Not setup for primary bull market in stocks yet
US STOCKS
The primary trend is bearish,
as explained here:
Here is an additional post concerning
the likely decline to follow primary bear markets signals:
The secondary trend is bullish (secondary reaction against primary bearish
trend) as explained here.
No setup for a primary bull
market signal has materialized yet. Hitherto, no index has declined for more
than two days and more than 3% from the last recorded secondary reaction highs.
We patiently wait and see.
GOLD AND
SILVER
The primary trend and
secondary trend is bullish, as reported here.
On February 16th,
GLD after having declined for two days, and going from a closing high of 119.06
to a closing low of 114.77, set up both precious metals for a primary bull market
signal. GLD declined -3.6%, which in volatility adjusted terms, given the then current
volatility levels of the SPY and GLD, was a movement of sufficient magnitude.
More about the rationale of volatility adjustments and how I perform them, here.
SLV did not even manage to
decline for two days. However, to set up markets for a primary bull/bear market
it suffices to have just one index. The principle of confirmation does not
apply on this specific instance, as was explained in depth, here.
On March 3, 2016, GLD managed
to break above the secondary reaction closing highs (2/11/2016). However, SLV refused
to confirm for some weeks, until March 17, 2016, when it finally managed to
break above its secondary reaction highs, and hence signaled a primary bull
market.
SLV has rallied ca. 16% from
its 12/14/2015 closing lows. GLD has rallied almost 21%. I quote what I wrote
in my post of March 3, 2016, which is applicable to the current (and for this
matter, “all”) primary bull/bear market signals:
“Please
readers mind that I am not engaged in giving trading advice (see disclaimer at
the footer of this Dow Theory blog). I am merely saying that according to my
reading of the Dow Theory the primary trend for SIL and GDX has turned bullish
today. Some traders may decide to take a long position. Others, may decide to
stay on the sidelines. It’s up to each investor. I am just discerning trends;
not advising anyone to act on my interpretation of the Dow Theory. This blog's
aim is to instruct, and to prompt readers to think. I personally would have
never "acted" on the opinions of a blogger (nor on the opinions of
anyone, no matter how "expert", for this matter). This is why, many
years ago, I decided to master as good as I could the Dow Theory so that I
would never be dependent on anyone's else advice. There are no shortcuts.
Furthermore,
I make this “additional” disclaimer, as I personally don’t take any trade
suggested by the Dow Theory. I discriminate. Why? Because not all Dow Theory
signals offer the same risk reward ratio. Like in baseball, I am not obliged to
be batting all the time. If the “buy” signal (primary bull market signal) comes
at a reasonable distance percentagewise from the primary bear market bottom,
I’ll take the signal. If the signals occurs after a long and steep rally (with
no breather, clearly overbought conditions) I may pass. So there are personal
judgment calls.
SIL has
rallied a whopping 57.49% from its 1/19/2016 closing low. GDX has rallied
58.94%. So clearly, this is not an easy trade to take. Each investor has
different risk tolerances, and circumstances. If I were a fundamental investor
convinced of the brilliant future for precious miners stocks (I am not, since I tend to dismiss any
fundamental judgment), I’d maybe
close my eyes and step in, since technically today things seem to have changed.
Other traders may decide to take a smaller than usual position, as the Dow
Theory stop loss (more about such a stop, here) is fixed at the primary bear market lows of
1/19/2016.
Other
traders might wait for SIL and GDX to start a secondary reaction with a view to
buying somewhat below the current price levels. However, there are no
guarantees that we will see a pullback of moderate proportions.”
Although I see this specific
SLV and GLD signal endowed with a better risk/reward ratio than that we saw on
March 3 with SIL and GDX, it is worth remembering that each investor should do his
homeworks.
Here you have an updated chart
depicting the secondary reaction (blue rectangles) against the then existing
primary bear market, the subsequent pullback (red rectangles) which set up both
precious metals for the primary bull market and the subsequent breakouts
(closing prices above red horizontal lines).
 |
| Primary bull market for SLV and GLD signaled on March 17, 2016 |
GOLD AND
SILVER MINERS ETFs
The primary and secondary trend is bullish as explained here:
Sincerely,
The Dow Theorist
