GDX and SIL under a primary bear market.
US STOCKS
The secondary
trend is bearish (secondary reaction against the primary bull market), as
explained here.
GOLD AND SILVER
The secondary trend turned
bearish on February 6th, 2015 (secondary reaction against the
primary trend) as explained here.
The setup for a primary bear
market signal was completed on March 24, 2015 as explained here.
Thus, now:
a) Either the primary bull
market closing highs 01/22/2015 are bettered in which case the primary bull
market will be reconfirmed.
b) Or the secondary reaction
lows are violated in which case a primary bear market will be signaled. If we are to judge according to recent
action, we are very close to the joint violation of the secondary reaction lows.
Silver violated yesterday its secondary reaction lows. Gold, though, refused to
do so, and hence, unconfirmed movements have no relevance under the Dow Theory.
If/when gold violates its secondary reaction lows, the primary bear market will
be signaled.
Is paper gold
dying? Some thoughts about this vital aspect (to be taken with a high dose of
skepticism, as this is “fundamental” thinking) here.
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 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. I
have to acknowledge that this is a weird signal. SIL violated months ago its
last recorded primary bear market lows but refused to violate its
secondary reaction lows. On the other hand, GDX, which did not confirm SIL’s
violation of the last primary bear market lows, has violated its secondary
reaction lows. No text-book (as far as I am aware of) says what to do in this
specific juncture. However, what I see, is that the violation of a primary bear
market low by SIL carries even more weight that the violation of a secondary
reaction low, and hence “confirmation” has been fulfilled (SIL by violating its
primary bear market low and GDX by violating its secondary reaction low). Of
course, I’d have prefered a clear-cut signal (either joint violation of
primary bear market lows or joint violation of secondary reaction lows) but the
market does not always oblige.
Look at the
charts below. The red horizontal lines display the primary bear market lows
level for SIL and secondary reaction lows for GDX. Both lines have been
violated.
 |
| Primary bear market for SIL and GDX |
For those
still doubtful about the existence of a primary bear market, a sensible course
of action could be to cut in half current positions, and wait for the violation
by SIL of the secondary reaction closing low (which is something which may
occur any moment now).
Sincerely,
The Dow
Theorist
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