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
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Dow Theory Investment
  • Dow Theory Update For Feb 28: Two Days Of Non Confirmation  0 comments
    Feb 28, 2013 5:33 PM | about stocks: SPY, DIA, IYT, GLD, SLV, GDX, SIL

    Yesterday's higher high of the Industrials unconfirmed yet.

    Special note on gold

    GLD lost yesterday (Feb 27) a whopping 12.04 tonnes of gold (0.947%). Thus, inventories have been declining for 7 days in a row. All in all, inventories have declined from 1322.97 tons to 1258.4 tonnes, that is 64.57 tonnes or 4.88%.

    I have written extensively about the bullishness of such an event (contrary to conventional wisdom), as you can find here and here.

    Today, I'd like to add that the appetite for physical gold must be truly enormous. If we look at the pattern of inventory losses, we can see that even with ascending prices (until February 26) the trickle down continued (which implies that the price advance was not enough in order to quench demand for physical). However, yesterday's phenomenal loss (Feb 27) coupled with a down day, implies that as soon as the price declines (even slightly) demand for physical shoots up. Thus, the pattern I see of prices and inventory changes tells me that the market for physical gold is under strain and that the modest rally of the last few days was not enough to calm the market.

    So something has to give in. Either we see a big rally in paper gold in the next few weeks, or some severe dislocation is likely to occur.


    The SPY and the Industrials closed down. The Transports closed up. Yesterday's higher high made by the Industrials has not been confirmed yet. The longer the non confirmation persists, the higher the odds of a secondary reaction. However, it is too soon to tell.

    Today's volume was higher than yesterday's, which makes it a bearish volume day. Thus, today we had the eighth bearish volume day in a row.

    Gold and silver

    GLD and SLV closed down today. The primary and secondary trend remains bearish.

    The gold and silver miners ETFs closed down. The primary and secondary trend remains bearish.


    The Dow Theorist

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