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Dow Theory Update For May 29: Yesterday's Higher High By The Industrials Remains Unconfirmed

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

Trends remain unchanged

The secular bear market is not finished yet

Danielle Park of the "Juggling Dynamite" blog, echoing Vitaliy Katsenelson, is of the opinion that the secular bear market in stocks that began in the year 2000 is far from over. PER and profit margins (and record highs) speak against a new secular bull market. As a consequence, we should brace ourselves for, at least, one more cyclical bear market.

From a Dow Theory perspective or, at least, from a Rhea/Classical Dow Theory perspective, it is immaterial to us whether we are in a secular bull or bear market, as we are mainly interested in the cyclical bull and bear markets. Thus, on November24, 2012, I wrote:

I personally tend to ignore the secular trend and, like Schannep, I feel comfortable spotting cyclical bull and bear markets. This implies a time frame of ca. 1-2 years, which is long term enough not to be a short term trader but short term enough not to be a "buy and hope," sorry, "buy and hold" investor. The secular trend is important, though: It helps me determine the total amount of capital to be committed to stocks. In a secular bull market like the nineties, I'd feel comfortable with an 80% allocation to stocks. Under a secular bear market, I'd decrease my commitment even under a cyclical bull market.

Furthermore, my Dow Theory studies show that the investor is able to extract profits (albeit more modestly) from the market even under secular bear markets, as explained here.


The SPY, Industrials and Transports closed down. The higher high made by the Industrials yesterday remains unconfirmed.

Today's volume was slightly higher than yesterday's. Accordingly, it has a bearish connotation as declining prices were confirmed by stronger volume. The overall pattern of volume is neutral, since, in spite of some bullish volume days, volume action was clearly bearish on 05/22/2013. Here you have an updated chart.



Volume is neutral.

Gold and Silver

GLD and SLV closed up. However, one "up" day is not enough to change trends. The primary and secondary trend remains bearish.

GDX and SIL closed up. The primary and secondary trend remains bearish.


The Dow Theorist