Seeking Alpha

Manuel Blay's  Instablog

Manuel Blay
Send Message
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).
My blog:
Dow Theory Investment
  • Dow Theory Update For August 12: SIL And GDX, Once Again, Close To Signaling A Primary Bull Market 0 comments
    Aug 13, 2014 9:13 AM | about stocks: SPY, DIA, IYT, GLD, SLV, GDX, SIL
    Secondary reaction in stocks runs its course

    US Stocks

    The SPY, Industrials and Transports closed down.

    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 bearish, as explained here and here. No rally exceeding 3% from the secondary reaction lows has occured and, hence, we derive two implications:

    a) No setup for a primary bear market signal has been completed.

    b) We cannot affirm that the secondary reaction has put its final lows yet.

    Here you have an updated chart:

    (click to enlarge)
    Stocks caught in a secondary (bearish) reaction against primary bullish trend

    Gold and Silver

    SLV closed down, and GLD closed up. 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 up.

    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. Today's action has brought both ETFs closer to the relevant levels to be jointly broken up, as shown in the chart below.

    (click to enlarge)
    If blue horizontal lines broken up, a primary bull market would be signaled for SIL and GDX

    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.

    Sincerely,

    The Dow Theorist

    Themes: Dow Theory Stocks: SPY, DIA, IYT, GLD, SLV, GDX, SIL
Back To Manuel Blay's Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (0)
Track new comments
Be the first to comment
Full index of posts »
Latest Followers

StockTalks

More »
Posts by Themes
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.