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Manuel Blay
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Investor and Trader As investor I'm deeply influenced by Dow Theory. I focus on the primary trend (1-2 years). My trading is short-term based (avg trade duration 4-5 days).
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Dow Theory Investment
  • Dow Theory Update For July 29: Stocks, Gold, Silver And Their Miners Have Not Changed Their Trends  0 comments
    Jul 30, 2014 4:27 AM | about stocks: SPY, DIA, IYT, GLD, SLV, GDX, SIL
    Reality Check for Forecasting

    This is the title of a great article which you can find on Dorsey Wright's blog. It clearly shows that forecasters consistently fail in their predictions. The bottom line is clear: Trend following is a much more sensible approach. Put aside your ego and hone your skills to become good at spotting trends (which implies become a proficient Dow Theorist).

    US Stocks.

    Some days ago I wrote:

    "The dreaded (and thousand times wrongly anticipated by many) secondary reaction stubbornly refuses to materialize, as stocks continue flirting with higher closing highs."

    Well, days pass by and according to the Dow Theory no secondary reaction has been signaled yet. The Transports and the SPY made recently higher highs.

    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

    Gold and silver (GLD and SLV) are still far from signaling a primary bull market signal .Thus, if volatility remains normal, any new primary bull market signal (which implies bettering the secondary reaction highs) is not in sight.

    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 old. More than 1 and ½ year elapsed since the bear market signal was flashed. However, I am extremely skeptical as to the predictive power of statistics. Each bull and bear market have their own idiosyncrasy and hence past durations do not necessarily help us time a change of trend. 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 and price compression.

    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.

    Gold and Silver miners ETFs (GDX and SIL)

    On July 11th, I alerted the followers of this Dow Theory blog that SIL and GDX were close to signaling a primary bull market. Go to the relevant post and chart here. On July 22nd, I explained that the signal did not materialize yet, as you can read 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.

    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

    Themes: Dow Theory Stocks: SPY, DIA, IYT, GLD, SLV, GDX, SIL
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