Secondary reaction in US stocks continues unabated
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.
GOLD AND SILVER
The primary trend is bearish
as explained here.
The secondary trend turned
bullish on January 26, as explained 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 current volatility levels of the SPY and GLD, is 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.
So now we have SLV and GLD set
up for a primary bull market signal. If the GLD’S 2/11/2016 closing highs and
SLV’s 2/12/2016 closing highs were jointly
broken out, a primary bull market would be signaled.
On March 3, 2016, GLD managed to break above the
secondary reaction closing highs (2/11/2016). However, SLV has not confirmed
and, hence, no primary bull market has been signaled.
Here you have an updated chart:
 |
| SLV must better the closing high of the last secondary reaction (blue rectangle) for a primary bull market to be signaled |
GOLD AND SILVER
MINERS ETFs
Today, finally, SIL deigned to break up above the
closing highs of the last completed secondary reaction (horizontal red lines on
the charts). While the current
secondary reaction did not even manage to have a pullback (tiny orange rectangles on
the right side of the chart) of sufficient magnitude to set up both ETFs for a
primary bull market, Rhea’s alternative definition of a primary bull/bear
market comes in handy. More about this less publicized alternative primary bull
market signal here (and in the linked post, you’ll find additional links, as it is
a five chapter saga).
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.
Here you have an updated chart. The red horizontal
lines display the relevant price levels to be broken out.
 |
| Primary bull market for SIL and GDX signaled today |
Sincerely,
The Dow Theorist
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