Volume doesn’t confirm stock’s rally
US stocks
The SPY, Industrials and Transports closed up.
The secondary trend is bearish (secondary reaction against the primary bull market) for the reasons explained here.
Last Friday October 11th, the stock market set up for a primary bear market signal, for the reasons given here. Please mind that a “set up” does not mean the actual signal. So, it is perfectly possible that the October 8th secondary reaction lows never get jointly violated and, accordingly, no primary bear market is signaled. We now merely have the “set up” for a primary bear market signal; whether it will materialize into an actual signal, depends on subsequent price action.
Today’s volume was lower than Fridays, which is bearish, as higher prices were not met by expanding volume. We have had three consecutive bearish volume days (as shown on the chart below). Furthermore, the pattern of volume during the ongoing rally is bearish as each subsequent higher price has attracted less and less volume (see the declining trendline on the volume chart). Therefore, today I change my stand on volume and label it as bearish, which means that now the odds favor lower prices (or at least stalling prices) in the days ahead. Nonetheless, please take volume readings with a grain of salt. Volume merely qualifies the odds for a given trend to continue, but price action trumps all other considerations.
 |
| Volume clearly contradicts recent price action: Prices up, volume down |
Gold and Silver
SLV closed down, and GLD closed up. For the reasons I explained 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.
Here, I explained that GLD and SLV set up for a primary bull market signal. However, a setup is not the same as the “real thing,” namely the primary bull market; thus, many “setups” do not materialize and until the secondary reaction closing highs are jointly broken up, no primary bull market will be signaled.
SIL and GDX closed up. SIL and GDX, unlike GLD and SLV, are in a primary bull market under the Dow Theory, as explained here and here.
The secondary trend is bearish, which is tantamount to saying that there is an ongoing secondary reaction against the primary bullish trend, for the reasons given here.
Here you have the figures for the SPY, GDX and SIL which represents the only markets with suggested open long positions.
| DOW THEORY PRIMARY TREND MONITOR SPY | |||
| SPY | |||
| Bull market started | 06/24/2013 | 157.06 | |
| Bull market signaled | 07/18/2013 | 168.87 | |
| Last close | 10/14/2013 | 170.94 | |
| Current stop level: Secondary reaction low | 165.48 | ||
| Unrlzd gain % | Tot advance since start bull mkt | Max Pot Loss % | |
| 1.23% | 8.84% | 2.05% | |
| DOW THEORY PRIMARY TREND MONITOR ETF SIL | |||
| SIL | |||
| Bull market started | 06/26/2013 | 10.59 | |
| Bull market signaled | 08/14/2013 | 15.36 | |
| Last close | 10/14/2013 | 12.23 | |
| Current stop level: Primary bear mkt low | 06/26/2013 | 10.59 | |
| Unrealized gain % | Tot advance since start bull mkt | Max Pot Loss % | |
| -20.38% | 15.49% | 45.04% | |
| DOW THEORY PRIMARY TREND MONITOR ETF GDX | |||
| GDX | |||
| Bull market started | 06/26/2013 | 22.22 | |
| Bull market signaled | 08/14/2013 | 28.7 | |
| Last close | 10/14/2013 | 23.11 | |
| Current stop level: Primary bear mkt low | 06/26/2013 | 22.22 | |
| Unrealized gain % | Tot advance since start bull mkt | Max Pot Loss % | |
| -19.48% | 4.01% | 29.16% | |
Sincerely,
The Dow Theorist
