Tuesday, November 17, 2015

Dow Theory Update for Nov 17: Primary bear market (or reconfirmation) for gold and silver signaled today

US Stocks under bearish secondary reaction

My apologies for this post. It has been written in a hurry, and I would have liked to have more time to write a more structured one. However, there are changes in trends, and I feel it is important to provide information to the followers of this Dow Theory blog.


The primary and secondary trends are bullish as explained here and here

By the way, this primary bull market signal was not greeted with enthusiasm by many. It is said that bull markets climb a wall of worries, and this last signal was met with disdain. This is what prompted me to write this post in order to set the record straight about the odds and the necessity of honor all signals.

 Since last Friday, November 13th stocks are under a secondary (bearish) reaction against the primary bullish trend.

According to Schannep’s Dow Theory flavor for a secondary reaction to be declared it is necessary that the average declining time for the SP 500, Industrials and Transports be at least 8 trading days. Furthermore, in order to avoid that just one very weak declining index tilts the average of declining days, it is necessary that at least two indices have been declining by 10 calendar days (each). Such time requirements were met last Friday, November 13th.

The extent requirement (namely, at least two indices should have declined by more than three percent since the last primary bull market recorded closing highs) was met last Friday too, as all three indices had declined by slightly more than 3%.

The last two trading days (Monday and Tuesday) have witnessed a rally. However, no index has rallied by more than 3%, and consequently no setup for a primary bear market has been completed. In other words, if last Friday closing lows were jointly violated, we merely would declare that the secondary reaction is making lower lows.

So now we have to wait until (if) one index is able to rally by more than three percent.

Here you have un updated chart. The red rectangles display the ongoing secondary reaction.

Stocks under secondary reaction. Primary trend remains bullish


I wrote that the primary bull market signal was highly debatable here.

And the primary market signal was debatable because the secondary reaction whose closing highs were broken out was also highly suspect, as I explained here:

Well, my qualms were for good reason. Today, SLV closed below the last recorded primary bear market closing low, and by doing this, it confirmed GLD which violated its last recorded primary bear market low on 11/11/2015.

Thus, lower confirmed lows unambiguously signal a primary bear market. 

Here you have an updated chart:

How low will precious metals go?

Since I wrote that the “bull market” was suspect, as the last recorded highs rather than a primary bull market signal could be read as meaning a mere secondary reaction against the prevailing primary bear market, today’s action, dispels all doubts: If it was a mere secondary reaction instead a primary bull market, lower lows, “reset” all interpretations. We are now below the last recorded primary bear market lows, and, this is bearish. Choose your pick: The primary bear market has been reconfirmed (in case we decided to negate the previous primary bull market signal and see the last recorded highs as the top of a secondary reaction) or a new primary bear market has been signaled.


The primary trend remains is bullish as explained here.

SIL has violated its 9/10/2015 closing low (last primary bear market low) unconfirmed by GDX. Both ETF miners are under a strong secondary reaction (displayed by the red rectangles on the chart below).

We have to wait for GDX to confirm. Until then we cannot declare a new primary bear market.

By the way, the comments I made concerning the debatable secondary reaction (which paved the way for the primary bull market signal) with gold and silver are also applicable to SIL and GDX.

Here you have an updated chart:

Not a very bullish picture...


The Dow Theorist

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