Dow Theory Update for September 4: Precious metals fall out of bed. Trends remain unchanged

Stocks remain in primary bull market

US Stocks

The Transports closed up. The SPY and the Industrials closed down.

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

The primary trend was reconfirmed as bullish on October 17^th, 2013, and November 13th, 2013, March 7th, 2014, and more recently, September 2^nd, 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 strongly down 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 27^th, 2013. From such highs the market declined without jointly violating the June 27^th, 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 down. Was today’s action a fake-out given the high relative strength of the miners versus their respective precious metals? If so, SIL and GDX should start to rally and escape the current depressed level soon.

On July 11^th, 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 22^nd, I explained that the signal did not materialize yet, as you can read here. Today’s action distances even more SIL and GDX from the relevant levels to be broken up for a primary bull market to be signaled.

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.

Sincerely,

The Dow Theorist