First of all my apologies for posting this review so late. However, facts are facts. My belated analysis of gold and silver performance does not change what happened in 2015.
Truth be said: This blog takes quite a toll on my free time. If time were in unlimited supply I’d like to post more studies (yes, there are many things I’d like to write about) and cover more markets under the prism of the Dow Theory but to do this I’d need to dispense with all other occupations (something I cannot do). Well, the rant is over, and let’s get started
GOLD AND SILVER
2015 began with an ongoing bear market which had been which has been signaled by this blogger truly yours on December 20th, 2012 (as explained here).
On October 12th, 2015 a very dubious primary bull market signal was signaled. In real time, I wrote that it was perfectly legitimate to ignore the signal, as the secondary reaction whose closing highs had been just broken up was more than dubious (time requirement very dubiously met).
By the way, my warnings concerning the dubious nature of the primary bull market signal were quite clear, since I minced no words:
“On a closer look, I have seen that SLV did not even manage to rally for at least 10 calendar days. According to Schannep, at least two indices should rally for 10 calendar days, irrespective of the average time of trading days. While all this is not carved in stone, and Rhea himself stressed the difficulty in defining secondary reactions, I feel that maybe the latest closing highs we have seen may not be indicative of a primary bull market, but rather constitute the real secondary reaction highs. Those willing to jump the gun, may consider the primary trend as bullish (especially given that the ETFs miners, which tend to lead, are already on a primary bull market of their own). Nonetheless, those more conservative may rightfully consider that the last recorded highs determine the real secondary reaction, and from this point we should wait for a pullback of at least 3% (in volatility-adjusted terms) on either SLV or GLD. After such a pullback the joint violation of the October 12 closing highs would entail a primary bull market.”
(bold letters added)
On November 17th, 2015, the last recorded primary bear market lows were violated, which implied a reconfirmation of the primary bear market (for those who interpreted that a “bull” had never existed) or a new primary bear market signal had been signaled (for those that considered that a primary bull market had been signaled). More about it here
All in all, 2015 ended under the grips of the bear.
Those who decided to stay the whole year on the sidelines avoided thus a loss of -11.53%
On the other hand, those that, in spite of my warnings concerning the dubious nature of the signal, went long on October 12th, 2015, underwent a loss of -8.05% (entry at 111.31 and exit at 102.34).
Please mind that even for those that went long and lost -8.05% on the trade that those with a buy and hold strategy would have lost -11.53%. So even accounting for the whipsaw, the Dow Theory managed to outperform buy and hold in 2015 (as it did in 2013 and 2014).
Furthermore, we have to bear in mind that during 2013 and 2014 we were also on the sidelines, hence avoiding a whopping -28.83% loss for that year, and an additional loss of -3.746% during 2014.
Thus, I am quite dumbfounded at some recent criticism recently thrown which literally says that the:
“[f]requency of inaccurate calls for gold, silver, HAO, GLD and SLV suggests that the Dow Theory being applied is inaccurate”
I feel that being on the sidelines since the end of 2012 all through the beginning of 2016 proves several things:
a) When there is a real trend (in this case bearish) there is not so much “frequency” of calls.
b) Besides such calls (only one, at most two) have been very accurate.
That being said, it is true that anything can happen on any given Dow Theory signal. One has to keep a long term perspective. To expect positive results on any given trade or in any given year is a very false assumption, as I explained here.
Here you have the 2015 chart for GLD:
|Another year of bear market action: 2015|
As to silver (here SLV), which I trade in tandem with paper gold (GLD), we had the same Dow Theory signals (of course). For those seeing a secondary reaction against the primary bear market and acting upon the breakup of the secondary reaction closing highs, there was a whipsaw, as the primary bull market was quickly reversed when the last recorded primary bear market closing highs were jointly broken by SLV and GLD. For more details, please read my comments concerning GLD above.
The year began with SLV at 14.96 and closed at 13.19. Hence, a decline of -11.83%.
Those who decided to stay the whole year on the sidelines avoided thus a loss of –11.83 %
On the other hand, those that, in spite of my warnings concerning the dubious nature of the signal, went long on October 12th, 2015, underwent a loss of -10.44% (entry at 15.13 and exit at 13.55 on Nov 17, 2015).
Please mind that even for those that went long and lost –10.44 % on the trade that those with a buy and hold strategy would have lost –11.83 %. So even accounting for the whipsaw, the Dow Theory managed to outperform buy and hold in 2015 (as it did in 2013 and 2014).
Furthermore, we have to bear in mind that during 2013 and 2014 we were also on the sidelines, hence avoiding a whopping -37.47% loss for that year, and an additional loss of -21.68% % during 2014.
Thus, you can see that the Dow Theory (even allowing for a very dubious whipsaw) did a good job at riding (by being out of the market) the bearish trend that was signaled at the end of 2012.
Here you have SLV’s chart for 2015:
I hope to post soon my 2015 review for SIL and GDX (gold and silver miners ETFs). Hopefully, it won’t take too long, or, at least, it will take less time than my gold and silver review for 2015.
The Dow Theorist