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 July 9: Stocks Close To Breaking The Last Recorded Highs  0 comments
    Jul 9, 2013 5:38 PM | about stocks: SPY, DIA, IYT, GLD, SLV, GDX, SIL

    Possible change of trends for stocks at hand

    Gold GOFO rates turn negative

    Zero Hedge reports that GOFO rates have just turned negative.

    As the article explains, it is difficult to isolate "in real time" what caused this dislocation. However, irrespective of the specific cause, a negative GOFO indicates that something is wrong with the gold market. Likely causes, according to Zero Hedge, are:

    • An ETF-induced repricing of paper and physical gold
    • Ongoing deliverable concerns and/or shortages involving one (NYSE:JPM) or more Comex gold members.
    • Liquidations in the paper gold market
    • A shortage of physical gold for a non-bullion bank market participant
    • A major fund unwinding a futures pair trade involving at least one gold leasing leg
    • An ongoing bullion bank failure with or without an associated allocated gold bank "run"
    • All of the above

    Stocks

    The SPY, Industrials, and Transports closed up.

    The primary trend is bearish for the reasons explained here, and further explained here.

    The secondary trend has just turned bullish. More about this change of trend tomorrow. However, since we are just interested on the primary trend in order to make commitments on the long side, we shouldn't get too excited with this change of the secondary trend.

    However, as you can see on the chart below, prices are steadily nearing the last recorded highs (actually, the last primary bull market highs). Such highs are shown with a horizontal blue line (the date of those closing highs is: 05/28 for the Industrials, 05/17 for the Transports, and 05/21 for the SPY). If these closing highs are jointly broken, a new primary bull market will be signaled.

     

     

    (click to enlarge)
    Keep an eye on the blue horizontal lines: If broken up, a new primary bull market would be signaled

    So, I'll keep a close eye on the three indices I monitor.

    Today's volume was lower than yesterday's, which is bearish as volume didn't support higher prices. The overall pattern of volume is slightly bearish.

    Gold and Silver

    SLV, and GLD closed up. The primary trend is bearish, as explained here and reconfirmed bearish here; the secondary trend remains bearish too.

    GDX and SIL, the gold and silver miners ETFs closed up. The primary trend is bearish, as explained here and reconfirmed bearish here; the secondary trend remains bearish too.

    Eventually, one of these primary bear market re-confirmations will be proven false. In the meantime, it is better not to fight the trend, and wait for a primary bull market signal in order to make a commitment on the long side.

    Sincerely,

    The Dow Theorist

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