Monday, September 8, 2014

Dow Theory Update for September 8: GLD and SLV are flirting with the primary bear market lows

If such lows were violated, the primary bear market for precious metals would be reconfirmed

US Stocks

The SPY, Industrials, and Transports closed down. The Industrials remain below the last recorded primary bull market closing highs.

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 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 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. 

Recent price action makes likely that the June 27, 2013 lows get violated. If this happens, the primary bear market would be reconfirmed. Here you have an updated chart which spans 16 months which displays the latest primary bear market swing, the subsequent (bullish) secondary reaction, the inability (at least until now) to break up the secondary reaction highs and how the last pullback has brought silver and gold to the primary bear market lows (red horizontal lines). Technically is not a nice picture.

Keep an eye on gold and silver: If primary bear market lows were violated all hell could break loose
As to the gold and silver miners ETFs, SIL and GDX closed down.

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.

The Dow Theorist

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