Saturday, June 17, 2017

Dow Theory Update for June 17: The Transports go on refusing to confirm the Industrial’s and S&P 500’s higher closing highs



GLD broke up its primary bull market high unconfirmed by SLV


US STOCKS

The primary trend is bullish since November 21st, 2016, as explained here and here.


The analysis I made in my last post of June 1st, 2017 remains fully valid. After June 1st the Industrials and the S&P 500 have made marginally higher closing highs, while the Transports remain below their last recorded March 1st closing highs.


All in all: No confirmation. The longer it takes for the Transports to confirm, the more suspect the current rally becomes.

One thing is clear: The benefit of doubt is always to be given to the current trend. The primary trend is bullish, and lest we forget, the trend when appraised with weekly bars using Dow Theory rules is unambiguously bullish.

By the way, the current primary bull market signal (given on November 21st, 2016) will soon be 7 months old. While this is less than the average duration for a Dow Theory signal, at least we are getting a “longer” signal that those we had in the last two years. Is the whipsawing over? I don’t know. I just stick to well digested rules. I only know that it was very hard to me to honor the November 21st, 2016 signal, as I thought that another whipsaw was in the making. However, I was disciplined. Maybe what I wrote here and here, helped me stay disciplined. Recent "fibrillation", no matter how annoying it is, is to be regarded as an oddity.

GOLD AND SILVER

The primary trend turned bullish on April 12th, 2017 as explained here

The secondary trend is bearish, as explained in depth here.


SLV and GLD set up for a primary bear market signal, as explained here.
 
On June 6th, 2017 GLD broke up its April 18th, 2017 primary bull market closing high (bottom chart, blue arrow). However, SLV did not confirm by a wide margin (which I interpret as being bearish), which implies that the primary bull market was not confirmed. Immediately thereafter, both precious metals have declined with gusto.

If SLV and GLD jointly violated their primary bear market closing lows (red horizontal lines), a primary bear market would be signaled.

Here you have an updated chart.

Lack of confirmation by SLV and a bearish trend when using weekly bars spells trouble for the current bull market

 
As an aside, it is worth mentioning that the primary trend when using weekly bars is bearish, which tends to be headwind for any meaningful bullish action.

GOLD AND SILVER MINERS EFTs


The primary trend is bearish, as was explained here and here.

The secondary trend is bullish as explained here

As was explained here, SIL and GDX have set up for a primary bull market signal.


Sincerely,
The Dow Theorist

Thursday, June 1, 2017

Dow Theory Update for June 1st: The Industrials make higher closing highs and confirm the S&P 500





However, the Transports refuse to do so


US STOCKS

The primary trend is bullish since November 21st, 2016, as explained here and here.

Today the Industrials closed at 21144.18 that is above their March 1st closing highs of 21115.55. And thus confirming the S&P 500 breakout of  May 10th.

However, the Transports are lagging behind, and hence they are not confirming.

What should be our reading?
 
As per the “Rhea/Classical” Dow Theory, the conclusion is clear. If we assume the existence of a secondary reaction (as per Schannep’s interpretation of the classical Dow Theory), then nothing has happened as the Transports have not confirmed. Thus, the secondary (bearish) reaction against the primary bull market has not been extinguished yet, and hence, the violation of the 4/13/2017 closing lows (Transports) and 4/19/2017 closing lows (Industrials) would entail a primary bear market signal.

An alternative legitimate interpretation of the “Rhea/classical” Dow Theory is that no secondary reaction has been signaled yet, as the last primary bull market swing has not been retraced on a confirmed basis by more than 1/3 by both the Industrials and the Transports. The entrails and chart of this interpretation are to be found here.

According to this interpretation, given the absence of a secondary reaction, higher highs not confirmed by the Transports merely mean that the longer the non-confirmation persist, the more likely a setback (which may be of just secondary proportions, that is a humble secondary reaction, is likely to set in). Since we don’t have secondary reaction lows (as there isn’t any), the violation of the 4/13/2017 closing lows (Transports) and 4/19/2017 closing lows (Industrials) would not entail a primary bear market signal. A decline extending those lows would merely imply a retracement of more than 1/3 of the primary bull market swing which would constitute a secondary reaction. Thus, as per this alternative interpretation of the classical Dow Theory, we are miles away from a primary bear market setup. We just have a primary bull market swing, which would become suspect, in case non confirmation persists.

Please mind that I am agnostic as to which interpretation of the Rhea/classical Dow Theory is better. “Better” is not a good word when it comes to analyzing markets. Personally, I live and die by Schannep’s Dow Theory, which is even better than Schannep’s interpretation of the Classical Dow Theory, which may be better than the Classical Dow Theory (please mind the nuances).  


Here you have an updated chart. The orange rectangles display the secondary reaction as per Schannep’s interpretation of the Classical Dow Theory. The blue rectangle display the +3% rally underwent by the Transports which set up stocks for a primary bear market signal. As you can see, the Industrials (top chart) have broken up the blue horizontal line (bull market highs of March 1st) on an unconfirmed basis, whereas the Transports violated the red horizontal line (secondary reaction closing lows) without confirmation either. Thus “tie”. One bullish reading versus one bearish reading.

As per the "Classical" Dow Theory as interpreted by Schannep nothing has happened. Just a secondary reaction.


As per Schannep’s Dow Theory, to be in the “clear”, we need that the three indices break up their primary bull market closing highs of March 1st, 2017. Only when this happens, we can “reset” our secondary reaction “counter”, and thus consider the secondary reaction as finished, and count a new primary bull market swing. Therefore, the secondary trend is bearish (secondary reaction against the primary bull market). The secondary reaction was signaled on April 13th, as explained here. Please mind that I lend more credence to Schannep's Dow Theory than to the Classical Dow Theory (in spite of its being very good too). Why Schannep's Dow Theory is superior to the Classical (no matter the way one interprets it), here.

 Here you have an updated chart.

To declare the ongoing seconary reaction als dead, the Transports must break up the March 1st highs


GOLD AND SILVER

The primary trend turned bullish on April 12th, 2017 as explained here

The secondary trend is bearish, as explained in depth here.

Given the recent rally off the secondary reaction closing lows, I feel the setup for a primary bear market signal has been completed. Here you have a chart. The orange rectangles display the secondary (bearish) reaction against the primary bull market, whereas the blue rectangles display the rally off the secondary reaction closing lows which have setup SLV and GLD for a primary bear market signal. Please mind, that setup does not necessarily imply the bear signal. Either the primary bull market highs get jointly broken up in which case the primary bull market would be confirmed, or the jointly violate the secondary reaction lows, which would imply a primary bear market signal.

Here you have an updated chart

Silver and Gold at crossroads: Either new bear market or primary bull market reconfirmed

 
GOLD AND SILVER MINERS EFTs

The primary trend is bearish, as was explained here and here.

The secondary trend is bullish as explained here

As was explained here, SIL and GDX have set up for a primary bull market signal.

Sincerely,
The Dow Theorist