Stocks close down
The SPY, Transports and Industrials closed down. Recent declines are
healthy, as the market needed to digest its overbought status. It is too soon,
though, to spot a secondary reaction against the primary bullish trend.
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 strongly 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. However, the secondary bullish reaction against such old primary bear
market is also getting quite old. Tie.
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 see that GDXJ (junior gold
miners ETF) is displaying more strength than GDX (normal gold miners ETF); in
past instances GDXJ greater strength lent credibility to a rally. In other
words, when speculators believe good times are ahead, they tend to favor the
more speculative GDXJ. On the other hand, when it is time to be defensive, GDXJ
declines more than GDX. Look at the chart below. It plots GDXJ (top) and GDX
(bottom). The red line displays the relative strength. An ascending line shows
GDXJ being stronger. A declining line shows GDX being stronger (or at least
less weak). The chart shows:
1) GDXJ (and also GDX) bottomed on 05/28 (shown by the blue arrow). The
relative strength line bottomed on 04/17 (pink arrow), this is a clear non-confirmation.
Lower prices in GDXJ where not confirmed by a lower RS line.
2) During the last decline GDXJ was declining less than GDX. This is usually bullish because the norm tends to be
GDXJ declining in unison with the relative strength line, which means that
declines affect more GDXJ than GDX. So the last decline was the exception to
the rule: GDXJ declined less.
3) The last rally has literally made the RS line to explode on the upside,
which means that GDXJ is displaying great relative strength.
4) Finally (not shown on
the chart), GDXJ has experienced a surge in volume (not matched by GDX), which
lends credence to the current rally. Please mind that I speak of “rally” (which
means days to weeks). I am not talking of a new primary trend. Plot yourself a
chart and judge for yourself.
All in all, if we couple the
non-confirmation, with a now ascending RS line, and supporting volume, we can conclude
that technically the odds favor higher prices in the days or even weeks ahead
for GDXJ and, by implication, for GDX and gold.
 |
| GDXJ's action says that the gold miners may have bottomed (at least short term for the coming days and even weeks) |
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 GDX 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 GDX 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
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