Entering text into the input field will update the search result below

Dow Theory Update For January 2: Are Stocks Topping Out?

Jan. 02, 2014 4:50 PM ETSPY, DIA, IYT, GLD, SLV, GDX, SIL
Manuel Blay profile picture
Manuel Blay's Blog
Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

Seeking Alpha Analyst Since 2012

Co-Editor of the top-ranked investment  Letter  thedowtheory.com

Investor and Trader As an investor I'm deeply influenced by Dow Theory, especially by the book "The Dow Theory for the 21st Century". I focus on the primary trend (1-2 years). My trading is short-term based (avg trade duration 4-5 days).

In addition to US stock indexes, I have successfully expanded the application of the Dow Theory to precious metals, their miners, and US interest rates. The Dow Theory is a more accurate timing device that moving averages, breakout systems, etc.

In spite of some today's up close, precious metals remain in the grips of the bear

Tom Vician is a successful trend follower. His latest post in his "TrendFollowing Trader" blog alerts us that markets are severely overbought, both technically and in sentiment. Furthermore, he notes that the market laggards have recently outperformed the market. As he says "the detritus floats", which is usually a bad omen. However, as a good trend follower, he waits for the actual signal and, in the meantime, acknowledges that the trend is up. Given his outstanding track record, it is worth to observe his thoughts. Personally, I feel the current run-up (or primary bull market leg) is due for a secondary correction, as you can see on the chart below; whether such a correction is to become a primary bear market, we cannot say; it is much too early. What is clear to me is that market sentiment is reaching extremes, as Zero Hedge reports here.



Recent SPY action: A primary bull market. The last primary bull market swing might be aging

US stocks

The SPY, Industrials and the Transports closed down and backed off from the most recent highs made last Tuesday highs.

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

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

Gold and Silver

SLV and GLD closed up. For the reasons I explained here, and more recently 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.

As to the gold and silver miners ETFs, SIL, and GDX closed up. The primary trend is bearish, as was profusely explained here and here. Likewise, the secondary trend is bearish.

Later today, or tomorrow I will post a review of 2013 according to the Dow Theory. We will revisit all the Dow Theory-based market calls and how we have fared compared to buy and hold. It'll be a real tour de force, as you will have before your eyes one full year of market action.


The Dow Theorist

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.