Friday, June 10, 2016

Dow Theory Update for June 10: Gold and Silver have set up for primary bear market signal.





Trends unchanged.


I am writing before the open of June 10th

US STOCKS

The primary trend (as determined by Schannep’s Dow Theory) is bullish, as explained here and here.

The secondary trend is bearish (secondary reaction), as explained here.

As I alerted here, US stocks have set up for a primary bear market signal. The Industrials (and also the SPY) have also rallied by more than three percent. Thus, unambiguously the set up for a primary bear market is beyond questioning. However, at the same time, it seems more likely that such strong rallies (while setting up the market for a primary bear market signal) are harbingers of a break up above the last recorded primary bull market highs of April 20th. We will not jump the gun, and wait for market action. Until now only the SPY (and S&P 500) has broken up its previous primary bull market highs. Thus, anything may happen.


Please mind that a setup for a primary bear market does not imply that a primary bear market is certainly coming. The secondary reaction closing low may not be jointly violated (or never be violated) in which case no primary bear market would be signaled. More about the different scenarios and how this time (should there be any primary bear market signal) the classical Dow Theory could be earlier than Schannep’s here (which is no flaw in Schannep’s Dow Theory, as its very rules say that “classical” Dow Theory signals are to be taken into account as well).

GOLD AND SILVER

The primary trend is bullish, as reported here and here.

The secondary trend is bearish (secondary reaction against the primary bull market), as explained here.

Yesterday, June 9th, SLV and GLD rallied again. SLV has rallied 8.57% from its secondary reaction closing lows (June 1st), and hence, it has set up both SLV and GLD for a primary bear market signal. My volatility-adjusted readings tell me that the minimum movement for SLV amounts to 8.51% (I calculate de 30 days average of the daily percentage change for both SLV, GLD and the SPY, and I divide SLV’s average by that of the SPY; same with GLD).Thus, SLV has exceeded the minimum volatility threshold.

GLD has rallied  4.87 from its May 27th secondary reaction closing lows. The volatility-adjusted minimum movement for GLD stands at 5.12%

Thus, GLD has not managed to reach the “minimum” threshold. However, as I have repeatedly explained the principle of confirmation does not apply when establishing the setup for a primary bull/bear market signal. Just one index is enough to setup both metals (or stocks) for a new signal. More about the nuances concerning the principle of confirmation here.


Thus, now we can say that precious metals (gold and silver) have set up for a primary bear market signal. Please read my above comments for US Stocks making clear that a setup for a primary bear (bull) market signal does not necessarily imply that the signal will be flashed.


 GOLD AND SILVER MINERS ETFs

The primary and secondary trend is bullish as explained here

The most recent decline experienced by SIL and GDX did not qualify as a secondary reaction as explained. Recent confirmed higher highs have set the clock for a secondary reaction to zero (more about it here).


Sincerely,
The Dow Theorist

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