Gold and Silver miners ETFs display remarkable strength
I see the markets coiled. While this is not strict Dow
Theory, and you know I am very adamant about departing from the Dow Theory, I
see that many markets are in a no-man’s land and getting ready to make a big
move (the issue is: which side?)
In other words, I see huge accumulation/distribution
patterns on many charts. I don’t know which way they will break up/down, but I
get the eerie feeling that something big will happen when markets finally start
moving again.
I see these patterns in stocks (in spite of their
primary bull market), gold and silver (which remain caught in an eternal
secondary bullish reaction against a still primary bearish trend) and their
corresponding mining ETFs (SIL and GDX), which, by the same token remain unable
to either break above the last recorded secondary reaction highs (which would
be a primary bull market signal according to the Dow Theory) or violate the
last recorded primary bear market lows (which would reconfirm the primary bear
market).
Ditto for TLT and IEF, the 20+ years and 7-10 years bonds
ETFs, respectively. Both remain caught in a narrow range since September 2013
unable to either rally (lower interest rates) or breakdown (higher interest
rates, and quite likely, weaker dollar).
It is queer that both precious metals and their
nemesis, interest rates are showing similar patterns on the charts: Unable to
move either way. It seems as if somebody/something is trying to prevent
something from happening. It seems that nobody likes to high paper gold, but at
the same time not too low. The same applies to interests rates. Let’s see what
happens when all unravels.
Thus, I see that vital markets such as stocks,
interest rates and precious metals, are caught between opposing forces, unable
to decide which way to turn (either up or down).
Since this consolidation is during almost an eternity
(the longer the consolidation, the stronger tends to be the subsequent move),
and it is being “confirmed” (here I borrow from the Dow Theory), as many
markets are acting in similar fashion, I feel that the breakup or breakdown can
be of monstrous proportions. This is like a coiled spring that is about to be
released. If the breakup or breakdown occurs, and more importantly, if the
breakdown or breakup is confirmed across several asset classes, the markets
will be displaying a powerful signal.
If I find time, which is uncertain, I will try to address what I see in
each market and provide you with some charts.
Let’s move on to our daily Dow Theory commentary.
US Stocks
The SPY, Industrials and
Transports closed down. Now it seems that the higher highs made by the Transports
will remain unconfirmed for some time. Remember that a couple of days ago I
noted that I saw not only lack of confirmation but also divergence (which tends
to be a red flag). Thus, and unless stocks begin to rally soon, a secondary
reaction might be in the making.
The primary trend was
reconfirmed as bullish on October 17th, 2013, and November 13th,
2013 and March 7th, 2014, for the reasons given here, here and here.
So the current primary bull
market signal has survived three secondary reactions.
Gold and Silver
SLV, and GLD closed up. For
the reasons I explained here, and more
recently here the primary trend remains bearish.
For the primary trend to turn
bullish, SLV and GLD should jointly
break above the secondary (bullish) reaction highs. As a reminder, the
secondary reaction closing highs were made on August 27th, 2013.
From such highs the market declined without jointly violating the June 27th,
2013 primary bear market lows.
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.
On a statistical basis the
primary bear market for GLD and SLV is getting old. More than one year since
the bear market signal was flashed has elapsed. However, I am extremely
skeptical as to the predictive power of statistics. I prefer price action to
guide me, and the Dow Theory tells me that the primary trend remains bearish
until reversed.
Furthermore, the June 27, 2013
lows remain untouched. The longer this situation lasts, the higher the odds
that something might be changing. But I wait for the verdict of
price action.
As to the gold and silver miners ETFs, SIL and GDX closed up. I
consider this a short term bullish accomplishment given that the gravitational
pull that dragged stocks today. However, under the Dow Theory, we still have to
wait and see, and no trends have changed.
I profusely explained that SIL
and GDX set up for a primary bull market signal. You can find all the relevant
information from a Dow Theory standpoint here.
Please mind that a setup is
not the real thing. So the primary trend has not turned bullish yet (or maybe “never”).
The secondary trend is
bullish, as explained here. In spite of short term
bullish accomplishments, SIL and GLD are not in a primary bull market.
The primary trend for SIL
and GDX remains, nonetheless, bearish, as was profusely explained here and here.
The secondary trend is
bullish, as explained here. In spite of short term bullish accomplishments, SIL and GLD are not in a
primary bull market.
The primary trend for SIL
and GDX remains, nonetheless, bearish, as was profusely explained here and here.
Sincerely,
The Dow Theorist
Have to say how much I appreciate your sharing your thoughts with us!.
ReplyDeleteyes i will second that ..i hope you have time to show those charts of the market.....im very interested in the coiling you are talking about
ReplyDeletewarmest regaards
thx Cache and Travis for your comments. I will try to oblige a provide you with a short study on interest rates.
ReplyDelete