Markets celebrate black Monday by mostly going down.
Gold and silver: secondary trend turns bearish.
Later today or early tomorrow I will post in this Dow Theory blog a special issue on the 1987 stock market crash. Would the Dow Theory have kept us safe on October 19, 1987? I’ll give you the answer in a few hours.
The three markets we monitor, the Industrials, Transports and S&P (through its proxy SPY) fell in unison today. Technically, nothing changed. We remain in a primary trend, and the secondary trend remains bearish.
Today volume was bearish, since the stock market closed down and volume was higher than yesterday’s. Thus, we have had two bearish days in a row. I am deriving some interesting conclusions from volume patterns. I want to see Monday’s action in order to reach more solid conclusions.
Gold and silver both were down today. And here is the big news: A secondary reaction signal has been flashed today. 11 trading days have elapsed since the October 4th highs jointly made by gold and silver. The decline has exceeded the minimum threshold of 3% in gold and 6% in silver. Why such percentages? Go and read this post for a full explanation.
To sum up, I now declare that gold and silver are in a secondary reaction because
1) Technical requirement fulfilled: last minor lows of 09/26/2012 have been jointly broken by the two metals.
2) Extent requirement fulfilled: Gold has had a down movement exceeding 3% and silver 6%.
3) Time requirement fulfilled: Since the Oct 4 highs, 11 trading days have elapsed, thus exceeding the minimum time requirement under Dow Theory to qualify a pullback as an official secondary reaction.
Now things get really interesting. Is this the second chance given to gold and silver would-be investors to enter belatedly the market? Those latecomers sitting on the sidelines should read my post in this Dow Theory Investment blog called “What should I do if I missed the Dow Theory bull signals for the SPY and GLD? Dow Theory’s second chance: The first secondary reaction” which you can find here
For the time being I would wait, as gold has only retraced 3.97% from the October 4th highs. I’d wait for a 6% retracement in gold and at least a 10% retracement in silver. I’ll write more about this in the coming days. Again, to understand why I say this, go and readthis post.
Then you will understand why I don’t advise to jump the gun right now.
As to the gold and silver miners, SIL closed down and GDX, closed up!! Furthermore, SIL and GDX refused to break prior lows. So in the precious metals’ miners universe no secondary reaction has been announced.
Here you have the figures for today of the markets I monitor.
| Data for October 19, 2012 | |||
| DOW THEORY PRIMARY TREND MONITOR SPY | |||
| SPY | |||
| Bull market started | 06/04/2012 | 128.1 | |
| Bull market signaled | 06/29/2012 | 136.1 | |
| Last close | 143.32 | ||
| Current stop level: Bear mkt low | 128.1 | ||
| Unrlzd gain % | Tot advance since start bull mkt | Max Pot Loss % | |
| 5.30% | 11.88% | 6.25% | |
| DOW THEORY PRIMARY TREND MONITOR GOLD (GLD) | |||
| GLD | |||
| Bull market started | 05/16/2012 | 149.46 | |
| Bull market signaled | 08/22/2012 | 160.54 | |
| Last close | 166.97 | ||
| Current stop level: Bear mkt low | 149.46 | ||
| Unrlzd gain % | Tot advance since start bull mkt | Max Pot Loss % | |
| 4.01% | 11.72% | 7.41% | |
| DOW THEORY PRIMARY TREND MONITOR SILVER (SLV) | |||
| SLV | |||
| Bull market started | 06/28/2012 | 25.63 | |
| Bull market signaled | 08/22/2012 | 28.92 | |
| Last close | 31.09 | ||
| Current stop level: Bear mkt low | 25.63 | ||
| Unrlzd gain % | Tot advance since start bull mkt | Max Pot Loss % | |
| 7.50% | 21.30% | 12.84% | |
| DOW THEORY PRIMARY TREND MONITOR ETF SIL | |||
| SIL | |||
| Bull market started | 07/24/2012 | 17.08 | |
| Bull market signaled | 09/04/2012 | 21.83 | |
| Last close | 24.47 | ||
| Current stop level: Bear mkt low | 17.08 | ||
| Unrlzd gain % | Tot advance since start bull mkt | Max Pot Loss % | |
| 12.09% | 43.27% | 27.81% | |
| DOW THEORY PRIMARY TREND MONITOR ETF GDX | |||
| GDX | |||
| Bull market started | 05/16/2012 | 39.56 | |
| Bull market signaled | 09/04/2012 | 47.77 | |
| Last close | 51.73 | ||
| Current stop level: Bear mkt low | 39.56 | ||
| Unrlzd gain % | Tot advance since start bull mkt | Max Pot Loss % | |
| 8.29% | 30.76% | 20.75% | |
Sincerely,
The Dow Theorist.
Disclaimer: Dow Theory Investment and its author is not a financial adviser. Dow Theory Investment and its author does not offer recommendations or personal investment advice to any specific person for any particular purpose. Please consult your own investment adviser and do your own due diligence before making any investment decisions. Please read the full disclaimer at the bottom of the footer of this blog.
