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Dow Theory Update For April 9: Industrials Make Higher Highs Unconfirmed

|Includes:DIA, GDL, GDX, IYT, SIL, SLV, SPDR S&P 500 Trust ETF (SPY)

Precious metals strong but no change in trends

The value trap

Dorsey Wright's blog "Systematic Relative Strength" has recently published an interesting article concerning blind value investing, namely buying stocks because they look cheap. The main thesis is that stocks, unlike staples or commodities, don't have a predetermined value or utility und, thus, what works for consumables (i.e. getting cheap toilet paper) doesn't necessarily work for assets, which by definition are not to be consumed but to be held for a long time. Cheap apples when held long time can and do turn rotten. So investors beware of blind value investing. Don't fall into the value trap.

One way to avoid such a value trap is, of course, to be a technical trader.


The SPY and Industrials closed up. The Industrials made a higher high on a closing basis whereas the SPY failed to do so. The Transports closed down. According to the Dow Theory, the primary and secondary trend remains bullish.

Today's volume was higher than yesterday's. Since it was an up day, it has a bullish connotation. The overall pattern of volume remains bearish.

Gold and silver.

GLD did not either win or lose inventory yesterday.

GLD and SLV closed up. Silver was stronger than gold. The primary and secondary trend remains bearish. I need to see more market action to at least label the secondary trend as bullish as per the Dow Theory. We are still far from that.

GDX and SIL, the gold and silver miners ETFs closed up. The primary and secondary trend remains bearish.


The Dow Theorist