Dow Theory Update for January 26: Secondary (bullish) reaction for Gold and Silver against primary bear market signaled today

US STOCKS

The primary and secondary trend is bearish, as explained here:

http://www.dowtheoryinvestment.com/2015/12/dow-theory-update-for-december-14.html

Here is an additional post concerning the likely decline to follow primary bear markets signals:

http://www.dowtheoryinvestment.com/2015/12/dow-theory-special-issue-additional.html
 

No secondary reaction has developed yet, albeit it could happen any moment now as explained here.

GOLD AND SILVER

The primary trend is bearish as explained here.

However, today, SLV and GLD made higher closing highs. SLV has rallied since its lowest closing low of December 12^th, 2015 and GLD since its December 17^th, 2015 closing low. This amounts to 28 trading days for SLV and 26 trading days for GLD. Thus, the time requirement for a secondary reaction has been amply met today.

As to the extent requirement, both SLV and GLD have rallied more than the minimum move requirement .

As readers of this Dow Theory blog know, when one is dealing with stock indices such as the Industrials, the minimum meaningful movement to consider the existence of a secondary reaction is 3%. However, given that SLV and GDL exhibit a different volatility pattern than indices like the Transports or Industrials, we have to conduct a volatility adjustment that takes into account their volatility.

To calculate the volatility multiplier we take the 30 days average of the daily volatility (percentage change) of the SPY. We do, likewise, with SLV and GDL and divide SLV and GDL volatility by SPY’s volatility. Once we have the multiplier, we apply it to 3% (the minimum volatility for the SPY for a meaningful movement) to determine the minimum movement for SLV and GDL. The spreadsheets below give you the full math:

	30-Days avg volt			30-Days avg volt
SPY	1.15		SPY	1.15
GLD	0.79		SLV	1.07
RATIO	0.68695652			0.93043478
Min move	2.06086957			2.79130435

The following spreadsheet shows the price advance of both SLV and GLD

	SLV		GLD
SecReac High	13.82		107.24
Sec Reac Low	13.06		100.5
% Move	0.05819296		0.06706468

Hence, we see that both ETFs have rallied much more than the minimum volatility-adjusted movement.

Hence, the extent requirement has been met.

All in all, a secondary (bullish) reaction against the primary bear market has been signaled today.

Here you have an updated chart (blue rectangles display the secondary reaction).

Secondary reaction against primary bear market for SLV and GLD

GOLD AND SILVER MINERS ETFs

The primary trend is bearish, as explained here.

Sincerely,

The Dow Theorist

Dow Theory Update for January 25: Will a secondary (bullish) reaction against the primary bear market materialize soon?

Trends unchanged

US STOCKS

For roughly 2 ½ months stocks have been declining. Dave Moening of “StateoftheMarkets.com”, whom I hold in high regard,  has recently penned that investor’s sentiment is very bearish, and hence, a rally is to be expected.

 

He writes that the odds now favor that one month from now stocks will have advanced. However, I feel this would be a mere secondary reaction (to be faded) under a primary bear market, since a primary bear market for stocks was signaled on December 11, 2015. After such a signal stocks have fallen in earnest.

http://www.dowtheoryinvestment.com/2015/12/dow-theory-update-for-december-14.html

Furthermore, a very long term “sell” signal (Dow Theory applied to weekly bars) was flashed on January 8^th, 2016, as explained here:

http://www.dowtheoryinvestment.com/2016/01/dow-theory-special-issue-very-long-term.html

Thus, both the intermediate trend and the very long term trend have turned bearish in unison. Nothing is certain, but technically stocks are screaming “bear market”. Therefore, it seems likely that stocks are close to a rally of secondary proportions. However, such a bounce has high odds of fizzling out.

GOLD AND SILVER

The primary and secondary trend is bearish as explained here.

GOLD AND SILVER MINERS ETFs

The primary trend is bearish, as explained here.

Sincerely,

The Dow Theorist

Dow Theory Update for January 20: Primary trend for gold and silver miners finally turns bearish

US Stocks break below the August 25^th, 2015 closing lows

US STOCKS

The primary and secondary trend is bearish, as explained here:

http://www.dowtheoryinvestment.com/2015/12/dow-theory-update-for-december-14.html

Here is an additional post concerning the likely decline to follow primary bear markets signals:

http://www.dowtheoryinvestment.com/2015/12/dow-theory-special-issue-additional.html
 

The SPY has declined a further ca. -8.04% following the primary bear market signal of December 11, 2015. Hence, we are approaching the average decline of ca. -13% which follows primary bear market signals. Please bear in mind that “averages” do not tell the full truth. In many instances, the decline following the primary bear market signal has been more substantial, and all market crashes and big bear markets have been preceded by a Dow Theory primary bear market signal.

To add insult to injury, if we apply the Dow Theory rules to weekly bars, the trend turned bearish on January 8 (and confirmed on January 15). Trends, when discerned with weekly bars and the Dow Theory, tend to be very long term. More about this vital change of trend which may be ominous, here:

 

Furthermore, we are approaching Schannep’s definition of a cyclical bear market. As per Schannep (“The Dow Theory for the 21stCentury”, pages 62-65), when both the S&P 500 and the Industrials decline more than -16% from their respective tops, a bear market (which I would label “cyclical” as opposed to “primary”) is signaled.

Following Schannep’s so-called bear market definition, there is a further average decline of -13.2% until the final lows are made. Thus, there is a clear risk of “cascading”. The primary bear market signal of December 11^th, 2015 may cause the S&P 500 and Industrials to decline by -16%, which entails a cyclical bear market, which, at the same time, statistically favors a subsequent -13.2% average decline.

Following the primary bear market signal of Friday 11th December, today stocks made lower lows. The August 25th, 2015 closing lows have been violated. Not a nice technical picture. 

GOLD AND SILVER

The primary and secondary trend is bearish as explained here.

GOLD AND SILVER MINERS ETF

The primary trend turned bearish yesterday.

SIL violated its 9/10/2015 closing low (last primary bear market low) on 11/17/2015. GDX refused to confirm. However, yesterday, very belatedly, GDX confirmed and violated its 8/26/2015 closing lows. Thus, a primary bear market has been signaled.

I take this signal with a grain of salt, as late confirmations carry less weight than punctual ones. Confirmation need not occur on the very same day; however, confirmations that occur so far in time should be viewed with some caution. Is it going to be a whipsaw? I don’t know. However, what I know is that we see bear markets world-wide when examined under the Dow Theory (please mind that armed with the Dow Theory we detect bear markets well before the mythical threshold of -20% has been reached). So there is clearly headwind for the miners, which after all, are stocks.  

Here you have an updated chart:

GDX threw the towel: Primary bear market for Silver and Gold miners ETFs

Sincerely,

The Dow Theorist