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.
US STOCKS
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.
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| 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:
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| 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.
GOLD AND SILVER
MINERS ETF
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:
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| Not a very bullish picture... |
Sincerely,
The Dow Theorist
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