Dow Theory Update for July 1: Richard Russell smells a bottom in the gold and silver universe

Stocks close up

Richards Russell thinks a bottom in precious metals likely

Last Friday precious metals rebound off the lows did not go unnoticed to Richard Russell, of the Dow Theory Letters. He thinks that sentiment towards the metals is black bearish, which is usually the kind of sentiment found at market bottoms. I feel Russell may be right.

Personally, and I think Russell would agree with me, I’d wait until the Dow Theory or one’s pet indicator, turns bullish. Why risk catching a falling knife? I prefer to forego the first 10-15% of a new primary bull market by not trying to call a bottom and wait until the primary trend turns bullish, as a trade-off for the enhanced probability of higher prices ahead.

Until now, my reluctance to try to call bottoms in the precious metal's debacle has served me well by avoiding temptation (in spite of being lured by the likes of Sinclair).

How much should GDX and SIL rally in order to signal the existence of a primary bull market?

If we judge according to today’s price structure (which may change if the rally lasts more than 10 days without breaking up the last recorded secondary reaction highs), a primary bull market signal would be signaled if the 06/03/2013 closing highs (last secondary reaction closing highs) were jointly broken up.

Look at the horizontal blue lines on the chart below. They show the level to be penetrated for a new primary bull market to exist. If a new secondary reaction develops followed by a pullback, then the relevant highs to be violated will be the still-to-happen secondary reaction closing highs. 

Recent price action for SIL and GDX

In the meantime, we patiently wait.

Stocks

The SPY, Industrials, and Transports closed up.

The primary trend and secondary trend is bearish for the reasons explained here, and further explained here.

Today’s volume was lower than Friday’s, which is bearish as volume contracted. The overall pattern of volume is very bearish for the reasons explained here. Here you have a chart that shows lots of red arrows (bearish). You can notice that the last five days (3 "up" and 2 "down) not been confirmed by volume, which resulted in 5 red arrows. The updated chart below shows clearly that the trend of volume is clearly bearish: Ascending when prices decline and descending when prices rally. 

Volume continues bearish. Volume vanishes on up days and expands on down days

 

Gold and Silver

SLV closed down, and GLD closed up. The primary trend is bearish, as explained here and reconfirmed bearish here; the secondary trend remains bearish too.

GDX and SIL, the gold and silver miners ETFs closed up. The primary trend is bearish, as explained here and reconfirmed bearish here; the secondary trend remains bearish too.

Eventually, one of these primary bear market re-confirmations will be proven false. In the meantime, it is better not to fight the trend, and wait for a primary bull market signal in order to make a commitment on the long side.

Here you have the figures of the markets I monitor for today, which contain no changes as we are flat.

 

Data for July 1, 2013
DOW THEORY PRIMARY TREND MONITOR SPY
			SPY
Bull market started		11/15/2012	135.7
Bull market signaled		01/02/2013	146.06
Exit June 21		06/21/2013	159.07
Current stop level: Sec reaction lows			161.27
Realized gain %	Tot advance since start bull mkt	Max Pot Loss %
8.91%	17.22%	None.
DOW THEORY PRIMARY TREND MONITOR GOLD (GLD)
			GLD
Bull market started		05/16/2012	149.46
Bull market signaled		08/22/2012	160.54
Exit December 20		12/20/2012	161.16
Current stop level: Sec React low		11/02/2012	162.6
Realized Loss %	Tot advance since start bull mkt
0.39%	7.83%
DOW THEORY PRIMARY TREND MONITOR SILVER (SLV)
			SLV
Bull market started		06/28/2012	25.63
Bull market signaled		08/22/2012	28.92
Exit December 20		12/20/2012	29
Current stop level: Sec React low		11/02/2012	29.95
Realized gain %	Tot advance since start bull mkt
0.28%	13.15%
DOW THEORY PRIMARY TREND MONITOR ETF SIL
			SIL
Bull market started		07/24/2012	17.08
Bull market signaled		09/04/2012	21.83
Exit January 23		01/24/2013	21.69
Current stop level: Sec React low		11/15/2012	21.87
Realized Loss %	Tot advance since start bull mkt	Max Pot Loss %
-0.64%	26.99%	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
Exit January 23		01/24/2013	44.56
Current stop level: Sec React low		12/05/2012	45.35
Realized Loss %	Tot advance since start bull mkt	Max Pot Loss %
-6.72%	12.64%	20.75%

Sincerely,

The Dow Theorist