First of all, we have to know our time frame. As I tend to say to market practitioners: “Show me your time frame”. It is easy to forecast the market without defining the time frame where the prediction is supposed to play out. Even a couple of up days could be labelled as a bull market, hence proving the market forecaster right.
What do I mean by a “new primary bull movement”? Do I mean that I think the market will go up for a month, a quarter, a year or a secular bull lasting many years?
Well, in Dow Theory the expression “primary movement” defines a bull or bear market over periods that span from less than a year to several years. Thus, the movement that under Dow Theory started last August 22, 2012 is supposed to be significant both in extent and duration. Maybe 6 months or maybe 2 years.
A primary bull movement doesn’t mean that gold and silver will not undergo corrections. However, such corrections should not exceed the lows made in May (Gold) and June (Silver).
In any instance, the signal we have just got is powerful under Dow Theory.
While Dow Theory was originally devised for stocks, it lends itself well to being applied to correlated markets like gold and silver. After all, Dow Theory is just a subset, albeit a very powerful one, of technical analysis. So the inferences drawn from Dow Theory may safely be applied to gold and silver like any other tool of technical analysis.
The Gold/Silver ratio (GSR) is moving in favor of silver which in the short-medium term is bullish for both metals. Thus, the GSR seems to be aligned with the Dow Theory signal.
Tomorrow I will give you the details of my interpretation of Dow Theory when applied to the gold and silver markets.
The Dow Theorist