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Dow Theory Update For July 1: Stocks Make Confirmed Higher Closing Highs

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

Secondary reaction averted

US Stocks

The SPY, Industrials and Transports closed up. They made higher closing highs (confirmed), which has two implications:

a) It is bullish. One day the primary bull market will end, but technically we have been wise not to outsmart the market and stick with the trend.

b) It averts the impending secondary reaction, I referred to yesterday, since the higher highs imply the resumption of the primary trend. Thus, we reset our "time clock" to zero.

The unrealized profits (please mind the word "unrealized") for our suggested long position in the SPY according to the primary bull market signal given by the Dow Theory on July 18, 2013 has reached a very decent 16.68%. We also know that our Dow Theory stop (more about "Dow Theory trailing stop, here) has locked a sizeable part of our profits (barring a cataclysmic event, with a -20% overnight gap), since our stop lies at the closing lows of the last recorded secondary reaction (on January 31, 2014 at 174.17 for the SPY), which is well above our entry price of 168.87.

Here you have a spreadsheet with the relevant data:

DOW THEORY PRIMARY TREND MONITOR SPY  
      SPY
Bull market started   06/24/2013 157.06
Bull market signaled   07/18/2013 168.87
Last close   07/01/2014 197.03
Current stop level: Secondary reaction low   174.17
       
Unrlzd gain % Tot advance since start bull mkt Max Pot Loss  
       
16.68% 25.45% None  
Click to enlarge

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

The primary trend was reconfirmed as bullish on October 17th, 2013, and November 13th, 2013 and March 7th, 2014, for the reasons given here, here and here.

So the current primary bull market signal has survived three secondary reactions.

The secondary trend is bullish too, as explained here and here.

Gold and Silver

SLV and GLD closed down. For the reasons I explained here, and more recently here the primary trend remains bearish.

For the primary trend to turn bullish, SLV and GLD should jointly break above the secondary (bullish) reaction highs. As a reminder, the secondary reaction closing highs were made on August 27th, 2013. From such highs the market declined without jointly violating the June 27th, 2013 primary bear market lows.

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.

On a statistical basis the primary bear market for GLD and SLV is getting old. More than one year since the bear market signal was flashed has elapsed. However, I am extremely skeptical as to the predictive power of statistics. I prefer price action to guide me, and the Dow Theory tells me that the primary trend remains bearish until reversed. However, the secondary bullish reaction against such old primary bear market is also getting quite old. Tie.

Furthermore, the June 27, 2013 lows remain untouched. The longer this situation lasts, the higher the odds that something might be changing. But I wait for the verdict of price action.

As to the gold and silver miners ETFs, SIL, and GDX closed down.

Please mind that a setup is not the real thing. So the primary trend has not turned bullish yet (or maybe "never").

The secondary trend is bullish, as explained here. In spite of short term bullish accomplishments, SIL and GDX are not in a primary bull market.

The primary trend for SIL and GDX remains, nonetheless, bearish, as was profusely explained here and here.

The secondary trend is bullish, as explained here. In spite of short term bullish accomplishments, SIL and GDX are not in a primary bull market.

The primary trend for SIL and GDX remains, nonetheless, bearish, as was profusely explained here and here.

Sincerely,

The Dow Theorist

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