However, I'd like it better if the Transports deigned to confirm the SPY and Industrials
US STOCKS
The SPY, Industrials, and
Transports closed down.
The SPY bettered on February
12nd its primary bull market closing highs. The Industrials confirmed on
February 20th. The Transports have not confirmed yet.
So what should I say? Has the primary
bull market been reconfirmed and, accordingly we can declare the secondary
reaction a thing of the past? Or lack of confirmation by the Transports implies
that the secondary reaction is not over yet?
If I adhered strictly to
Schannep’s Dow Theory, I would say that an “in the clear” signal requires
confirmation by the three indices, so we could not declare the secondary
reaction as finished.
However, I feel that just two
indices (especially, when one of the indices making new highs is the SPY) is enough
for the primary bull market to be reconfirmed.
Please read carefully my post
of September 3rd, 2014 wherein I amply reasoned the reasons that
prompt me to depart from Schannep on this very specific point.
As you can read in the post I
have linked, my interpretation of the Dow Theory which relies heavily on the
lows of the last completed secondary reaction, as an alternative exit point,
helps me being quite straightforward when it comes to declaring the secondary
reaction as finished.
More about the vital
alternative stop loss (exit point) as per Rhea’s Dow Theory, here.
All in all, armed with the
lows of the last completed secondary reaction (red horizontal lines), I
consider:
a) The primary bull market as reconfirmed.
b) The secondary reaction as extinguished.
Here you have an updated
chart:
 |
| The lows of the last completed secondary reaction remain as a valid stoploss |
Gold and Silver
The secondary trend turned
bearish on February 6th, 2015 (secondary reaction against the
primary trend) as explained here. The secondary reaction continues running its course. SLV rallied modestly
(from February 6 to February 13). However, such rally was a meager ca. 3%,
which in volatility-adjusted terms, is not enough to set up SLV and GLD
for a primary bear market signal. Had SLV have rallied by a more ample
amount (let’s say at least more than 5.4%, which is one recent
volatility-adjusted reading, as you can see here), then the set up would have been completed.
Thus, the subsequent violation
of the February 6th closing lows did not flash a primary bear market
signal. We still have to wait for a rally of sufficient volatility-adjusted
magnitude for SLV and/or GLD (let’s
say ca. more than 5.4% for SLV and 3.85% for GLD, as per recent volatility
readings) so that the set up for a primary bear market signal is completed.
In the absence of such a
rally, a primary bear market would be signaled if both SLV and GLD violated their
November 5th, 2014 closing lows (primary
bear market lows). Please mind that there are several ways of declaring a
primary bear market under the Dow Theory. The most common and classical
sequence "primary bull (bear) swing, correction, rally (pullback) and
final breakout", is just one of the ways of declaring a change of
primary trend. More information about alternative primary bear (bull) market
signals here.
Gold and Silver miners ETFs (GDX and SIL)
As to the gold and silver miners ETFs, SIL and GDX closed up.
On January 12, 2015, a primary
bull market was signaled. More information as to the details of such a signal here.
The secondary trend is bearish
(secondary reaction against the primary bull market), as explained here.
Sincerely,
The Dow Theorist.
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