Tuesday, September 16, 2014

Dow Theory Update for September 16: No primary and secondary trend has changed

On  September 12th Silver closed at the primary bear market lows (which is not a violation)


US Stocks

The SPY, Industrials, and Transports closed up. The Industrials remain below the last recorded primary bull market closing highs (by a hair, but below nevertheless).

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

The primary trend was reconfirmed as bullish on October 17th, 2013, and November 13th, 2013, March 7th, 2014, and more recently, September 2nd, 2014, for the reasons given here, here, here and here.

So the current primary bull market signal has survived four secondary reactions.

The secondary trend is bullish, as explained here.

Gold and Silver

SLV and GLD closed up. For the reasons I explained here, and more recently here the primary trend remains bearish. On September 12th SLV closed at the June 27th, 2013 primary bear market lows. Closing “at” the lows is not a violation of such lows. On the other hand, GLD hasn’t even managed to violate its primary bear market lows. All in all: The primary bear market has not been reconfirmed yet.

Here you have an updated chart depicting recent price action.

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 you have an updated chart:

The primary bear market has not been re-confirmed
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. 

As to the gold and silver miners ETFs, SIL and GDX closed up.

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, and recent price action seems to suggest that the primary bull market signal is not in sight yet.

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.

By the way, I still see GDXJ showing more strength than GDX which tends to belie recent bear market action. The chart below shows the GDXJ/GDX relative strength (red line). As you can see as gold stocks were going down, the red line was going up, which show that GDXJ stronger than GDX. Furthermore, volume readings (absolute volume and more importantly the ratio of the average of bullish versus bearish volume) still show a moderate bullish picture (for the next weeks) for GDXJ and Stronger GDXJ tends to be harbinger of bullish action for the miners. So the technical picture I explained by late August remains valid.

GDXJ shows good relative strength, and its RS diverged from price action

The Dow Theorist

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