But we are not there yet.
US Stocks
The
Industrials has been declining for 11 trading days. The Transports for 6 days
and the SPY for 5 days. Thus, in spite of today’s big decline, it is still too
early to signal a secondary (bearish) reaction against the primary bullish
trend. Let’s remember the rules (under Schannep’s Dow Theory flavor) for a secondary reaction:
1) 8 trading days as the average
decline of the three indices.
2) At least two indices must decline
by 3% or more.
3)
The decline must last a minimum of 10 calendar days (that is two full weeks) in
at least 2 indices.
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
Gold and silver (GLD and SLV) are
still far from signaling a primary bull market signal .Thus,
if volatility remains normal, any new primary bull market signal (which implies
bettering the secondary reaction highs) is not in sight.
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 old. More than 1 and ½ year elapsed since the
bear market signal was flashed. However, I am extremely skeptical as to the
predictive power of statistics. Each bull and bear market have their own
idiosyncrasy and hence past durations do not necessarily help us time a change
of trend. 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 and price compression.
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.
Gold
and Silver miners ETFs (GDX and SIL)
On July 11th, I alerted
the followers of this Dow Theory blog that SIL and GDX were close to signaling
a primary bull market. Go to the relevant post and chart here. On
July 22nd, I explained that the signal did not materialize yet, as
you can read here.
On July 31st, the
situation remaines unchanged. SIL and GDX have not fallen out of bed, but
remain unable to rally with conviction.
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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