Thursday, September 25, 2014

Dow Theory Update for September 25: Stocks continue making lower lows

 Gold and silver have not re-confirmed primary bear market yet.

US Stocks

The SPY, Industrials, and Transports closed down . In spite of stocks making lower (minor) lows, it is still too early to declare the existence of a secondary reaction.

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 closed down, and GLD closed up. For the reasons I explained here, and more recently here the primary trend remains bearish. SLV is well below the primary bear market lows of June 27th, 2013. However, GLD remains above this critical level, and, accordingly, the primary bear market has not been reconfirmed (yet or never). Here you have a post devoted exclusively to the current situation of gold and silver.

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:

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 closed unchanged, 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. Furthermore, recent price action makes more likely a reconfirmation of the primary bear market (that is joint violation of the primary bear market lows) than a new primary bull market.

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 Dow Theorist

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