Dow Theory Update for November 8: GDX and SIL continue flirting with a primary bear market signal

Industrials make higher high

Let’s get started with our Dow Theory commentary for today.

US stocks

The SPY,Industrials and Transports closed up.

The primary trend is bullish, as explained here, and more in-depth here.

The primary trend was reconfirmed as bullish on October 17th, for the reasons given here.

Today’s volume was much weaker than yesterday’s. This is bearish, as higher prices were not met by stronger volume. I consider volume to be bearish for the reasons given here and here. Furthermore, the trend line of volume of the last few days is ominously bearish, as volume has steadily contracted as prices advanced and has expanded as prices declined. Here you have an updated chart:

 

Volume is bearish: volume expands on down days, while contracts on up days

 

The persistent bearish pattern of volume has not escaped trader Tom V, of the “TrendFollowing Trader” blog, as he has noticed heavy volume distribution across US equity indices. Go and read his post to get convinced.

 

Gold and Silver

SLV and GLD closed down. For the reasons I explained here, and more recently 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 closed down, and GDX closed up. SIL and GDX are still flirting with a primary bear market signal, as was explained here. Take a look at the chart and judge for yourself. If the red horizontal lines get jointly violated, kiss good-bye to the current primary bull market.

 

Will SIL and GDX signal a primary bear market soon?

SIL and GDX, unlike GLD and SLV, are in a primary bull market under the Dow Theory, as explained here and here, even though they set up for a primary bear market for the reasons given 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.

 

Data for November 8, 2013
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		11/08/2013	177.29
Current stop level: Secondary reaction low			165.48
Unrlzd gain %	Tot advance since start bull mkt	Max Pot Loss %
4.99%	12.88%	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		11/08/2013	12.2
Current stop level: Primary bear mkt low		06/26/2013	10.59
Unrealized gain %	Tot advance since start bull mkt	Max Pot Loss %
-20.57%	15.20%	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		11/08/2013	24.28
Current stop level: Primary bear mkt low		06/26/2013	22.22
Unrealized gain %	Tot advance since start bull mkt	Max Pot Loss %
-15.40%	9.27%	29.16%

Sincerely,

The Dow Theorist