Manuel Blay's  Instablog

Manuel Blay
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Trader and investor. My trading is short-term based (avg trade duration 4-5 days). As investor I'm deeply influenced by Dow Theory
My blog:
Dow Theory Investment
  • Dow Theory Update For Nov 12: Gold And Silver Setting Up For Primary Bear Market Signal  0 comments
    Nov 13, 2012 7:41 AM | about stocks: SPY, DIA, IYT, GLD, SLV, GDX, SIL
    No technical changes until now

    The SPY and Transports closed up. The Industrials closed down by a mere -0.23 point.

    Since the SPY and the Transports closed up, I'd say that basically it was an "up" day. However, volume was dramatically low, which has a bearish connotation.

    Technically, nothing has changed. The primary trend remains bullish and the secondary trend remains bearish. However, if you have not done so yet, I encourage you to read my post "Is the primary trend for stocks about to change? which you can read here

    If you read that post, you will see that the the primary trend for stocks may turn bearish very soon.

    Gold and silver closed down today. I find noteworthy that gold and silver are setting up for a primary bear market signal. On 10/04/2012, gold and silver jointly made new highs. Since that date, they retraced the primary bull market advance until 11/02/2012. From that date, both GLD and SLV staged a rally off the 11/02/2012 secondary reaction lows. Such rally clearly exceeded 3% for GLD and almost reached 6% for silver. You know that for stocks the rally following the secondary reaction lows must reach at least 3% in order to be meaningful. You also know that for gold and silver I adjust such 3% threshold to their own volatility. Gold has roughly the same volatility of the SPY and, hence, if no adjustment is made. Silver almost doubles gold volatility, so I demand ca. 6%.

    From their 11/02/2012 lows at 162.60 gold rallied until 11/08/2012 when it reached 167.99. This is a rally of 3.3%. Silver didn't quite reach 6% but as you can find here, I only demand one rally. Furthermore, silver almost confirmed since its rally amounted to 5.3%.

    Therefore, if the secondary reaction lows of 11/02/2012 are broken a primary bear signal under Dow Theory will be flashed for gold and silver. Here you have an updated chart. The red line shows the price level to be jointly violated to have a primary bear market signal.



    (click to enlarge)
    Gold and silver setting up for a primary bear market signal

    The precious metals ETF miners GDX and SIL closed down. However, there is no technical change to report.

    So we have plenty of work to do in the coming days. We have to keep a close eye on the Transports, GLD and SLV.


    The Dow Theorist

    Stocks: SPY, DIA, IYT, GLD, SLV, GDX, SIL
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