here you have the figures of
the markets I monitor for today. Please mind the changes in the SPY. Since now
we are in a bear market, I changed the text of the columns which now reflect
the ongoing bear market.
| Data for November 19, 2012 |
|
|
|
|
|
|
| DOW
THEORY PRIMARY TREND MONITOR SPY |
|
|
|
|
|
SPY |
| Bear market started |
|
09/14/2012 |
147.24 |
| Bear market signaled |
|
11/16/2012 |
136.37 |
| Last close |
|
11/19/2012 |
139.13 |
| Current stop level: Bull
market high |
|
|
147.24 |
|
|
|
|
| Price chg since bear mkt
signaled |
Tot decline since start bear mkt |
Max Pot Loss % |
|
|
|
|
|
| 2.02% |
-5.51% |
-7.38% |
|
|
|
|
|
| DOW
THEORY PRIMARY TREND MONITOR GOLD (GLD) |
|
|
|
|
GLD |
| Bull market started |
|
05/16/2012 |
149.46 |
| Bull market signaled |
|
08/22/2012 |
160.54 |
| Last close |
|
11/19/2012 |
167.87 |
| Current stop level: Bear mkt
low |
|
|
149.46 |
|
|
|
|
| Unrlzd gain % |
Tot advance since start bull mkt |
Max Pot Loss % |
|
|
|
|
|
| 4.57% |
12.32% |
7.41% |
|
|
|
|
|
| DOW
THEORY PRIMARY TREND MONITOR SILVER (SLV) |
|
|
|
|
SLV |
| Bull market started |
|
06/28/2012 |
25.63 |
| Bull market signaled |
|
08/22/2012 |
28.92 |
| Last close |
|
11/19/2012 |
32.05 |
| Current stop level: Bear mkt
low |
|
|
25.63 |
|
|
|
|
| Unrlzd gain % |
Tot advance since start bull mkt |
Max Pot Loss % |
|
|
|
|
|
| 10.82% |
25.05% |
12.84% |
|
|
|
|
|
| DOW
THEORY PRIMARY TREND MONITOR ETF SIL |
|
|
|
|
SIL |
| Bull market started |
|
07/24/2012 |
17.08 |
| Bull market signaled |
|
09/04/2012 |
21.83 |
| Last close |
|
11/19/2012 |
22.98 |
| Current stop level: Bear mkt
low |
|
|
17.08 |
|
|
|
|
| Unrlzd gain % |
Tot advance since start bull mkt |
Max Pot Loss % |
|
|
|
|
|
| 5.27% |
34.54% |
27.81% |
|
|
|
|
|
| DOW
THEORY PRIMARY TREND MONITOR ETF GDX |
|
|
|
|
GDX |
| Bull market started |
|
05/16/2012 |
39.56 |
| Bull market signaled |
|
09/04/2012 |
47.77 |
| Last close |
|
11/19/2012 |
47.76 |
| Current stop level: Bear mkt
low |
|
|
39.56 |
|
|
|
|
| Unrlzd gain % |
Tot advance since start bull mkt |
Max Pot Loss % |
|
|
|
|
|
| -0.02% |
20.73% |
20.75% |
|
Sincerely,
The Dow Theorist
