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 October 15: Stocks Temporarily Halt Their Rally  0 comments
    Oct 15, 2013 5:00 PM | about stocks: SPY, DIA, IYT, GLD, SLV, GDX, SIL

    And Precious metals temporarily halt their decline with unconfirmed lower lows

    US stocks

    The SPY, Industrials and Transports closed down.

    The primary trend remains bullish, as explained here, and more in-depth here.

    The secondary trend is bearish (secondary reaction against the primary bull market) for the reasons explained here.

    Last Friday October 11th, the stock market set up for a primary bear market signal, for the reasons given here

    Today's volume was higher than Monday's, which is bearish, as lower prices were met by expanding volume. We have had four consecutive bearish volume days (as shown on the chart below). Furthermore, the pattern of volume during the last 4-days rally is bearish as each subsequent higher price attracted less and less volume (see the declining trendline on the volume chart). Therefore, I consider volume to be bearish, which means that now the odds favor lower prices (or at least stalling prices) in the days ahead.

     

     

    (click to enlarge)
    Volume is bearish: last rally saw contracting volume and today's decline was on higher volume

    Gold and Silver

    SLV and GLD closed up. For the reasons I explained here, I feel the primary trend remains bearish. Here I analyzed the primary bear market signal given on December 20, 2012. The primary trend was reconfirmed bearish, as explained here. The secondary trend is bullish (secondary reaction against the primary bearish trend), as explained here.

    Here, I explained that GLD and SLV set up for a primary bull market signal. However, a setup is not the same as the "real thing," namely the primary bull market; thus, many "setups" do not materialize and until the secondary reaction closing highs are jointly broken up, no primary bull market will be signaled.

    SIL and GDX closed up. SIL and GDX, unlike GLD and SLV, are in a primary bull market under the Dow Theory, as explained here and here.

    By the way, on October 11th, GLD made a lower closing low unconfirmed by SLV. Such a lack of confirmation may be hinting that the current pullback might be running out of gas. The longer the non-confirmation persists, the higher the odds for a trend reversal (of secondary proportions, given that the unconfirmed lows relate to a modest pullback). Take a look at the chart below. It displays an interesting juncture. If the red horizontal lines got jointly violated, the primary bear market would be re-confirmed. If the blue horizontal lines got broken up, then a primary bull market would be signaled. Price action is currently caught between these two vital technical levels. If the current non-confirmation bore fruit and prices would arrest their decline, then a new primary bull market would be a distinct possibility. In the meantime, let's wait and observe price action.

     

     

    (click to enlarge)
    Is the current pullback against the secondary bullish trend (blue rectangle) being temporarily halted. Unconfirmed lower lows (blue arrows) seem to indicate so

    The secondary trend is bearish, which is tantamount to saying that there is an ongoing secondary reaction against the primary bullish trend, for the reasons given here.

    Sincerely,

    The Dow Theorist

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