Trends remain unchanged
US STOCKS
The secondary trend is bearish
(secondary reaction against the primary bull market), as explained here.
All indices rallied more than
3% off their July 8th closing lows. So now either:
a) Stocks jointly violate
their secondary reaction lows, in which case a primary bear market will be
signaled.
b) Stocks jointly better their
last recorded primary bull market highs (May 19th, for the INDU, May
21st, for the SPY, and May 18th for the TRAN), in which
case the primary bull market will be reconfirmed.
GOLD AND SILVER
The primary and secondary
trend is bearish as explained here.
By the way, the steep decline
that followed SLV’s and GLD’s primary bear market signal, confirms that one
should not “hope” for a rebound following a primary bear market signal in an
attempt to get a better “exit” price. Experience says that ca. 2/3 of the time,
a small rally follows immediately after the primary bear market signal.
However, 1/3 of the time, such a rally fails to materialize and we get an even
steeper decline. The money won by not selling immediately is more than lost in
the 1/3 of occurrences when a collapse follows a primary bear market signal
(i.e. 1929 and 1987 crash among other instances).
Bottom line: One must react as soon as possible once a primary
bear market signal has been flashed.
GOLD AND SILVER MINER'S ETFs
As to the gold and silver
miners ETFs,on 3/10/15 SIL violated its 12/16/2014 primary
bear market closing low. On July 8, 2015 SIL violated its March 10th,
2015 closing low.
On 7/1/2015 GDX violated its
secondary reaction lows of 3/10/2015, and hence, it confirmed the bearish
action of SIL thereby signaling a primary bear market signal.
Thus the primary and secondary
trend for SIL and GDX is bearish.
By the way, my musings
concerning the need to promptly and without hesitation honor the Dow Theory
signals do fully apply to SIL and GDX. Price action after the primary bear
signal offered no respite to sellers. No rally, no mercy.
Sincerely,
The Dow Theorist
P.S: When I find time (oh my! Time is always
in very short supply) I would like to write about the Chinese stock market
debacle from a Dow Theory perspective. What has happened to Chinese stocks
should give us food for thought concerning the US stock market. I have many
times written that, after all, US stocks have been very lenient to investors
during the last +115 years. Not only because they mainly went up, but because
they behaved in an “orderly” manner (i.e. by producing close enough secondary reactions
to give us good exit points, that is to contain losses and lock in profits). Chinese stocks seem to be more unbecoming to
investors, and hence, they offer a wealth of insights for Dow Theorists in
order to prepare for the worst (“worst” not being necessarily “lower” prices,
but abrupt declines with no intervening secondary reactions). I hope to offer a
couple of useful thoughts in a future post of this Dow Theory blog. How would we trade US Stocks, if one day they behaved like Chinese stocks? Think about it.
I too think/ am concerned about China vs. US stocks and Dow Theory. I think your previously mentioned -16% and trailing stops are pertinent from your Oct. 15, 2014 post and comments. Looking forward to a full post. Thank you for your blog!
ReplyDeletePlease mind volatility. The -16% stop is an empirically deducted stop which seems to do well with US indices which normally have lower volatility than Chinese ones. Hence, I'd be very careful to extrapolate the -16% stop to Chinese indices or for that matter to silver, gold or GDX or SIL. One thing is clear, given US indices volatility, if I had seen something similar to what happened to Chinese stocks to US stocks, I would have honored the -16% stop. But, alas, Chinese stocks are not US Stocks. When I find time a full article will be posted. Stay tuned. Thx for following.
Delete