Tuesday, January 13, 2015

Dow Theory Update for January 13: Gold and silver failed by a hair to signal a primary bull market

Thus, the primary trend remains bearish

US stocks

The Industrials, Transports and SPY closed down.

The primary trend remains bullish, as explained here and here.

The secondary trend is bullish. No secondary reaction yet.

Gold and Silver

SLV closed strongly up, and GLD closed down. SLV failed by a hair to better the secondary reaction high. Nonetheless, SLV did not deign to confirm, and, hence, according to one of the most important Dow Theory tenets, a primary bull market has not been signaled. When or if SLV broke above its secondary reaction highs, then, we would have confirmation, and a new primary bull market. Now it is time to closely follow SLV and GLD.

The chart below gives an update of the current situation. The blue rectangles display the secondary (bullish) reaction against the primary bear market. The red rectangles display the pullback that followed that set up GLD and SLV for a primary bull market. The red horizontal lines show the relevant levels to be jointly bettered on a closing basis for a primary bull market to be signaled.

Very near, but not there yet. SLV refuses to confirm

Until confirmation occurs, we cannot change our verdict as to the primary trend, which remains bearish. 

The primary bear market was reconfirmed on October 3rd 2014, as GLD finally broke below the June 27th, 2013 primary bear market closing lows (something which SLV had already done on Sept 17, 2014). As lower lows were confirmed, the primary bear market was reconfirmed. 

For the reasons I explained here, and more recently here the primary trend remains bearish.

The secondary trend is bullish (secondary bullish reaction against the primary bear market), as explained recently here. Furthermore, SLV and GLD completed the setup for a primary bull market, as explained here.

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 bearish.

On a statistical basis the primary bear market for GLD and SLV is old. Two years have elapsed since the bear market signal was flashed. 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. When will this vicious bear market end? I don’t know, and I don’t need to know. I only know that the Dow Theory will see to my being informed punctually when a new primary bull market is born.

Gold and Silver miners ETFs (GDX and SIL)

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

Yesterday, I primary bull market was signaled. More information as to the details of such a signal here.

The primary and secondary trend is bullish.

I’d feel more confident about the brand new primary bull market in gold and silver stocks, if the precious metals themselves were soon in a primary bull market. Next days will be crucial.

The Dow Theorist

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