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